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Conference On A NZ/US Closer Economic Partnership


Rt Hon Helen Clark
Prime Minister

ADDRESS TO

Conference on a New Zealand¡VUnited States
Closer Economic Partnership


Sheraton Hotel
Auckland

9.00 am

Thursday 6 December 2001


I begin by thanking the grouping of business organisations which has supported the organisation of this conference today.

There is keen business interest in New Zealand in the prospect of a closer economic partnership with the United States. The government shares that interest and will work as hard as it can to advance the prospect.

Of course many nations dream of having access to the United States market open up. With so much interest, the prospects of a small economy like New Zealand¡¦s attracting the attention of United States decision-makers might seem slight. But over the past year there have been most welcome expressions of support for New Zealand¡¦s case from within the United States itself. Senior Congressional figures have written to the President, and the United States Chamber of Commerce has been most encouraging.

This conference gives New Zealand government and business the opportunity to review the state of play and consider what our next moves might be. The title of the conference itself, ¡§Creating Coalitions of Interest¡¨, points to the way ahead. Progress will be made by building coalitions of support for New Zealand¡¦s approach.

In attendance here we have people well versed in the ways of Washington. On the American side, the presence of the United States Ambassador, Charles Swindells; the President of the United States-New Zealand Council, Fred Benson; and the Vice-President of the United States Chamber of Commerce, Myron Brilliant, is especially welcome. On the New Zealand side, our Ambassador Designate to the United States, John Wood, will offer his expertise, informed as it is by his previous diplomatic appointments to the United States, including as Ambassador, and by his senior role in New Zealand trade policy during his term as Deputy Secretary of Foreign Affairs. The presence also of so many private sector representatives with business links with the United States enhances the significance of the occasion.

Before getting into the detail of why a New Zealand-United States economic partnership is desirable, let me set out the context of the importance to New Zealand of exporting, of developing internationally competitive, high value industry sectors, and of open trade.

Exporting contributes 31 per cent of our GDP, and its health is essential to our economy. In the past two years New Zealand has experienced the real benefits of export-led growth. Our exporters, across all sectors, are doing an outstanding job for New Zealand.

The challenge our government is setting for New Zealand is to see our export profile move up the value chain. As we all know, dependence on commodity exports in the 21st century is no place to be if we want to maintain our first world living standards.

We all want to see New Zealand in the future back in the top half of the OECD economic indicators, as we already are on most social indicators. On the latter score, we can all take pleasure from the excellent rankings of New Zealand school students in literacy, maths, and science reported yesterday from a major OECD study.

Educated, skilled, innovative, and entrepreneurial New Zealanders are going to drive our 21st century economy. The government is taking steps now to draw together all the policies which will back those New Zealanders. That is why:

„h Enormous change is going on in tertiary education aimed at raising standards, producing the skills we need, and creating more centres of excellence.
„h We are making huge changes to immigration policy so that employers can rapidly recruit specialist talent not available in New Zealand. The new talent visa policy was announced on Monday.
„h Government¡¦s investment in science and research has increased by twelve per cent in the past two years and the tax treatment of private sector R & D has improved.
„h We are backing the spread of business incubators aligned with tertiary and research institutions to nurture innovative new businesses, and have moved to fill the gap in the venture capital market for seed and start up capital through the New Zealand Venture Investment Fund.
„h We have developed the spectrum of grant and advisory programmes funded by the Ministry of Research, Science, and Technology, Industry New Zealand, and Trade New Zealand.

The last two years have seen a proliferation of initiatives to speed up business formation and growth. Our task now is to bring better co-ordination to what we are doing to get the best results and so that the conveyor belt of programmes is able to be easily understood by business.

New Zealand¡¦s future lies in being outward-looking, export oriented, and being positioned at the top of the market. There are big opportunities for small, smart, nimble, interconnected, and open nations like ours.

For a small economy like ours, key priorities are to increase the size of the market for our goods and services and to raise our profile as a nation to do business with and to invest in. That is why our government is so active in promoting more open access to all markets through the World Trade Organisation; to regional markets through APEC; and to selected markets through sub-regional and bilateral arrangements.

We are well pleased with the outcome of the WTO Ministerial Meeting in Doha. Launching a new trade round there was essential for stimulating confidence in the world economy. For the first time, New Zealand and its friends in the Cairns Group of agricultural exporting nations were successful in getting the phase out of export subsidies for agriculture on the negotiating table. It is estimated that if New Zealand were to get even half of what it wants in these talks, our GDP would be boosted by around four per cent.

If anyone doesn¡¦t think export subsidies are a problem, then the latest ANZ Bank commodity price index is worth looking at. Dairy prices, which make up 31 per cent of the index, fell 10.3 per cent after the European Union¡¦s decision to increase export subsidies on milk powder and butter. It was European interests which resisted most strongly negotiations on the phase out of export subsidies in the new WTO round.

While the greatest long term gains for New Zealand trade will flow from successful WTO rounds, we should not hold back from pursuing other compatible options which could bring faster short and medium term gains. At last count, the WTO convoy had some 144 vessels attached to it, and it inevitably travels at the speed of the slowest. If we can find partners who will travel faster and further with us, we should exercise that option too.

APEC offers us considerable opportunity as its developed nations have undertaken to open up their markets fully by 2010 and the developing nations by 2020. But our experience suggests that bilateral initiatives are also worth pursuing. New Zealand¡¦s Closer Economic Relationship with Australia had the effect of hugely increasing our domestic market, and our government is working hard to harmonise our two economies further. As CER Partners we are also in dialogue with the ASEAN Free Trade Area.

Last year New Zealand negotiated a comprehensive Closer Economic Partnership agreement with Singapore. It is encouraging to see that Australia has now followed us down that path and is currently engaged in its own negotiation with Singapore. Our agreement has certainly raised our profile in that market which itself is externally oriented to the greater Asian region.

We are endeavouring to conclude a similar arrangement with Hong Kong, a sophisticated market, not only roughly twice Singapore¡¦s size, but also one which knows the China trade well.

We also have other irons on the fire. I have personally initiated a process to look at how we can intensify the New Zealand/Japan economic relationship following on from my visit there with the senior business delegation earlier this year. On my recent visit to Latin America, again with a business delegation, we explored further the possibility of an agreement with Chile and Singapore, and of dialogue between CER and Mercosur.

Some of these possibilities may well prove to be more of a glint in the eye than an iron in the fire, at least for some time yet. But it is in New Zealand¡¦s interest to position ourselves for the unexpected.

The really significant gains from pursuing strategic linkages of the kind we have started with Hong Kong and Singapore will come if and when we can get into genuinely liberalising arrangements with such partners as the United States, ASEAN, and North Asia. Those Asian markets are presently heavily protected and it will be very difficult to secure genuinely open trading arrangements with them. But we must continue to work to that end.

That brings me to the option of a closer economic partnership with the United States. It is obvious that such an arrangement would fit well into the strategic direction of our government¡¦s trade policy.

The United States remains the world¡¦s most dynamic economy. Certainly its long boom has been reversed for the moment, but if we focused on America¡¦s present slowdown we would fail to see the wood for the trees. The United States will remain a powerhouse of growth, innovation, and wealth. The rest of the world is competing for access to its market, its expertise, and its intellectual and capital resources.

We have every reason to want to intensify our economic linkages with the United States so that we can better exploit the win-win opportunities which derive from that. The United States is already our second largest export market and trading partner. It also ranks second for us as a source of international investment and third for tourism.

Thus our present economic relationship with the United States is substantial, but we could and should build on it further. We need to get more firmly onto the radar screens of the movers and shakers in that economy. The direct trade gains from a closer economic partnership would clearly be positive, and I believe the real gains would be more dynamic than can ever be captured by the economic models. In the case of the United States, it is above all a matter of enhancing investment interest in New Zealand and fostering the dynamic linkages that would flow from economic engagement, the management connections, the entrepreneurial linkages, and the research and development linkages. Those are precisely the kinds of connections which will enable us to leverage the gains to the more knowledge-driven and innovative economy which we are seeking to build.

The current United States Administration has made it clear that, as a matter of general policy, it is interested in pursuing an international trade agenda similar to ours, in terms of combining multilateral, regional, and sub-regional initiatives.

The United States is in no doubt about the level of New Zealand¡¦s interest in an agreement. The Minister for Trade Negotiations, Jim Sutton, was in Washington in early May. He confirmed New Zealand¡¦s broad interest in pursuing a closer economic partnership with the United States with Bob Zoellick, the United States Trade Representative, and Ann Veneman, the Secretary of Agriculture. Foreign Minister Phil Goff had the month before registered this same interest with Secretary of State Colin Powell in Washington. At officials¡¦ level the issue has been kept under discussion. I had the opportunity to convey our interest in the subject in my meetings with Secretary of State Colin Powell and President Bush at APEC last month.

As we all know, the United States is not yet ready to negotiate and sign up to an agreement. There are several reasons for that. Right now the Administration does not have the power to conclude negotiations of this kind. It needs first to obtain the necessary authority and support from the US Congress. It is in the process of seeking that authority and support. That exercise is now coming to a crunch point. But until the issue is resolved, not much progress can be made.

It is also fair to say that the United States already has a busy trade policy agenda. It is negotiating with Singapore and Chile; it is promoting the Free Trade Agreement of the Americas; it is also active in APEC; and it too is prioritising the WTO round.

I said earlier, the positive attitude within the United States Congress has been encouraging. Not only have a number of important figures in the House of Representatives written to the President urging negotiation with New Zealand, but also in the Senate, there have been motions of support for opening negotiations with us and a letter from the majority and minority leadership there to the same effect. Business leadership within the United States has also conveyed to the President support for the idea.

These kinds of signals of interest and support don¡¦t happen every day. We must also be aware, however, that even a small country like ours can provide stiff competition to some American industry sectors and resistance to negotiating with us can be expected.

What is crystal clear is that a closer economic partnership with the United States is an idea worth pursuing with vigour. For that reason I can only emphasise again how valuable it is to have an occasion such as this to progress the idea.

It is absolutely necessary for an idea such as this to have business support. If we are engaged in an actual negotiation, there will be a range of stakeholders who will need to be fully engaged. We will ensure that they are.

To those who have brought this conference together today, thank you for your practical input and for using your networks with your United States counterparts to push the process along. Together we can send a strong message that a closer economic partnership with the United States will be of mutual benefit.

I am pleased to declare the conference open.

ENDS

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