Dividends on summit investment years away

By Brian Fallow

By one crucial yardstick Apec's Auckland meeting has to be judged a success.

It has boosted the chances of the next round of world trade negotiations, due to begin in Seattle in December, getting off to a good start.

For New Zealand the stakes are high.

The costs of trade liberalisation are largely behind us. But the gains - especially in access to markets for the stuff we are efficient at producing - are largely still to come.

The Seattle round of World Trade Organisation talks is the forum where the big trade gains will come, if they come at all.

In that regard three useful things have been achieved in Auckland:

* The Apec leaders have called for the abolition of agricultural export subsidies.

* They want the Seattle round completed within three years. (The last one took eight)

* They have preserved at least the possibility of an "early harvest" of agreements from the round, including deals to scrap tariffs on fish and forest products, which are major New Zealand exports.

In the murky world of trade policy nothing is ever straightforward, however. Ifs and buts abound.

It is, for example, all well and good for Apec to support the scrapping of export subsidies in agricultural products. Getting the Europeans to do it is the hard part.

Export subsidies allow high-cost producers to dump surplus production in export markets where they would not be able to compete without the subsidy from their taxpayers at home.

The big offenders are the Europeans. The Americans are not Simon Pure in this regard, but on balance they see themselves more as the victims of European export subsidies.

For the Europeans to agree to scrap, or even seriously reduce, export subsidies will require some major trade-offs in return.

In order to enhance the prospects of that kind of horse-trading the Europeans, the Japanese and now Apec as a whole back the idea of one big binding deal at the end of the round - known in the jargon as the single undertaking.

The Americans, for their part, favour an early harvest of deals in some sectors, notably ones where a lot of preparatory work has been done within Apec.

The concern of the Europeans and Japanese is that that would allow the Americans to pick off early the sectors they wanted gains in, pocket them, and then walk away from the process.

The Americans in turn were reluctant to commit to a single all-or-nothing approach for fear that it would defer any practical gains from the talks for years and years.

Senior US trade official Charlene Barshefsky said on Friday that there could be no agreement on a single undertaking until the bounds of the round's agenda are agreed (which will not happen until November's Seattle meeting).

The gap between the US and Japanese points of view has been bridged in Auckland by the idea that you can have early but provisional sectoral deals that can be implemented at once, even though they would not become binding until the end of the round.

It remains to be seen whether anything will come of this compromise in practice.

Representatives of New Zealand's forestry and fishing industries are optimistic that early deals to abolish tariffs in their sectors will be struck next year.

Others suspect that the Europeans, or failing that the Japanese, will block an early deal. Time will tell.

The bigger picture, however, is that the free-trade agenda, which appeared to be losing traction and momentum after the Asian financial crisis, is on the roll again.

It still faces an uphill struggle. Although the 21 Apec economies represent 45 per cent of world trade they do not call all the shots when it comes to setting the agenda and timeframe for the Seattle round. The Europeans still have to agree.

China, although a member of Apec, is not a member of the WTO and will have to conclude a deal with both the Americans and the Europeans before it can become one. Its absence would leave a huge hole in any WTO pact.

Progress towards a deal between the US and China on its joining the WTO has also been made in Auckland.