Trade deal stretches across the Pacific

A trade agreement linking New Zealand, Chile, Singapore and Brunei, signed in Wellington yesterday, is being promoted as a high quality agreement that other countries may yet join.

The deal will make a "small but positive" contribution to New Zealand's growth prospects, concludes a national interest analysis submitted to Parliament yesterday.

The Trans-Pacific Strategic Economic Partnership agreement is not being put forward as one which will have a big impact on trade among the parties, which are all small and open economies.

But the national interest analysis stresses the strategic benefits of the agreement. It is the first with a Latin American country and is intended to serve "both as a building block and as a model within Apec that is open for other countries to join".

The Sultanate of Brunei was a late addition to the negotiations between Singapore, New Zealand and Chile.

"Brunei has demonstrated that this is a way to get into the trade liberalisation business off the shelf," Trade Minister Jim Sutton said.

"We have already had unofficial little nibbles from other countries in South America and Southeast Asia."

Prime Minister Helen Clark said it was a high quality agreement in that it achieved what few bilateral trade agreements did - a commitment to eliminate tariffs on all traded goods.

And on services it embodies the negative list approach: all sectors are opened up unless they are expressly excluded.

While the end-point is zero tariffs across the board there are some phase-out arrangements for sensitive sectors, including a transitional safeguard mechanism for dairy exports to Chile.

But the volume of exports which would trigger it is well above current trade with Chile and the level of tariffs which would apply, 6 per cent, is not considered prohibitive.

New Zealand's largest export trade to Chile, about $10 million worth of coal a year, will enter duty-free as soon as the agreement comes into force on January 1 next year. That trade is expected to grow.

As Chile already has preferential trade agreements with the United States, the European Union and other South American countries, the trans-Pacific agreement is more a case of levelling the playing field for New Zealand exporters.