Fran O'Sullivan: Spadework needed to win trade place

New Zealand's formal invitation to join what might ultimately prove to be the world's largest free-trade area will not be in the mail anytime soon.

But Prime Minister Helen Clark's inclusion at the inaugural East Asia summit here today should be seen as an indication that, over time, New Zealand will be formally invited into the club (if we play our cards right).

This is a welcome development for business, particularly those companies that are astute enough to read the geo-political shifts and take a longer term strategic view towards the region.
It may take years, perhaps a decade or so, before a new free-trade area reaching from Russia, Japan and South Korea in the north, across China to India in the east, then down to cover the 10 Southeast Asian nations and finally to encompass Australia and NZ actually emerges.

The resultant free-trade area may not even use the words East Asia.

There are plenty of sensitivities around that term particularly among smaller Asean nations (and some bigger ones) that are already scared stiff of being overrun by the two fast-emerging economic giants: China and India.

But make no mistake about it: if the initial steps under way in Kuala Lumpur today ultimately emerge in a new trade bloc that will far outweigh the economic and political power of the European Union and the North American Free Trade Area.

The multilateral trade talks in Hong Kong look unlikely to post the aggressive gains that New Zealand's agricultural exporters want so it is essential that we do not find ourselves locked out if the global trade game ultimately becomes a matter of negotiations between three huge trading blocs.

This admittedly is a pessimistic view. But even if the WTO talks result in a high-quality deal - a new (East Asian) free-trade area will create preferences for its members that are not open to all the WTO's 149 members.

This presents this country (and Australia) an opportunity to overcome the tyranny of distance from the world's main markets that we have not enjoyed since Britain said "goodbye chaps" and joined the European common market nearly 30 years ago.

What needs to be said (loudly) is that Clark and her officials are not going to get there on their own. Diplomacy has limitations. There is no guarantee that Clark's ultimate successor as prime minister will win the same amount of respect within East Asia that she has won from Asean's political leaders.

Here's the wakeup call:

First: NZ Inc needs to demonstrate it wants to be involved.

There is a posse of Kiwi business players accompanying Trade Negotiations Minister Jim Sutton at the WTO talks in Hong Kong this week. That's fair enough. But surely a couple of representatives could have peeled off to wave the flag at the third Asean business summit that preceded today's summit.

It is not as if Australian businesspeople were thick on the ground either, just a smattering turned up. But New Zealand's absence was noted by the raft of influential politicians, officials and businesspeople present that I spoke to over the weekend.

They were surprised that NZ Inc did not take advantage of the opportunity to position itself for the longer game and be seen to support the political effort at this historic summit.

New Zealand business may not want to position itself (and shouldn't) as a government court jester at home. But if this country wants to be seen as East Asian it has to give regard to form as well as substance.

Second: The Ministry of Foreign Affairs and Trade should appropriately resource New Zealand's two business representatives in Asean circles, Griffins Food managing director Tony Nowell and Carter Holt Harvey chairman John Maasland.

It would appear that there is not so far a sufficiently dedicated resource for the pair to undertake to a high level the vital track two diplomacy which will be required to ensure our business interests are underpinned as the political agenda proceeds.

Third: Business New Zealand and the Chambers of Commerce must quickly put their territorial disputes to one side and form a Business International umbrella organisation.

All the key players have been banging on about this longer than I care to remember. Business needs a co-ordinated private-sector voice in offshore forums that NZ Trade & Enterprise cannot provide. It should be independent and also involve Federated Farmers, the Export Institute and what's left of our NZ-domiciled corporates. How hard can this be?

Fourth: Foreign companies with investments in New Zealand need to get over treating their Kiwi subsidiaries as branch offices and wake up to the fact that their investments are situated in a small country that, over time, may be able to grow rapidly, rather like Ireland did, once it gets access to a big free-trade area. Capitalising their New Zealand domestic subsidiaries so they have the wherewithal to make investments in the region rather than directly at head-office level - and support New Zealand's business-led diplomacy - would be a step in the right direction. Profit-shipping has limitations.

That's the sermon.

Here are a few points to absorb.

Asean's bigger game is that it stays centre-stage in the new free-trade area.

That is why the 10 Southeast Asian nations are pursuing their strategy in a piecemeal fashion negotiating the Asean Plus Three deal involving Japan, China and South Korea first, then the Asean-CER (Asean plus New Zealand and Australia) next before tacking on similar deals with India and probably Russia.

Despite bird flu and high oil prices the Asean countries still managed to score an average growth rate of 6.3 per cent last year, more than 50 per cent higher than New Zealand's own growth rate.

Kiwi business take note. 
 

Dynamic area

Asean, the Association of Southeast Asian Nations, includes Thailand, Myanmar, Laos, Cambodia, Vietnam, Singapore, Malaysia, Indonesia, the Philippines and Brunei.

It is one of world's most dynamic growth areas and has a population of 500 million.

The region has a GDP of $1 trillion and exports of $700 billion.

The average per capita income is $1400 and growing.