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Jim Sutton Speech - APEC CEOs summit, Auckland

Hon. Jim Sutton
Speech Notes
21 March 2001
APEC CEOs summit, Auckland

Ladies and Gentlemen: I am delighted to be present tonight at the launch of your group. NZ APEC CEO Summit members are to be congratulated on recognising the need for a business forum to discuss and promote the benefits to New Zealand of trade liberalisation.

This is an important initiative, and one which I support fully.

It is also a timely initiative.

We face uncertainty in the global economy. The economic slowdown in the United States will play out around the world in various ways. We are likely to experience the impact not only in the US market itself, but elsewhere as global trading conditions become tougher.

When you add to that the resurgent difficulties in Japan and the slowdown in the market across the Tasman, the outlook for New Zealand exporters is one of belt tightening.

It is precisely at times like this that we have to be extra vigilant about the actions of our trading partners.

Protectionist impulses are never far from the surface.

And they are difficult to contain if you are, as many of our trading partners are, a democratic government faced with demands for help from industries under pressure, as well as from sections of civil society who sense an opportunity to pursue barriers to trade as an answer to non trade objectives.

It is counter-intuitive to many that the answer in times of difficulty is to maintain open economies and to take international trade liberalisation further.

In New Zealand, where trade is vital to our economic wellbeing and our comparative advantage lies in exporting goods that continue to face some of the highest market barriers around the world, you would think that making the case for further international trade liberalisation would be easy.

It is not.

The message that trade is an important driver of economic growth and job creation is not well understood.

Nor is the message that international trade can be conducted with due regard for environmental sustainability, without imposing all sorts of trade restrictions.

Which is why I am pleased to see the launching of the Free Trade Network as a vehicle for promoting public debate on the benefits of trade liberalisation.

The task of communicating these messages has not only become more urgent but more difficult. For many in civil society, globalisation and trade liberalisation conjure up images of the streets of Seattle in late 1999, when the World Treade Organisation tried and failed to launch a new round of multilateral trade negotiations.

The messages that resonated during that week were not the ones being debated inside the conference hall. They were those of the demonstrators outside, of their claims that the international trade rules were geared to the lowest common denominator; that they favoured the interests of multinational business over sovereign governments; that international trade was conducted at the expense of basic workers' rights; that trade harmed the environment; that the rules were skewed against developing countries.

The reason that these messages resonated was simple. The events at Seattle exposed a quite high degree of public unease, and indeed fear, about how the international trading system - and globalisation more broadly - affects people's daily lives.

Although more than 200 distinct groups ? ranging from "Free Tibet" to "Save the Turtles" ? were on the streets of Seattle, the biggest group was the United States steel workers, whose motives were very straight forward: they didn't want to face competition from the workers of foreign places, such as New Zealand.

Seattle showed us all that many people simply do not see how a rules based international trading system contributes to global economic growth and prosperity.

Part of the problem is one of terminology. Without wanting to cast any aspersions on your choice of name for the Free Trade Network, I admit that I myself have some difficulties with the phrase "free trade". It conjures up images of the law of the jungle.

That is not the type of trade that the New Zealand government supports or advocates. I would hate to think where New Zealand - small, geographically isolated - would be if trade were conducted on the basis of brute, unbridled strength.

Many people would promote the term "fair trade" as an alternative. But I have problems with that too.

All too often, this is code for arguing for protectionist measures, often to achieve non-trade objectives. Restricting imports is an easy way of claiming you are doing something. But the causes of most problems are domestic and complex and they don't go away simply because you have shut out your trading partners.

I prefer the phrase "rules based" to describe the international trading system. The World Trade Organisation exists as a forum for governments to negotiate the ground rules for trade to be conducted on a basis of equality amongst the players. For New Zealand, it provides us with both our best opportunity and our best protection to compete fairly in the global economy, regardless of our size, or our political, or military power.

Having settled the question of terminology, another problem is that to communicate the benefits of trade liberalisation, you have to communicate also the importance of the decisions you are making at home in broader economic and social policy areas. The external debate is an extension of the domestic one.

This is an issue that the Coalition Government has sought to address. The messages at Seattle were ones that we had been hearing for some time. They are essentially calls for government to be accountable for the social and environmental consequences of its economic and trade policies and to ensure that we put into place measures to assist those displaced or disadvantaged by change.

The response being made to this by the present government is not confined to the trade policy area, but I am going to comment only on the trade side tonight.

The first response we made was to look at our tariff settings. We would not disagree that tariffs were an issue that our predecessors had to address. But we found ourselves in a position where we had few tariffs left. 95% by value of our imports enter duty free; over 90% of our current applied tariffs are zero. The average weighted applied tariff is now 0.7%.

Our trading partners, by contrast, have taken a more leisurely approach to tariff reform. Our exports, especially of agricultural, horticultural, fisheries and forestry products, continue to face some of the highest barriers in the world.

Our government determined that we could afford to provide breathing space for those industries that still had tariff assistance and were still grappling with adjustment problems. Hence our decision last year to freeze tariffs for a five year period.

The government's future tariff policy is the subject of review this year. But our current approachs is that tariff reductions should be the result of reciprocal trade negotiations, where both sides are making adjustments and reaping mutual benefits.

I have met trade ministers who have said to me, in effect: "why should we negotiate trade liberalisation with you ? we already have free access to your market."

A second area where the Coalition government has taken a different approach is in the area of labour standards and environmental issues.

We believe that there are legitimate labour rights and environment issues that need to be integrated with trade agreements. Equally, however, we believe strongly that these should not be used as devices to protect against fair competition from developing countries, or indeed any country.

There has been something of a North/South divide on these issues. Developing countries, with some justification in my view, have been suspicious of the motivation behind the push from some of those pushing for the WTO to address labour standards issues and environmental issues.

But I think we need to convince developing countries that the debate is not one of free trade and market access against protectionism. It is really one about the values that underpin the international trading system. Former President Clinton described it simply as "trade with a human face".

In the case of labour, developing countries, as much as developed ones, pursue trade liberalisation to increase the welfare of their people. They expect to evolve improved labour standards and conditions as part of that process. They equally expect to be assisted by developed countries along that path, and not penalised.

Usefully in my view, the debate on trade and labour has increasingly moved towards addressing fundamental labour rights, such as the elimination of forced or compulsory labour or the worst forms of child labour, an end to discrimination in the workplace.

As a result the debate has become less an economic one and more about basic, universal human rights. And few would argue that the international trading system should be exempt from such fundamental values.

On trade and environment, we have key interests at stake. We have high environmental standards on the one hand. On the other, our economic structure makes us more vulnerable than most to protectionist instincts which can threaten exports of our primary products.

In that respect, we can provide a bridge between developing country interests, who fear the exploitation of this issue by protectionist forces, and those who argue that environmental causes are more important than economic ones, even for people in poverty.

It follows from my comments that I believe the messages that were heard in the streets of Seattle in 1999, and since then in the streets outside most international economic and trade meetings, should not be ignored simply because I disagree with their contention that trade is the problem and trade restrictions the answer.

Many of those in Seattle were rightly drawing attention to questions about how trade policy is woven into broader economic and social issues, and the consequences of getting things wrong.

There was one group that was conspicuous by its absence in the streets around Seattle. That was business. I understand why that was so.

But the consequence was that it yielded the public ground to those arguing against further trade liberalisation. And it left the business sector in the position of being reactive, rather than proactive, in arguing the case for trade liberalisation before a largely disinterested public.

We've been on the back foot publicly ever since. It is important, this year, as the government pursues other initiatives to break down the barriers internationally to New Zealand export interests, that the business sector be proactive in making its case publicly.

You have my support in this endeavour, just as I know I have your support in pursuing the opportunities for improving New Zealand's position in international markets.


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