Jim Sutton Speech: Bell Gully seminar Wellington

Jim Sutton Speech: Bell Gully seminar Wellington

Ladies and Gentlemen: thank you for the invitation to speak about trade liberalisation this evening.

This is one area where the government can make a real impact for New Zealand business where it really counts ? in our markets.

The changes possible in the domestic arena are small compared to those in the international arena ? our global marketplace.

Since being elected, this Government has made it clear that its main international trade priority is the World Trade Organisation's multilateral round of negotiations. We worked hard to ensure the Doha Round was started three years ago, and we worked hard, albeit unrewarded, for a result at the Cancun meeting last year.

We have maintained that effort this year.

Last week I spoke at a forum in China on a small country's perspective on the global trading system and regional integration. They say that mice always need to watch where elephants tread their feet ? I gave some thoughts on what it is like running with the elephants!

First, for a small country, there can be no higher priority than the successful completion of the Doha Round.

The Doha Round is equivalent to bilateral negotiations among 148 economies. Nothing can match the returns to the world economy from genuine progress in trade liberalisation at the multilateral level.

It is quite clear that for the two major economies, the European Union and the United States, liberalisation of highly sensitive sectors such as agriculture or textiles is simply not possible outside of a multilateral round.

In the decades after the establishment of the GATT in 1947, these sensitive sectors were largely untouched. Significant reductions in tariffs for manufactured goods, outside of textiles, clothing and footwear, did occur over successive Rounds. This reflected the interests of the developed country Members that dominated the GATT at the time.

That situation changed with the completion of the Uruguay Round of negotiations in 1994, and the establishment of the World Trade Organisation. Now the bulk of WTO members are developing countries and with the launch of the new Round at Doha in 2001 development issues were put at the heart of the Organisation's work.

Ever since, agriculture has been the key to the Round. Elimination of export subsidies, long prohibited for all other goods; substantial reductions in market-distorting domestic support; and genuine market access openings.

Progress on agriculture will take us through to a result, but stalemate will continue to frustrate the Round. An agriculture outcome presents the biggest dividend for development from these negotiations.

This is not to downplay the importance of other issues on the agenda, such as further expansion of non-agricultural market access. And liberalisation in trade in services.

The Round is also about further elaboration of trade rules. The rules-based system is critical for small countries, not least the ability to enforce those rules through dispute settlement. Since 1994 an increasing number of smaller players have taken on larger Members and won ? New Zealand included.

I know that participation in the rules-based system was a major factor behind China's lengthy bid to join the WTO. Not just to ensure that other countries apply the same rules to them, without discrimination. But also because the rules-based system provides a framework of standards, principles and practice that allows individual countries to change the ways they do business.

Trade negotiations may seem quite remote to real life back here in New Zealand. Change seems to happen at a glacial rate, and it's not obvious the effect it has on people here, in Wellington, in South Canterbury, and other parts of our country.

But I can assure you that nothing else has quite the same impact on your livelihoods as progress in international trade.

Research carried out by MAF on the quantitative benefits of the last big round of international trade negotiations, the Uruguay Round, showed in the single year of 2000 (the year that many of the gains of the Uruguay Round kicked in) the beef, sheepmeat, and dairy sectors gained about $590 million from product price and volume increases in the major markets of the United States and European Union.

That works out to an average increase in earnings for each sheep, beef, or dairy farmer of $11,500 a year. And that was from changes in our trade with just two of the 146 members of the WTO.

Combined MAF and MFAT research assessed the overall benefits from the Uruguay Round as at least $9 billion over the 10-year implementation period of Uruguay Round changes, and about 17,600 jobs throughout our economy, including 2000 in agriculture in particular.

In addition to the $9 billion of gains from those measures, New Zealand exporters have also gained from firmer trade rules, a strengthened disputes settlement system, and the dynamic effects of a world economy stronger than it would have been without the Uruguay Round.

But the Uruguay Round was only a toe in the door, for agriculture, which is still one of the most heavily protected sectors in the world.

The Doha Development Round has even greater potential.

So that's our main priority, our "Plan A". However, we also have a "Plan B".

The Government is also putting significant effort into bilateral trade negotiations.

In that regard, I am sure you will be disappointed to learn that, by and large, the world has not been beating a path to our door, clamouring for admission to our vast and wealthy domestic market.

So when we do get advances in international trade, it is the result of a lot of hard work.

Earlier today, MAF director-general Murray Sherwin and I signed an agriculture and forestry agreement with my Chilean counterpart Jaime Campos, who is accompanying his president on a state visit there. As part of that visit, President Lagos reiterated Chile's desire to see a successful completion of the "Pacific 3" trade agreement between Chile, New Zealand and Singapore.

Last month, I was delighted to be able to join the Prime Minister in announcing that that New Zealand and China have agreed on a formal Trade and Economic Cooperation Framework, a key feature of which is agreement to negotiate a free trade agreement next year.

This is the first time China has agreed to negotiate such a trade agreement with a developed country.

A trade agreement with China will benefit businesses already exporting there and would create opportunities for other New Zealand companies. This would apply across the primary, secondary and service sectors.

The government believes that an FTA with China would unlock significant trade and investment potential for both countries. China is the world's fastest growing major economy and New Zealand's fourth largest trading partner. New Zealand exports to China have more than doubled in the past six years.

New Zealand was the first country to support China's accession to the WTO, which brought China fully into the world trading system.

China has already developed a strong and vibrant private sector. Since China decided to move away from central planning a decade ago, its economy has grown by around 10 per cent each year.

New Zealand has also agreed that it would not apply provisions in China's WTO Accession Protocol relating to anti-dumping.

The key point in this respect is that New Zealand manufacturers will lose none of the trade remedy protections which they presently have under New Zealand legislation. In effect we are agreeing not to use against China discriminatory protectionist measures which were sought by other countries and which we have not used in any case.

To my mind, there is no more important trade and economic relationship for New Zealand across the scope of this century than that with China. That doesn't mean our relationships with other countries, especially those of Australia and the United States, aren't important ? they most certainly are.

But the potential for growth with China is enormous, and not just for our agricultural producers.

There is to be a widespread public consultation process throughout the country, and I encourage anyone interested in this negotiation to contact either the Ministry of Foreign Affairs and Trade or my office in Wellington to make sure your views are heard.

We are also making good progress with Thailand, and I hope that the feasibility study will be completed shortly, in time for a trade agreement to be negotiated this year. Remember that Australia, our main competitor in key product areas and a much larger and more attractive market, is ahead of us in Thailand. If we cannot keep up, we stand to lose significant market share.

Since the announcement of our agreement to negotiate with China, the ASEAN trade ministers have agreed to recommend to their leaders that an FTA be negotiated between AFTA and CER.

This is an outcome NZ and Australia have been seeking for several years, and there had been little reason to believe that a breakthrough was close.

In my opinion, the change in perspective ? that NZ is indeed by reason of both geography and commitment is a natural part of any Asian trade framework ? is an early harvest of our recognition by China as a worthy and worthwhile negotiating partner in the region.

We are continuing to work with Mexico and Korea on bilateral agreements. We are continuing to lobby for a trade agreement with the United States, and talks with Hong Kong are temporarily suspended. Other partners are still in the wings.

Ladies and Gentlemen: I am excited at recent progress with trade liberalization, and I can assure you that the Labour-Progressive Government will continue to vigorously pursue New Zealand's cause.