[asia-apec 899] NZ Trade Minister on NZ-Thai Relations

[Gatt Watchdog]

 Speech: New Zealand & Thailand: APEC Partners
 Wednesday, 18 November 1998, 1:54 pm
 Press Release: New Zealand Government

    An Address By The Trade Minister of New Zealand

    Dr the Hon Lockwood Smith

    New Zealand & Thailand: APEC Partners

    Breakfast Meeting Thai/New Zealand Chamber of Commerce
    Bangkok Thailand

    7.30 am Wednesday 18 November 1998 (Thailand Time) 1.30 pm
    Wednesday 18 November 1998 (New Zealand Time)

    The Thai/New Zealand Chamber of Commerce is the organisation
    behind the substance of the relationship between our two
    APEC economies. I'm pleased it has proven possible for me to
    meet with you here in Bangkok this morning.

    Thailand is an important market for New Zealand - our 17th
    largest in global terms. We're also an economy that is open
    to Thailand, as we are to all trading partners. While the
    Asian Economic Crisis has meant our exports to Thailand have
    declined, your exports to New Zealand have increased by a
    third.

    We're perfectly happy to see your exports to New Zealand
    continue to grow, taking advantage of the lower baht,
    because it shows you can produce goods that New Zealanders
    value, at the right price. We're a fully open economy,
    because we believe New Zealanders benefit from that.

    Of course, we would like our exports to Thailand to fully
    recover too - and grow. We are already seeing a
    strengthening of education linkages, with our universities
    and polytechnics developing linkages with their counterparts
    throughout ASEAN. New visa regulations for foreign students
    will make it easier for Thai students to study in New
    Zealand. As a former Minister of Education, I can assure you
    that our schools, universities and polytechnics are world
    class.

    There are other areas where we see particular potential,
    such as food processing, forestry, pulp and paper,
    environmental engineering and telecommunications. In all
    these areas, and others, New Zealand offers the finest
    expertise and knowledge in the world. We look forward to
    working with Thailand.

    The speed with which those linkages grow will depend on the
    speed with which Thailand and the region recovers from the
    current difficulties.

    With the Asian Economic Crisis, the people of New Zealand
    have a great deal of sympathy with the people of Thailand
    and elsewhere in the region. The contagion effects of the
    crisis mean that we have experienced a small recession in
    the first two quarters of this year, which has caused some
    hardship. We know the effects have been far, far worse here.
    We have provided some assistance with public sector reform.

    But we also admire how Thailand is courageously tackling the
    crisis, while also maintaining your commitment to further
    opening markets. We look forward to being able to make
    progress on access issues of particular interest to New
    Zealand, such as kiwifruit, skim milk powder and cheese.

    New Zealand holds the view strongly that trade benefits
    people, and the more trade the better. In the last decade,
    countries which have had open economies have achieved double
    the annual growth rates of others.

    The world has moved towards more and more trade. Since 1950,
    world trade volumes have increased by 16 times, while
    production has increased by only six times. Just between
    1994 and 1997, trade volumes grew by an average of 9% a
    year.

    Here in the Asia Pacific we experienced a quarter century
    which has generally been peaceful. It's led to huge growth
    in regional consultation, cooperation and trade. It has
    meant that more people have risen out of poverty in a
    shorter period and on a greater scale than at any other
    place or time in human history.

    We in New Zealand believe strongly that should and must
    continue. It is why we are such strong proponents of further
    liberalisation. We believe it is a vital component to
    achieve recovery from the current crisis. We're pleased that
    Thailand remains committed to reform. We're pleased that, in
    general, all Asia Pacific economies are committed to reform.

    Over the weekend in Kuala Lumpur, APEC Trade Ministers from
    sixteen economies reached agreement on early voluntary
    liberalisation of trade in nine sectors. The sixteen
    economies include Thailand and New Zealand, and also the
    world's two biggest economies, the US and Japan.

    Among the nine sectors are two of vital importance to New
    Zealand, fish and forest products. The other seven sectors
    are chemicals, energy, environmental goods and services,
    gems and jewellery, medical equipment, toys and a
    telecommunications mutual recognition agreement. It was a
    balanced package designed to provide immediate benefits to
    each APEC economy.

    In each of the sectors, tariff end-rates and end-dates were
    specified for every product line by Trade Ministers earlier
    this year.

    What was agreed was that APEC economies may immediately
    implement the tariff components of a voluntary basis. There
    will be implementation of facilitation, ECOTECH and other
    initiatives in all nine sectors.

    Even more significantly, it was agreed that a WTO process
    will be initiated immediately on the basis of the framework
    established in Kuching. All participating economies -
    including the economic superpowers, the US and Japan - have
    agreed to work constructively to conclude the agreement in
    all nine sectors in 1999 at the WTO.

    It means that we now have agreement at APEC to achieve
    rules-based liberalisation in those nine sectors next year.
    It means that WTO members that are not members of APEC will
    have the option of joining up.

    I am confident that positive statement of support for trade
    liberalisation in the region will contribute to restoring
    business confidence. Economies such as Thailand - and also
    Indonesia, Korea and Malaysia - facing tremendous
    difficulties, deserve commendation for their courage and
    commitment in signing up.

    Obviously, I believe the deal will help create growth and
    jobs in New Zealand's fisheries and forestry sectors. It
    will mean we will have much better access to some of our
    most important markets for some of our most important
    products.

    But, just as importantly to New Zealand and the region, I
    believe it will be good for all participating economies. It
    will help to get growth back into the region. I don't base
    that opinion on theory. I base it on New Zealand's
    experience over the last 14 years.

    I don't want to suggest that what New Zealand has done can
    be dire ctly translated to any other economy, including
    Thailand. Thailand's des tiny is for Thailand to choose. But
    I do believe an understanding of New Zealand's experience
    could be useful as a case study as you plan the next phase
    of your economic comeback.

    Back in 1984, New Zealand's economy was a basket-case. We
    subsid ised our main industry of agriculture. We had strict
    capital controls. We protected our manufacturing sector,
    with import controls. Un ions dominated our labour market.
    Big, incompetent Government dominated the economy. We had
    extraordinarily high levels of direct taxation, wi th a top
    rate of 66%. Despite that, we had budget deficits of up to 8
    % of GDP. Inflation was controlled only because the
    Government made p rice and wage increases illegal. None of
    this was sustainable. Our li ving standards were plunging
    down the OECD league tables.

    In 1984, an incoming Labour Government began the process of
    turning that around. In 1990, the incoming National
    Government - of which I w as a part - continued with the
    programme and refined it. Combined, our two main political
    parties have contributed to turning New Zealand aroun d.

    We abolished all our agricultural subsidies in one year. We
    free floated our dollar. We lifted almost all our import
    controls. We now have a flexible labour market, based on
    cooperation between emplo yers and employees under simple
    contract law. State assets were privati sed, including our
    airline and our rail and telecommunications industr ies. We
    controlled Government spending, cut taxes, and our debt has
    fa llen from over half of GDP to around a quarter. We have
    no net for eign public debt. Inflation in our economy is
    controlled by the Governo r of our independent Reserve Bank
    being fired if it goes above 3%.

    The transition was not easy. When we abolished agriculture
    subsid ies, around 1% of our farmers had to stop farming.
    Unemployment rose f or a time, as inefficient, import
    substitution industries found they coul dn't compete. But
    the returns have come. Around a quarter of a million new
    jobs have been created this decade in an economy with a
    populatio n of fewer than 4 million. Our living standards
    have risen with take home pay packets in our economy
    increasing faster than prices. We're now able to compete
    with the rest of the world and succeed.

    What's more, further liberalisation is continuing. Already,
    95 % of imports enter New Zealand under a zero tariff. The
    tariffs on the remaining 5% are also very low. By 2006, we
    will have abolished all our tariffs. One hundred percent of
    imports from Thailand or anywhere else will be entirely
    tariff-free.

    At the same time, we are making it easier for businesspeople
    from overseas to obtain long-term multiple-entry business
    visas. We've made it easier for such people to later obtain
    permanent residence. And we've made it easier for overseas
    companies to relocate in New Zea land and bring employees
    with them. We encourage investment from oversea s.

    Domestically, we've reformed our electricity industry, and
    alr eady consumer prices have started to fall significantly.
    We're preparin g to sell our second largest electricity
    generator. We're seeking a sim pler system of paying for our
    roading network. Our key piece of environmental legislation
    will be reformed to speed up econ omic development, while
    still protecting our environment.

    What we are aiming to be is the most efficient and open
    economy in the world, because we believe that will lead to
    higher and higher li ving standards for New Zealanders.

    Each Asia Pacific economy will want to respond to the Asian
    Econ omic Crisis differently. What New Zealand provides is a
    case study of how one Asia Pacific economy responded to our
    economic crisis in 1984. We may provide some ideas of what
    to do, and what not to do - for exam ple, we got some of the
    phasing of our reforms wrong.

    Next year, New Zealand will chair APEC. It will be our
    biggest t rade and economic policy challenge ever. We're
    determined to use our yea r in the chair constructively to
    help the process of putting the region back on a growth
    path.

    We'll be developing initiatives around three key themes:

    1. trade and investment liberalisation and facilitation 2.
    strengthening markets, and 3. broadening support for APEC

    We look forward to working with Thailand through our year in
    the APEC chair, to progress this vital work. And we look
    forward to working with you at the WTO, both on the APEC
    deal and on a new Round.

    New Zealand admires Thailand's courage at this difficult
    time, as you continue to reform and liberalise your economy.
    We have every confidence you will recover and come back
    stronger than before. We maintain our strong belief that the
    21st Century will be the Asia Pacific Century.