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Sutton APEC Business Advisory Council Speech

Hon. Jim Sutton
Speech Notes

18 August 2004

APEC Business Advisory Council meeting, Auckland

Welcome to Auckland Ladies and Gentlemen. I know that you were given a traditional powhiri last night so have experienced a true New Zealand welcome. There is a well-known Maori proverb which I believe captures the spirit of ABAC and APEC cooperation in our region.

He aha te mea nui? He tangata. He tangata. He tangata. What is the most important thing? It is people. It is people. It is people.

In APEC we each bring our own important contribution to the common goal of enhancing economic growth and prosperity for the people living in our region and to strengthening connections among them.

You bring an enormous wealth of business experience. Today I have been asked to focus very much on my contribution as Trade Negotiations Minister in relation to the latest WTO developments in Geneva and where I see regional and bilateral trade agreements fitting in. If we have time at the end I would be delighted to field questions.

At the outset I want to note that APEC and ABAC continue to play an important part in maintaining pressure and forging consensus to enable progress at the WTO. The ABAC interim report delivered to APEC Trade Ministers in June by Hernan (Mr Somerville, ABAC Chair) legitimately demanded our "firm and unambiguous commitment to a comprehensive multilateral outcome".

We may not have achieved all you were after but did meet a major objective ? to get negotiations back on track and moving forward. As I will explain later there is a lot more to come. ABAC has an ongoing role to make recommendations and demand progress both at home and within APEC - on WTO matters and other areas of APEC's work .

First though I would like to touch briefly on other aspects of ABAC's work which you will be considering at this meeting. ABAC's theme for 2004 "Bridging the Pacific: Coping with the Challenges of Globalisation" covers a lot of the key issues which we are all grappling with today.

You have rightly raised the important issue of implementation of past APEC commitments. The mid-term review in 2005 should celebrate APEC's successes so far, as well as address implementation and steps needed if APEC is collectively going to meet the Bogor Goals. New Zealand supports the current review of APEC effectiveness and relevance and the effective involvement of ABAC in the Individual Action Plan process. We have made recommendations to strengthen support for work done 'behind the border' which is an important part of improving business facilitation. We also recommend the involvement of organised labour more formally as a development partner in APEC.

I am also encouraged by your continued focus on trade facilitation and secure trade. There are practical messages for APEC to take on board. New Zealand is completing its report on trade facilitation and I am pleased to note that nearly 60% of the actions listed in the Trade Facilitation Action Plan have been completed by New Zealand. Another 30% are underway. Some on the basis of continuous improvement.

I am delighted that New Zealand institutions have come forward to join the ABAC Business Schools Network. The new focus on anti-corruption is welcome. New Zealand has signed the UN Convention Against Corruption and is party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Transactions. It is a serious economic development issue and we certainly support ABAC's call that it be forcefully addressed by governments and businesses in the APEC region.

Now where are we at the WTO?

Had the 147 members of the WTO failed to reach agreement to the July frameworks package, just under a fortnight ago all of us might well have had to question our commitment to the multilateral system. To look at what trade policy alternatives are on offer.

But as you know, after a marathon effort in Geneva the WTO did reach the agreement. And so I can reaffirm categorically that a successful conclusion to the Doha Development Round of multilateral trade negotiations remains New Zealand's top trade priority.

Put simply, nothing else can match the potential returns to the New Zealand economy from global trade liberalisation. It is the equivalent of conducting bilateral negotiations with 146 other partners.

And I must say it felt like we were doing just that in Geneva a fortnight ago!

First a little bit of background to put the WTO into context. The WTO is truly global. With 147 members, most of the world economy is now covered by multilateral rules. A few economies still remain outside ? Russia and Viet Nam are the notable APEC exceptions - and we hope this is remedied soon.

Why is the multilateral system important? I'll give you a variation on the "three Rs":

· it is about Returns ? the world economy stands to gain most from genuine progress in multilateral trade liberalisation;

· it is about Rules ? establishing and sustaining a rules based system to govern global trade;

· and it is about Resolution ? the ability for large and small alike to defend their interests through enforcement of those rules.

This background provides a good context for explaining why it was so important to get agreement to the frameworks package in Geneva last month.

A number of factors played their part, not only in the intensive phase of negotiations in the latter half of July, but over the ten months since Cancun.

Cancun was a failure. But it also provided some valuable lessons. And ironically, we have a result in the July frameworks package that is better than anything ever on the table at Cancun.

The process of rebuilding began shortly after Cancun. WTO Members ? even those who had directly triggered the breakdown - recognised that Cancun was a lost opportunity. Political commitment to restore momentum to the Doha Round could be seen across the organisation.

There were conscious efforts to engage and involve developing countries ? both at home, or at regional meetings ? as well as in Geneva. APEC Trade Ministers at Pucon in June issued a timely, succinct and strong message to the rest of the WTO. ABAC likewise issued a call for concrete results and made recommendations in the key negotiating areas. And the EU made a major contribution through some key negotiating concessions, notably on elimination of export subsidies, and setting aside three of the four contentious Singapore issues.

Agriculture remains the key. The focus for the agriculture negotiations rested with the "Five Interested Parties" or FIPS ? Australia, Brazil, the EU, India and the US. They made good progress, especially in the last few months. But the challenge was to "multilateralise" the process, in other words, to get buy-in from across the WTO membership to the building blocks established by this crucial core group.

This was not a case of sleepwalking to an agreement, though sleep deprivation was certainly a factor at the end ? with negotiators going for 40-48 hours at a stretch! It was bruising, and protracted. It was touch and go to the end. But the result was one that met with genuine satisfaction across the WTO Membership. And that itself is quite remarkable.

What did we achieve?

In New Zealand the headlines read "Trade Talks: Biggest advance in 50 years". Perhaps some editorial licence here, but nevertheless it was a significant result.

In agriculture, we have an historic commitment to eliminate export subsidies. For the first time in 50 years, the debate will now be about when and not whether we do it at all.

On market access, while the language could have been more ambitious, we have the basis for arguing for substantial improvement in market access for all products, including tariff quota expansion for sensitive products. And the framework sets the basis for big cuts in domestic subsidies.

Cotton too, an important icon for developing countries, was addressed in a way that satisfied immediate African expectations, though the problem is still not resolved.

The overall result on agriculture is a significant improvement on what was on offer at Cancun.

The other important negotiation was on non-agricultural market access, known by its acronym as NAMA.

The NAMA framework is virtually unchanged from the text at Cancun, with the exception of one additional paragraph. I saw some commentary in the media suggesting this meant nothing had been achieved over the last 10 months. But the result doesn't tell the whole story.

Sometimes the most difficult negotiation you can have is to try and hang onto something you might not like, but you know that the alternatives are far worse. This was certainly the case with NAMA. I cannot overstate how sensitive these negotiations proved to be ? they almost broke down, on a couple of occasions, and had this happened it could have taken the whole deal down, as the Singapore issues did at Cancun.

As for the Singapore issues, we agreed to start negotiations on trade facilitation, the least contentious of the four. The other three, investment, competition policy and transparency in government procurement, are set aside from the Doha work programme. There's some ambiguity in the language, but what this means is that we have removed some significant obstacles to reaching an outcome. A simplified Doha Agenda is no bad thing.

But to emphasise ? these are frameworks. This is not the end of the Round, or of the negotiations ? far from it. We still have to negotiate on what is known in the WTO as "modalities" or the numbers. And this is a big ask.

Depending on the numbers, we could see an ambitious outcome wound back to a very modest result. But what is important is we still have an opportunity to press for ambition. That is why these frameworks are so important, and why they are seen as an improvement on Cancun. The Doha Round is back on track.

What lies ahead?

The next major focus is the Sixth Ministerial meeting in Hong Kong in December 2005.

In the meantime there will be considerable technical work across all the negotiating issues. There's plenty of room for hiccoughs along the way. But if we can agree on modalities at this next Ministerial meeting, we may be on track to conclude the Round some time in 2006.

Then a couple of years for implementation to start, and anything between 5-10 years to implement the commitments arising from the Doha Round. If we make it to a tenth Round, it could well be 2020.

This is a reminder that trade policy is about the long run. Rules are decided occasionally, and implemented gradually. That's why we need to get a decision now. The next opportunity will be in another generation.

That said, commerce and industry - I could add politics too - tends to live in the short run.

We can move further and faster, if we choose. And this brings me to the second leg ? our Plan B - bilateral and regional arrangements.

As Mike Moore pointed out after the failure at Seattle, as the oxygen left the multilateral system it popped up again in bilateral and regional work. As of May 2004, there are some 208 regional trade agreements, of which 68 have entered into force since 2000. At least 12 have been concluded between APEC economies since 1999 with many more to come. So I don't see any sign of trade liberalisation fatigue at this level.

New Zealand is also actively involved in negotiating Closer Economic Partnerships and other trade arrangements. Quite simply, we cannot afford to be marginalised or end up at a competitive disadvantage. Improved market access, over and above what we gain from WTO negotiations, means real economic returns for our exporters.

There is also a strategic element to our approach. To consolidate relationships, particularly within the region, both in their own right and as "stepping stones" to broader goals. Singapore, for example, our second CEP after Australia, has provided a platform not just for our present negotiations on a "Pacific Three" agreement with Chile and Singapore, but also for an ASEAN-Australia-New Zealand trade agreement.

And CEPs are not only about trade. They are about shared governance, covering areas such as competition, services, labour, environment. Chile, in our Pacific Three negotiations, talks of a "strategic alliance" between the three countries, involving cooperation and collaboration as well as competition - an approach New Zealand endorses.

These arrangements provide a means for deepening integration, including through institutional developments over time, as we have found with Australia.

It makes sense to look to build and strengthen these relationships with our regional neighbours. Open regionalism in trade and economic spheres is a key to regional security and stability. And our contributions to security and development in the region have complemented our wider economic interests.

CEPs build on sound political and diplomatic relations, and in turn we rely on those relationships to reinforce the will of governments to accept the adjustment costs that come with opening domestic markets.

Another factor is precedent. Twenty years on, CER is testament to the vision of its original negotiators that we still have the world's most comprehensive and effective trade agreement. It has brought huge benefits to both countries.

New Zealand business has gone from disinterest and in some cases outright opposition in the early 1980s to appreciating the potential benefits of the next stage of development: a Single Economic Market ? that standing still in this relationship, and others, is not an option.

These are all good reasons for being involved with bilateral trade agreements. But we do need to be concerned about the potential impact on business costs of dealing with different rules and agreements. There are also implications for APEC's open regionalism approach and the Bogor Goals. New Zealand shares ABAC's view that it is important for APEC to develop a policy response to help us design trade agreements that can serve as 'building blocks' towards achieving the Bogor Goals.

I am pleased that APEC will be looking more closely at this issue during the year. The aim should be to produce some clear guidance for APEC members on the essential features of trade agreements that support the multilateral trading system and APEC objectives. It needs to be forward looking and avoid the tendency to focus on the lowest common denominator rather than on high quality outcomes. From a New Zealand perspective comprehensive sectoral coverage for goods and openness to participation by others are key priorities.

Part of this mix will be consideration of ABAC's proposal for a Free Trade Area of the Asia-Pacific. I understand Rob Scollay of PECC (Professor Robert Scollay, Auckland University) has undertaken some preliminary work on this proposal for ABAC which will inform your discussions in Auckland. It is an ambitious and intriguing concept and I look forward to learning more about it.

Thank you for inviting me today. I wish you a productive and lively meeting both outside and inside the meeting rooms. If we have some time I'd be happy to take any questions. Thank you.


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