O'Sullivan: US restarts race for free trade

By FRAN O'SULLIVAN

New Zealand business can come out from behind the PC-speak of fair trade.

So can the Government politicians.

The free-trade motors are once again running too fast to be stopped - the election of United States President George W. Bush has seen to that.

Dubya may be using the euphemistic term "trade promotion authority," instead of "fast track," to describe the power he is seeking to bypass Congress and authorise a string of bilateral free-trade agreements. But neither US business players nor the countries lining up to make trade deals with America are in any doubt of his commitment to getting the process of free trade speeded up.

Put simply, Americans have had enough of multilateral liberalisation.

The World Trade Organisation is in danger of becoming buried under the weight of litigation. The sheer bureaucratic nightmare of resolving issues by negotiation means many thorny areas are tossed into the too-hard basket.

This benefits the lawyers but stymies progress.

While the Bush Administration is not interested in regional agreements to the exclusion of a comprehensive round in the WTO, the trade promotion authority will give the President broad authority to pursue regional and bilateral agreements.

The US presidential debutant will next month share top billing at the Summit of the Americas in Quebec City, where 34 western hemisphere countries will talk turkey on the proposed Free Trade Area of the Americas. The FTAA - if successfully negotiated - will be the largest free-trade zone in the world. It is timetabled to take effect by 2005 and is the most ambitious trade deal ever attempted.

Canadian reports suggest the FTAA will incorporate the most business-friendly aspects of the World Trade Organisation (WTO), the North American Free Trade Agreement (Nafta) and even the failed Multilateral Agreement on Investment in the biggest free-trade agreement yet. It would apply to all the countries of the Western Hemisphere, excluding Cuba.

Its opponents say it could open up the full range of public services to private competition. The detractors are already well-organised. Websites abound, detailing methods to mobilise against the agreement - even down to mock scripts for street theatre and click-and-print posters.

But the Bush rhetoric is instructive.

While he tends to operate through his envoy - US Trade Representative Robert Zoellick - Mr Bush has said he will look both north and south as the continental marriage is brokered.

The President has huge support from Americans who want their country to resume its leadership mantle in driving international free trade.

Last month, several of America's most influential corporations wrote to President Bush urging him to make the US-Singapore free-trade agreement a priority for 2001 using trade promotion authority.

From New Zealand's perspective, the US corporations' stance was extremely supportive as the letter noted that the trade agreement which Singapore signed with New Zealand late last year could serve as the basis for a regional Pacific-5 Agreement.

Australia's decision to sidestep New Zealand and mount a direct case for its own bilateral agreement with the US may have knocked the stuffing from P-5.

But it is early days yet.

Australia's economy is hampered by protectionist practices, which will make negotiating a free-trade agreement particularly tiresome.

In New Zealand's case, the United States is likely to reopen the issue of parallel importing. Then there is the tit-for-tat issue of reciprocal access for dairy and lamb.

But there is no doubting the commitment by Prime Minister Helen Clark and her Trade Negotiations Minister, Jim Sutton, to this process.

As Helen Clark puts it, the local opponents have "rocks in their heads."

But before New Zealand gets a seat at the negotiating table, the US must deal with the issue of presidential powers.

Mr Zoellick puts the US leadership case bluntly.

Testifying to the House ways and means committee, he spelt out that a new commitment to trade liberalisation could help boost a vigorous, long-term recovery from the present economic slowdown in the US.

Refreshingly, Mr Zoellick puts forward three arguments for free trade:

Trade raises the standard of living. He cites an estimated 12 million US jobs supported by increased exports.

Free trade is about freedom: habits of liberty create expectations of democracy.

Trade affects national security.

At his earlier confirmation hearing, Mr Zoellick had sidestepped the concerns of many senators about the specific practices of his country's trading partners. But he made the point that the US could not afford to stand still while other nations seized the mantle of leadership on trade from the United States. Mr Zoellick's open promotion of free trade and its benefits should encourage other players to come out on the issue.

In the Beehive, politicians have tagged their support for markets liberalisation with the proviso that the resultant trade will bring benefits to New Zealand. The reality of coalition politics means that even fervent free-traders like Mr Sutton feel bound to use a little obfuscation rather than risk upsetting Labour's Alliance bedmates.

But if Mr Sutton is handicapped, New Zealand business must lead the debate.

The issues are quite simple.

The shift in the power balance between global and multinational corporations and nation-states has sparked the usual protests at the World Economic Forum in Davos, Switzerland, this year. The Stop Nafta forces mobilising for the Summit of the Americas in Quebec next month share similar concerns.

The widening of the gap between "haves" and "have-nots" has caused a rethink in how business sells the benefits of free trade.

It may seem something of an oxymoron but, as Mr Sutton points out, free trade does take place within sets of rules which are supposed to eliminate competitive distortions.

New Zealand business must ensure that the issues are thoroughly aired.

One of Australia's foremost advocates of liberalisation, Andrew Stoeckel, will advance the case at a Trade Liberalisation Workshop in Wellington next week. Mr Stoeckel's visit will set the scene for renewed debate and commitment within the business sector to advancing New Zealand's cause.

With the WTO stalemated, despite boss Mike Moore's claims otherwise, New Zealand business has few options but to pursue single-mindedly bilateral and regional agreements.

As Wolfgang Kasper - speaking about Australia's similar push - said this week: In the longer term, membership in an elite, US-led, free-economy club and integration with wider Western political, economic and knowledge networks would make that country more attractive and worthier of respect in that other great market, Asia.

The same can be said for New Zealand.