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Has NZ and Thailand Signed an FTA?

New Zealand and Thailand have signed a free trade agreement. But, have they?

Before Australia signed a free trade deal with the US, Prime Minister Helen Clark said in a speech delivered in New York on 13 December 2002, "While it would not be the intention of either the United States Administration or the Australian Government to affect New Zealand adversely, the reality is that there would be trade and investment distortion created."

She was absolutely right, so when the US and Australia signed a free trade agreement, the spinmeisters in Government and their plants in the media had to work frantically to discredit the agreement: "But what's in it for the poor Australian sugar farmers?" they asked. The idea was to portray a limited agreement as being worse than having no agreement at all - the situation that Clark's anti-Americanism has landed this country in.

Well, we have now completed an agreement with Thailand. How comprehensive is it?

Our tariffs on clothing and shoes from Thailand will be phased to zero by 2015. In return, Thai tariffs on New Zealand cheese and butter will phase to zero by 2020 and their tariff and quota restrictions on skim milk powder imports from New Zealand will be removed by 2025.

Thai farmers should not become unduly alarmed with this break-neck pace. Thailand will apply 'special safeguards' for the most sensitive agricultural products (whole milk powder and a number of other dairy products, beef, beef offal and processed frozen potatoes). Imports of these products will benefit from reducing tariffs up to a certain volume based on historical imports, plus a growth factor. Once the volume of imports from New Zealand reaches that level, the 'safeguards' automatically trigger a snapback to the normal tariff. In other words, if freeing up trade actually starts to work, the Thais will slap on tariffs to stop it - with the agreement of New Zealand.

However, both countries are members of APEC. Ten years ago, in Bogor, Indonesia, the leaders from all APEC countries solemnly announced their "commitment to complete the achievement of the goal of free and open trade and investment in the Asia-Pacific" region, with the industrialised economies achieving that goal no later than 2010 and developing economies no later than 2020.

The current deal amounts, quite simply, to a public repudiation of Bogor by both the New Zealand and Thai governments.

The deal also includes an interesting clause on rules of origin. Instead of relying on area content (like we do with Australia), the two countries will use a mechanism known as "change of tariff classification". This is a much more straight-forward way to verify preferential origin claims. However, our ever-paranoid clothing and footwear lobbyists prevailed on the officials for yet another dispensation. Textile, apparel, footwear and carpet products must meet a 50% FOB Thai/New Zealand content rule, in addition to the change of tariff classification requirement.

We are continuously disappointed by the apparent willingness of our trade negotiators and their political masters to hock the national interest to the self-interest of lobby groups. The Economist (www.economist.com) put it rather well:

"The mercantilist view of trade - exports are good, imports are bad - is an economic fallacy. Politically - and this is to endorse a point made by sceptics - it serves to enthrone producer interests, neglecting all others. Trade agreements go forward when exporters on all sides tell their governments that they see something in it for them; the interests of importers (that is, workers and consumers at large) are implicitly regarded as politically insignificant.

"This has a further consequence. Most governments insist that the grubby details of trade negotiations be kept secret; this is their idea, not the WTO's. At the end of any round of trade talks, a triumphant breakthrough backed by all sides can be announced. In the meantime, as you might expect, governments prefer to keep their negotiators' craven submission to corporate interests under wraps."

The Importers Institute was pointedly excluded from the rounds of consultation between officials and business organisations on this particular trade deal. Had we been consulted, we would have advised the officials that clothing and shoes are not even in the top ten imports from Thailand; saddling importers with complicated rules of origin to protect an insignificant industry is stupid; and sabotaging the promise of Bogor for the sake of appeasing a few Greenies and Trade Unionists is against the national interest.

But then again, they probably know all that. The purpose of the deal was not so much to progress free trade but to provide the Labour government with the ability to go to the electorate and claim to be in favour of free trade, while continuing to pander to protectionists and eco-fascists at every turn. Who knows, it may even work - after all, some of the people can be fooled all of the time.

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