Hon Phil Goff
Minister of Trade

27 February 2007

Speech Notes

Recent trade developments and priorities for New Zealand
Speech to Wellington Regional Chamber of Commerce Breakfast

It is a pleasure to join you here today and to be able to note some positive news on the trade front

First – as you will know, the World Trade Organisation’s Doha negotiations have restarted following their suspension last July.

Second – we’ve had some success in securing access in specific markets, we are continuing to push forward with trade negotiations with China and Asean, starting new negotiations with the 6 Gulf Cooperation Council states, and we are laying the groundwork in other countries where we would like an agreement such as Japan, Korea, the US and the EU.

Third - Export Year 2007 is underway. It is a private sector-government partnership to boost our export performance.

I want to start with the World Trade Organisation’s Doha Development Round.

The multilateral system is still the best way for a small country such as New Zealand to deal with the trade issues we face – both tariff barriers and farm subsidies.

It’s also the best way to raise global incomes. The evidence shows that reforming trade can help lift people out of poverty. This is one of the key objectives of the Doha Round.

The year has begun with the WTO Doha Round negotiations back in business.

The resumption of negotiations was announced following a trade ministers meeting I attended in Davos at the end of January. There was at that meeting a sense that progress was being made, that the European Union and United States were now seriously talking to each other, and that the time was right for us to move the Round back into formal negotiations.

There are still tough issues ahead of us. We have to be careful not to underestimate the scale of those difficulties.

But getting the Doha Round up and running again is vital for New Zealand’s trade interests. We will do all we can to get a deal.

Through January and February there have been top-level meetings between the Europeans and the Americans. The message from European and US political leaders has been” “Get it done”. That has been followed through at negotiator level, both across the Atlantic and with Brazil and India.

We are now in a new phase in the negotiations. For the immediate future the emphasis is on bilateral discussions among the big four and a few others to build up some bilateral understandings on some workable numbers. The aim then is to do some “reverse engineering” finding a formula that will deliver the numbers and feeding that into the regular Geneva negotiating process.

There was a cluster of these meetings among the big players last week in London. There is talk of follow-up at ministerial level within the same group in the near future.

This could turn out to be the start of the end game. What happens in the exchanges is critical for New Zealand. We want the majors to reach agreement because without that there is no overall outcome. But we want to make sure that our interests are taken into account in the process

New Zealand will have a key role to play given the need for any understandings agreed by the big players to be fed into the wider Geneva process – to be tested and turned into a text.

First we have put a lot of effort into staying alongside the key players.

I have kept in touch with Pascal Lamy and with ministers from the G6 and other countries since the middle of last year including visits to Oslo, Brussels and Berlin on the way to Davos.

We are also talking privately to key players at technical level about specific New Zealand interests, it is important that those interest are heard as critical judgements are being formed on elements of a deal.

We have worked with New Zealand exporters to get a fix on our priorities across the negotiating agenda. We will pursue those interests, as work gets under way again in the Geneva negotiating groups.

We have made available our ambassador in Geneva, Crawford Falconer, to chair the agriculture negotiation. We have been active in behind-the-scenes work by small groups in such areas as environment, services and industrial goods or as “Friends of the Chair” and in informal grouping called the Oslo process – countries with diverse interests but with a constructive desire to achieve a conclusion to the round.

We know New Zealand’s major commercial gains in this Round are going to come through the agriculture negotiation. But it’s also clear that we are not going to get a deal out of this Round without a balanced result. That means we need solid outcomes in areas like industrial goods (just under half of New Zealand’s goods exports, and important for many smaller manufacturers) and services, as well as on things that touch on the trade and environment nexus – eliminating fisheries subsidies, eliminating barriers to environmental goods and services and so on.

This works in New Zealand’s favour. While agriculture takes top billing for us we do of course have real commercial interests in further opening up international trade in goods and services.

Also, eliminating the tariffs on environmental goods would make them cheaper and thus more available to assist in addressing environmental problems. This would create important, new commercial opportunities for New Zealand companies who currently export such goods.

In the services negotiations it is going to be difficult to achieve much in the way of new market openings in this Round. The Round will likely do more in terms of the binding in of current regulatory and trade regimes than actual new market access.

This is frustrating.

But we should not dismiss lightly the commercial benefits this could bring, particularly in terms of improved transparency and certainty in trading conditions.

At the same time that we are focused on the WTO, New Zealand has not put all of its trade interests in one basket.

New Zealand’s strategy has been to actively pursue bilateral and plurilateral free trade negotiations and explore other trade opportunities.

Regionally we are supporting a free trade agreement for Asia- Pacific, which appeared for the first time on the APEC agenda this year. We are also participating in a study into a comprehensive economic partnership in East Asia (Asean plus six). Neither will deliver a free trade agreement in the near future but it is important we are included in any agreement, which may be reached, in the longer term.

Bilaterally, we look to create high-quality, broad agreements that cover goods and services, as well as investment, government procurement, competition policy, rules of origin and economic cooperation.

Our negotiation with China is the largest commitment we have on the bilateral front at present. Ten rounds of negotiations have now been completed, the latest of which took place at the end of January.

With discussions in a number of the technical areas of the agreement now well advanced, negotiators are increasingly concentrating on respective market access commitments in goods, services and investment.

The round itself followed a further meeting between the Prime Minister and Chinese Premier Wen Jiabao, held in the margins of the East Asia Summit in Cebu, the Philippines. Both leaders jointly reiterated their commitment to reaching a comprehensive, high quality and balanced FTA before April 2008

For New Zealand, high quality means tariff elimination on all products of trade interest over a commercially meaningful timeframe. It means seeking a package of initial commitments on services and investment focused on areas of priority interest. This requires some sensitivities to be worked through such as China’s concerns on dairy.

Negotiators are scheduled to meet in New Zealand in late April and will continue to work through the issues, including questions of market access there is still quite a bit of work to do. But I am confident that the commitment exists from the leadership of both sides to achieve a high quality agreement in the timeframe set.

We are also negotiating with the ten countries of ASEAN.

The eighth round is to take place here in Wellington in two weeks time with as many as 180 delegates in the city for the best part of a week.

This negotiation is progressing slowly but in a satisfactory direction.

There are the negotiations with Malaysia – which are on a slow track at the moment with some important issues outstanding, such as services and investment. The Malaysians are currently negotiating with the United States and we will be watching closely the outcome of that negotiation. Many of the same issues are at stake.

Then there is our most recent FTA negotiations with the six states (Saudi, UAE, Bahrain, Qatar, Kuwait and Oman) of the Gulf Cooperation Council.

Negotiators are preparing for the first formal round of talks after positive initial discussions late last year

On top of these negotiations we are also sharpening our trade focus with South Korea and Japan. We have an FTA study underway with South Korea and are in talks to deepen the Japan-New Zealand trading relationship.

The Korea process is part of a new 21st Century Partnership agreed when President Roh visited New Zealand in December. Both countries share an interest in working more closely together across a range of areas. We have made it clear that the trade and economic relationship must also achieve progress. For its part, Korea has confirmed that New Zealand is a significant partner, but agriculture sector liberalisation and other negotiating pressures have been issues.

The FTA study is to be completed later this year. We hope it will enable both sides to agree to an FTA negotiation in 2008.

The Japan process is not so far advanced. Japan, like Korea, has started to negotiate and conclude FTAs with other countries. As the most advanced economy in Asia and one of New Zealand’s closest friends, it has long been a priority for a closer economic partnership.

The decision between Australia and Japan to commence FTA negotiations this year has raised the stakes for us. While that negotiation will undoubtedly be difficult, a comprehensive deal between Australia and Japan would have a significant impact on our economy, as both are aware.

Japan has agreed to a working group process this year with New Zealand to produce information and analysis that will help move ahead the dialogue about a closer economic partnership.

It’s not going to be easy. Japan has concerns about agriculture that will require in-depth discussion. But we will be working hard to demonstrate how both countries would benefit from liberalised trading conditions

With the US we are continuing to build up support among business and in Congress to start FTA negotiations. We work closely with the US on trade matters and our broader relationship with is has strengthened.

However, the administration will not name any new negotiating partners until it has a renewed Trade Promotion Authority.

In regard to the EU we have talked with the Commission about strengthening our overall relationship including trade once the Doha Round is complete

We have had success in specific markets. We have seen Egypt reduce tariffs for dairy and meat products from New Zealand – this is worth $3 million for those exporters.

And, after several years of work, we have gained access to the United States for all our citrus fruit. This is worth $2 million immediately but the citrus industry believes its trade to the United States could quickly increase to $10 million annually.

Now to Export Year 2007,

Small countries like New Zealand must export to take advantage of economies of scale to lower production costs.

We need more globally competitive exporters - supported and supplied by more educated, skilled, innovative, and productive workers and workplaces.

The objective of Export Year 2007 is to improve our long-term export performance by increasing the number and capacity of NZ firms willing and able to compete globally.

NZ exports are concentrated in a small number of firms: only 580 firms export more that $5 million annually and 160 firms are responsible for three quarters of all exports.

The value of exports to GDP is 29 percent, about the same as it was in the mid 1980s, and well below most other small OECD countries which tend to have ratios above 50 percent.

In addressing the challenge of increasing exports, private sector involvement is crucial. Key private sector people including Ken Stevens, Peter Maire and others have been involved from the start.

Four broad areas of focus of Export Year have been identified. They are:

Raising export aspirations and awareness;

Improving export capability;

Promoting export facilitation and development; and

Economic settings and export-related policy requirements.

Every New Zealander needs to be made aware that they have a stake in our economic future - which depends on exporting and internationalising our economy. So the campaign will be targeting the broader public as well as the potential exporter.

There will be an increase in exporter mentoring programmes.

Exporter forums will provide high profile networking opportunities - not just for business to business but for example, business to research organisation, ICT to tourism operator; scientist to education institution, farmer to innovator.

We expect to increase participation in Exporter Education courses, and we are working on other initiatives in the education sector.

An expansion of NZTE’s ‘Path to Market’ programme that helps new exporters is also planned.

Export Year 2007 will also bring increased support for market development activity (on top of the increased $37 million funding for Market Development Assistance Scheme announced in the Budget 2006)

I am very pleased to announce today that the Wellington Chamber of Commerce is launching an Export Development programme for the Wellington region. New Zealand Trade and Enterprise is funding this pilot programme which will see the Chamber hire a dedicated export programme manager to work closely with up to 60 businesses in the region.

Each business participating in the pilot programme will have a full assessment of its needs and will then be directed to the appropriate capability-building services.

The Chamber’s export programme manager will help ensure participating businesses realise their exporting potential.

I would like to thank and congratulate the Chamber for working with us for the good of your local companies.

Government is looking at a reduction in headline business tax rates and tax credits for R & D, marketing and improving work skills.

We are also looking at how to expand exports and engagement in Asia. We will be issuing a White paper on New Zealand’s relations with Asia to lift our game and to help us integrate with the region.

NZTE is gradually shifting its focus from on-shore to offshore support for business.

With that in mind we are looking to expand NZTE’s coverage, including the very successful Beachheads programme and Focus Centres.

We plan to put more effort into trade missions to help business get into markets. Planning is well advanced on a comprehensive plan for Minister-led trade missions but we’ll be working closely with the private sector on priority markets.

We are developing a single window for export documentation to make it easier to find and process all the necessary paperwork for exporting - which I hope will be nearly completed this time next year.

On top of all this you can expect to see a revised tourism strategy and international education strategy before the end of the year – aimed at improving our tourism performance and focusing our education exports.

In conclusion, there are some positive developments in our trade negotiations and a positive commitment in Export Year to raise capacity among New Zealand firms and producers to take advantage of emerging opportunities.

Neither process is straightforward and a current high exchange rate does not make it easy for exporters.

However, in areas as diverse as ICT, film-making, wine production and agritechnology, we can see examples of how creative and innovative New Zealanders are world leaders.

I think the Chamber for the role it is playing and look forward to building on that constructive partnership this year.

Thank you.

ENDS

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