Asia view: Momentum needed for Asia-Pacific trade talks

By VAUGHAN YARWOOD

Within a matter of weeks, New Zealand and Hong Kong will decide whether to shift their exploratory trade talks up a gear and enter into official negotiations.

A green light for the talks would help the cause of global trade.

Hong Kong appears keen to proceed. It is a free port under the terms of reunification with China, and therefore is entitled to enter into trade agreements on its own account. Moreover, its import regime is similar to that of Singapore, with which New Zealand entered into the groundbreaking Closer Economic Partnership in January.

Though no substitute for comprehensive multilateral trade liberalisation, pacts such as CEP serve to keep the free-trade flame alight while the World Trade Organisation's more ambitious plans are languishing. After the failure of its Seattle ministerial meeting in late 1999, the stalled WTO is desperate to begin fresh negotiations to build on the achievements of the Uruguay Round. The WTO's director general, Mike Moore, wants to get the basis for a new round on the table by the end of July, in time for the Qatar ministerial meeting in November.

Setting an agenda for Qatar has been slowed by foot-dragging on workers' rights and environmental protection among developing countries, and by widespread disagreements on how to handle agriculture and product dumping.

Unexpectedly, these difficulties have won Australia over to the cause of regional trade areas, which it once saw as hindering progress at the global level. It may have been encouraged by the emerging Free Trade Agreement for the Americas. Now Australia has warmed to New Zealand's plan to use CER and the Singapore pact as the nucleus of an Asean free-trade area.

The slowdown in the US economy could be a fillip to such a scheme. Many Asian economies are overexposed to the downturn in US technology spending and will be coming under increasing pressure to stimulate trade and investment through structural changes. Among highly vulnerable economies are the Philippines, Singapore and Malaysia, each of which has 50 per cent or more of its exports composed of information-technology products.

Since its founding in 1989, the Asia-Pacific Economic Cooperation forum has had limited success in driving economic integration, largely because of a tendency among individual member countries to focus on sectors in which they were competitive and elsewhere to remain protectionist.

There is hope that the spectre of a global slump will galvanise Apec members at the October leaders' meeting in Shanghai to more actively pursue the forum's goals.

The Singapore CEP agreement could not have come at a better time for Trade Negotiations Minister Jim Sutton. It is a tangible expression of Apec's 1995 goal of opening trade and investment in developed countries by 2010 and in developing countries by 2020. Unlike Apec's initiative, CEP is legally binding and provides mechanisms for redress and compensation. Not only is CEP fully consistent with WTO provisions, but by removing all tariffs, expanding service commitments and prohibiting agricultural subsidies it sets a benchmark for inclusive trade arrangements.

New Zealand has always fought to keep agriculture on the WTO agenda. As a global trader in agricultural products, it cannot afford to see agriculture sidelined by entrenched protectionism. Imprecise WTO guidelines which talk of covering substantially all trade have been interpreted by some as meaning that problematic sectors can be left out of negotiations. New Zealand has taken the more rigorous line that any trade agreement must be comprehensive.

Worldwide, some 220 trade agreements are in force or under negotiation, and it is in New Zealand's interest to ensure that, at a minimum, they conform with WTO guidelines. Until two years ago none of the free-trade initiatives involved Asia. Now Korea is well advanced in negotiations with Chile and is talking to Japan. Singapore is in dialogue separately with the US, Canada, Mexico, Australia and Japan.

China is not expected to be in a position to contemplate any such talks until its admission to the WTO is completed, which now looks unlikely before the end of the year.

As the first free-trade agreement between an Asian economy and a developed Western country, CEP has symbolic importance. It also confers real benefits on New Zealand by reducing compliance costs for exporters and expanding market access in service sectors such as education, engineering, architecture and telecommunications.

A pact with Hong Kong would cement this achievement and further the goal of creating an interlocking net of trade agreements within Apec.

* Vaughan Yarwood can be contacted at hiero@ihug.co.nz