Bigger trade bloc possible within year

BRUNEI - New Zealand, Australia and Singapore could be a free-trade bloc by this time next year.

Australia and Singapore said yesterday that they would start talks on a comprehensive bilateral free-trade agreement immediately and hoped to sign a deal in time for next year's Apec leaders' meeting in Shanghai.

Yesterday's announcement - which New Zealand officials had known about in advance - comes hard on the heels of the historic free-trade deal between Singapore and New Zealand, which the two countries' Prime Ministers signed on Tuesday on their way to this year's Apec summit in Brunei.

New Zealand and Australia already have their longstanding CER partnership which has removed tariff barriers. The new moves thus set up the possibility of a trilateral arrangement.

And Prime Minister Helen Clark immediately raised the prospect of Chile joining, saying that country would be spurred into action by yesterday's announcement despite worries about protecting its inefficient dairy industry.

To kick things along, she scheduled a trilateral meeting with Chilean President Ricardo Lagos and Singaporean leader Goh Chok Tong yesterday afternoon.

She also flagged the possibility of Hong Kong being party to the wider arrangement down the track, although she acknowledged it competed with Singapore as a financial services centre.

Both Singapore and New Zealand are also trying to entice the United States into a "Pacific Five" free-trade area, which would also include Australia and Chile - a mega-deal on hold until after the new American President takes office.

Both Mr Goh and Helen Clark raised the possibility of New Zealand being party to talks with Australia on a combined free-trade area.

The sudden proliferation of such bilateral deals has dominated this year's Apec, which is struggling to advance global talks on new trade rules. The danger is that Apec will be trampled in the rush and poorer members, such as Vietnam, will be ignored by richer states stitching up deals between themselves.

Mr Goh and Australian Prime Minister John Howard said their negotiations should not be seen as undermining Apec's own free-trade goals or efforts to start a fresh round of multilateral talks through the World Trade Organisation.

"Those who can run faster should be allowed to run faster," said Mr Goh. "They should not be constrained by those who do not want to run at all."

Those remarks may be seen as a pointed reference to Malaysia, which has this week blocked attempts to start WTO talks.

Herald Online feature: Apec