Chile, NZ ready to talk on trade

By COLIN JAMES

New Zealand and Chile are set to open negotiations for a free trade agreement.

The announcement of the talks will be made at the Apec leaders' summit on October 26 and 27.

New Zealand has long sought an agreement with Chile, bilaterally and as part of a "Pacific Five" free trade area covering Australia, Chile, New Zealand, Singapore and the US.

The holdup with Chile has been dairy products.

But Wellington sources say that is less of an issue now Argentine dairy products can enter Chile under the Mercosur South American trade agreement at tariffs in the 1 per cent to 1.5 per cent range.

In any case, the tariff on New Zealand dairy products is 6 per cent, which is not a deterrent.

As well, Chile is becoming a net exporter of dairy products, and officials there recognise the need for their dairy industry to become more internationally competitive.

New Zealand and Chile came close to starting negotiations some years ago.

At last year's Apec summit it was agreed to do a study that has shown direct trade gains will be small because both countries have open economies.

But it would point businesses in each country towards opportunities in the other's region.

New Zealand has a free trade agreement with Australia and a closer economic partnership with Singapore and the hope in Wellington is that Singapore might be brought into talks with Chile.

Singapore and Chile are negotiating trade agreements with the United States. Australia is negotiating a partnership with Singapore.

The United States announced on September 21 that it would negotiate a trade agreement with Australia.

New Zealand and Singapore's announcement of negotiations at the Apec summit in Auckland in September 1999 was a talking point in an organisation in which the momentum for trade liberalisation had stalled, though developed nations - including New Zealand - had earlier committed themselves to zero tariff for Apec members by 2010.

New Zealand froze its remaining tariffs for five years in 2000, and is now reviewing those tariffs for decision next year.

Most industries and businesses are now operating in anticipation of zero tariff at some point, so there is an argument for moving to zero in 2005.

But Trade Minister Jim Sutton says he values having some tariffs as bargaining chips in negotiations.