Free-trade ball back in play

By Brian Fallow

Forestry and fishing industry leaders have welcomed progress at Apec towards freeing up international trade in their sectors.

Two years ago at the Vancouver summit, a something-for-everyone group of sectors, including forestry and fishing, was selected for early voluntary trade liberalisation.

That proposal was kicked to touch a year ago at Kuala Lumpur. The Auckland meeting has thrown the ball back into the field.

The Apec economies have agreed as an objective that the World Trade Organisation should reach agreement on the package by the end of next year.

It would be a provisional agreement, able to be implemented at once but not final and binding until the coming WTO negotiating round is completed in - another Apec aspiration - three years.

"We will know within the next two years whether we are on a fast track to free trade in forest products or not," said James Griffiths, chief executive of the New Zealand Forest Industries Council.

His US counterpart, Maureen Smith of the American Forest and Paper Association, has a more ambitious reading of the Auckland outcome. She sees it as envisaging an agreement in principle at December's WTO round launch in Seattle on an "early harvest" of sectoral liberalisation, with next year spent on the fine details and implementation beginning by the end of 2000.

Against such optimism has to be put reported comments by Japanese Foreign Minister Makio Miyagawa that Tokyo will refuse to cut tariffs on forest products and fish while the WTO talks continue.

Mr Griffiths said that there tended to be a big gap between how Japanese bureaucrats perceived their forest industry, and the industry itself. Some heavyweights like Sumitomo, Panpac Oji and Juken Nissho had a global outlook and were more focused on access to fast-growing markets elsewhere in Asia than protecting a mature home market in Japan.

Nor should the European industry, whose agreement was essential if a WTO deal is to be possible, be seen as monolithic and protectionist.

Although tariffs in the pulp and paper sector were not high, their elimination could obliterate the profit margins of some European producers, Mr Griffiths said. But others had a global outlook and, like their Japanese counterparts, were looking to fast-growing Asian markets.

The proposal sent to the WTO from Apec last year envisages complete elimination of tariffs by 2004 for developed countries and 2007 or 2008 for developing ones.

It also covers a comprehensive range of products: pulp and paper, sawn timber, panels and valued-added products (like furniture components).

One impediment to investment in further processing of New Zealand logs is that tariff barriers tend to be higher for higher-value-added products.

"It's all about building momentum," Mr Griffiths said. Once countries experienced the benefits of lower-input costs as a result of reduced tariffs, protectionist instincts tended to weaken. China, he said, was very negative three years ago about liberalising trade in forest products but had already agreed to sizable tariff cuts as part of its WTO access negotiations. Thailand, Indonesia and Malaysia had all made voluntary tariff cuts.

Alastair Macfarlane, of the Seafood Industry Council, said the early harvest package proposed eliminating tariffs on fisheries products by the end of 2005 and quotas by 2007.

Securing European agreement might be difficult because the European Union was conducting a comprehensive review of its common fishery policy which was not due until 2002. But a deal on frozen fish for further processing might be achievable earlier.