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Sutoon Speech: US-NZ Business Council

Hon Jim Sutton

Speech Notes 1 May 2001

US-NZ Business Council, Washington DC, United States

Thank you, Ambassador, for your generous introduction and good morning to you all.

I would like to join Mr Bolger in welcoming you here to the New Zealand Embassy this morning. I would also like to thank the US/NZ Council for their assistance in facilitating this breakfast gathering.

At the outset let me pay tribute to the sterling contribution that Ambassador Paul Cleveland has made, as President of the Council, to enhancing the friendship of our two countries. We wish you well, Paul, in your new role with the US/Indonesia Council and know you will continue also to take an active interest in things New Zealand.

I would also like to welcome council president-elect Fred Benson. Fred needs no introduction in this town as your presence here this morning illustrates. I am delighted that you are coming on board Fred. We are looking forward to your leadership in helping promote enhanced bilateral relations.

Ladies and gentlemen

New Zealand, like others, has taken heart from President Bush's stated commitment to free trade. As a result we are hopeful of renewed and vigorous US leadership on the international trade agenda.

New Zealand and the United States have long worked closely together, as partners, to advance the cause of trade liberalisation. Today I want to talk about some of the opportunities I see to re-invigorate that partnership to drive the trade liberalisation agenda in both regional and multilateral fora.

This year, at the next World Trade Organisation Ministerial in Qatar, we have another chance to launch a Round.

As we do so we need to communicate better to civil society and the general public that trade is not an end in itself but that it makes a key contribution to continued growth, prosperity and peace - as it has over the remarkable second half of the 20th century.

Equally, we need a better meeting of minds between member governments so that all participants can feel their interests are being adequately addressed

United States leadership will be vital on both counts. The task of building consensus on a Round, among the WTO's 140 members is Herculean.

I look forward to working with the Administration in pursuit of common interests as we approach that task.

Foremost amongst those common interests is agriculture. We worked closely together in the Uruguay Round to get agriculture firmly into the WTO agenda. That was a significant achievement but a recent OECD report shows how much remains to be done.

Agriculture accounts for about one-third of all WTO disputes including some of the most contentious. Subsidies for agriculture in OECD countries are running at $360 billion per year with three quarters of that total still being highly trade distortive measures. Agricultural tariffs average over 40 percent. That's about the level of industrial tariffs 50 years ago and ten times the current industrial average.

A large part of the workforce in most of the world's developing countries are engaged in agriculture or food production. They, and the efficient farmers of the developed countries, must not be made to wait another 50 years to be able to fairly exploit their comparative advantage in world agricultural markets.

Liberalising agricultural trade remains a key New Zealand priority and one we share with the United States. New Zealand could also subscribe to the recent proposal from US industry to eliminate industrial tariffs in the WTO.

Multilateral free trade in goods and services remains the overall objective of New Zealand's trade policy. But we also agree with the Administration that well constructed regional and bilateral initiatives can serve as building blocks for progress.

Regionally, New Zealand and the United States are jointly founder members of APEC, established in 1989 with strong leadership also from Australia.

For New Zealand, and I suspect the United States, APEC is the most significant economic forum we belong to, short of the WTO. It binds together half the world's population and the most dynamic half of the global economy - in the common pursuit of stability, security and prosperity.

For New Zealand the APEC economies comprise more than 70 percent of our two-way trade and 80 percent of our inwards FDI. We welcomed the 1994 commitment of APEC Leaders to achieve free and open trade and investment in the region, no later than 2010 for developed economies and no later than 2020 for developing economies.

That commitment has been reiterated by APEC Leaders each year since 1994. We have made generally good progress along the way. But we have already used up more than a third of the time available and 2010 is now less than 10 years away.

In thinking of timelines, some people compare the APEC 2010 date with the FTAA 2005 timeframe. It is important to note, however, that 2005 is the date by which FTAA participants are to have negotiated an agreement on how they will move towards free trade from that time forward. By contrast, for APEC's developed economies 2010 is the date by which free trade is to have been fully achieved.

The APEC clock is well and truly ticking.

The WTO will hopefully help get us part of the way there. But it is increasingly clear that other mechanisms will be needed to catalyse APEC from within. Right now the most promising candidate is APEC members, bilaterally or in small groups, acting to liberalise trade amongst themselves, particularly across the Pacific.

Again US leadership is crucial and New Zealand looks to play a partnership role.

New Zealand has been actively seeking a closer economic partnership with the United States for over 10 years. We made an initial step forward together in 1992 with the conclusion of a bilateral Trade and Investment Framework Agreement..

Bilaterally the United States is New Zealand's second largest economic partner.

With our largest economic partner, Australia, we have the CER (Closer Economic Relations) Agreement which provides free trade in all goods and essentially all services. Our economies are closely integrated to our quantifiably mutual benefit. We would like to achieve the same with our second largest economic partner, the United States.

That is why I have come to Washington in the early days of the new Administration: to communicate New Zealand's interest in trade liberalisation with the United States and to explore with business people, politicians and officials the likely enthusiasm for that idea on this side of the Pacific.

For the past several years we have been encouraged, by the United States, to look at possible liberalisation of NZ/US trade through the prism of the so-called P5 (Pacific Five): the United States, Chile, Singapore, Australia and New Zealand.

We were and remain interested in the P5 concept, including for its relevance in the APEC context. But we are not hung up on P5. Lesser constellations are also attractive to us. And, as it happens, P5 countries are exploring these constellations.

As I have said, we have CER with Australia. New Zealand has negotiated an agreement with Singapore which is now being implemented, and Australia has begun negotiations with Singapore. And we and Singapore are exploring opportunities to negotiate with Chile.

Here, the United States has started negotiations with Singapore and Chile. New Zealand hopes the United States will add both us and Australia to the list of countries with which it is negotiating trade agreements.

For our part we are open to how the United States would wish to approach such negotiations; bilaterally or as part of a broader process. As I have spoken with various people around town it is noticeable the extent to which Australia and New Zealand are perceived together.

I say noticeable, but not surprising. We inhabit the same part of the world, we share a commitment to democratic values and respect for the individual, and together we have fought alongside the United States in the major conflicts of the past 100 years. And for US business, under CER Australia and New Zealand are essentially a single market.

It is pretty obvious why New Zealand is interested in liberalising trade with the economic powerhouse of the United States. But what's in it for you?

According to our figures New Zealand, along with Australia, remains one of the few countries with which the United States has a trade surplus. And based on your figures, CER is the United States 8th largest export destination.

New Zealand contributes approximately 15% to the combined Australasian economy based on GDP size. While we are a relatively small market for US products, we are an enthusiastic one. On a per capita basis the average New Zealander buys 95 times as much from the United States as the average American buys from us. And New Zealand continues to be home to a rising amount of FDI from the United States.

There are also strong strategic reasons for the United States to engage actively in our part of the world. We have relatively few bilateral problems on the trade front and the adjustment issues in liberalising trade in sensitive sectors are not intractable. We also have a familiar business culture and robust labour and environmental standards.

That means we have the opportunity to progress negotiations quickly and to establish a modern high-standards template which can serve as a benchmark in APEC and the WTO. This is particularly so in the areas of agriculture and services where competing paradigms, if left unchecked, threaten to undermine the comprehensive approach to which New Zealand and the United States are both committed.

Comprehensive trade agreements between at least New Zealand, Australia and the United States, in addition to the negotiations the United States is already pursuing with Singapore and Chile, have the potential to set the standard in the WTO and to serve as a catalyst to re-energise the APEC process on both sides of the Pacific.

We would not see this as an exclusive club. To the contrary, experience suggests it would serve to stimulate interest amongst the economies of North and Southeast Asia and in Europe.

If the Administration is looking for early results on its trade agenda which deliver tangible benefits and offer clear strategic advantages, I cannot think of any potential candidates which offer more realistic promise than Australia and New Zealand.

That is the message I will be taking to USTR Zoellick when I meet with him later today. I understand very well that he is currently engaged in attempting to build the domestic consensus necessary to move the Administration's trade agenda forward. So I won't be seeking any promises. But I hope to persuade him of the merits of looking in our direction as he puts together his strategy for moving beyond the built in agenda he inherited.

Ambassador Zoellick during his confirmation hearing said the message he would like to send to the world was that "the US is willing to negotiate. We're willing to open if they open." I'm here to give the United States the message that New Zealand is so willing.

I look forward to the prospect of enhancing our partnership in trade liberalisation and I hope you will join with me in voicing your support for that possibility.

Thank you.

Office of Hon Jim Sutton

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