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New Zealand Government On Horns Of Dilemma

Closing doors, burning bridges, and the search for a mythical holy grail. Bill Rosenberg con-siders the country's mad rush to more free trade.

New Zealand Government On Horns Of Dilemma

In the maze of international trade policy, opening one door closes others. The gov-ernment may well be closing more doors than it opens in its pursuit of a Free Trade Agreement (FTA) with the United States.

The US door has opened a crack. It is no more than a crack. All that the US Trade Representative, Robert Zoellick, has said is that he will be “soliciting the views of the Congress on this matter as we move forward with the Australia FTA.” We can only guess the price of the next tiny creak of the hinges.

Yet statements coming from the World Trade Organisation (WTO) suggest that other doors may be closing. At last week’s controversial Sydney mini-Ministerial, WTO Director-General Supachai Panitchpakdi, in the most diplomatic of language, ex-pressed concern that the rush of bilateral and regional trade agreements threatens movement at the WTO itself.

New Zealand governments have consistently advocated multilateral negotiations – the WTO. FTAs are second-best. US tactics reinforce the dangers present in bilaterals. It is abundantly clear that the US is using access to its huge market as a bribe for sup-porting its wider agenda – military, political and economic.

No country is guaranteed an easy entry. They are hard negotiators. New Zealand is being reeled in step by step before negotiations have even been offered, let alone be-gun. Each step requires further evidence of support for the wider US agenda.

In the process, the chances of a meaningful deal in the WTO are being undermined.

It is not just that FTAs divert countries from the complex, bitterly fought WTO nego-tiations. FTAs also allow the US to avoid recognising the increasingly insistent views of the WTO’s majority, its poorer members.

The FTAs encourage the US to test the water. Does it need the WTO at all? If FTAs can give it privileged access to others markets, with the added bonus of advancing its wider agenda, why bother?

New Zealand may well find that “success” means competing against an ever-increasing number of US free-trade partners. Its NAFTA partner, Mexico, is already losing market share following China’s entry to the WTO. Our entry price will have steadily diminishing returns, while the government’s ideal of a WTO agreement fades into irrelevance without the commitment of the dominant world power.

The returns at best will be small. The Minister of Finance Michael Cullen recently admitted that all New Zealand might gain is a once-only GDP increase of about one percent.

Even that estimate depends on a host of unpublished assumptions. The greatest is that New Zealand can achieve a first – demolition of the enormous barriers around US ag-riculture. Indeed, the US is heading in totally the opposite direction. Its 2002 Farm Bill raised next decade’s agricultural support to US$180 billion – 80% more than the 1996 Farm Bill.

The price for whatever part of the one percent we get will be high. Australia’s abject “all the way with the USA” foreign policy, plus US official documents including its recently published objectives for the Australian negotiations, give us some idea.

Certainly intensified political and military support for US actions will be required. That won’t end even once a deal is signed, just as it unilaterally told us we were no longer active members of ANZUS because of our nuclear policies, and just as it con-tinues to put trade and political pressures on NAFTA partners Canada and Mexico.

Its FTA negotiating objectives will include an end to the marketing rights of Fonterra, Zespri and other producer boards; to Pharmac’s work to hold down medicine prices; to the remaining restrictions on the sale of land to overseas buyers; to government buying preferences for local suppliers; to limitations on the release of genetically modified organisms and labelling requirements for genetically modified food; to par-allel importing of cheaper videos, music and software; to local content requirements for radio and TV; and to our remaining tariffs. One study predicts a two-thirds in-crease in textile and apparel imports from the US.

Conceding to these demands means “kicking away the ladder” of support and protec-tion that the now-powerful industrialised countries, including the US, initially used to build their own industries. The government is trying something similar with its “inno-vation strategy”.

The FTA presents multiple dilemmas – between bilateral and multilateral negotia-tions; between New Zealand’s pride in maintaining some independence in our foreign policy and the need to please the US; and between the domestic economic policies the government was elected on and the free-market demands of free trade agreements, whether bilateral or in the WTO.

We’ve gone down the wrong path in the maze. Let’s back out before it’s too late.


- Dr Bill Rosenberg researches and writes on foreign investment, trade and New Zealand's in-ternational economic relationships with development issues think-tank, ARENA, the Action, Re-search and Education Network of Aotearoa. He can be reached for comment at bill.rosenberg@canterbury.ac.nz

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