US accord 'worth $1bn'

By BRIAN FALLOW

A free trade agreement with the United States would boost New Zealand's gross domestic product by at least 1 per cent or $1 billion, says Institute of Economic Research director Alex Sundakov.

But there was less in it in dollar terms for the US.

Speaking in Auckland yesterday at a conference on a US-New Zealand closer economic partnership, Mr Sundakov said $1 billion - "a lot of radiotherapists" - was a back-of-the-envelope figure based on static modelling that would underestimate the longer-term benefits.

But New Zealand had to be realistic about how little it had to offer the US, as its market was small and its tariffs already low.

Policies on genetically modified organisms, Pharmac's role in the pharmaceutical industry and parallel importing might have to be re-examined to make a deal worth America's while.

But Trade Minister Jim Sutton emphasised the value, for the US as well as New Zealand, of setting an example of a high-quality bilateral trade agreement. That meant a comprehensive agreement, including agriculture.

"We have to get into the game to avoid being squeezed out by others," he said.

"It will be especially difficult for us because we lack economic critical mass.

"But we cannot acquiesce in shonky deals that are less than comprehensive just to join the party."

The US could not find a better partner for a genuinely comprehensive model arrangement, Mr Sutton said.

The risk was "dirty" trade deals that entrenched protectionism and excluded sensitive sectors would proliferate.

That would make it harder to reach Apec's Bogor goals of free trade and investment by 2010, which was in the interests of New Zealand and the US.

Even the issue of access to US dairy markets could be addressed by phasing arrangements.

"New Zealand produces only 2 per cent of the world's dairy products. It is hardly in a position to flood the US market with cheap product," Mr Sutton said.

US ambassador Charles Swindells injected a cautionary note.

The US trade agenda was full, he said, and the priorities were the Doha World Trade Organisation round and the pursuit of existing trade commitments, including the Free Trade Agreement of the Americas.

A joint approach from Australia and New Zealand would be helpful, he said.

The president of the US New Zealand Council, Fred Benson, went further, saying he understood US officials would give Australia the word that a three-way negotiation was the way to go.

Prime Minister Helen Clark said: "There is no barrier on our side to it being trilateral. To all intents and purposes we [Australia and New Zealand] are one market. We are ready when the Australians are."

But the US Administration did not have the power to conclude negotiations of this kind.

A vote is scheduled to take place in the US House of Representatives today on whether to give the Administration trade promotion authority (known as "fast track"). It limits Congress to voting on trade agreements without amendment. Without it any deal could be altered on Capitol Hill, a prospect few US trading partners would contemplate.

Mr Benson said his congressional contacts were telling him the Administration was a few votes short, but the "the tide is turning".