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Comments To Gateway To America Conference

Comments To Gateway To America Conference

12 August 2005,

Charles Finny, CEO, Wellington Regional Chamber Of Commerce

USA Today – How To Create New Opp0rtunities – Government Procurement Is The Best Place To Start

Can I begin by thanking the organisers for inviting me to be a speaker today and to you, Ladies and Gentlemen, for coming to listen.

My comments are by necessity brief and to the point. In fact I want to make five points. Don’t play domestic politics with the US relationship. The Government has really pissed me off by selectively leaking the notes taken by a junior MFAT official and by adopting an anti-American stance in its political posturing I will follow their lead and make one comment that could be interpreted as political. If you really want an FTA Mr Sutton, the best thing to do is to take the anti-American billboards down NOW.

We are not going to see any short term break through on the launch of an FTA negotiation between the US and New Zealand. The facts suggest that we have a problem standing in the way of an FTA and that problem is not – as the Government claims - our small size or the efficiency of our agriculture sector. That problem is not easily solved. Once the dust of the election settles down, I do hope that both sides take up the idea proposed by outgoing US Ambassador Charles Swindels on 4 July, and sit down and talk fully and openly about any differences and explore ways in which we can take the relationship forward.

Now moving away from politics I want to suggest to New Zealand policy makers means by which we can – with some certainty of success – create new opportunities for New Zealand exporters in the world’s biggest market.

First we can, and should, keep pressing for progress in the ongoing WTO negotiations.

Second in our FTA negotiations with China, with ASEAN and with Malaysia New Zealand should seek a high quality outcome and not sacrifice quality for speed. New Zealand’s every move is being scrutinised by the United States, Japan and others with regard to China. If something substandard emerges as the outcome this is not going to be well regarded in Washington. And if we deliver a high quality outcome we will benefit directly from increased investment from the US and elsewhere.

As there is no prospect of a FTA between the US and China or the EU and China for some years, and if New Zealand enjoys tariff preferences and special services access in the Chinese market, US and EU companies are going to be seeking to establish or expand a New Zealand presence to take advantages of the opportunities that New Zealand has created.

Third and most importantly is another thing that we could do, one entirely within our power which would allow us access to a market – worth over US$200 billion from which we are excluded. I am talking about the US Federal Government’s procurement of goods and services.

Why are we excluded from this market? Because we choose to be.

How can we achieve access to this market? Access to this and 28 or so other Government Procurement markets will be possible for New Zealand exporters if we join the WTO Government Procurement Agreement.

Is this really a big issue?

Yes. If one looks at the work done by Australia valuing its FTA with the US one third of the gains are estimated to be coming from access to the US Government procurement market. For Australia access to the US Government procurement market is estimated as delivering gains of A$200 million a year. Like New Zealand, Australia has chosen not to be part of the WTO agreement but was able to negotiate bilateral access to it in the FTA.

Australia’s reasons for not being party to the WTO Agreement are supposedly different from New Zealand’s. Australia essentially does not want to belong for protectionist reasons. It does not want to open its State and Federal Government Procurement markets to the world. Some of you might recall how difficult it was for New Zealand to gain access to the Australian Government procurement market in the early years of CER – achieving access to this market was indeed one of the big wins for New Zealand in CER.

New Zealand’s reasons are supposedly less base. I quote from a letter written by written by Hon David Cunliffe, Minister of Communications, to Sir Angus Tait, Chairman of Tait Electronics Limited on 19 January 2005. In this letter the Minister states that “New Zealand has considered accession to the WTO GPA several times over the last decade, most recently in 2003. On each occasion, the costs of accession to the GPA have been deemed to outweigh the benefits and overall exporter interest in new access opportunities has been relatively small”.

What are these costs? The costs are those associated with the transparency and prescriptive nature of the procedures set down in the WTO Agreement.

These costs must be truly enormous as judging from Australia’s analysis we could be talking or market opportunities in the US alone worth tens of millions of New Zealand dollars a year. Imagine the potential market amongst the full WTO GPA membership?

Oh, one more thing, I know that the US Government would be pleasantly surprised and fully supportive of New Zealand taking the decision to apply for GPA membership. How do I know? I asked.

Now having said that, Minister Sutton can I make a prediction. Some MFAT or MED official is bound to think up the excuse that – because the US wants New Zealand to join the GPA, New Zealand should not join. Rather we should hold this policy back as negotiating coin or as an inducement for the US when considering whether to or not to negotiate a FTA with New Zealand.

Minister, if this happens, please give Simon Murdoch or Geoff Dangerfield a call and suggest that the author of this advice needs to be pensioned off. The fact is that the US has nothing really to gain from New Zealand membership of the GPA. The US already has free access to our Government Procurement market. The gains are all one way – New Zealand’s.

Ladies and gentlemen thank you.


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