Going all the way with free trade deals

By FRAN O'SULLIVAN


A top US businessman focused the free trade debate with a critical question at the Apec CEO Summit: are free trade agreements building blocks or stumbling blocks?

Tom Donohue - president of the influential US Chamber of Commerce - got to the point: "In a world where free trade agreements are proliferating not all FTAs are created equal - in fact some of them are missed opportunities."

Donohue's recipe for FTA success:

* They must be comprehensive with all products on the negotiating table, including the sensitive area of agriculture.

* They must be ambitious and go further than current World Trade Organisation criteria.

* They must not detract from business efforts to get a new liberalising round at the WTO.

Yesterday, Asia-Pacific political leaders delivered their response to Donohue's question, pledging to work with a renewed sense of urgency to get a balanced result in the WTO's Doha Round.

They want substantial progress before the next WTO ministerial meeting in Hong Kong in December next year, and promoted efforts to get Russia and Vietnam admitted to the global trading organisation.

They also agreed that bilateral and regional FTAs could play a constructive role in accelerating liberalisation in the region but urged a move to "best practice".

It was the only credible response.

Opting for plan B - a proposal to create a Free Trade Area of the Asia-Pacific, generated by Apec's Business Advisory Council, was always a mere second-best option to be pulled out of the drawer if the WTO round collapsed.

An experts group will work with regional trade ministers on what has now been named a "Santiago initiative for expanded trade in Apec". This will build from the advisory council's initiative and examine how to cut the red tape that hinders trade.

The numbers tell the story: a World Bank study estimates a successful conclusion to the current WTO round would help about 140 million people escape poverty while adding US$500 billion ($704 billion) to the global economy by 2015.

Will the stratagem succeed?

Economists such as Fred Bergsten, who chaired the eminent persons group that developed Apec's trade vision a decade ago, argue that the exclusionary nature of the Free Trade Area of the Asia-Pacific would force big trade players such as Brazil, the European Union and India, who would not be members, to "sue for peace".

If the incredible happens and global trade talks collapse again, look to the Asia-Pacific link to re-emerge as a mechanism to bridge the Pacific between the Free Trade Area of the Americas and the rapidly forming East Asian bloc as global trade moves to competition between the Americas, Asia and Europe.

For New Zealand such an outcome would be disastrous.

Our link to US

Tom Donohue on New Zealand's free trade chances with the US:

"There is a possibility of getting movement on it. The election in the US is over and we're going to move again with a whole series of free trade discussions."

"I support it vigorously and I think the extraordinary support we've received from New Zealand in Afghanistan and other matters over the years are such that it's the right and fine thing to do and we're going to encourage it."

It should be a parallel agreement with Australia.

New Zealand's ban on anti-nuclear ships shouldn't be a deterrent: "Probably the people who are most engaged and worried about that won't be in government very long."