[asia-apec 1555] The Press (Christchurch) on Singapore-NZ FTA

[APEC Monitoring Group]

The Press, Christchurch
MONDAY, 11 SEPTEMBER 2000

      O P I N I O N   S T O R Y
Linking with Asia
11 SEPTEMBER 2000

New Zealand's free trade agreement with Singapore is more important than the
sum of its parts. It usefully binds us more closely to one of our most
prosperous neighbours but, more significantly, it signals the Clark
Government's commitment to the globalised economy, writes The Press in an
editorial.

That was in doubt. Labour's strong nationalism – cultural and economic – and
its criticism of the rush to reduce tariffs might have led to it suspending
the deal with Singapore. The pact, after all, is a prime example of the new
global age of open trade and finance, reducing virtually all economic
barriers between the two countries. It also better positions New Zealand for
the continuing attempts to unite the Pacific Rim in a free trade area,
suggesting the Government is committed to those wider globalisation schemes.

Considering the radical suspicions of the Alliance about free trade, the
commitment must have been hard to reach. Maybe the coalition will divide on
the deal with Singapore. The parliamentary support Labour is seeking for it
might be gained only by ACT and National backing Labour.

The deal with Singapore has been achieved, also, against a growing worldwide
sentiment opposing globalisation. The strength of that movement played a
significant part in knocking the World Trade Organisation off track in last
year's attempt to initiate another round of international talks aimed at
removing the remaining trade barriers. Many New Zealanders, particularly
those active on the Centre-Left, are sympathetic to the protectionist cause.

It is a relief that the Government is resisting the seductions of the
anti-free trade position. New Zealand is a world trader offering, primarily,
agricultural products, which are the most susceptible to being locked out of
markets. We must be at the forefront of the international moves to keep
markets open and to lower barriers where they exist. The effort is vital to
our prosperity.

That was never more true than it is today. The sharp fall in the kiwi dollar
was a warning that we must narrow the gap between our imports and exports;
that overseas investors have limited tolerance of our addiction to spending
more than we earn. The lower dollar, by making our exports cheaper and our
imports more expensive, gives us a chance of changing our unsustainable
habits. That change will be faster and easier the fewer trading barriers in
New Zealand's way.

Singapore's opening of its doors will not of itself dramatically advance our
cause. The detail of the Closer Economic Partnership pact with that country
is still not public, but it will, according to Trade Negotiations Minister
Jim Sutton, deliver reciprocal benefits, encourage trade and investment, and
significantly enhance the economic partnership with a key Asian economy. He
goes on to say that Singapore has agreed to improve access for New Zealand
suppliers in key sectors – education, telecommunications, the environment,
medicine, architecture, engineering. Professional qualifications will be
mutually recognised, some goods' standards will be harmonised, and technical
trade barriers reduced.

These are useful gains, but from them greater things might flow. The New
Zealand Government is explicit that it regards the Singapore pact as the
first step in the creation of a wider regional trade pact. Mr Sutton said in
Kuala Lumpur on Monday that the aim was to bind Australia and New Zealand
with the Association of Southeast Asian Nations in a free trade bloc. The
gains of such an association with Brunei, Cambodia, Indonesia, Laos,
Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam, Mr
Sutton said, would be huge – $50 billion in new business over 20 years. The
second step is to win Thailand and Malaysia to the cause, and Finance
Minister Michael Cullen has been raising this with them in the last few
days.

This is a very ambitious agenda and it will not be easily implemented. The
already low New Zealand and Australian tariffs mean that the Tasman nations
have limited bargaining chips, and they do not offer huge markets. Some
Asian nations therefore feel less enthusiasm for a free-trade area than does
New Zealand, and others think development of trade among themselves should
be strengthened before they open the market to their southern neighbours.
Backing this Asian caution is a feeling that Australia and New Zealand are
too culturally different to fit.

But the proposal is at least being discussed. Michael Cullen was doing that
at the weekend on the sidelines of the Apec finance ministers' meeting in
Brunei. And, in October, Asean and Tasman ministers will meet in Thailand to
explore the issue.

The fact that Australia is joining New Zealand in this venture is
significant. Until the breakdown of the World Trade Organisation initiative
in Seattle last year, Canberra was not keen on regional trading blocks, on
the basis that they prevented the world-wide liberalisation of trade. The
Seattle failure has changed that, and it showed last week when the Tasman
ministers met to review CER. Mr Sutton, in particular, was plain about using
CER as the basis of a free trade push into Asia.

The agreement with Singapore encourages the tackling of the wider agenda. It
shows that a mutually beneficial free-trade pact can be established between
an Asian and a non-Asian country. Great benefits can flow from this
promising start.