We drive their cars...

Free trade has delivered the goods for consumers, but at what personal cost? By Vernon Small

The street level view of Apec depends largely on which street you are in. If you are shopping in the High Street, at the Warehouse, a top flight boutique, or the local car lot, free trade has delivered you greater choice and in most cases a better price.

But that is not the whole story.

Some individuals and communities have been left on the sidewalk as the free market roars by.

Recent liberalisation of New Zealand's trade relationships started with Closer Economic Relations with Australia in the mid 1980s and has gained pace with unilateral decisions to end car tariffs and lead the race towards Apec's voluntary goal of lower tariffs.

Since 1984 tariffs have fallen from an average of 30 per cent, to 5 per cent now. Controls on used car imports have gone completely. Restrictions on parallel imports went in last year's Budget.

Supporters of the changes, from Prime Minister Jenny Shipley down, invariably point to the benefits for consumers.

A report in June by the Institute of Economic Research (NZIER) looked at the benefits from import liberalisation of products with high tariffs - cars, shoes, clothes and household appliances. Since 1987, it found, the average household of three people has gained about $22 a week or $1140 a year.

All tariffs will go by 2006, but benefits should continue to accrue until 2010 thanks to the delayed impact of some changes.

The report found that cars are now 16 per cent cheaper, appliances 9 per cent, shoes 5 per cent and clothes are down by 15 per cent. By 2010 the cut in car prices will amount to 31 per cent, appliances 16 per cent, shoes 22 per cent and clothes 34 per cent.

Those four items account for a quarter of household spending, suggesting that by 1998 the average consumer had seen their weekly purchasing power increase by $7.30. By 2006, the same consumer could expect to be $13.30 a week better off.

It's a message Shipley has been keen to hammer home.

"Cars have never been cheaper and they are affordable for all families now, not just those families who happen to have enough cash. I am proud of that and it is a good thing," she says.

She revels in telling farmers that a Toyota Hilux utility is $9000 cheaper than it once was, and even that rural icon, the gumboot, is now at bargain basement prices.

But over the whole community, the message is not so clear cut.

While consumers have undoubtedly gained from increased choice and lower prices, those gains are small and widely spread. For individuals, and for some communities hit by industry closures, the pain is concentrated and all too real.

Shipley nods in that direction but points to job growth overall.

"While some people have lost their jobs - I am not seeking to duck that responsibility - the number of people in the full time labour market has grown over the decade, not shrunk. There are now over 200,000 more New Zealanders working than there were when we began this process.

"Tariffs are a tax on someone. The only question is which sector of the population they will be a tax on," she told Wanganui Rotarians earlier this month.

She has said that while there are "short term adjustment problems in industries that are affected ... over the whole economy the long term benefits are very clear."

It is not a view shared by those dealing with closures in the automotive industry. Engineers Union organiser Anna Kenny saw 100 jobs go when Kenson Industries closed its car seat plant in Wainuiomata, near Wellington.

"I think Jenny Shipley has completely missed it. The very consumers she is talking about are the very ones whose livelihoods have gone."

While some have part-time or temporary work it does not fill the vacuum.

"The issue is that they had a stable secure income. Now for hire purchase, mortgages, new vehicles, banks look askance. If you are talking about the consumer society you have closed off the credit river."

The car industry, which employed 10,000 people in 1976, is now virtually gone.

Downstream industries have been savaged, and towns like Thames and Wainuiomata have struggled to find a substitute.

Most of the workers who lost their jobs at Kenson's last August have still not found jobs, says Kenny, and those who have are mostly in temporary work.

"One I know applied for 66 jobs and got two temporary ones. He is still in the second one."

Some have gone to Australia, selling everything to fund the trip, because they have still not seen any redundancy pay.

Council of Trade Unions economist Peter Harris says not enough attention has been paid to the problems associated with free trade.

"On the measure of spending more overseas than we are earning, free trade has been a disaster," he says.

But it was not just free trade's fault. "Other countries had an industry policy and we didn't. We were over-zealous in our disinflation policy."

A worker made redundant from a South Auckland factory may get a job as a security guard at a casino, says Harris, but those new jobs are often casual, transport costs are higher and there is less stability of income.

"We have replaced quality employment with a lower quality of employment."

The answer? "Liberalise, plus manage the transition and relocate the disruption. You can't have a free trade policy without an active structural adjustment policy," Harris says.

He is not opposed to trade liberalisation, but describes New Zealand's urge to move fastest as "like the lemming crying: 'the last one dead is a sissy'".

But there are success stories from sectors which have thrived under the liberal trade regime.

Twenty years ago the wine industry was protected by tariffs to encourage domestic production. Since then high tariffs have become a thing of the past, and with them chateau cardboard. Production is up 50 per cent since 1988 and we are switching to better quality wines. The industry employs 4000 permanent and 1000 seasonal workers.

But on the street there is still skepticism.

Marion, a working mother of two, says she welcomes the cheap shoes and the availability of good computer gear for the kids at prices she can afford.

Has it been good for the country? "It's a disaster because you buy cheap imports not local stuff."

Mike, who manages a CD Store in Wellington's top shopping precinct, Lambton Quay, is doubtful about the benefits to consumers from parallel importing.

Most stores stick with the local supplier, he says. "It's a reputational thing". He says there has been little impact on prices.

When it comes to selling the free trade message, the Government's Apec PR machine has plenty of unfinished business yet.