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Helec Clark Speech: Asia/Pacific Trade

Rt Hon Helen Clark
Prime Minister

ADDRESS TO


AUCKLAND CHAMBER OF COMMERCE/
ASEAN NZ Combined Business Council

Carlton Hotel
Auckland

1.00 pm


23 November 2000


Thank you for the invitation to speak to you today. It was suggested that I should speak on New Zealand's place in Asia-Pacific trade. Having just returned from the APEC Leaders' Summit and being the leader of a government which has taken a number of initiatives in Asia-Pacific trade this year, I welcome the opportunity to outline our approach to trade initiatives in our region.

For us, trade means the opportunity to concentrate on the things we do best, and to use the export income we generate to increase our purchasing power for what we can’t make, or for what others can do better or more effectively. Inward investment allows us to pick up quickly on best practice in technology and entrepreneurship, and gives us access to the marketing networks already built up by others.

It is generally recognised that trade and investment have been the motor behind the unprecedented prosperity which many countries have experienced
in recent decades. East Asia has been the standout performer, and the relatively open United States market has been the key prize for countries looking to develop internationally competitive export sectors.

Led by Japan, the East Asian economies tended to concentrate first on the American market, but now look increasingly to trade with each other. As each economy has become more sophisticated, it has tended to leave the simpler, more labour-intensive industries behind for another economy to pick up.

The popular metaphors often used for trade do not help a clear understanding of what is involved. Trade is often likened to a game or even a war. But unlike those arenas, where for every winner there is by definition a loser, trade has the potential to benefit both sides. It is up to governments to ensure that their nations are in a position to prosper from freer trade.

The growth in the Asia-Pacific economies has been impressive by any standards. Between 1989 and 1999 (a period which includes the Asian economic crisis) real average incomes per person in the 21 member economies of APEC increased by sixteen per cent in the high-income economies and sixty one per cent in the lower-income economies (compared with a decline of seven per cent on average for non-APEC lower-income economies).

There have been corresponding improvements in social wellbeing, as measured by some important indicators. The United Nations Development Programme’s Human Development Index, for example, - a broad measure which includes income, education, and life expectancy - showed between 1985 and 1997 an improvement of nearly twenty per cent in China, over fifteen per cent in Indonesia, and over ten per cent in Korea, Singapore, Malaysia, and Thailand. (The corresponding figure for New Zealand is 4.5%, 6.3% for Australia, and 3.3% for the United States reflecting our already developed country status.). There will have been some slippage in some Asian countries as a result of the economic crisis but one would not expect its effects to be permanent.

The evidence suggests that the simplistic slogan we sometimes hear that trade makes rich countries richer and poor countries poorer did not hold up for our region. But it is also true that there is nothing inherent in the international trading and investment system which ensures that the benefits are distributed equitably, either between countries or within societies. That is where the role of governments is important.

Labour in government is committed to using trade and inward investment to open up opportunities for New Zealanders. Our location and the stand-out economic growth in the region make the Asia-Pacific an obvious priority for our efforts. The government makes its own contribution both at home, through policies to develop skills and an innovative economy, and internationally by negotiating reciprocal market opening arrangements and by participating actively and constructively in the institutions which underpin the rules-based international trading system.

The most important of these institutions for New Zealand is the World Trade Organisation, where the representatives of governments negotiate agreements and argue their case in trade disputes. But given the events in Seattle, reinforced by those in Melbourne and Prague, it is likely that progress in the WTO will be slower than New Zealand would like. We are therefore also pursuing improved market access through regional efforts, such as APEC and AFTA/CER and through sub-regional arrangements such as the Closer Economic Partnership with Singapore which I signed just over a week ago.

Indeed I would be so bold as to say that New Zealand and Singapore made the running on trade at APEC last week. We had achieved a modern, model, and comprehensive trade agreement between us. Others are now queuing to be part of the action.

It was at last year’s APEC Leaders' meeting in Auckland, that New Zealand and Singapore first announced a joint intention to negotiate a third generation trade agreement. The agreement signed last Tuesday, covers goods, services, and investment, and goes beyond what is being achieved in the WTO.
One of the strategic reasons for pursuing the agreement was to contribute to the momentum for better trade access throughout the region. A few weeks after the Auckland APEC Leaders' meeting, economic ministers from ASEAN, Australia and New Zealand agreed to establish a task force to investigate the feasibility of an AFTA/CER free trade agreement. Hon Bill Birch has continued to work this year as New Zealand's representative on that task force.

The task force met three times this year. Its final report recommended that a free trade area linking CER and AFTA was not only feasible, but also advisable. An economic study estimated that over the period 2000-2020 New Zealand would benefit by over NZ$7 billion and the region by over NZ$110 billion. Significant other benefits would also be likely to accrue, in terms of productivity, investment and welfare. These estimates could well be conservative as the dynamic impacts of trade agreements often exceed expectations.

Hon Jim Sutton, Minister for Trade Negotiations, met his Australian and ASEAN colleagues in Chiang Mai, Thailand, last month to consider the task force recommendations and to decide what the next steps for the AFTA/CER concept should be.

As was expected, the meeting threw up a variety of different views about the concept. Indonesia and Malaysia in particular were not keen to proceed quickly with AFTA/CER talks. Malaysia’s trade minister, however, did express some interest in the Closer Economic Partnership negotiated between Singapore and New Zealand and thought that something similar could be the eventual goal for ASEAN and CER.

In Chiang Mai, the trade ministers were able to take the AFTA/CER process to a new stage. It was agreed that governments should consider the recommendations of the task force and look into the idea of a Closer Economic Partnership (CEP) between ASEAN and CER. That may not sound like much progress. But we have always been aware that it would take time to work through all the issues with twelve very different countries. What we have now is a process to carry the idea forward.

We believe New Zealand would gain from an AFTA/CER linkage. The linkage would have political as well as economic advantages and would reinforce the close relationships New Zealand and Australia share with ASEAN. The removal of tariffs alone would mean New Zealand exporters keeping the NZ$90 million paid each year in customs duties. And, as the ASEAN region continues to grow, it offers new trade prospects for New Zealand exporters. For these reasons, Labour in government will continue to support the development of closer economic links with ASEAN through AFTA/CER.

Now to APEC, through which New Zealand is also developing closer economic linkages with the nations of ASEAN. APEC's membership stands at twenty one members and includes the major economies of North East and South East Asia, the US and Canada, Mexico, Chile and Peru, Russia, Australia, Papua New Guinea, as well as New Zealand. Its members account for over half the world's economy, and over the past ten years for nearly seventy per cent of growth in the world economy. This is a club worth belonging to. I certainly enjoyed attending the Summit and being able to be part of a debate about globalisation, trade, and broad economic, technological and social issues with leaders from such a wide range of nations.

For some years now, I have expressed my concern that APEC's twin goals of trade liberalisation and economic development should receive equal prominence. Prior to the Asian economic crisis the emphasis was very much on the former. But the crisis left Asia's economies feeling very exposed and increasingly concerned about economic and technological development. This year I believe APEC achieved a better balance in its work and that that will be to the long term benefit of the organisation.

In 1994 at Bogor, Indonesia, APEC leaders made a commitment to achieve free trade throughout the region by 2010 in the case of the developed economies and 2020 for the developing economies. The path to those ends, however, was rather ill defined. With 2010 now only a decade away, little progress had been made. It was to stimulate more action on the trade front that New Zealand and Singapore entered into talks with each other, and, going by the interest we have generated, the effect will be positive.

It was announced at APEC that Australia is to initiate similar negotiations with Singapore, as is the United States. Singapore is also engaged in exploratory talks with Japan. In addition, New Zealand has exploratory talks with Hong Kong, and, together with Singapore still hopes to engage Chile in a three way agreement.

Our engagement in these activities is strategic; it is designed to build trade bridges across the wider Asia-Pacific region, which will give us a practical means of achieving APEC's longer term goals.

But for these agreements to advance APEC's goals and our goals for the WTO, it is important that they are consistent with them and do not undermine them. Were APEC countries, for example, to sign agreements with each other which excluded whole sectors from coverage or were not open to others to join, that would undermine the goals all APEC countries freely signed up to.

Economic and technical co-operation is becoming an increasingly important part of APEC's work. There is a vast array of projects and initiatives, under way and completed, for developing peoples’ capacity to thrive in the rapidly changing economy. A concern New Zealand had was that the results of all the studies and training were not readily accessible. We therefore sponsored the development of a new APEC website which I launched formally in Brunei. It provides easy access to all the information held in APEC and kindred organisations on topics from human resource development to trade promotion, small and medium-sized enterprises, marine resource conservation, and sustainable development - to name but a small part of the work APEC is involved in.

The website, rather grandly named the Ecotech Information Clearing House, also provides for informal on-line discussions and a virtual market place for matching up service providers and those needing their services. This initiative has been particularly well received. For New Zealanders, it will provide access to a wealth of information, and opportunities for many of our institutions and talented individuals to market their services internationally.

The APEC Leaders' Declaration recognised the Clearing House as an important addition to the interaction between governments and the community and a valuable way of making economic and technical information more accessible.
The Australians too have contributed a one-stop “information portal”, BizApec.com, to allow businesses to access opportunities throughout the region.
The centrepiece of the APEC summit I attended was the day of discussions, among leaders only, on globalisation and more free trade. Despite the diversity in the circumstances of our individual economies, we are all wrestling with the same questions of how to harness these powerful forces to deliver real improvements to the lives of our people, particularly those in vulnerable groups, and to manage our way through the change and accompanying disruption of people’s lives. There was general agreement that pursuing the complementary paths of liberalisation and capacity building is the right approach.
As a tangible demonstration of New Zealand’s resolve to help poorer countries reap the benefits of globalisation by participating in trade, I announced New Zealand's decision to provide unrestricted access to our markets for the 48 designated Least Developed Countries. These account for a small proportion of imports here, almost a third of which already have duty free access under the SPARTECA Agreement. I encouraged other leaders to follow our lead and that already taken by the European Union and leverage this initiative into a major opportunity for the Least Developed Countries.

Frankly, I have been astonished by some of the ill informed reaction to this move. Only 0.07 per cent of New Zealand's imports come from these countries. Yet I have heard absurd claims that open access for them will lead to the loss of many thousands of New Zealand jobs. All I can say is that if New Zealand wants to compete with the products of Chad, Djibouti, Somalia, and Bangladesh, then we deserve fourth world, not first world, status.

A feature of the APEC Leaders' Declaration, Delivering to the Community, was the adoption of an Action Agenda for the New Economy. This articulates a programme, for strengthening institutions, developing a policy environment conducive for investment in infrastructure and the development of technology, and building knowledge and entrepreneurship.

Extending internet access was identified as a key priority for all of APEC and especially for its developing economies. New APEC initiatives include the development of a network of Skills Development Centres across the region, a high-level symposium on e-commerce and paperless trading, co-operation towards e-government, the creation of a Cyber Education Network, designing training and consulting programmes on the understanding and use of information and communications technology in business, and addressing life long employability and learning. We in New Zealand are making good progress in these areas and are in a good position to contribute to the APEC-wide work. We are the lead country in the work on consumer protection being undertaken by APEC's E-commerce Steering Group.

The Asian economic crisis exposed the need for significant reform in the region's financial and legal systems and corporate governance. New Zealand has been playing a leading role within APEC in this area. This year we have co-chaired the APEC Finance Ministers' process and led initiatives on promoting more stable capital flows. We also led APEC's work on the development of more effective corporate law and competition policy.

This year, preparatory work in APEC has given rise to innovation in the important sector of air services. Up until now this sector has been governed by an unwieldy series of bilateral agreements. In Brunei we were able to announce an "Open Skies" agreement among New Zealand, the United States, Chile, Singapore, and Brunei. Moving from bilateral negotiations to agreements involving larger groups of countries is a promising approach and should allow us to respond more quickly in future to new developments and opportunities. Nonetheless, the new bilateral Open Skies Agreement between New Zealand and Australia signed this week is also to be welcomed.

I think you will agree with me that our new government has continued to play a very active part in trade and economic initiatives in our region. We do so because of our belief in the economic benefits for New Zealand.
In the year to June, for example, our exports to Singapore were up thirty four per cent in value. While some of that increase will be due to currency depreciation, it is our view that a good deal of it is due to the much higher profile New Zealand, and Singapore have been gaining in each other's markets. Results like these speak for themselves.

I have myself engaged the Chilean President four times this year on the prospects for a trilateral trade agreement. Chile's underdeveloped dairy industry has been the sticking point, but we have now agreed over the next seven months to explore how we might assist its further development. Our aim will be to negotiate with Chile a timetable for elimination of its tariffs against our dairy produce to enable the wider three way talks with Singapore to occur.

While my focus today has been on the Asia-Pacific, I would like to note briefly two other initiatives. We are becoming much more active in Latin America and have launched a new New Zealand strategy for relationships with that region, in which the potential for trade is a key feature.

Next year, I plan to go to Brazil to open our first New Zealand embassy there. It is hoped to extend the visit also to Argentina and Mexico and to have a trade mission accompany me.

A small trade mission brought together by Dr Ross Armstrong accompanied me to Turkey this year. It is a hard market to break into, but it is important to build up the relationship. In time, Turkey will enter the European Union, in which it will be the second largest nation and influential. In addition, it acts as an entry point for access to the markets of the former Soviet republics in its neighbourhood.

In conclusion, I want to thank the Auckland Chamber of Commerce and the ASEAN New Zealand Combined Business Council for their continuing interest in the work of APEC. The Chamber played a key role in organising the APEC CEO Summit here last year, and prominent Aucklanders were at this year's Summit in Brunei.
The New Zealanders who have served on the APEC Business Advisory Council, Hon Philip Burdon, Fran Wilde, and Douglas Myers, have also worked extraordinarily hard to advance New Zealand's interest, especially in the improvement of policies for the whole food sector. Their work will now be followed through by the three new members; Sir Dryden Spring, Peter Masfen and Wendy Pye.
Thank you once again for the opportunity to address you on our Asia-Pacific trade policy which is of such critical importance to New Zealand's future.

ENDS

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