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Speech: L Smith -A Bridge Across the Pacific

Embargoed Until Delivery

An Address by

Hon Lockwood Smith PhD
Minister for International Trade

Building a Bridge Across the Pacific

Latin America / New Zealand Business Council


3 November 1999
1730 hours

Ezequiel Trumper, and friends of the Latin American - New Zealand Business Council.

Thanks for the opportunity to be here today. It's certainly timely that I'm here just a couple of months after leading an extremely interesting and rewarding trade mission through Argentina, Brazil, Peru and Chile, and just a month after APEC and other exciting trade developments within the region.

The trade mission to South America in July reflected the increasing focus of our Government on supporting the private sector's efforts to establish business relationships with South America, and having seen the opportunities first hand, I'm convinced that our attention is warranted.

Overall, New Zealand's interest in the region is relatively recent, but it is by no means a new phenomenon. My predecessor Philip Burdon visited in 1993, and in 1996, we launched our Focus Latin America programme. What's more, Chile is our biggest investment destination outside Australia.

I'm emphasising this because some commentators have suggested that we've only turned to South America because of the Asian Crisis.

Let me be clear on this point. Our efforts and our interest in Asia has not, and will not wane.

Geographically, commercially and historically, New Zealand's interests are inextricably linked to the Asian region. We maintain good relationships with economies throughout Asia, and it remains a huge priority for New Zealand's trade and foreign policy.

The rationale for Focus Latin America was different - in fact, the programme forms part of our ongoing efforts to develop a diversified range of relationships.

As a trading nation, it's crucial that New Zealand follows this approach.

In the 1970s, we learnt the hard way the dangers of reliance on a single market, the UK.

New Zealand has since come of age and taken its place in the world, and our political and economic relationships are now broader than at any other time in our history.

Our efforts in South America then, are additional to our efforts in Asia.

But there's also a strong element of complementarity in these relationships.

As the world evolves into a truly global marketplace, the relationships between South America and Asia are going to increase, and New Zealand provides the ideal linkage between the two economic blocs.

The South Polar air route, pioneered by Aerolineas, demonstrates New Zealand's value as the bridge across the Pacific between Latin America and Asia.

Today, it's just as easy to get to Buenos Aires as it is to go to Singapore. Even more significantly, it's just as easy for a business-person in Singapore to get to B.A. through New Zealand, and vice-versa.

When I first gave this address in Auckland a couple of months ago, I said that many at both ends of this bridge have yet to recognise the full potential this new opportunity provides.

I said I was optimistic that in the future, we'd be able to bring this linkage, and New Zealand's place within it, to fruition through the development of new, exciting and mutually rewarding trade and investment relationships.

As we now know, that optimism was well founded, and during the APEC meetings in Auckland a couple of weeks ago, we saw our work pay dividends.

On 11 September, New Zealand and Singapore signed a Heads of Agreement to negotiate a Free Trade Agreement to take us toward APEC's Bogor Goals of free and open trade and investment across the region by 2010 for developed economies, and 2020 for developing economies.

On 12 September, our Prime Minister and Chile's President Frei agreed to form a working group to investigate the scope for a Free Trade Agreement between New Zealand and Chile. And on 13 September, Chile, New Zealand and Singapore agreed to expand this study to investigate the scope to develop a Free Trade Agreement spanning the Pacific, joining Chile in the East, Singapore in the West, with New Zealand as the Pacific bridge.

This agreement was strategic, and intended to act as a catalyst to light a fire under progress toward broader Free Trade Agreements. And it's working.

On 1 October, ASEAN, Australian and New Zealand Ministers agreed to a study on the possibilities of an AFTA / CER Free Trade Agreement.

We're working on even greater developments which may also see Australia and the United States come together with Singapore, Chile and New Zealand to form a "State of the Art" Free Trade Agreement.

US President Bill Clinton has taken this concept back to Washington DC, and the proposal is being worked on right now.

These are exciting developments involving Asia and South America. But we can't become complacent about our relationships with, or our profile in South America. Indeed, the recent New Zealand trade mission to South America was an important step in the Government's deliberate strategy to develop stronger relationships there.

At this stage of the relationship, it's important that we, and by that I mean both Government and the private sector, build New Zealand's visible identity in South America.

And we shouldn't kid ourselves.

All of the cities - and I repeat the cities - we visited on our recent trade mission had a population greater than New Zealand's, and it's not easy for a country of our size, which can't support embassies all over the world, to build this constituency.

Today I want to talk a little about the recent trade mission, and give you an insight into how the Government sees the development of New Zealand's relationship with South America, and how you, as business-people, fit into our vision.

As I said earlier, the trade mission was a rewarding and successful experience.

There's something quite special about being involved with a group of Kiwis travelling abroad to develop new business relationships. The team was able to bounce ideas off one another, and the group dynamics meant that enthusiasm ran high throughout the whole trip.

Of the twenty exporters who signed up for the mission, all but three were first time exporters to the region who, on the strength of TradeNZ market research, had established that a familiarisation visit to South America might be worthwhile.

Since returning to New Zealand, all participants have reported positive contacts, and in many cases, encouraging leads to follow up in South America.

It would of course be optimistic to expect substantive business to follow on immediately from the first visit to countries where personal relationships are an important part of conducting business.

But I understand that the level of interest is higher than had been expected, and TradeNZ and the companies are now developing individual marketing programmes to ensure the momentum is not lost.

The significant level of interest in this mission from new exporters is a good indication of the changing patterns of our relationships with South America.

For much of the past twenty years, dairy products have dominated our trade with South America. While this trade and the Dairy Board's investments in Santiago and Sao Paulo mean that dairy exports remain important to us, as these Southern Cone economies have adopted more open economic policies, we're seeing the development of new opportunities for a whole range of New Zealand companies.

Chile, for example, is now our second most important investment destination, second only to Australia, and it's been identified by both the Manufacturers' Federation and TradeNZ as a growth market for high-tech products and services.

Investment in forestry is spilling over the Andes into Argentina and Brazil.

In Argentina suppliers of meat and forestry technology and services are finding niche markets for similar production systems and processes to those developed for New Zealand conditions.

Educational links too provide another avenue for introducing New Zealand technology and production systems. And it's an ideal export business for New Zealand. With our existing infrastructure, we can deliver English language training and tertiary qualifications, either in New Zealand, or through new technologies, directly in South America.

There's also opportunities for our schools and education professionals to market their expertise - in education methods, curriculum development, and more.

And our relationship is developing in other ways.

Initiatives such as the recent trade mission, the work of TradeNZ and the New Zealand Tourism Board, and the individual relationships developed by many of you here with families and companies in South America add value in another way - they create a more favourable climate for educational exchange, language and cultural studies.

Spanish is now one of the more popular foreign languages in our high schools. Latin dancing and Spanish language evening classes are booked out.

Auckland of course boasts the highly regarded "Kantuta" from Chile, Peru and Bolivia. Locally here in Wellington, the next International Festival of the Arts is expecting a significant line-up of Latin artists. The festival programme announced in September includes an exhibition of the most important Mexican modern art to leave Mexico - the works of Mexican icons Frida Kahlo and Diego Rivera and their associates. The musical programme also includes classical works from Latin American composers.

Last year, we had two Latin American Presidential State Visits to New Zealand (Argentina and Peru) and earlier this month, the Presidents of Chile, Peru and Mexico were in Auckland for the APEC Leaders' Meeting.

By the beginning of this year we had as many Latin embassies resident in Wellington as European. And almost nightly we now see Maricio Olmedo Perez, a young New Zealander of Latin American origin, on our televisions.

The Latin American connection is clearly on a roll.

At the government level, New Zealand is keen to develop these linkages further.

With shared Cairns Group membership, Argentina, Brazil, Chile and Uruguay are some of our best allies in the battle to open markets for agricultural trade around the world. And we want to build on that relationship.

And I believe that there's scope to develop broader, and more meaningful trade relationships with South America.

It's no secret that New Zealand believes the best access security for our exporters is an open free trade system guaranteed by the rules of the WTO. Partners who share these ambitions for the WTO are therefore especially important to us.

But in order to accelerate the open trade agenda we are also prepared to explore all options for bilateral or regional free trade arrangements consistent with WTO principles.

Through APEC, our friends in Chile and Peru are now committed to the Bogor Goals of free and open trade and investment by 2010 and 2020, and as I said earlier, we've seen exciting developments with Chile in the last couple of weeks.

However, our friends over the Andes in the Mercosur Community fall outside the APEC "footprint", and I'm convinced that in the medium term, New Zealand must be working with these economies to supplement and accelerate global trade liberalisation on either a bilateral or subregional basis.

So, in addition to the official calls designed to raise the profile of the mission itself, I also talked to my Cairns Group counterparts, the Ministers of Agriculture - and to Ministers of Foreign Affairs, Industry and the Economy to find out more about their trade policy priorities and economic reform programmes.

I'm not unrealistic about the time-frame for the development of new relationships in South America, particularly beyond our APEC partners.

In the short term, many of these countries already have full trade policy agendas with regional integration, and the prospect of developing Free Trade Agreements with other significant markets.

Clearly, we won't develop free trade agreements overnight, but what I can say is that no-one said that closer links were a silly idea.

There is interest in expanding trade relationships, and although it's early days, I'm confident that some of the ideas we explored will take root, as we've seen with Chile.

And we mustn't allow apparent obstacles to prevent us from exploring all possibilities. Fainthearted Ministers could never have got CER off the ground 30 years ago.

But in order to make these opportunities bear fruit, we in New Zealand have to accept that our focus can't be limited to the trade relationship.

In Latin America, equal significance is placed on political and cultural relationships, and it's this recognition that underpins my Government's approach to South America - we have deliberately set out to develop a broader and stronger understanding of their countries, their people, and the issues that are important to them.

Since Don McKinnon's visit to the region last year, the Prime Minister has visited Chile, Peru and Mexico.

The Ministers of Science and Transport, and of Tourism and Sport visited Chile, Brazil and Argentina with business delegations last year.

The Minister for the Environment, Simon Upton, has visited Argentina and Brazil on environmental and Antarctic issues.

My colleague John Luxton returned just last month from a six nation tour including Uruguay and Venezuela which aimed to build understanding with his agriculture, fisheries and forestry counterparts. And I visited Buenos Aires again in August for a meeting of the Cairns Group.

We've opened an embassy in Buenos Aires and a Consulate General in Sao Paulo. We hope to open an embassy in Brazilia as soon as we can overcome the current economic and budget constraints.

We've signed air services agreements with Brazil, Argentina, Chile and Mexico. We are negotiating with Peru. Last year we upgraded to an "open skies" air services arrangement with Chile and we're making progress in negotiations to further liberalise air services with Argentina.

We've concluded reciprocal visa waiver arrangements with Chile, Uruguay and Argentina. We have a unilateral visa waiver for business-people and tourists from Brazil, and they've offered to facilitate business visitors and investors and we're currently considering a proposal for a reciprocal visa waiver agreement with Brazil.

While I was in Santiago in July I signed an Investment Promotion and Protection Agreement with Chile, and I concluded a similar agreement with Argentina when I was there for the Cairns Group meeting in August.

Along with our CER partner, Australia, we have signed a voluntary Investment Declaration with all four Mercosur members.

And there are a whole range of other initiatives that demonstrate New Zealand's commitment to building our relationship with our friends in South America.

But how, you might ask, does all this benefit business?

Quite simply, increased contact builds better understanding. It means that we'll be more comfortable doing business with each other, and better bilateral relationships mean that you're less likely to face problems in the process of going about your business.

Increased flight services mean that we'll see more tourists, and you'll have better access for supplying perishable goods, spares, and technical support.

You'll have more flexibility to choose when to visit South America, and how long you'll stay.

Visa waivers reduce the cost of visiting markets, and investment arrangements provide a more predictable environment and clear rules for treatment of your investments in South American economies.

In short, stronger Government relations mean that you should face less barriers to doing business in South America. It means that you, as business-people from New Zealand, will have a profile in the eyes of Latin American politicians, officials and business organisations you encounter as you seek to develop markets for your products and services.

And of course the prospect of a Free Trade Area spanning Asia, New Zealand, Australia and the Americas means better access for products and services in off-shore markets.

But I also have a challenge for you - Governments don't exist in a vacuum.

New Zealand's experience with CER has taught us that progress is not only reliant upon political leadership with vision. It also requires the active, vigorous support of the business constituency, and that's where you can and must help.

We need to know what your priorities are, and we need you to build linkages with trade, economic and producer interests in your target markets so that Governments are hearing what a good idea it is to be doing business with New Zealand.

I have clear a vision for New Zealand's future relationship with South America. It's a vision of Asia and South America developing a strong trade relationship, with New Zealand and CER as its bridge.

It's not a pipe-dream. The East Asia Latin American Forum, which involves New Zealand and Australia, had its inaugural meeting in Singapore last month. Developments at APEC were very positive, and there's significant interest in advancing the vision through a "State of the Art" free trade development.

To our Mercosur friends I want to say that you are as important to us as our Latin APEC partners. And interestingly, according to the provisional trade figures for the year to June 1999, Mercosur as a group is now selling to New Zealand about as much as we are selling to Mercosur.

We both need to start thinking now about arrangements to lock in our mutual trade access to allow for continued business development for the future. New Zealand is ready and willing to develop Free Trade Agreements with any willing partner or trading group.

At the start of the new millennium, let's light a fire under the relationship between New Zealand and South America.

Together, let's build that trade and investment bridge across the Pacific Ocean. You can now fly it without stopping. What trade and investment follows is up to us.


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