PM Helen Clark Address To The Chicago Council on Global Affairs

Illinois seems a natural place to have a conversation about globalisation.

Here in heartland America, farmers, manufacturers, and workers know what it is to be part of a global marketplace, as does the Chicago Mercantile Exchange - with its truly global reach - which I will visit this afternoon.

Chicago is also home to many business giants – like Boeing, Kraft, McDonalds, John Deere, and Caterpillar – whose international production and sales networks make them drivers of the globalisation phenomenon.

Globalisation brings huge benefits, but it also requires major mind shifts and adjustments. For first world economies which want to keep that status, it's a case of innovate or fall behind. That is a lesson New Zealand had to learn the hard way

As Thomas Friedman said in The World is Flat: "If globalization were a sport, it would be a 100-meter dash, over and over and over. And no matter how many times you win, you have to race again the next day."

In my government, we acknowledge that New Zealand's competitors never stand still. Our economy will have to continually reinvent itself. And we owe it to our citizens to offer them every opportunity we can to upskill for employment in a higher value, more innovative, and open economy. Today I would like to share with you some of our thinking on trade policy and our experience of opening our economy up to international competition.

In the era of globalisation, freeing up trade has come to be seen by many worldwide as disruptive of people's lives and something to be feared. If governments want to pursue more open trade policies and retain support while doing so, they need to assure their citizens that there is a place in the brave new world for them. In New Zealand's open trading economy, we know that our jobs and incomes now depend on trading our way to prosperity in a competitive and rapidly changing world marketplace.

A further consequence of globalisation is that trade policy and domestic economic policy are increasingly intertwined. This presents challenges for policy-makers and business people alike, as to what direction we should take on the international trade agenda, and how we adjust our economies to the outcomes.

The top item on that agenda right now is the Doha Development Round of negotiations in the World Trade Organisation. The good news is that these talks are showing fresh signs of life.

But the WTO doesn't always get a good press. Committed multilateralists who call for more and better global rules on areas like the environment, human rights and disarmament, can be decidedly more equivocal about enhancing the global rules for trade. If we are to change that, the international system and national policies will have to have greater regard for the social impacts of globalisation and for strategies which can more effectively address them. That will require more co-ordination across and cohesion within the multilateral system than we have seen to date, as the wide ranging International Labour Organisation report on this subject recommended three years ago.

The New Zealand Government believes it is possible to reform world trade rules so that they deliver a win-win outcome. Having effective trade rules is important for all countries, large and small. And having the opportunity to lift living standards through trade is especially vital for developing nations.

I commend President Bush for the commitment he is making to injecting new energy into the Doha round negotiations. Yesterday I spent some time discussing the Round with the President and members of his Cabinet. We are agreed that a deal is achievable, and that the cost of failure is quite simply unthinkable for us all. We share the view that an ambitious outcome would bring big benefits over time to all countries. That, therefore, must be our goal.

WTO negotiations are difficult precisely because they involve countries making policy changes in politically sensitive areas; yet the gains from doing so can be significant. Consider for example, China's WTO accession deal, which was a landmark event in stimulating economic reform and social change in that country. This Round of WTO negotiations has helped drive the far-reaching EU decisions on reform of its Common Agricultural Policy in 2003. And so, now, Brazil, India, and others in the G20 Group face some tough decisions relating to the protection they have for their manufacturing sectors.

Many of the reforms which have stimulated growth in OECD and emerging economies in recent decades have been unilateral. That was certainly the case in New Zealand. But some reform is difficult to achieve other than through a multilateral negotiation. The challenge is to secure reciprocal concessions which lead to firm commitments from others.

A stand-out example of such an area is farm subsidies. The Europeans are big spenders on agricultural protection. But they have now offered deep cuts in subsidies along with the elimination of their export subsidies. The WTO agriculture negotiations and the current debate on the United States' new Farm Bill also offers this country the opportunity to take decisions on farm spending which will provide strong leadership in the Doha negotiations.

When US Agriculture Secretary, Mike Johanns, visited New Zealand in 2005, he met a number of farmers. The message he got from them was clear and unequivocal: farming without subsidies and protection is more profitable, more efficient and a great deal more satisfying.

New Zealand unilaterally eliminated farm subsidies more than two decades ago. The short-term effects were very harsh, and hindsight suggests that adjustment could have been facilitated. But down the track we can see that our agriculture has forged ahead; dairy productivity has increased by nearly 50%, the average lamb carcass weight has increased by 20%, and agriculture’s contribution to New Zealand’s GDP has doubled in the past 15 years. This has been achieved in spite of the fact that our key exports generally face high tariff barriers and are up against heavily subsidised competition. The European Union and the United States support for their dairy industries, for example, runs at levels 60 to 140% greater than the total value of New Zealand dairy production.

Our experience suggests that farm programme reform in the United States, which is so well known for its enterprise and innovation, is achievable and would be beneficial.

Because of far reaching economic change in earlier years New Zealand has few defensive concerns in the WTO negotiations. That has allowed us to hold out for big market access results in all sectors – agriculture, manufacturing, and services. It has enabled our negotiators to work closely with our American counterparts on seeking an ambitious result which translates into real market access openings across all parts of the negotiations.

From my discussions yesterday with the highest levels of the US Administration, it is clear that we have a common view of the strategic importance of completing a WTO deal. It will be good for our economies, for other first world economies, and for the developing world. Indeed offering new agricultural market access and cleaning up subsidies is the single most important thing we can do for development and poverty alleviation.

We can also deliver on other key objectives through the Doha negotiations. For my government, sustainability is central to our policy agenda. We are active in those areas of the WTO negotiations which offer the prospect of good environmental outcomes.

One is fisheries. Over the past decade the United States and New Zealand have led efforts to get agreement in the WTO on tighter rules on subsidies in the fisheries sector. We believe that the global fishery is in a state of crisis, with 75 per cent of the world’s commercial fisheries either overexploited, fully exploited, or significantly depleted. Only one per cent of these are recovering.

One of the causes of that crisis is subsidies. It is estimated that around 20 per cent of global fishing industry revenues are subsidies. These have perverse effects through the contribution they make to excess capacity and the excessive fishing effort which has devastated the global fishery. We need to deal with this - and the WTO negotiations are the place to do so.

We face a difficult challenge in persuading our friends in Europe, Japan, Korea, and elsewhere that we need new rules to eliminate damaging subsidies in this sector. The United States paper on fish subsidies tabled at the WTO In Geneva this week proposes a broad prohibition on subsidies on the harvesting of marine wild capture fisheries, and will provide Impetus to the negotiations.

We are also working closely with the US on efforts to free up trade in environmental goods and services, the market for which exceeds US$550 billion. By way of comparison this is roughly the same size as the markets for information technology or for pharmaceuticals.

Average tariffs for environmental goods and services exceed fifteen per cent globally, making the commercial case for freeing up this trade clear. But we are also strongly motivated by the environmental benefits of making these products and services more widely available and cheaper. Once again, it is satisfying to be able to work alongside the United States in this campaign to use better trade rules to deliver benefits to the environment.

Globalisation implies a steady move to greater economic integration on a global scale. For governments this means that we need to keep asking ourselves whether we have appropriate structures in place to benefit from trends in the international marketplace and, so, 'future-proof' our economies.

The New Zealand-China FTA project is one of a number of trade negotiations we have initiated with countries in the Asia-Pacific region in recent years for such strategic reasons. There is every reason to seek association with and benefit from China's fast growing economy. We are also part of a four-way deal with Chile, Singapore and Brunei, which demonstrates how four diverse economies can work together. We have an FTA on goods with Thailand; we have been negotiating with Malaysia; and, together with Australia, we are negotiating with the 10 members of the Association of Southeast Asian Nations.

We are also thinking actively about how to deepen and widen our economic and trading relationships with the other major economies in the region, including Japan and Korea, and, on the other side of the Pacific, with the United States and Mexico. Taken together, these initiatives are all designed to strengthen our integration in the region and secure our long-term prosperity.

This audience includes a number of business champions of an FTA between New Zealand and the United States. An FTA would not only build on our strong trading relationship; It would also complement the growing co-operation between us in other fields. While we understand the current uncertainties about an extension to Trade Promotion Authority, and the hurdles to be overcome in securing Congressional support for FTAs already negotiated, we look forward to a time when negotiations between New Zealand and the United States will be possible.

There has been a proliferation of free trade agreements and preferential trade in the Asia Pacific in recent years, leading to calls from APEC's Business Advisory Council for consideration of a Free Trade Area of the Asia Pacific which would be more comprehensive and less complex for business to operate in.

New Zealand has been a supporter of this concept for some time. We were delighted to see President Bush throw his weight behind further development of the FTAAP concept at the annual APEC Leaders' Summit In Hanoi last November. That gave the impetus needed for a decision by leaders to explore ways to further promote regional economic integration, "including the concept of a Free Trade Agreement of the Asia Pacific" as a long-term goal. This will be debated again at this year's APEC Summit In Sydney In September.

I have at several points In this speech argued that we have to look carefully at the non-commercial aspects of the trade agenda, including the interface with the sustainability agenda.

Trade is not an end in itself. We export to make money to pay for imports and to lift our living standards. New Zealand also wants to see our trade interaction based on a commitment to ILO standards and to advancing environmental sustainability.

This is an area of sensitivity for developing countries, which have understandable concerns about the scope for abuse of labour and environmental provisions as barriers to trade. Having seen debates about food miles and travel miles take off In Europe, I have some sympathy for that suspicion! But I believe that the mechanisms New Zealand has developed within or alongside our FTAs on labour and environment allows us to get Into a constructive dialogue on these issues, and to promote better practice in ways which are supportive of developing countries.

New Zealand's economic crisis in the mid-1980s sparked a period of radical economic reform. Our currency was floated, farm subsidies were abolished, a number of state trading enterprises were privatised, and tariffs were slashed. Our country made a rapid transition from being one of the most heavily-protected economies in the developed world to being one of the most open.

The adjustment period was difficult, with too little consideration given to how to facilitate it. My government has over the past seven and a half years adopted a more strategic approach, accepting a role for government as a partner, facilitator, and broker in economic development. Over our time in government, growth has been above the OECD average, and our unemployment at 3.7 per cent sits amongst the lowest In the OECD. We are relatively well positioned to respond to challenges in the international marketplace. Our explicit goal Is continual economic transformation, with our growth and development being driven by innovation, enterprise, and being outward looking.

Our traditional agricultural sectors have led the way in productivity Increases. We have dynamic new sectors in high value horticulture and aquaculture products, top quality wines, marine industries, ICT, biotechnology, and film. Tourism often ranks close to dairy as a top export dollar earner, and the international education services sector is sizable. Niche manufacturing also does well. Forestry and fishing are very important too, but we do need to extract more value from these sectors.

New Zealand these days is considered a good place to do business. We rank in the top 5 of “economically free” countries in the 2007 index of Economic Freedom – recently published by the Heritage Foundation; and we ranked number 1 out of 145 countries surveyed by the World Bank in its “Doing Business” 2005 survey for overall “Ease of Doing Business”.

As I have emphasised, New Zealand's adjustment to the global economy was done at speed in a time of crisis. It took a long time to build a new, more innovative and higher value economy, and we can improve much further. But New Zealand is doing well as a very open economy, and is making its own luck in our globalised world. We hope that others will grasp the opportunity offered by the WTO Round to open up their markets and drop their subsidies to give others the chance to grow and develop through trade.

ends

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