[asia-apec 1168] NZ Herald on APEC US/NZ trade relations

[Gatt Watchdog]

New Zealand Herald, Auckland, June 19-20, 1999
                             
Parties stew over lamb deal

United States talk of tariffs does not bode well for Apec

by Vernon Small
Political Reporter

In sport and war there are losers and winners.

In the arcane world of diplomacy there are only winners, but of
two sorts.

There are winners (winners) and "winners" (losers).  Or to put it
another way, everyone must be able to claim a win of some sort,
even if he or she has been shafted.

And that is the way the too-ing and fro-ing over US moves to slap
tariffs on NZ and Australian lamb is set to end.

If the diplomats have been doing their job the winners circle will
contain the US producers, who will have tariff protection of some
sort, the President, who will have delivered it, and the New
Zealand and Australian Governments, who will be able to claim that
their relationship with the US made the crucial difference.  They
will need to claim they saw off the worst.

It may be that the outcome of President Bill Clinton's musings
will not be known until midweek.  That will put his decision after
a crucial meeting of US steel producers who are seeking protection
against imported steel, mainly from Japan.

The steel producers are pondering whether to trust the US
International Trade Commission route - "safeguard" tariffs - that
the US lamb producers chose or whether to advocate the stroppier
option of quotas.

President Clinton wants to reassure the steel producers that the
ITC route is effective.  However, if for the lamb he is leaning
towards the commission's softest option - a tariff on future
growth of New Zealand and Australian exports but a nil tariff on
existing volumes - he might prefer to deliver that decision after
the steel vote.

Plumping for that soft option (incidentally, the majority ITC
recommendation) would offer the added benefit of delivering
"winners" all round.

Which is not something that you could really say of the third or
compromise option of 9 per cent on existing lamb tonnage and 40
per cent on future trade.

On the other hand, had we never been told of this third option
there would be no room for our Government to claim a pyrrhic
victory, for it to be a "winner".

A nil tariff on existing tonnage would have the added advantage of
deflating New Zealand's strongest argument against the US at the
World Trade Organisation (WTO).

Since the ITC found only a "threat of injury" from New Zealand's
lamb imports, then by implication it found no damage to US
domestic producers by existing levels.

To then impose a tariff on existing levels would hand New Zealand
a strong WTO case.

But setting aside for a moment President Clinton's decision and
the kudos the Government may be able to claim, the US must ponder
a larger issue.

A tariff by the US on the country that is hosting the Apec
conference would, to put it diplomatically, be a classic own-goal,
especially as the US is an ally and is advocating the promotion of
Mike Moore to the top WTO job.

Then there is the impact of such a decision on one of the Shipley
Government's main themes for this Apec round: building support
for, and understanding of, Apec in the community.

In a week when the current account deficit blew out from an
expected 6.1 per cent of gross domestic product to 6.4 per cent -
underlining the need for New Zealand to boost its exports to
rebalance an over-stimulated domestic economy - it will be even
more difficult to explain to a sceptical public and business
community that we should be part of the US bloc's attempt to
"lower" trade barriers.

The questioning by the chief of the Auckland Chamber of Commerce,
Michael Barnett, of the speed of the tariff reduction is both an
annoyance and a serious worry to the Government in that regard.

If the opponents of Apec and its free trade focus, both in this
country and elsewhere, ever needed a better public relations
weapon, Bill Clinton has it in his hands to deliver it.

The US Deputy Trade Representative, Richard Fisher, hasn't helped
either.

This week, Fisher praised NZ's "magnificent liberalisation of its
economy" and "superb leadership" in one breath and then advised
that the best way to overcome protectionist forces in the US was
to demonstrate the freedom of the US to access other markets.

Don't do as we do, do as we say.

He said the decision on lamb would take into account the
ramifications for world trade reform and would not impact on the
Apec meeting's ability to deliver trade reform.

That contrasts with the views of our own Trade Minister, Lockwood
Smith, and of the Australian Foreign Minister, Alexander Downer,
who has urged Clinton not to give in to political arm-twisting,
which would "send a very negative signal to the world about trade
liberalisation."

But if the domestic approval of free trade, removal of tariffs and
Apec itself has been damaged by the US lamb fracas, other aspects
of the Apec forum can deliver a more positive message.

In fact, you have to ask whether the Government might be wise to
beat a retreat from its over-hyped free trade message.  Shipley's
own enthusiasm for positive free trade news got her into strife
when she returned from the US in January signalling movement on a
free trade agreement without the details to back it up.

The best option for the Government in the runup to Apec would be
to openly acknowledge that this round will be difficult and shift
the emphasis towards other goals - strengthening the functions of
markets and expanding business opportunities in the Asia Pacific
region.

But whatever the final domestic verdict on Apec, it is unlikely to
deliver the widely touted political filip for the ailing
Government.

Rubbing shoulders with leaders is, according to the received
wisdom, a good thing.  It makes you look important and voters are
supposed to like that.

However, such a strong focus on the international stage may
militate against the Government's recovery chances, creating a
flat patch in mid-September - just the thing if you are ahead in
the polls and wanting to bed that lead in but not the best if you
are trailing by about 8 per cent and want to build on the message
coming out of the July 9-11 National Party conference.