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Jim Sutton speech to Pipfruit NZ SGM

Hon Jim Sutton MP for Aoraki

Minister of Agriculture, Minister for Biosecurity, Minister for Trade Negotiations, and Associate Minister for Rural Affairs

Speech Notes|

8 July 2005

Pipfruit NZ special general meeting, Napier

Chairman Ian Palmer, Ladies and Gentlemen, thank you for the invitation to speak today.

At the beginning of this week, millions of people around the world watched a group of musicians and assorted celebrities sing, dance, and otherwise perform on stage on behalf of the poor in Africa.

The focus there is on proposals before the G8 group of nations for debt relief for the stricken nations of Africa.

This is obviously a worthy cause.

Africa, more than any other region of the world, is suffering. Its people lack education, opportunities, clean water, and in many cases, hope. Its poverty is crippling.

But wiping debt and giving more in aid money, while necessary, is not a sufficient answer.

The focus must also be on trade, and the accompanying issues of administrative capacity and good governance.

There is a saying: "give a man a fish, and you will feed him for an afternoon. Teach a man to fish, and you will feed him for life".

Millions of people around the world are mired in poverty. They need help to escape it. Sometimes they do need emergency food aid. But that is like giving them a fish. They need also a means of ongoing self-help. In the 21st century, that means development assistance and fair trading opportunities.

That is why Bob Geldof calls for Aid and Trade.

Until all nations, rich or poor, developing or developed, north or south, can lift their productivity and trade their products freely, it's going to be hard for them to lift the living standards of their citizens.

New Zealand also wants and needs what many other nations in the international trading system want: a fair system, without the barriers to trade that we now face.

Let's get one thing straight: international trade is not fair, in many important respects.

The way things stand now, access for our products into other countries' markets is a privilege, not a right. We get it on sufferance. In some cases, we have it only because generations of our young men fought, shed blood, and died on foreign soils and those countries felt at the time we were negotiating access that they still owed us something for that. But those feelings fade over time.

Even from our closest friends and neighbours, people with whom we have the most mature and comprehensive trade agreement in the world, want to bar our products.

There was no formal dispute settlement process provided in the CER trade agreement, and there have been a few times recently where I have regretted that.

There is a multilateral system to resolve some sorts of disputes between trading nations, and we are using that.

Last month, we took the unprecedented step of listing a complaint against Australia at the World Trade Organisation's quarantine (SPS) committee. The New Zealand statement was very clear, and delivered a strong message. It was supported by other countries as well, including from the two heavy hitters the United States and the European Union.

It was timed to coincide with the WTO implementation panel ruling on Japan apples, which helpfully demolished the legal pretext for almost all the barriers to trade in apples, trotted out by Australia in their earlier aborted import risk assessment.

WTO members, including Australia, were left in no doubt about New Zealand's frustration with this 84 year-old dispute and the seriousness of our intentions to resolve it.

The significance of this step clearly registered with other WTO members - this is the first time we have placed an issue of concern with Australia on the agenda of any WTO committee, and only the fourth time we have raised an issue under this category in the SPS committee.

The apple concerns will now remain on the SPS agenda till resolved.

If a mutually acceptable solution cannot be reached, further options for resolving this long-standing issue cannot be ruled out.

I know this does not go far enough for some apple growers, but I can assure you, even if we were to kick over the table in the Cairns Group and boycott CER consultations, as some have advocated, that would not sell a single apple into Australia.

Australia tell us they are working through their quarantine process to design an import health standard for our apples and this should be available soon. We are not lifting the pressure on them and they will be held to that. Until that is issued, your dispute is with the Australian Government, not the New Zealand one.

Till the international trading system is truly comprehensive, and is based on rules fair to all traders, then we are going to run into problems.

Agricultural trade has the most tariffs, subsidies, quotas, and other barriers to trade of all the international markets.

It's because of that unfairness, that the WTO multilateral negotiations are so important to us.

It's a variation on the three R's:

· it is about Returns - the world economy stand to gain most from maximizing productivity and efficiency through multilateral trade liberalisation;

· it is about Rules - to govern global trade;

· and it is about Resolution - the ability for large and small alike to seek fairness through enforcement of those rules.

We have to remember that while the WTO and its predecessor the GATT are about 50 years old, it was only in the last round of multilateral negotiations - the Uruguay Round completed in 1994 - that rules for agricultural trade were included for the first time. That round also created the binding disputes resolution process as well, along with the rules on the application of SPS measures.

We're putting a lot of effort into those World Trade Organisation negotiations: they are this Government's top trade priority.

At the moment, it's looking a bit grim.

Negotiations on non-agriculture products are treading water, agriculture's not going too well either having been bogged down for months on technical issues, and services negotiations are making scant progress either.

Early on Monday, I leave for a meeting in Dalian, China, to see what progress Ministers can make. This meeting is what they call "a mini-ministerial", roughly representative of the WTO membership, which will try to thrash out solutions that might be acceptable to the whole 148-economy membership.

It's one of the last such mini-ministerial meetings before the full ministerial meeting in Hong Kong in December.

We're running out of time to get a solution.

There have been some dramatic and positive signs of movement - such as United States president George W Bush's offer to eliminate US domestic support for agriculture if the European Union did the same thing.

This would be extremely beneficial, particularly when coupled with the agreement to eliminate export subsidies at last year's WTO General Council meeting.

However, under WTO rules, nothing is agreed till everything is agreed, and there is still a lot of negotiating to go before we get to that position. So we cannot count the extra export earnings just yet?

There is a way to move further and faster than the WTO, if we choose. And this brings me to Plan B - bilateral and regional arrangements.

This arrangements, which we have dubbed Closer Economic Partnerships, or CEPs, are useful in maintaining our competitive advantage.

Quite simply, others are in this game and we need to be there too.

Our major southern hemisphere competitors are all in various ways either negotiating or have already concluded preferential free trade agreements with our major developed country markets - the US and the EU. If we were to be left behind, we would end up at a competitive disadvantage.

That was a key driver in our negotiations with Thailand: Australia already had one, and had tariff advantages, particularly in the fruit and vegetable sector. We needed to match that.

I understand that the first shipments under the Thai CEP are hitting the market there now. Early concerns about the proposed new Thai screening system have been allayed as Thailand has delayed the introduction of that system for at least six months, and we expect to have resolved the issue to our satisfaction by then.

The tariff reductions on fruit as part of the Thai CEP are significant, and the Government is confident that your industry will benefit.

Negotiating trade agreements that maintain and enhance our access to other markets is definitely in our national interest, but that doesn't fully explain the interest other countries have shown in negotiating CEPs with us.

We are after all a tiny market with an uncomfortable trade profile. The very reasons that push us towards others could put us into the "too hard basket". Yet the record speaks for itself - we have completed three CEPs, we are presently negotiating or about to enter into negotiations on three more, and we have others in prospect.

Our negotiations with China are going well so far, although it is still early days. I am optimistic that we can land a trade agreement with really important opportunities for our exporters.

Negotiations with Malaysia and the 10 nations of the Association of South East Asian Nations are in the preliminary stages, but also show promising signs.

Please don't make the mistake of thinking these agreements just naturally happen, either.

There is a reason why this Government has completed three trade deals and started another three, compared to the previous Government having only started one in nine years.

We are a developed country, but we don't come with some of the baggage others may carry.

We have a track record of high quality agreements, and our negotiators are recognised as first class. As such, we have value as a strategic partner, and as a building block for wider trade liberalisation steps.

We can enhance our attractiveness to others by working closely with Australia - our two economies combined are equivalent to the ten South East Asian members of ASEAN.

And finally, we are active out there in the CEP market - we have made clear we are very willing to explore new arrangements.

A huge effort has gone into reaching out to other nations, and in finding common ground.

In last year's Budget, an extra $2.5 million was allocated to negotiate trade agreements with Thailand, China, Chile, and Singapore. On top of that, another $10 million a year was allocated to NZ Trade and Enterprise for the next three financial years, rising to $12 million a year in 2007-2008 and subsequent.

In this year's Budget, a further $31.1 million over the next four years was allocated to conclude trade agreement negotiations and ensure those agreements deliver real gains to New Zealand business and the economy.

Ladies and Gentlemen: this speech has focused mainly on trade agreements. There are other things in the international market and significant domestic issues facing your industry.

There is an oversupply of apples on the international market at the moment, caused by both an increase in apples grown around the world and also an improvement in storage technology that has shortened the out-of-season window in northern hemisphere markets that used to be so good for us.

This, and the strength of the New Zealand dollar, is having a horrendous impact on returns to growers.

The coincidence of this oversupply with the fragmentation of our industry in the wake of deregulation is deepening the problems your industry faces.

I understand that you are to discuss options with the Horticulture Export Authority, and I encourage you to consider these options very thoroughly. Export markets are vital to all of us. We need to target them in a disciplined way. We don't need a monopoly exporter. That era is in your past. But we do need all our exporters united in their determination to make the label "New Zealand" synonymous with superior quality.

We also need to maintain our commitment to innovation in our industry, and to continue to introduce new varieties, although that is not always a panacea, as you well know.

For my part, I commit to maintaining the Government's intensive efforts to open up the Australian and Japanese markets for our pipfruit. As both agriculture and trade negotiations minister, I spend my time working to maintain and enhance market access for industries such as this one. You do have a good product - the best apples and pears in the world - and it is only right that the average Australian and Japanese should have the opportunity to taste them.


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