HON JOHN LUXTON: SPEECH NOTES
Minister of Food and Fibre
Associate Minister of International Trade
Address to NZ/Fiji Joint Business Council Meeting
Parkroyal Hotel, Wellington
25 June 1999
The Prime Minister of Fiji, the Hon Mahendra Chaudhry
The Rt Hon Sir William Birch
Mr Francis Mortimer, President of the Fiji Business Council
Your excellency Mr Isimeli Bainimara, Fiji High Commissioner to New Zealand
Ni sa bula vinaka
Tena koutou, tena koutou, tena tatou katoa.
Thank you to the NZ/Fiji Business Council for their hospitality in hosting this conference. I appreciate the invitation
to address this conference once again.
I'd like to reiterate what my colleague Sir William Birch said earlier, it is my pleasure to welcome the Fiji
delegation, led by the Prime Minister, the Hon Mahendra Chaudhry and the Fiji based conference delegates here in
I was in Fiji at the beginning of the month for the South Pacific Forum of Trade Ministers where I enjoyed the
opportunity to meet your Deputy Prime Minister, the Hon Dr Tupeni Baba.
Fiji is New Zealand's largest South Pacific trading partner and our 20th largest market for exports overall. In the year
to December 1998, New Zealand exported $195 million worth of goods to Fiji. Exports have increased steadily from $121m
New Zealand imports $55.5 million worth of goods from Fiji with apparel and footwear the main items. While the balance
remains in our favour, import growth has been substantial since 1985 when we imported only $19 million worth of goods. I
am sure Fiji's increasing export focus will narrow the gap and allow New Zealand consumers to enjoy more of what Fijian
business has to offer
So this meeting is a timely and important opportunity for the NZ/Fiji Business Council to again consider trade
liberalisation issues, particularly in the context of globalisation.
What is globalisation?
It seems to me that I should at least attempt to answer what must be one of the most frequently asked questions, and
that is what is globalisation and how can we benefit from the process?
Globalisation is a process which has been around for a long time. It is just that the pace has quickened with the speed
of communications. The moment humans discovered that wealth can be generated through trade, the process of increasing
opportunities to exchange goods and services began. It has advanced to the point where we now live in a global
The globalisation process cannot be halted. And as well as providing immense opportunities for participants, there are
risks too for the ill prepared.
With exports of New Zealand goods and services comprising 30% of our GDP, participation for us is a matter of necessity,
rather than choice.
Key features of globalisation and emerging opportunities
Services are emerging as the new lifeblood of international trade - trade is now measured according to the transfer of
financial, legal, managerial, design and information skills. Intellectual capital is a prized commodity of the world
market - the knowledge economy.
This trend is changing the pattern of trade and a range of new policy responses is required. Accordingly the Uruguay
Round saw moves to liberalise rules covering services in areas such as telecommunications and the financial sector. More
recently the WTO has been looking at trade and investment and competition policy.Increasing pressure will remain for an
Information Technology Agreement that will eliminate tariffs on a wide range of technology products by the year 2000.
Foreign Direct Investment remains a powerful force behind global economic growth and integration. Trade often follows
investment so regulation of FDI can have a major impact on trade flows. There is a need for improved international rules
on investment including the liberalisation of investment regimes; investment protection; and effective dispute
settlement procedures.And we should also not forget indirect benefits of increased international commerce such as -
knowledge transfer, improved resources allocation and strengthening of domestic financial markets.
What can governments do to assist successful participation?
So what can governments do to assist successful participation in their own economies? The fundamentals, I think, are
These include a strong macro-economic policy framework, in particular a strong fiscal position. Mechanisms to minimise
domestic price distortions, sound banking systems, a well functioning market infrastructure and a consistent regulatory
framework for the capital market.
Government has a central role to play in developing the appropriate policy settings in each of these areas. It also has
a role in working to remove barriers to trade and in co-operating over the establishment of effective international
institutions and rules.
Government policy if not correct can reduce the a country's growth and employment opportunities.
How will developing countries fare in the globalisation process?
Pacific Island countries are part of a global environment in which we are becoming less isolated and less protected. Our
small economies, limited resources (natural, human and capital), heavy reliance on exports of primary commodity products
and remoteness from the marketplace makes us particularly vulnerable. Many have a high level of import dependence.
Countries with weak links to the global economy will fall behind in the next decade, particularly as a reduction of MFN
rates erode their margins of preference.
While presently we have no way of knowing just how long trade preferences will last, one thing we can be fairly certain
about is that change will occur. Increasing competition will mean that the viability of vulnerable export sectors will
be called into question. Those countries confined to the production and export of a narrow range of traditional
commodities will be particularly at risk.
The Asian economic crisis has shown us just how vulnerable certain economies are.
The ease with which money is able to flow across international borders has also increased the scope for financial crime.
Particularly in jurisdictions which do not have the adequate regulatory and legislative framework. I know there is
growing concern among the international community about the increasing vulnerability of the Pacific region to crimes of
What can be done?
In describing the factors likely to impede the real progress and participation of developing countries, I have drawn
from real concerns articulated by small countries, including our Pacific Island partners at a number of regional and
international fora and also on a bilateral level.
Having gone from one of the most protected and closed economies to one of the most open ones in a relatively short space
of time, we do appreciate that there are added difficulties for developing countries embarking along the same path.
The transition may require some accommodation on the part of developed countries. Certainly creative solutions in
overcoming the impediments which limit the ability of developing countries to participate in the global economy need to
Governments will continue to be required to take some hard decisions in making some short term sacrifices for the
future. There are no easy answers but constructive and close co-operation with regional and international partners over
issues will be very important.Likewise effective partnerships between government and the private sector will also remain
a critical success factor for the future. In this regard, forums such as these joint business council meetings, make an
Regional and multilateral issues
I would now like to turn to a number of related regional and multilateral trade issues which will be of interest to this
As I said I recently attended the Pacific Trade Ministers meeting to discuss the development of a regional free trade
agreement. A recommendation will be put to Forum Leaders in October, to endorse in principle, the negotiation of a
Pacific Regional Free Trade Area (FTA) among Forum Island Countries.
The New Zealand Government is supportive of the process. The initial FTA will be restricted to Forum Island Countries,
but New Zealand and Australia are provided for in the draft protocol and will be involved in the negotiation process.
We are aware of Fiji's reservations about the FTA and hope that the process will enable more concerted attention to be
given by the region to improving and strengthening critical trade facilitation measures (customs, quarantine, labelling,
packaging, phytosanitary and other sanitary requirements, export/import controls, exchange controls and technical
The relationship between regionalism and multilateralism is indeed a complex one and a key challenge for policy makers
is to ensure that the two grow together and not apart. And experience has shown that there is good scope for regional
agreements to provide models for broader agreement. The key factor in this development is of course political commitment
towards keeping the process moving forward.
New Zealand's small and open economy means that our business cycle is to a significant extent, influenced and shaped by
those of our major trading partners, in particular the US and Australia, but also the Asian economies.
Like Fiji and many developing nations, we in New Zealand don't have a lot of economic muscle with which to try and open
up difficult markets.
Our influence tends to come through collective effort, building coalitions of interest with other countries to
liberalise trade. The 15 member Cairns Group of agricultural exporting nations is an example of a successful coalition
of interest. We work with other groupings as well, depending on the issue. APEC is invaluable in this regard.
I should also like to mention that during our year as APEC chair, NZ has sought to ensure that its Pacific Islands
partners will have opportunities to participate in and benefit from, that process. Mr Wevers, Chairman of the Senior
Officials of the APEC group may well wish to expand on that a little further in his presentation to you.
The WTO provides a forum for negotiation of freer trade with almost all of our key trading partners. Under the WTO's
most favoured nation principle, trade benefits to one country have to be given to all. So small countries like Fiji and
New Zealand can benefit from the greater negotiating influence of the major economies.
Having a secure framework of rules governing the conduct of international trade enables small countries to defend their
rights against much bigger countries. It also provides a means for advancing trade expansion and economic recovery.
In a time of global uncertainty, the WTO provides a bulwark against protectionism. It provides stability in the
multilateral trading system, so that companies and investors can be confident that trade barriers are not raised
arbitrarily when times get tough. During these times, the fundamental principles of consensus, non-discrimination and
the rule of law that underpins the WTO becomes even more critical.
The Uruguay Round was the first step on the road to establishing a fair and market oriented system for agricultural
trade. But there is much unfinished business. The rules for agricultural trade need to be put on the same basis as for
trade in other goods.
We are already working closely with other members of the Cairns Group, including with Fiji, to prepare for these
negotiations. Services will also be a key area for New Zealand. The service sector forms the major part of our economy,
accounting for over two thirds of our GDP and nearly 3/4 of our employment.
Exports of services have been growing faster than any other sector, and now make up 20% of total exports. Good progress
in liberalising services trade, with agreements reached on telecommunications and financial services have been made. But
air and maritime transport still need attention.
Liberalisation of these sectors would benefit tourism, which is our largest single foreign exchange earner. Other
priorities for New Zealand in the service sector include education, software, construction, and professional services
such as engineering, architecture, accountancy, legal and audiovisual services.
As we prepare for a new WTO round, we need to know about the problems that New Zealand and Fiji exporters are facing
overseas. We want to be sure that we meet the needs of small exporters as well as the big ones, and that we promote the
interests of all sectors. This is where input from the business community will be invaluable.
We need answers to questions which will allow us to understand the nature and scope of the practical barriers you face.
Tariffs that are too high. Quarantine requirements that you believe are unreasonable. Regulations that affect your
ability to do business in particular markets. Technical standards that are unnecessarily restrictive, unusual labelling
requirements. Intellectual property issues that you are concerned about. Restrictions on government procurement in areas
where you would like to be competing to supply.
We can't promise you a quick fix. Trade negotiations are complex and tortuous. We are probably looking at a new WTO
round of at least three years. But I do assure you that we will remain resolute in our commitment to work towards
ensuring that the trading environment we operate in is a freer, fairer and more predictable one.
Increasing trade and reducing barriers to trade is a key to increasing the wealth and prosperity of both our countries.
It does seem however that protectionist forces across the world are growing.
Among the forces at play at present are:
- residual effects from a global recession
- growing pre millennial tension, accompanied by significant changes in the global security situation
- a global debate on genetically modified food
- phenomenal growth in information technology and communications
- the battles between the US and the EU on bananas and HGPs
- an expanding European Union and a war in Europe - thankfully now over.
When it comes to freeing up world trade New Zealand's biggest allies are not the US. They are the developing nations,
South Africa, Brazil, Morocco. Nations who - like us - want access to the protected markets of the European Union, the
US and Japan.
In other words we aim to see these economies reduce their high existing barriers to our exports as we have done for
their exports in manufactured goods.
Just as they agreed on the benefits of trade liberalisation to their domestic economies, the leaders of these nations
also spoke with one voice on the need for change.
In New Zealand currently, there is some debate as the US suggests that they might impose a quota and some tariff on New
Zealand and Australian lamb imports.
This will raise lamb prices in the US market and in the short term assist inefficient United States lamb farmers, but in
raising the price of lamb, less will be purchased and the market will slump. Not helpful for either I would have
But even if an anti competition tariff or levy of $10m is imposed to appease US political pressures it should also be
seen in the context of the $100m growth in that market for New Zealand lamb producers over the last five years. So 90%
of the gains are still retained and it will grow again in the future.
Politics occasionally provides some slippage in the general progress towards greater trade and lower barriers.
Trade continues to grow at three times the rate of production increases around the world and tariffs overall continue to
reduce around the world.
Here in New Zealand some have questioned the issue of free trade.
Why should we unilaterally remove protection in New Zealand they say? Particularly if others don't!
There are two very good reasons.
1. To improve the real income of our citizens whose pay packet can buy more products cheaper and with greater choice
from a world market.
2. To grow our export sector who can be world competitive if they can purchase their plant and materials at world best
prices, instead of at higher prices aimed at propping up uncompetitive parts of the economy.
Often we undervalue the cost of protections such as tariffs or who actually benefits from them.
A classic example was our car assembly plants in New Zealand up until last year.
Less than 2,000 jobs were directly involved in the industry which was protected with a 22 1/2% tariff on all imported
This meant that every car cost around 20% more than it would have done a year later and as a result New Zealanders were
levied in their purchase price about $200,000 per job remaining in the New Zealand car assembly industry.
But these workers actually received less than a quarter of that and the majority went to the firms involved and some to
other local businesses.
A year later I'm told over 90% of those workers seeking work are back into jobs in other parts of the economy, some of
which have been stimulated by the spending of ordinary New Zealand families no longer having to pay 20% move for their
President Mandela in speaking on the WTO this year stated:
"In seeking to build a better future we ignore the lessons of the past at our peril. Though international trade and
investment have always been an integral part of the world economy, the extent to which all parties have benefited has
depended on the circumstances in which they have taken place. The current process of globalization is no exception."
In this context he emphasised the importance of a rules based system. Just as South Africa needed a rules based
constitution to navigate around its past so did the trading system of the world.
"If our constitution was blind to the reality of inequality and historical imbalances that prevent equal access to
opportunity; then it would become a source of both actual and perceived injustice. Rules must be applied without fear or
favour, but if they contain prescriptions that cannot be complied with by all, or if the results benefit too few, then
injustice will emerge."
"Rules are respected when they are above expediency, in perception and in practice."
When it comes to free trade, New Zealand's objectives and those of other Pacific Islands are identical to those of South
Africa. Which is why I will conclude this speech with some more words from Nelson Mandela.
"Fifty years ago, when the founders of the GATT evoked the link between trade, growth and a better life, few could have
foreseen such poverty, homelessness and unemployment as the world now knows.
"Few would have imagined that the exploitation of the world's abundant resources and a prodigious growth in world trade
would have seen the gap between rich and poor widening. And few could have anticipated the burden of debt on many poor
"As we celebrate what has been achieved in shaping the world trading system, let us resolve to leave no stone unturned
in working together to ensure that our shared principles are everywhere translated into reality.
"As we enter the new millennium, let us forge a partnership for development through trade and investment."
Again it is hard to disagree.