11am, 27 November 2001

Singapore Institute of Policy Studies meeting, Singapore

Ladies and Gentlemen: thank you for the invitation to speak with you today. Thank you especially to our hosts this morning, and particularly Tommy Koh, Director of the Institute and a very good friend of New Zealand.

When I was first invited to address you about "the role of Free Trade Agreements or Closer Economic Partnerships in a post-Doha world", I didn't know, of course, what Doha would produce.

I am delighted - and relieved - that we have launched a new round of World Trade Organisation negotiations.

The failure at Seattle cost New Zealand dearly in terms of delays in reform of international agricultural markets in particular. We are two years behind where we should have been.

But we now have the opportunity we need to pursue further liberalisation of markets for New Zealand exports of goods and services, and to tighten the international trade rules to prevent abuse by protectionist forces. I would like to pay tribute to the tireless role in Doha of your trade minister, George Yeo, who had the thankless task of acting as facilitator in the very tough agricultural negotiations. George first accepted this role in Seattle, and by popular demand resumed it in Doha. I hope the people of Singapore appreciated the leadership role their trade minister plays on the world stage.

What is interesting - and this goes to the core of my topic today - is that closer economic partnerships such as the one our respective prime ministers signed a year ago, do not become redundant simply because we now have the prospect of a deal that will lower trade barriers across all the 144 economies of the WTO community.

The WTO provides the broad framework of rules for international trade and a forum for pursuing trade liberalisation at a global level. But high quality CEPs deepen economic interaction. When they are based, as New Zealand's are, on the multilateral framework, they can also provide guidance on the direction in which the multilateral rules should evolve. They therefore complement the WTO system and will remain an important element of New Zealand's trade policy.

I believe the same holds true for Singapore. Both of us have much in common in our approach in this area and in the objectives we want to achieve. We will therefore be looking to Singapore as a key partner in this work as we proceed with the new WTO round.

The economic fallout from the events of 11 September, which is becoming more apparent each day, brought a sharp edge to the WTO Ministerial meeting. There was good reason why WTO members went ahead with the Doha meeting, despite the cancellation or postponement of other international high-level events in the weeks before.

Ministers arrived in Doha concerned about the state of the world economy and determined to send a strong message about moving forward on trade issues. We were all well aware that the WTO and the international trading system could not afford another failure.

But Doha's success also lay in the lessons that we learnt from Seattle.

We learnt that an organisation with 142 members must operate in a different way to one encompassing the 88 countries who gavelled the Uruguay Round.

We learnt that developing country interests must be front and centre when they form 80% of the membership and when so many are marginalised in international trade.

We learnt to take a bottom up approach to the issues before us, to focus on the core business of trade liberalisation and on issues where consensus was possible.

We learnt that we had to operate in an open and transparent way so that all members had a sense of ownership over the outcome.

We learnt that we ignore civil society at our peril. Much of what was being sought by the people protesting in Seattle was more coherent policy making at the international level. They were looking for assurances that the WTO would not undermine the work of other international organisations dealing with issues like the environment, labour standards and social issues.

And so we were able to launch at Doha a round of global trade talks, with a mandate solidly based in the WTO's traditional work of market access negotiations and rule making, with the goal of addressing the marginalisation of developing countries in the world economy, and a commitment to ensuring our trade liberalization work supports, not undermines, the objectives of other important international organisations.

This is an important and ambitious mandate.

It is only the beginning of the process however. The level of commitment to the Doha mandate will only become evident as the negotiations proceed.

And it will be up to countries such as Singapore and New Zealand, who bring a profound commitment to open markets and the rules based system, to keep our WTO partners focused on the goals this mandate provides.

The Doha meeting will be remembered also for bringing to a close 15 long years of negotiations with China on its accession. Over a billion more people are now represented in the WTO. For New Zealand as a trading nation, as no doubt for Singapore, this is good news. You will be familiar with China's commitments to cut tariffs and open up services sectors; with the impact of WTO disciplines on non-tariff barriers; and with the value of WTO membership in locking in China's transition to a rules-based economic system.

China's entry to the WTO also reflects its commitment, to a more open economy that is more closely engaged with the world. This commitment can be seen also in China's willingness to explore a possible free trade area with ASEAN.

I do not see that these free trade areas and Closer Economic Partnerships as new defensive walls that divide regions because they exclude neighbours who don't belong. Rather, they signal a determination to head even faster towards the goals that all WTO members are committed to.

New Zealand and Singapore were in that position last year. Both economies are open and dynamic. But they are also complementary, in that the sectors New Zealand is strongest in, such as agriculture, dovetail with your much more urban-based activity here in Singapore. The same applies with Hong Kong, and which is our partner in negotiations towards another CEP agreement.

Such agreements aim to make it easier for our traders to do business in each other's economies on terms as close to equal as possible.

They lower trade barriers or 'bind' duty-free entry so those barriers can't be re-erected in the future; they address the dross of red tape that adds to the cost and hassle of getting goods to market; they harmonise areas like regulations, professional qualifications and standards and making them transparent, so the practitioners from one market can have confidence they'll be on a reasonably even footing with the local competitors when opening up shop in the partner economy; They highlight areas of opportunity that might otherwise remain obscure or difficult to access, such as large government contracts.

Finally, CEPs offer the opportunity to address the overarching nature of an economic partnership, to knit together and strengthen the separate areas that make up the relationship.

Our ministerial review of the New Zealand Singapore CEP will assess how well we are doing in our first year of the new partnership. It is very important that Singapore and New Zealand Ministers continue to take a close interest in developments so that we can make sure that we keep moving forward. The whole aim of the Agreement is that it should be a dynamic arrangement.

I am pleased with the progress we have made so far, even in difficult economic times. Already the Agreement is generating interest in our respective business communities and raising the profile for new opportunities.

The CEP Agreement commits us to exploring ways to reduce compliance costs for our business, to lower and remove barriers to services trade and to encourage two way investment. There are still a number of restrictions or limitations applied to New Zealand services exporters in this market and we will be working closely with your Government to remove them progressively.

New Zealand and Singapore planted a seed that is now bearing fruit. Within the Apec region, Australia, Japan, Korea, Thailand, Chile, Taiwan, China and the United States are all exploring the potential for similar deals.

ASEAN countries recently agreed to explore a regional free trade agreement with China. This would be a major step, in keeping with your region's efforts to achieve greater economic integration. It is a welcome and forward-looking development.

Clearly the expectation is that any China-ASEAN treaty would take some years to conclude. New Zealand hopes, of course, that it might meanwhile act as a stimulus - not a stumbling block - to a trade agreement between the ASEAN Free Trade Area on the one hand and ourselves and Australia on the other.

Singapore undoubtedly provides economic leadership in this region. This is particularly important at times like these, when your economy is under pressure. It is unquestionably a testing time for us all, as the world economy slows. But I'm sure it won't be lost on other countries that goods trade between our two economies has not only held up on a year ago, but has increased slightly during the nine months to September - despite the recession here.

Like Singapore, New Zealand sees merit in a trade agreement with the United States. The United States is not just the world's largest and wealthiest market. It is also a crucial market where ideas and innovation and investment and initiative and technical knowledge and research are all sold and bought and exchanged. Engagement with the United States is an important part of any national strategy for success in the global market. And as I see it, a trade agreement is the best possible way of securing and maintaining that engagement with the United States. I wish that, like Singapore, we also were involved in negotiations. We are not at that stage yet. But we are working on it.

If Singapore negotiates successfully with the United States and if we could also secure United States involvement in similar arrangements with Australia and New Zealand, those agreements would add up to more than a series of bilateral agreements. We would then have a precedent for liberalisation of the wider Asia Pacific market. That would send important signals into the rest of APEC about the potential for progress under APEC's Bogor goals. And it would send a signal from APEC to all 144 members of the WTO that one way or another trade liberalisation has its momentum.

New Zealand is certainly not interested in low-quality trade agreements which would undercut what needs to happen at the WTO. We strongly oppose narrow agreements which opportunistically pick the low fruit, but leave the so-called "sensitive" sectors in an unattractive "too-hard basket". We want to see "WTO Plus" agreements that enhance rather than impede multilateralism. These should meet at least the same standards of openness and comprehensiveness over all sectors that made getting the launch of a new WTO round such a challenge - and such an achievement.

The CEP between our two countries is one such agreement; the Closer Economic Relations Treaty New Zealand signed with Australia nearly twenty years ago is another - and it has lost none of its pathfinder status in all that time.

Within the twenty-one economies that make up APEC, we have the Bogor goals of free and open trade and investment by 2010 for developed countries and 2020 for developing - goals that some member economies are struggling with. But APEC contributes another dimension, again, to multilateralism with the principle of open regionalism - which means lowering barriers against non-participants as well as participants.

Such openness is important to ensuring that CEPs don't widen the gap between the pace-setters and the developing economies in our region - that the less fortunate, the less attractive potential partners are not left sidelined. This may yet be a major area where the WTO's "development agenda" launched at Doha can be picked up at the level of implementation within the partner economies of APEC. This is a challenge for us within our region and at the multilateral level.

Thank you.

Office of Hon Jim Sutton

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