Tariff issue returns to top of Apec agenda

By Brian Fallow

WELLINGTON - The Government is looking to the Apec leaders' meeting for a revival of early tariff cuts on forestry and fish products.

Last year's leaders' meeting at Kuala Lumpur kicked to touch plans for early trade liberalisation in eight sectors, including forestry and fishing, by sending them to the World Trade Organisation.

The package, now called the Accelerated Tariff Liberalisation initiative, "has basically sat there", International Trade Minister Dr Lockwood Smith said yesterday.

Now the Government is pushing for the package to form the basis of an early, but provisional, outcome from the WTO negotiating round due to begin in December. The aim is to bridge the gap between those seeking an early harvest from the WTO round and those insisting it culminate in a single comprehensive agreement.

Those who want early progress in these sectors are afraid that if it is caught up in a full negotiating round, including industrial goods, agriculture and services, it will be at least three years, and quite likely more, before any deal is struck.

Others are concerned that if they agree to an early deal on these eight sectors they will lose horse-trading traction for other areas they care more about.

"Some WTO members are frightened that if they sign up for 'early harvest', including the forest products initiative, other WTO members may say 'thanks very much, that's all we wanted', pack their bags and go home," Dr Smith said.

By making an early harvest agreement provisional on a successful outcome to a full industrials negotiation, horse-trading leverage would be maintained, but an early start on tariff reductions could be made.

The early harvest initiative aims to eliminate tariffs entirely in all the sectors (except energy where the end-point target is 5 per cent) years earlier than the overall Apec targets of 2010 for developed and 2020 for developing economies.

European support is crucial. One reason the package was sent to the WTO was that the United States said it required "critical mass" - 85 per cent or more of world trade in each area to be covered by the agreement - otherwise the free-rider problem would be too great. Apec alone could not deliver that.

The second reason was that Japan insisted it be negotiated through the WTO.

For that to happen there must be an industrials component to the next round. The G7 powers support a broad-based round and the Apec leaders are expected to endorse their trade ministers' recommendation to include a full industrials negotiation.

Forest Industries Council chief executive James Griffiths said improved market access, especially for value-added products which face higher tariffs than raw logs, would stimulate investment in further processing in the New Zealand.

New Zealand's wood harvest is set to double over the next 15 years. Processing that potentially required $5 billion or $6 billion in new investment.