Package to cut tariffs put back on agenda

By Brian Fallow

Hopes that a tariff-cutting package including forest products and fishing may be drawn up by the end of next year were resuscitated by Apec trade and foreign ministers yesterday.

The deal struck by the ministers goes substantially further than their officials were able to agree on Wednesday. It is expected to be endorsed by the Apec leaders.

The Apec economies would seek an agreement by the end of next year within the World Trade Organisation round to eliminate tariffs in a package of eight sectors, including fish and forest products.

The agreement would need "critical mass," a United States requirement which in effect means that it covers at last 85 per cent of world trade in the sector concerned.

And the agreement would only be provisional.

The Minister for Trade, Lockwood Smith, explained that it could be implemented as soon as agreement was reached, but would only become binding as part of a single package at the end of the WTO round.

This concept of an agreement that can be implemented at once but might subsequently be undone if the whole WTO round fails is an innovation intended to reconcile the concerns of two groups.

This involves those who do not want progress on the eight sectors to wait for the completion of the WTO round, and those like the Europeans and Japanese who worry that after an early agreement the Americans might be satisfied and lose their appetite to complete the round.

Yesterday's deal meets the latter concerns by stipulating that the WTO negotiations be structured "so that the outcomes are finalised, bound and fully implemented as a single package."

That is, in effect, the single undertaking seen by the Japanese and others as crucial to maximising the room for horse-trading.

The US aversion to a single undertaking largely reflects a worry that the round could be strung out for many years, delaying liberalisation in practice.

To meet the US concern, the Apec position would be that the round should be completed within three years.

For the three-year timeframe to be achievable, the rounds agenda is likely to be limited to industrial tariffs, agriculture and services.

An agreement to liberalise trade in forest products, fish and the other six sectors which were kicked to touch at the Kuala Lumpur Apec summit a year ago, remains highly conditional:

* Although Apec represents about half of world trade, the other half, including the Europeans, have to agree to the ground rules of the coming WTO round.

* An agreement on the eight sectors by the end of next year is only an "objective." A year ago the objective was to reach that agreement this year.

* It requires critical mass - in effect European agreement.

The outcome sought by the New Zealand forest and fishing industries is clearly far from being in the bag, but at least there is a bag.