Linked trade agreements worth US$48 billion during the next 20 years: Sutton

An economic study demonstrating a linkage between CER and AFTA was worth US$48 billion over the next 20 years shows that the concept is worth studying, Trade Negotiations Minister Jim Sutton said today.

CER is the Closer Economic Relationship trade agreement between New Zealand and Australia and AFTA is the ASEAN Free Trade Agreement. ASEAN is the Association of South East Asian Nations, grouping Brunei, Singapore, Indonesia, Malaysia, Vietnam, Laos, the Philippines, Thailand, Cambodia, and Myanmar.

The study, carried out by the Canberra-based Centre for International Economics on behalf of the eminent persons group considering the AFTA-CER concept, shows there are economic benefits for all countries from forming a linkage between the two trade agreements. All countries gain in terms of productivity, investment, income and welfare.

The gains were estimated to be US$48.1 billion of gross domestic product in net present value terms over the period 2000 to 2020. That is US$25.6 billion for AFTA and US$22.5 billion for CER, of which New Zealand would gain US$3.4 billion.

The gains rise through time reaching around 0.3 per cent of additional GDP by 2010 for both AFTA and CER.

Mr Sutton said New Zealand had a representative taking part in an eminent persons group considering whether the CER-AFTA linkage was worth pursuing.

"New Zealand's representative, Sir William Birch, had been extremely positive about the work of the eminent persons group when he last briefed me," Mr Sutton said.

"As this study shows, it could have considerable benefits."

Mr Sutton said CER and ASEAN ministers would discuss the eminent persons report, which would include the CIE report's findings, at a meeting in Thailand in October.

He said time would be needed to allow trade ministers in all 12 countries to consider the eminent persons group report fully.

"If it's accepted, it is likely that each country will do benefit analysis studies of their own rather than move straight into negotiations. Many countries - including New Zealand - would also want to consult widely with interested communities."

Mr Sutton said that should the two agreements be linked, it could be expected that there would be other benefits in addition to the economic benefits listed in the report.

"New Zealand's experience with Australia in CER showed that. The trade agreement had led to new synergies in business that had not been initially expected."

Any CER-AFTA linkage would also be consistent with Asia Pacific Economic Forum and World Trade Organisation goals. Any proposal to join the two trade agreements could act as a springboard and assist efforts by APEC and the WTO to liberalise world trade, Mr Sutton said.

"An agreement would signal to the rest of the world that this region was committed to rules-based trade liberalisation. It would also be complementary to wider liberalisation efforts which would offer significant benefits to New Zealand farmers, New Zealand exporters, and the New Zealand economy."

THE CIE REPORT IS AVAILABLE ON: www.dfat.gov.au

Office of Hon Jim Sutton

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