Asian trade breakthrough in Thailand

Trade minister Tim Groser

As fears of increased protectionism grow during the international financial crisis, New Zealand products are to benefit from a new trade deal signed up to in Thailand last night.

New Zealand and Australia entered the free trade agreement (FTA) with 10 Asian countries - members of the Association of South East Asian Nations (Asean) Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Myanmar and Cambodia - representing a market of more than 500 million people.

Trade Minister Tim Groser and Australian Trade Minister Simon Crean signed the agreement in Hua Hin, Thailand.

"We've just put down an agreement that's exactly what the world needs on a global level," Tim Groser told Reuters in an interview.

"It's a very good response in the current macroeconomic situation, when some of these economies are hurting in the massive downturn in world trade."

"This agreement is a significant agreement for the region," echoed Mr Crean to a press conference after the signing.

"It powerfully demonstrates... the region's strong commitment to opening up markets in the face of this crisis."

As leaders of the regional grouping arrived in the Thai beach resort for their three-day summit, they gave mixed signals on the region's attitude to economic protectionism, AFP reported.

"We must not resort to protectionist tendencies at trying times," Thai Prime Minister Abhisit Vejjajiva said in a speech to business leaders.

But Malaysian premier Abdullah Ahmad Badawi said in an interview with the Bangkok Post that it was a "normal reaction" to urge people to buy local goods during times of crisis.

The deal means eventually 99 per cent of New Zealand's trade in key Asian markets will be duty free.

Tariffs will be eliminated in 2010 on New Zealand exports worth $429 million a year, including in some markets butter, milk powder, wool, kiwifruit, apples and some manufactured products.

Tariffs on a further $435m of exports to Indonesia, Malaysia, Vietnam and Philippines will be eliminated between 2011 and 2020.

Within 12 years, 99 per cent of tariffs will have been eliminated in the key markets of Indonesia, Malaysia, Philippines and Vietnam.

When the FTA is fully implemented it will mean annual duty savings of about $50m.

Asean's side of the agreement means that by 2010, 85 per cent of their exports will enter New Zealand duty free.

All New Zealand tariffs on Asean goods will be phased out by 2020.

Progress is being made on deals with South Korea and India.

Meat and Wool New Zealand chairman Mike Petersen said the FTA was a big opportunity and a positive step during gloomy economic times.

"Importantly for New Zealand sheep and beef farmers, the FTA means that we will not be at a competitive disadvantage compared with other major exporting countries, and in the longer term it offers tariff-free access for New Zealand meat and wood products," Mr Petersen said.

He said the negotiations were difficult because agricultural producers had lobbied their governments to resist concessions on farm products.

Mr Petersen said current tariffs were low but the FTA would mean they were not hiked.

"For example, tariffs on beef into Indonesia are 5 per cent but it has the ability to raise them up to 50 per cent. This agreement will eliminate the risk of tariff increases on imports from New Zealand and secure duty-free access for most beef, sheepmeat and co-products by 2020."

Business NZ's Phil O'Reilly said the deal bought the Asian centre of influence closer to New Zealand.

"It could not have come at a better time given recent protectionist signals from other parts of the world," he said.

"More market access and more opportunity for New Zealand will reap rewards."

The NZ International Business Forum executive director Stephen Jacobi said the deal would help New Zealand's future economic recovery.

"Times are very tough in international markets and costs of doing business need to be reduced sharply," he said.

The deal and planned deals with India and South Korea were "some good news amongst the current gloom".

Mr Groser last night said he hoped the FTA would come into force as early as July, after parliamentary approval.

"Significant benefits for New Zealand exporters have been achieved, including the phased elimination of trade barriers, greater certainty and transparency, and reductions in associated transaction costs," he said.

"Asean is New Zealand's third-largest export market, growing 121 per cent since 2000 and worth $4.6 billion in 2008."

Mr Groser said the FTA would send the message that New Zealand, Australia and the Asean countries believed that continued regional economic integration, not protectionism, was the best way to get through the most serious international economic crisis since the Great Depression.

Negotiations for the FTA, known as the Asean-Australia-New Zealand Free Trade Area, took place during the term of the previous government.

Mr Groser was accompanied at the signing ceremony by Labour's trade spokeswoman, Maryan Street.

- NZPA