Hon Jim Sutton
Speech Notes
27 April 2001

Business meeting,
Toronto, Canada

Ladies and Gentlemen: thank you for the warm welcome. And my thanks to the Bank of Montreal for their part in arranging today's event.

This is a city with more people than there are in my whole country! But in New Zealand, we like to think we punch above our weight. Given the diverse range of scientific, sporting, and cultural icons we have contributed to the world, including Lucy Lawless, Xena Warrior Princess, maybe we have a point.

Today, I'd like to offer you a perspective on issues in which both New Zealand and Canada have keen interest.

The prosperity of both our countries is inextricably tied to trade. The well being of New Zealanders and Canadians alike is dependent on our access to, and our success in, the global marketplace.

I am therefore delighted to be here in Toronto, Canada's commercial hub and a city that is deeply integrated into the larger North American economy, and the home of the Maple Leafs to whom we wish all the best for the Stanley Cup.

New Zealand is forging deeper links with Toronto. Last year, we appointed Andrina Lever to be New Zealand's first Honorary Consul in the city.

Today I am pleased to announce that New Zealand's trade promotion agency Trade New Zealand is adding its presence to the New Zealand Consulate here with the appointment of Denny Raincock as Trade New Zealand's Market Manager in Toronto.

Denny joins the New Zealand trade promotion team at a time when trade links between our countries are growing. New Zealand exports to Canada grew 36 percent last year and Canadian exports to New Zealand grew 28 percent. But I believe there is still much untapped potential. This is particularly so in areas that have traditionally not been a major feature of the Canada/New Zealand economic relationship: areas such as software, electronics, biotechnologies, or perhaps film and television production.

I hope my comments will stir your interest in New Zealand as a place to do business.

Many of you may have heard of the "New Zealand model" because of the reform process we followed - over 15 years ago - to revitalise a largely moribund economy.

While supportive of the fundamental thrust of those reforms, with the benefit of hindsight the present Government recognises that an entirely hands-off approach to Government does not lead to the most desirable economic or social outcomes.

My message today is that we are now building on the legacy of the reform process.

Experience has shown us above all that our economy has to be competitive if we are to defend the living standards to which we have become accustomed. And for us to defend the America's Cup! - our competitiveness - to punch above our weight in the world. How else can a

Let me illustrate:

· 95 percent of imports into New Zealand enter duty free; over 90 percent of our current applied tariffs are zero; the average weighted applied tariff is now 0.7 percent.

· Our regime with respect to foreign investment is welcoming and business-friendly: scrutiny is given to certain large investments but the process is largely one of notification, with closer examination where the investment involves certain sensitive issues such as rural land.

· Our tax rates are internationally competitive and we have no hidden taxes and no tax on capital gains.

· Work place relations are very positive and the Coalition Government's recent changes to our employment legislation are expected to consolidate the atmosphere of good faith and the very low level of work stoppages we have had in recent years.

To make the New Zealand economy more competitive:

· We are investing in programmes to promote economic development and innovation.

- We are paying particular attention to eduction and training.

· We are increasing our science spending and actively promoting technological innovation - such as e-commerce - to bring down business costs.

· We are revisiting some of our commercial laws with a view to improving the shape and performance of our capital markets and to further strengthen our competition framework.

· We are, in short, putting special emphasis on creating an attractive environment for overseas investors - please come and see for yourselves.

When Pierre Trudeau visited New Zealand 30 years ago, he spoke of Canada's place in the world, and particularly its relationship with the US in these terms:

"now obviously when you're dealing with an elephant you can't hope to be stronger and better and bigger than the elephant. What you can do is select areas in which you can perform better. You know, man is smaller than an elephant, but perhaps he has certain talents that the elephant doesn't have".

Canada has shown great success in leveraging export and economic growth from the US relationship. But I think the analogy works for other countries too: for New Zealand, there are a lot of elephants out there!

This is the reason that over many years New Zealand has invested so much effort in the development of a rules-based international trading regime - and why we remain strong supporters of open trade.

It is fashionable in some circles to criticise the WTO - well let me say that for a small country, trade without international rules would simply mean the law of the jungle. We speak from experience - and that is why New Zealand is an advocate for the rule of law internationally - whether it be through the UN or the WTO.

A framework of law, either in domestic legal systems or internationally, is a key safeguard of fair play and fair trade.

For over 50 years the GATT and now the WTO has provided the opportunity for trade barriers to be reduced, to mutual advantage. The fundamental principles of national treatment and non-discrimination have been reinforced over time.

WTO members have made binding commitments with respect cutting tariff levels and providing better market access for goods, to protect intellectual property rights, and address the issue of trade in services. A system has been set up for the resolution of disputes.

The benefits of freer trade are apparent in the demonstrably higher economic growth rates and wider consumer choice in those countries who have relatively open trading environments when compared to those that don't.

Nonetheless, major challenges remain. Those areas of trade which have been the most sensitive - agriculture and textiles - remain highly distorted. Both are of key importance to developing countries. Both must be brought fully under WTO rules.

Furthermore, trade must be responsive to the concerns of society. I do not mean that the WTO should become the vehicle to conclude agreements on the environment or labour laws or whatever. But governments should be prepared to examine those issues to ensure that what we sign up to in the WTO does not undermine in any way the hardwon progress achieved in the ILO and environment treaties.

However I remain convinced that the most pressing challenge for the WTO remains to provide genuinely more open markets and to protect the gains already made - particularly when the pressures of slower growth may invite not only renewed interest in overseas opportunities but also the unwelcome resurgence of protectionism.

To a Trade Minister, watching the diplomatic cables each day, the imaginative ploys to restrict access to markets seem infinite. So, New Zealand has concluded that we must keep pedalling the trade liberalisation bicycle or else we will all fall off.

As you know, new WTO negotiations on services and agriculture are already proceeding. It is our strong belief that we should be able to add other issues onto this "built in agenda" and to launch a wider set of multilateral trade negotiations at the next WTO ministerial meeting in November in Doha, Qatar.

The distortions in some trade sectors are appallingly large. The rich OECD countries support their agriculture to the tune of US$360 billion per year ? enough to send all the 41 million dairy cows in the OECD around the world flying first class one and a half times, with spending money besides. These subsidies shut off opportunities not only for efficient producers like New Zealand but for millions of farmers in scores of developing countries.

It is of course uncertain whether WTO members can respond positively to these needs. The potential obstacles to a November launch in Qatar are numerous, but we see positive signs in that the major developed and developing country players are talking to each other and many developing countries recognise that their interests will be served by further negotiation inter alia to address concerns over the implementation of the Uruguay Round.

We also see some new flexibility on the scope of an agenda which was a problem before Seattle. For New Zealand's part we have no fears about discussing environmental concerns or labour in a constructive way. We have, for example, been pressing for subsidies disciplines to be applied to the fishing industry. This would in our view provide a win-win-win situation for trade, the environment and for developing countries too.

What we will continue to do, however, is to resist in all areas disguised protectionism in all its forms.

Let me talk briefly about agriculture - since I know that the issue is also is a live one here. New Zealand has a particular interest in this area: apart from its many other assets, New Zealand has a important comparative advantage in the production of certain temperate products.

And while we account for only 2% of world dairy production we are wrongly portrayed by dairy farmers in the EU, the United States and Canada as "the barbarians at the gates" - clearly absurd given our size, and totally unprotected and unsubsidised New Zealand base. It is an unfortunate fact that overall agriculture remains one of most heavily protected and heavily subsidised sectors in international commerce - including here in Canada.

While the Uruguay Round negotiations produced some gains, the latest annual OECD study reveals that support for agriculture in the developed world has now returned to the levels of a decade ago.

The distortions across many agricultural products stimulate overproduction, not to mention the frenetic pursuit of subsidies that spread foot and mouth disease-infected sheep far and wide in Britain. Prices for efficient New Zealand and Canadian farmers are depressed. So we want to see progress on this issue.

Despite the great importance that we attach to the WTO, clearly it is no longer the only trade liberalisation game in town. Countries around the world including Canada have in the last few years been seeking to increase the pace of trade liberalisation through bilateral and regional agreements.

New Zealand has been no exception. But we place a high premium on quality. In our view, bilateral trade agreements that are not comprehensive potentially undermine the quest for global trade liberalisation and the wide benefits that this would bring.

New Zealand has concluded two bilateral trade liberalisation agreements: one with Australia and one with Singapore. Last week, we announced the launch of another negotiation ? this time with Hong Kong. Like Singapore, Hong Kong's negotiation with us is the first time they have explored a bilateral trade agreement. We are also exploring a number of others.

New Zealand - and Australia too - are looking to follow Canada's lead in pressing for free trade with the United States; and Canada and Australia are pursuing negotiations with Singapore, among others. So we have a picture of interlocking relationships which in addition to being trade liberalising themselves and to adding impetus to the multilateral process, could also help regional economies attain the goals that were set by APEC leaders at Bogor, Indonesia in 1990. (At that meeting of course, regional leaders committed their countries to "free and open trade and investment by 2010 for developed countries and 2020 for less developed economies". That clock is ticking.)

That brings me back to the Canada/New Zealand trade relationship. New Zealand, like Canada, lives off trade. New Zealand, like Canada, has been a keen supporter of the WTO. New Zealand, like Canada, has an FTA with its big near neighbour. But New Zealand has gone further than that. We have looked to enter comprehensive FTAs with other important economies in our region. We had always thought that the Canadian and New Zealand economies were a good fit. We have for a long time signalled a readiness to negotiate a comprehensive FTA with Canada. But Canada has not been ready to move.

Perhaps that will change in time. In the meantime there are two economies out there where the business communities are finding good opportunities to engage. You are engaged in our food industry. You are engaged in our broadcasting industry. Perhaps surprisingly, you are not very much involved in our forestry industry. But the potential is there and I encourage you to explore it.

So, in conclusion, New Zealand like Canada, looks for a global approach to improved market access - but will take up other opportunities as stepping stones to that goal.

We have a reformed, open, efficient economy - our producers are now hungry to use overseas opportunities - and we are budgeting to further improve our educational and scientific base.

Unlike Canada, our major export markets are spread evenly between Australia, Japan, the United States and Europe; about 15-20 per cent each. So we are not overly dependent on a single market.

Our strategic vision has been conditioned by the need to remove subsidies and to promote efficiency and adaptability while promoting broad economic and social well being; we believe Canada has similar long term values.

While we have some important Canadian investors there now, I would be delighted to see more Canadians investing in New Zealand. And I would be delighted if business links could be encouraged by government action to reduce and to remove over time, the significant remaining barriers to our bilateral trade, whether in the context of a WTO negotiation - or bilaterally.

I am convinced that welfare in both countries would be advanced by this.

ENDS./

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