Sutton planning US juggling act

By BRIAN FALLOW

Trade Negotiations Minister Jim Sutton will be in Washington next week, with a new complaint in one pocket and an old aspiration in the other.

The complaint relates to the Farm Bill passed by Congress last week, a package of measures so protectionist it would make a Frenchman blush.

The aspiration, of course, is a bilateral free trade agreement with the world's largest economy.

Sutton goes to a Washington in which the shadow of the mid-term Congressional elections later this year creates a chilly environment for free-traders, including President George W. Bush, who has been unable, despite sky-high approval ratings, to secure fast-track trade negotiating authority from Capitol Hill.

Bush a free-trader? You might not think so in light of the steel tariffs or the impost the United States has slapped on softwood imports from Canada, a partner in the North American Free Trade Agreement.

But let's take him at his word.

The Farm Bill will increase farm support spending by about US$82 billion ($180 billion) over the next 10 years.

It will also require mandatory country-of-origin labelling on meat, fish, fruit and vegetables, a measure New Zealand opposes because it gives consumers a sense that imported produce is less safe than domestic.

"It represents a setback in the long struggle for fair trade in agriculture," Sutton said yesterday. "It will make it harder to achieve agricultural trade liberalisation in the [World Trade Organisation] Doha round."

Tactfully, given that he is due to have talks with them, Sutton said the US Administration, and particularly US Trade Representative Robert Zoellick and Agriculture Secretary Ann Veneman, wanted further trade liberalisation in agriculture.

"They may well have preferred a different outcome."

Sutton's predecessor, Lockwood Smith, recently returned from going around the traps in Washington himself, counsels against "beating up" key officials like Zoellick or Veneman over the Farm Bill, when their support will be vital to securing support for a US-New Zealand bilateral free trade agreement.

Smith says there will be only a brief window of opportunity next year for a few countries to make progress on FTAs, before the focus of US trade policy turns to the Free Trade Area of the Americas and the Doha round.

At this stage, he says, it looks like New Zealand may not make the cut.

When Zoellick talks publicly of bilateral FTAs, New Zealand is not mentioned. Smith says he was told by a senior trade official that this was a conscious omission.

He worries that New Zealand is being complacent while Australia is putting in the hard work, meaning we risk a repeat of the Rugby World Cup.

Sutton disagrees that there will be only a brief window of opportunity for FTAs.

While the US has made no secret that multilateral avenues like the Free Trade Area of the Americas and the World Trade Organisation top its agenda, it has the resources to walk and chew gum at the same time.

One test the Americans can be expected to apply in deciding on FTAs is how much is in it for them. On that test New Zealand, with a small and already wide open economy, does not score highly.

But another test is how easy a deal would be to do, and on that count New Zealand has few sensitive areas, like dairy, compared with Australia (cotton, cars, wheat, rice, sugar and so on).

That leaves the purely political question about whether the US is interested in rewarding a particularly adhesive ally, Australia, ahead of a very, very, very good friend like New Zealand.

Sutton is confident the Americans understand the difficulties which would arise if one CER partner had preferential access to the US market and the other did not.

"It wouldn't do us any good to be left out. But it wouldn't constitute a sudden emergency either."