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Cablegate: New Zealand and Thailand Aim to Conclude

This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 02 WELLINGTON 000915

SIPDIS

STATE FOR EAP/ANP, EAP/BCLTV AND EB/TPP/BTA/ANA
STATE PASS TO USTR - BWEISEL
COMMERCE FOR 4530/ITA/MAC/AP/OSAO/GPAINE

E.O. 12958: DECL: 11/03/2014
TAGS: ETRD ECON PREL TH NZ
SUBJECT: NEW ZEALAND AND THAILAND AIM TO CONCLUDE
FREE-TRADE AGREEMENT


Classified by DCM David R. Burnett. Reasons: 1.4 (b) and (d).

1. (C) Begin summary: New Zealand and Thailand have begun the
fourth and possibly final round in negotiations for a
free-trade agreement, which New Zealand hopes to conclude by
November 19, before the next APEC summit. The New Zealand
government acknowledged that its effort has been hampered by
the fact that the Thais stand to gain little from an
agreement. New Zealand also has had difficulty surpassing
the achievements of Australian negotiators in their
free-trade deal with Thailand, which provided for limited
liberalization for agriculture. New Zealand's experience may
hold some lessons for Washington as U.S. negotiators work
toward a free-trade agreement with Bangkok. End summary.

2. (U) In October 2003 during the Asia-Pacific Economic
Cooperation (APEC) Leaders meeting in Bangkok, the prime
ministers of New Zealand and Thailand made a commitment to
begin free-trade negotiations. After holding informal
discussions in March and May, the two governments began an
ambitious schedule of formal negotiations in June, meeting
every six weeks in each other's capitals. The fourth round,
which started November 1, is being held in Bangkok. New
Zealand hopes this will be the final round of negotiations,
with an agreement signed before the November 20-21 APEC
summit in Santiago.

3. (C) Shortly before leaving for Bangkok, Rachel Fry, New
Zealand's chief negotiator in the talks, told post October 28
that access to the Thai market for goods -- particularly
agricultural commodities -- was the principal New Zealand
issue remaining to be resolved. In turn, Thailand was
seeking to gain access to the New Zealand market for
specialist Thai chefs and traditional Thai masseurs. While
the Thais presented that goal as a services issue, Fry said
New Zealand views it as an immigration matter it proposes to
be addressed through a side letter.

Obstacles to New Zealand
------------------------
4. (C) Fry said that New Zealand encountered a number of
challenges in the negotiations. Among the most important,
Thailand's across-the-board high tariffs made a free-trade
agreement (FTA) very attractive to New Zealand, while
Thailand had far less to gain from a deal. Sixty-five
percent of Thailand's products already can enter the New
Zealand market duty-free. Nonetheless, Fry said that the
Thai government considers FTAs as a way to promote
competitiveness among its industries. The Thai prime
minister also sees himself as a regional leader on trade
issues and views bilateral trade agreements as a means to
bolster Thailand's stature in such forums as the Association
of Southeast Asian Nations (ASEAN). New Zealand expected
that, under the agreement, a large number of Thai tariffs on
New Zealand products would be removed on implementation, with
others phased out over five years.

5. (C) Fry noted that Thailand's free-trade pact with
Australia -- concluded in October 2003 and signed July 5,
2004 -- had provided a useful template for the Thai-New
Zealand agreement and had helped enable the two sides to keep
to the ambitious negotiating schedule set by leaders. But
using this template also has set the bar low on what New
Zealand negotiators can achieve. Thailand essentially
expected that an agreement with New Zealand would replicate
the one it signed with Australia. New Zealand negotiators
considered the Australian-Thai agreement as a general model
but weak on market-access issues, specifically on
agriculture. For example, the Australia-Thailand agreement
provided lengthy timeframes for the phaseout of tariffs on
beef and dairy products, which are to end in 2020 and 2025,
respectively. There also will be delays in Thai tariff
reductions for other "sensitive" products, including honey
and potatoes. Fry said that while 10 percent of Australia's
exports to Thailand are composed of such sensitive items, 30
percent of New Zealand's exports fall into that category.
New Zealand is trying to shorten the tariff phaseout times
for beef and dairy products in particular, but Fry recognized
that as a difficult challenge.

6. (C) Thailand's desire to shelter its dairy farms poses a
particular problem for New Zealand, whose largest export
earner is dairy. Fry said that, because the Thai government
had been accused of ramming through the Australian agreement
without public consultations, it has made a concerted effort
to consult stakeholders on the New Zealand negotiations. The
result was that the relatively small but well-organized Thai
dairy industry had significant impact on Thailand's position
on dairy access. Fry posited that U.S. negotiators would
face similar problems.

7. (C) In the agreements with Australia and New Zealand,
Thailand rebuffed any provision that would require a change
in legislation. Fry expected that Thailand would need to
change its stance on this issue in its negotiations with the
United States. Fry added that Thailand's lack of trade
statistics and deficiencies in its tariff schedule also
hindered the talks. New Zealand may have been disadvantaged
by agreeing with Thailand to use each other's import
statistics, she said. For example, Thai statistics appear to
understate imports of New Zealand goods compared to reports
by New Zealand exporters. That disparity could harm New
Zealand, since proposed agricultural safeguards would be
triggered by the growth in import volumes.

8. (C) Fry said the agreement will include chapters on
technical barriers to trade and sanitary and phytosanitary
measures. New Zealand hopes these provisions will create
mechanisms through which such issues could be addressed
through the FTA. The Thais have asked New Zealand to develop
certain import health standards for tropical fruit, which do
not now exist. A chapter on intellectual property will
reiterate both countries' obligations under the Agreement on
Trade-Related Aspects of Intellectual Property Rights and
include a commitment to cooperate on enforcement.

9. (C) New Zealand had hoped to gain access to Thailand's
hugely restrictive services market, but now expects to pursue
further negotiation on the issue in three years, according to
Fry. New Zealand also hoped to include chapters on
environmental and labor protections, but the Thais objected.
Instead, the agreement will include nonbinding, political
commitments, which Fry said Thai negotiators classify as
"hortatory," stating that each party will not depart from
labor and environmental standards to gain a trade advantage.

Negotiating tips
----------------
10. (C) Fry characterized the Thais' negotiating style as
"cautious," although some of the members of the Thai team are
very energetic. Many of the team members were prior
participants in the negotiations with Australia, and Fry
expected they also would play roles in talks with the United
States. She identified Ms. Chutima, who took the lead on
policy issues, as a particularly tough negotiator.

11. (C) Fry also noted that the Thai Agriculture and Commerce
Ministries do not appear to coordinate their messages well.
The Ministry of Agriculture in particular has tried to keep a
tight rein on its issues, leading to mistakes and confusions
in the Thai government's presentations at negotiating
sessions, especially at the working level. At times, the
Agriculture Ministry presented positions that the Commerce
Ministry appeared to not have closely reviewed. The Thai
negotiators then changed their negotiating positions.

12. (U) Two-way goods trade between New Zealand and Thailand
totaled about NZ $900 million (US $617 million) in 2003, with
New Zealand's exports to Thailand pegged at NZ $329.72
million (US $222 million) and imports at NZ $572.73 million
(US $393 million). Thailand is New Zealand's 15th-largest
trading partner.

13. (U) New Zealand -- which has free-trade partnerships with
Australia and Singapore -- is currently holding three-way
talks with Chile and Singapore. It also is preparing for
negotiations with China and is considering such talks with
Egypt, Malaysia and Mexico. In addition, ASEAN has proposed
free-trade negotiations with New Zealand and Australia.
Swindells

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