Lockwood - What APEC Meant For Business
An Address By
Hon Lockwood Smith PhD
MP for Rodney
What APEC Meant to New Zealand Business
10 November 1999
Mr Chairman, my parliamentary colleague Dr Wayne Mapp, members of the Northern Club, Ladies & Gentlemen.
I want to thank you most sincerely for being here today to review what APEC meant for New Zealand business, and to look ahead to international trade developments and to consider what they mean for New Zealand.
It’s no secret that as New Zealand prepared to Chair APEC this year, there was concern that the drive to open up markets internationally was running out of steam.
The concern was well-founded. Having experienced APEC 1998 in Kuala Lumpur, I was concerned. And I’m sure that many of you would have shared my concern.
Remember that throughout this year, we’ve seen the Americans talking about free trade, and then putting tariffs on our lamb.
In the lead-up to APEC in Auckland, the two biggest powers - China and the US - really weren’t even talking to one another after the Chinese Embassy in Belgrade was bombed.
And key Asian economies were still struggling in the wake of the financial crisis.
But post-APEC, I can report that the drive to open up markets internationally has found its second wind.
And much of that is because of the success of APEC and the meetings that surrounded it here in Auckland.
APEC is about improving the prosperity of all the people in the region.
And the way it does that is by encouraging greater trade, investment and economic co-operation between its various member economies.
But it doesn’t work by wheeling and dealing – the old fashioned way of one economy trading one thing off for another.
It works by setting goals and each economy working towards them in its own way.
Chief among APEC’s goals is the Bogor Goals – free and open trade and investment by 2010 for developed economies and 2020 for all economies.
In the ten years of APEC’s existence, we’ve made a lot more progress towards those goals than many people think.
Two economies – Singapore and Hong Kong, China – have already reached zero tariffs.
Brunei has got down to 2%.
Far from the protectionists’ claim of New Zealand leading the world in tariff reduction, we come in fourth with an average tariff rate of 4.2%.
Australia and Canada are now both below 6% and the US is down to 6.4%.
Korea and China have slashed their tariffs by more than half, and Malaysia by 43%.
China, just this year, has cut tariffs on more than 1000 items.
Canada has cut tariffs on 640 items; Malaysia 74, in the sensitive sectors of food, textiles and raw materials.
We’re abolishing our tariffs because in essence they’re just taxes on clothing New Zealand’s children, buying them shoes and allowing families to buy a new car to cart them around.
In Auckland, APEC agreed to work to improve that process of cutting tariffs to ensure we achieve the 2010/2020 free trade goals.
The big issue, though, is always food, particularly for economies with direct territorial experience of war.
It’s why it was such an important step for APEC to agree to implement the APEC Food System.
The APEC Food System is designed to promote trade in food, develop rural infrastructure and disseminate advances in technology.
We want a more efficient regional food industry.
That’s good for the consumer.
And it can only be good for those of us with a competitive advantage in the production of food.
As part of the Food System, we want to abolish export subsidies, which right now gobble up over $12 billion a year of taxpayers’ money world wide, with nearly $5 billion of that in the dairy industry alone.
If we get rid of them, it’ll mean our dairy products won’t face unfair competition from subsidised products, which push down the world price.
And it’s crucial for the poorest economies, struggling to develop their own agricultural industries against cheap, subsidised surpluses.
APEC will also be taking that united message to the World Trade Organisation, which is starting negotiations to free up world trade next month.
APEC also agreed that the WTO negotiations should deliver better market access as well.
Obviously, some in the European Union will have other ideas, but APEC has delivered a strong statement of principle representing half of world trade.
We’re a major, united, negotiating bloc.
Our united stance will push those negotiations much further on, covering agriculture, services and industrial products.
And there’s broader support for our message.
Earlier this month I attended an informal WTO Ministerial in Lausanne.
The message from the major developing economies such as South Africa and Egypt was clear.
If we in the developed world were truly interested in helping developing countries, we would open our markets to agricultural trade rather than doling out ever more foreign aid.
It’s a clear message. It’s a message that makes sense. And it’s a message that New Zealand, and all of APEC supports.
At the same time, APEC agreed to facilitate trade – to strengthen markets behind borders.
I often tell a hypothetical story of an ice cream exporter – you may have read a bit of it in TIME magazine.
Yes - it’s very important to liberalise trade by abolishing the tariffs that prevent our ice cream exporters from selling their product in many markets.
But it’s just as important to facilitate trade – to make sure the ice cream doesn’t melt while waiting to go through Customs in overseas markets.
And it’s very important that economies have decent electricity and transportation networks to get it to the shops.
It’s almost as important to align product standards, so you don’t have to make different kinds of ice cream for different markets.
We also need to reduce the paperwork involved in international transactions.
And so on, right through the whole spectrum of government regulation, including making sure competition law is fair.
At APEC we endorsed a whole set of principles to address those kinds of issues, behind borders.
To help developing economies in particular, we also agreed to improve our economic and technical assistance programme.
In the last year, around 250 projects were undertaken or completed.
You’ll be pleased to know that I’m not going to run through all of them here today.
Suffice it to say that, for example, in the last year or so APEC has held workshops in Indonesia, Papua New Guinea, China, Korea, Mexico and Chile to help improve the quality and efficiency of seafood inspection.
Programmes like that will make it easier for our seafood industry to get their product into those markets.
There are another 249 projects that address other issues similar to that.
As I said, we’re improving the overall programme this year.
East Timor dominated the media coverage from Auckland.
It wasn’t an APEC issue, because APEC has to be strictly about economics.
But by building better relationships between Leaders, ministers and officials – and bringing them together in one city – APEC helps the region to deal much more effectively with issues like East Timor.
Leaders and Foreign Ministers used the opportunity of all being in Auckland to respond to the carnage in our neighbourhood.
The relationships I’ve built through APEC have worked in similar ways with respect to free trade.
In Auckland, Singapore’s Trade Minister and I signed an agreement to negotiate a Free Trade Agreement between our two economies.
Chile subsequently agreed to be involved.
Australia, the United States and other economies fully committed to free trade are welcome to be involved.
The agreement was largely strategic at the outset.
Singapore is a very successful and wealthy economy, but its population is even smaller than ours.
Neither of us is under any illusion that we are going to be one another’s major trading partner any time soon.
But Singapore, remember, is one of only two APEC economies that are already at zero tariffs.
We’ll join them at zero by 2006.
And we’re both right at the top of the league tables when it comes to economic freedom and openness.
What we want to do is negotiate a very simple Free Trade Agreement.
It’d cover goods, services and investment.
There would be no tariffs or export subsidies – obviously – and no non-tariff barriers either.
Maybe even anti-dumping measures would be eliminated as well.
Government procurement would be fair to both our business sectors.
Customs would be simplified, standards made to conform, intellectual property protected, and competition principles developed.
The list of exceptions to the agreement would be strictly limited.
And we’d also make sure that the development was fully in line with APEC developments and WTO rules.
The idea is that it should be the ultimate free trade agreement – even more comprehensive and simple than our CER with Australia.
It would of course have some direct economic benefits that would increase exponentially if more economies joined.
Chile, for example, is our second biggest destination for New Zealand investment offshore.
Australia is our biggest trading partner and investment destination.
The United States is the United States – enough said – and President Clinton exceeded even my expectations when he said publicly he thinks the idea is interesting and that he’d be having his officials explore how it might proceed.
But the key objective at this stage is for it to be a model for the rest of the world, and another path towards APEC’s 2010/2020 free trade goals.
Already, it’s helping to kick start developments elsewhere.
In Singapore last month, Australia and New Zealand as CER partners were meeting with the ASEAN Free Trade Area – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
We agreed to study the possibility of a free trade area including all our economies by 2010.
And we appointed no less than a former Prime Minister of the Philippines to lead the study and to report back within 12 months.
It’d provide another path towards APEC’s 2010/2020 free trade goals.
Just a couple of weeks ago I was in Washington discussing a state-of-the-art free trade agreement involving the US, New Zealand, Australia, Singapore and Chile which President Clinton promised to consider on his recent visit to New Zealand.
The proposal is being actively considered by the US Administration, and we’re expecting to hear more from the US within the next few weeks.
It’s all these developments, which have come about directly or indirectly because of APEC, that mean I can report to you that the drive towards global free trade has found its second wind.
And it’s quite extraordinary that to one extent or another, New Zealand has played a leadership role in all of them.
I love New Zealand.
We’ve had a tumultuous 15 years.
We’ve been buffeted about by the financial crisis in Asia and a series of droughts.
But we have managed our way into a position where we have all the right economic fundamentals here at home.
We’re making the transition to a knowledge economy.
And we’re now right at the forefront of developments to really give us the boost we need – freeing up world trade.
The question for us is how we see ourselves into the 21st Century.
We can be one of those top performing economies, like Singapore or Hong Kong over the last 30 years – but I’d argue with a superior life style with land and open space.
The only thing that can hold New Zealand back is if we doubt ourselves and if we fall into the trap of negativity.
I get criticised sometimes for being too optimistic and too enthusiastic about New Zealand.
I know that when I first started talking about a Free Trade Agreement with the United States, many people rolled their eyes and thought it was a pipe dream.
Then the lamb tariff decision came out and it looked like they might be right.
And in a sense they were right all along.
It was, at the beginning, just a dream.
But New Zealand’s success over the years has always been based on our ability to dream – whether it’s allowing women the right to exercise their right to vote, climbing Everest or winning the America’s Cup.
The question in a couple of weeks time is whether New Zealanders still dare to dream of a better future – the best in the world.
The alternative is opting for mediocrity – middle of the second division.
I think if New Zealanders reflect on all New Zealand has to offer, they’ll opt for the former.
Because New Zealand is and can be the best country in the world.
We have the best lifestyle.
We can be an economic leader too.
I want to leave you with the words of President Clinton just before be left New Zealand:
“… this has been a magical trip. I think every person, when he or she is young, dreams of finding some enchanted place, of beautiful mountains and breathtaking coastline and clear lakes and amazing wildlife, and most people give up on it because they never get to New Zealand.”
I think he’s right, and the more my job sends me overseas the more I know he’s right.
Thanks for this opportunity to update you today on developments my trade portfolio.
My commitment to you is to deliver you the market access you need to take New Zealand into the future.