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Jim Sutton Speech - Apec Trade And Investment

Apec Trade And Investment Liberalisation: Finding Effective Ways For Substantial Liberalisation

Address by Hon Jim Sutton Minister for Trade Negotiations, New Zealand

APEC Forum on Shared Prosperity and Harmony; Seoul, 31 March 2000

I would like to thank the Korean Government for the opportunity to address this distinguished audience.

As Chair of APEC last year, New Zealand welcomed President Kim Dae-jung’s initiative in hosting a discussion of the many issues which faced the region in the aftermath of the economic crisis of 1997-98. New Zealand too was affected by the crisis and we firmly believe that closer cooperation is important to avoid a repeat.

We have a new Government in New Zealand now, but I can assure you we have the same commitment to trade liberalisation. By trading with each other, we enhance the chances of prosperity and harmony for the region.

Trade and investment liberalisation lies at the heart of the APEC -Asia Pacific Economic Cooperation - agenda.

To my mind, it is hard to think of true economic cooperation in an environment where we continue to impose barriers against the goods and services we each produce.

It is no accident therefore, that at only their second meeting, APEC Leaders in Bogor in 1994 agreed the 2010/2020 goals for achieving free and open trade and investment in industrialised and developing member economies.

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This was not a hollow commitment, convenient at the time but then shelved and quietly forgotten about. It has been continually reiterated at successive Leaders meetings, including by all the economies which have joined since then.

But, what about delivery?

?The cheque?s in the mail? is a line that eventually wears thin, even if it signed by the Leaders of the world?s largest economies. Five years on from Bogor, APEC?s credibility would be at risk if commitment was not backed up with concrete progress towards the agreed goal.

Fortunately that is not the case.

Last year while New Zealand was in the Chair, APEC economies, with help from the Pacific Economic Cooperation Council, took a good look at progress being made towards the Bogor Goals under the existing machinery of individual and collective actions. The result may not have been an ?A plus? but it did rate a solid B; B for ?broadly on track?.

The progress which has been achieved has been a combination of three elements: unilateral liberalisation; multilateral liberalisation under the WTO; and liberalisation in the context of sub-regional initiatives.

With continued commitment and political leadership, I see no reason why the momentum towards Bogor which has been built over the past five years should not be sustained.

Many APEC economies have undertaken autonomous programmes of domestic reform and opening of markets. APEC?s shared commitment to common goals provides a supportive environment for policies which economies implement in their own best interest.

Australia and New Zealand have been engaged in broadly similar reform programmes, but we are not unique.

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To highlight a few others ? China and Chinese Taipei, and now Russia and Viet Nam have been and will continue to liberalise their economies as part of their process of accession to the WTO.

Chile is part way through an autonomous tariff reduction programme which will see its tariffs, across the board, fall to 6 percent by 2003.

And in the economies of Asia, reform efforts have been given a boost in the aftermath of the economic crisis.

So to say that unilateral liberalisation within APEC has run out of steam is to overstate the case.

It is true that some APEC economies, including the largest, have made it clear that unilateral liberalisation in areas such as tariffs is not for them. But tariffs are only one part of the Osaka Action Agenda. As the New Zealand sponsored theme of Strengthening Markets demonstrates, there is far more to achieving the Bogor Goals and to having a competitive economy than simply cutting tariffs at the border.

APEC Leaders in Auckland stressed that ?open, transparent and well-governed markets, both domestic and international, are the essential foundation of prosperity?. I suspect that as individual economies demonstrate the truth of this statement through their actions, others will follow.

The only system which APEC? s founders rejected as being inconsistent with the organisation?s goals was blocism.

Open regionalism was, and still is, seen as the best way forward. Hand in hand with this approach went an enduring commitment to strengthening the multilateral trading system.

Support for a new Round of multilateral trade negotiations under the WTO was a key feature of the ?Auckland Challenge? issued by Leaders last September.

We all know what happened at Seattle.

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Leaders and Ministers will be rightly disappointed that their challenge was not taken up and that it did not prove possible to launch the Round as hoped. The challenge for us within APEC now is to build on the platform of Auckland and to make the maximum contribution we can to rebuilding momentum for the launch of a Round at the earliest opportunity.

Fortunately not all was lost at Seattle. Progress was made in increasing understanding and narrowing differences on most of the outstanding issues. And importantly negotiations on agriculture and services are underway in Geneva.

Services comprise the bulk of economic activity in most of our economies. And agriculture is one of the main areas where traditional barriers to market access are concentrated. It happens also to be an area of comparative advantage for many developing economies.

Liberalisation of the world?s agricultural markets would make a key contribution to global development.

As individual APEC economies we must now ensure that we take part in the negotiations to seek the abolition of agricultural export subsidies and unjustifiable export prohibitions and restrictions.

APEC and the World Trade Organisation need to work in the same direction. Progress in the WTO could make a huge contribution towards the Bogor Goals.

Economic integration initiatives between groups of economies have also made and will continue to make a contribution to the achievement of free and open trade and investment in the APEC region.

CER between Australia and New Zealand, AFTA in ASEAN, and NAFTA in North America are relatively longstanding examples.

But at Auckland and more so since Seattle there has been a proliferation of new initiatives between widely diverse groups of economies.

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This perhaps signals an impatience to get on with the job of liberalisation. It is worthwhile considering how we can best harness this energy to our common good.

I see two ways in which regional liberalisation agreements can contribute to the realisation of the Bogor Goals ? either top-down, or bottom-up.

The top-down approach would involve the collective negotiation of an FTA amongst the APEC membership after the upcoming WTO negotiations ? essentially, the concept that President Zedillo of Mexico raised at Auckland.

President Zedillo?s suggestion has merit in that it attaches primacy to negotiating in the WTO and it provides us with much more information about the nature of the task in APEC, if and when we come to that point.

Meanwhile we should look to take advantage of the bottom-up approach.

As I noted, following Auckland there are many sub-regional liberalisation initiatives underway ? such as New Zealand's negotiations with Singapore, and the initiative we and Australia are exploring with ASEAN.

As well, Korea is negotiating with Chile and is undertaking studies with New Zealand and Japan; and Japan is studying an agreement with Singapore.

One-way to harness the energy of a bottom-up approach would be to envisage these initiatives as ?building blocks? which could be knitted together. Clearly this would be best if the architecture of the individual agreements was consistent with that of the Bogor Goal in key respects such as comprehensiveness and the outer timeframes of 2010/2020.

As you can see, I am optimistic that effective ways to achieve substantial liberalisation exist. But, the seizing of those opportunities requires political commitment and leadership.

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Kofi Annan said at UNCTAD recently that ?the main losers in today?s very unequal world are not those who are too much exposed to globalisation. They are those who have been left out.?

APEC Leaders in Auckland were already thinking along the same lines in recognising that their task ?is to set the course which will allow for sustainable development and which will deliver a strong social dividend to our populations?.

They noted that task involved ensuring ?full and successful participation by all of our populations in the modern economy.?

To take our people with us through the process of change, we must deliver on this task. And we must better explain how the policies we intend to implement will do that.

ENDS

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