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Sutton To National Press Club, Tokyo, Japan

Hon Jim Sutton Speech Notes

National Press Club, Tokyo, Japan

Ladies and Gentlemen

I'm delighted to be making my first visit to Japan. Thank you for the opportunity to speak to you today.

I welcome the opportunity to outline New Zealand's approach to trade initiatives in our region and globally, and in particular to underline the extent to which New Zealand and Japan are partners with strong, common interests in the health and vitality of the international trading system.

Let's start by talking about the nature of trade.

The popular metaphors used for trade often liken it to a game or even something more sinister. If you had been present, as I was, in Seattle at the WTO Ministerial meeting in 1999, you might have had some justification for this view.

But unlike a game or a contest, in the case of trade, there is the potential for both sides to be winners.

What is trade about? Quite simply, for a country, it 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.

By concentrating on doing the things we do best, nations, like individuals, are more productive. Welfare is enhanced, and individuals can give expression to their talent and initiative. The result is economic growth.

It is generally recognised that trade and investment have been the engine behind the unprecedented prosperity which many countries have experienced in recent decades.

Notwithstanding the regional crisis of the late 1990s, the Asia Pacific region has been the standout performer.

Between 1989 and 1999, real average incomes per person in the 21 member economies of APEC increased by 16 percent in the high income economies and by 61% in the lower income economies. There have been corresponding improvements in social well-being.

This suggests that the simplistic slogan we sometimes hear, that trade makes the rich richer and the poor poorer, is not generally true.

But it is true that there is nothing inherent in the international trade and investment system that ensures that the benefits are distributed equitably, either between countries or within societies. This is where the role of governments comes in.

My government has made clear that it is committed to using trade and investment to open up opportunities for New Zealanders.

The government makes its own contribution both at home, through policies to develop skills and provide appropriate regulation, and internationally, by negotiating reciprocal market opening and by participating actively and constructively in the institutions that underpin the rules-based international trading system.

The most important of these institutions for New Zealand as well as for Japan is the World Trade Organisation.

The launch of a WTO Round is the number one trade priority for New Zealand.

We are paying a heavy price for the failure of Seattle in late 1999.

Nearly a third - 31.4% - of New Zealand's GDP is generated by export activity, but the returns from that are decimated by the costs of exporting over high market barriers in other countries, including Japan. 60% of our exports still come from farming, forestry, fisheries and horticulture, which face some of the highest barriers of all.

Let me give you an example of the inequalities that we face.

We recently prepared in New Zealand a relative tariff ratio index of our trade with our bilateral partners, including Japan. This is based on a calculation which says that if we sent all of our exports to Japan, what would be the average duty that we paid? The answer is 80.44%.

By contrast, if you apply the index in the other direction, and sent all Japan's exports to New Zealand, the average duty Japanese exporters would pay is 2.76%.

The study revealed that we face higher barriers in Japan than any of our other major markets. The reason for that is the high barriers that Japan still imposes against agricultural products in particular.

So you will understand that New Zealanders' feelings on these issues sometimes go beyond frustration to real resentment. That sense of injustice does not of course single out Japan, which is in fact our third largest market, despite the high barriers around it. And there are extensive people to people contacts which New Zealanders value very much.

But such examples give you a sobering sense of the price New Zealand pays for protectionism in our export markets.

I am feeling more optimistic than I was last year about the prospects for launching a new WTO Round. In the 15 months since the failure of Seattle, the WTO, led by Director-General Moore, has worked hard to rebuild the confidence of its members in the multilateral trade system.

The fact that there is still a long queue of countries wanting to join suggests that many governments accept that the WTO has a critical role to play in setting equitable grounds rules for international trade.

WTO members have also been doing a lot of soul searching in that time. We've thought about what went wrong in Seattle and we've been taking steps to do something about it.

One thing was very clear. There were new voices wanting to have a say in multilateral trade policy, both inside the meeting rooms and outside in the streets. Developing countries would not be ignored. Nor would the protestors. The WTO membership has been looking for ways to address both.

The need for a WTO Round is one of the reasons I am here in Tokyo. Japan has played a leading role in encouraging other WTO members to recognise the importance of further trade liberalisation, and the need to provide a negotiating forum to address the desires of so many countries for progress.

If you doubt that desire, you need only look at the proliferation of announcements of negotiations on regional trade agreements we have seen around the world over the past 15 months.

We in New Zealand think that these arrangements, if rightly managed, can contribute to progress in the WTO. They can also be a means of advancing the APEC Bogor goal of free trade and investment in the Asia Pacific region by 2010 for developed countries.

New Zealand already has the experience of our longstanding agreement with Australia, CER. Last year we negotiated a Closer Economic Partnership agreement with Singapore.

It came into effect on 1 January 2001, covers all goods, services and investment, and is regarded as a model of its type. Like Japan, we have other discussions underway with a range of countries.

The important thing is to make sure that we build on these initiatives to progress the multilateral agenda.

I welcome Japan's strong desire to play a leadership role in launching a Round, and I will be lending New Zealand's full support to the efforts of my Japanese colleagues in that work.

I'm here in Tokyo also to talk about the bilateral trade and economic relationship between Japan and New Zealand. There is much that we can do together outside a WTO Round to deepen our economic partnership.

Our economic and trade links with Japan are firmly established among our most important. Formal ties between our two countries actually stretch back to a 1928 trade treaty. Today Japan is one of our top three largest trading partners. Trade between us is evenly balanced.

Your market remains our most important for many of our key exports, including forest products, aluminium, cheese, vegetables, kiwifruit, seafood and fresh chilled beef.

Japan is also our most important source of education services revenue and our second most important source of tourists by value. These linkages are growing and diversifying.

New Zealand has high quality products to sell and we are reliable suppliers, keen to meet market demands and the needs of discerning consumers.

We don't have a problem with that. But we do when market barriers or restrictions are put up as a means of severely limiting the trade and protecting domestic producers.

Food security in developed countries used to be about being self sufficient to overcome the threat of disasters caused by nature or humankind.

Time has passed. Advances in technology, communication, and transport have resolved many of the problems of that period. These days ensuring diverse, reliable, secure supplies of food from a variety of sources provides the best means of food security for highly developed countries with high incomes.

Open trade is integral to food security.

From your perspective, our market, while small, is one of the most open in the world. Through the CER agreement we have with Australia integrating the two economies, our market offers wider business opportunities. A wide range of Japanese imports, including cars, machinery and industrial and consumer electronics, all form an integral part of our industrial and consumer markets.

New Zealand welcomes foreign investment and we'd like to see more from Japan. Through taking investment opportunities in New Zealand, Japanese companies have gained access to much needed resources, such as aluminium, forestry, fisheries and tourism facilities.

By the same token, Japanese investment in such facilities provide jobs, technology and capital, contributing to our industrial and economic development generally.

Two recent examples are worth a mention.

Last year Heinz Japan upgraded and expanded its food processing facilities near Hastings and earlier this year Nissui in a joint venture with the Treaty of Waitangi Fisheries Commission purchased a significant share of a New Zealand fishing company Sealords.

In both cases, these companies are looking to supply the domestic market through expanding their international activities. It's an outcome that both countries benefit from.

Given the disparity in size between our economies, it is not surprising that our share of Japan's total imports is only 0.6%. We could hardly be described as an economic threat. There is - and should be - plenty of scope to increase this share to mutual benefit.

What might that mean in practice?

Let me make one thing certainly clear: I would certainly aspire to seeing a comprehensive liberalising arrangement between us.

Nor should that be particularly surprising: Both our governments have, after all, pledged - via APEC - to get to precisely that point - free trade and investment in the region-by 2010.

And there is no doubt that the new WTO Round to which both our Governments are committed will be central in moving us to that objective.

Some might even see our CEP with Singapore as a model for future arrangements between Japan and New Zealand.

I certainly would applaud their vision. But, when it comes to the big picture, I have to confess to preferring the one that has all the canvass painted in - no blank corners!

Our Singapore agreement reflects that vision. It is comprehensive in coverage - there are no product exemptions.

But I am realistic. We know this vision will take time to become reality. Our approach is to make progress where we can.

We should still look to creative steps to energise our bilateral trade and investment relationship and to focus private sector attention in both countries.

I have asked the private sector in New Zealand to give some thought to this.

Business needs and interests must be in the forefront, motivating our two governments to consider the scope and nature of any new economic partnership.

We are open to ideas which could be explored further, without detracting from our WTO or APEC commitments.

The ultimate aim, as Trade Minister Hiranuma said last year in the context of the proposed Japan/Singapore FTA, is "to create a flexible, borderless business environment". How we go about this depends on our respective business sectors, the leadership of our governments and wider regional and multilateral developments.

I have no doubt that moving in this direction, whether in the WTO, APEC or bilaterally, is in the best interests of our economies, our businesses, workers and ultimately to all the people of both countries.

Office of Hon Jim Sutton

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