[asia-apec 1580] NZ Press Assn article - Singapore FTA

[APEC Monitoring Group]

MONDAY, 18 SEPTEMBER 2000

      F E A T U R E S   S T O R Y
Singapore deal stepping stone to bigger economies
16 SEPTEMBER 2000

There's much more to New Zealand's proposed trade agreement with Singapore
than meets the eye – it could lead to stronger economic relationships with
Asia and even the rest of the world.
If the Government and the Opposition can agree on the wording of New
Zealand's Closer Economic Partnership agreement with Singapore, the country
could be opening more than just one trade door.

Commentators say the trade deal could be the start of something big and
that, by forging links with Singapore, New Zealand will gain greater access
to both South-East and North-East Asian economies, followed by the Americas.

Finance Minister Michael Cullen said the Government hoped to have the trade
agreement with Singapore in place by January 1 next year.

It will wipe tariffs on locally-made goods from each country and liberalise
trade in services between the two countries.

Since New Zealand and Australia forged a Closer Economic Relations
agreement, trans-Tasman trade has surged.

The same could be expected under the Singapore pact.

Statistics New Zealand said imports from Singapore were worth $458 million
last year out of a total $24.248 billion.

Provisional figures for the 2000, to the end of July, were $538 million out
of $29.206 billion.

The Alliance's protectionist policies mean Labour needs National's support
to cement the agreement but the major parties have hit a snag.

They are quibbling about a clause reserving the New Zealand Government's
ability to fulfil its Treaty of Waitangi commitments and take action to
close the gaps between Maori and other New Zealanders.

If and when the two parties ratify the agreement, the benefits for New
Zealand's economy could be huge, Victoria University emeritus professor in
economics Sir Frank Holmes told NZPA.

As well as the direct effects of the deal – reduced trade barriers between
the countries – it would also act as a stepping stone towards other more
important arrangements, Sir Frank said.

The arrangement wouldn't make much of a difference to the agricultural and
manufacturing sectors because access in those areas was already quite free,
he said.

"It's only in areas where there's an element of protection, such as textiles
and clothing, where there may be some additional competition."

The Trade Union Federation had expressed concern the Singapore free trade
agreement could be used to get products from Indonesian sweatshops into New
Zealand through the back door.

It feared textiles, clothing and shoes could be made on the cheap on
Indonesian islands just off the coast of Singapore.

But a spokeswoman for Overseas Trade Minister Jim Sutton said 40 per cent of
an item must be sourced in Singapore to qualify under the agreement.

The rules stipulated this 40 per cent must not be simply a minimal process,
like packaging or labelling.

Sir Frank agreed, saying the rules would prevent goods from other countries
being brought into New Zealand.

"As far as the textile industry is concerned, we were on the way to removing
all our barriers to trade anyway.




"The Singaporeans would not have been interested in just New Zealand – we're
not as important as all that – but they have somewhat similar reasons to our
own. They want this to be a model which one hopes others will adopt." - Sir
Frank Holmes




"There are much fewer barriers now than there used to be and the really good
parts of the textile and clothing industry – the ones where we have good New
Zealand design and things like that – are surviving and thriving quite well,
selling into other markets," he said.

"(The agreement) will ginger up the whole industry over time and as long as
particular industries have a few years to get ready for the competition, if
it's any good it will adjust."

But the main benefits to New Zealand would come through in the services
sector, with considerable improvements anticipated in the sale of
educational, financial and legal services.

"They're trying to improve their own performance in that area and they've
had a lot of restrictions on competition there," Sir Frank said.

"If New Zealand gets a free trade deal with them we may have some advantage
over other countries in getting access to their fairly restricted market."

The agreement would also put Singapore and New Zealand in "a rather special
political position" and both would be more interested in investing in each
another's countries, he said.

"There's quite a bit of Singaporean investment in New Zealand already and
their interest in us will probably be increased to some extent."

Singapore Airlines owns 25 per cent of national carrier Air New Zealand, and
Brierley Investments is now based in Singapore.

In a speech to the Singapore/New Zealand Business Council in Singapore, Dr
Cullen said the agreement would put New Zealand's bilateral trade and
economic relationship with Singapore on a "new and firmer footing".

"It will stimulate and encourage trade and investment and significantly
enhance our economic partnership with this key Asian economy," he said.

However, Sir Frank said the deal might lead to more significant arrangements
with other countries, "and they are much more important than the direct
benefits that we might get from the Singapore deal".

Australia and New Zealand's CER pact could be linked with the Association of
South-East Asian Nations' free trade agreement, he said.

The Singapore-New Zealand deal would be a good stepping stone towards that
broader arrangement.

"We hope that the Australians will want to come in on this deal – it's a
starting point not a finishing point for other arrangements that are more
important than the Singapore-New Zealand deal directly.

"The Singaporeans would not have been interested in just New Zealand – we're
not as important as all that – but they have somewhat similar reasons to our
own. They want this to be a model which one hopes others will adopt."

Parts of North-East Asia were also forging regional trading agreements in
other parts of Asia, Sir Frank said.

"Even the Japanese are negotiating with Singapore about the possibility of a
free trade deal, the Koreans are doing quite a bit. There's a danger that
countries like Australia and New Zealand might be left out of this game
unless we have linkages with other countries in Asia.

"The Singapore deal links us in with one of these countries that will
participate with the North-East Asian countries, Japan Korea, Taiwan and
perhaps China."

Sir Frank said the Singapore deal could also be a step towards the mooted P5
agreement between Australia, New Zealand, Singapore, Chile and the United
States.

"It's terribly important to us and to Australia that we're not left out in
the cold. The Singapore link is a link with a small but important country in
Asia that might be useful in keeping us in the game." - NZPA