Finding a way out of the trade abyss

We're the victim of hypocritical policies, reports FRAN O'SULLIVAN.

If the World Trade Organisation can crack agricultural protectionism, we've got it made.

Unfortunately, the big wheel at the WTO, Mike Moore, can't tell you when the farm gates will finally come down: five, 15, or 50 years. "All I can promise is that agricultural protectionism will go."

Moore should be putting the final touches to his three-year reign as WTO director general by getting the launch of the next negotiating round under way. Instead he is locked in brinksmanship between US President George W. Bush and the powerful European Union over steel tariffs. Like other steel-exporting nations, New Zealand is caught by Bush's decision to award tariffs of up to 30 per cent to protect the ailing US industry.

Moore, once the pugilist in New Zealand politics, sits above the fray in this trade war. But other players are not so quiet.

Bruce Knecht observed in the Wall Street Journal : "The loudest proponents of free trade - the US and the leaders of the European Union - have refused to open their markets to New Zealand's best products. New Zealand is cast as the victim of hypocritical international-trade policy on the part of the world's biggest countries."

Knecht's article is one of several published in US newspapers recently by commentators and economists who believe New Zealand's dismantling of protectionism provides a successful template - particularly for removing agricultural quotas and subsidies.

Bush's decision to protect the US domestic steel industry was not unexpected. Most trade experts expected he would act after a December report advising the move.

His fellow Republicans are facing Congressional elections this year. And there is sympathy for giving the steel industry more time to reinvent itself.

Critics are less sympathetic as the protectionist bill mounts up: the Farm Bill and a US$15 billion bailout of a loss-making aviation industry have led Europeans to claim the US is dumping subsidised product on world market.

To get out of this abyss, New Zealand needs to stitch a lattice work of bilateral trade deals to keep the doors of some of the world's biggest consuming nations open.

Trade Negotiations Minister Jim Sutton has banged on Washington doors and played an influential behind the scenes role in getting the Doha round launched.

Canterbury University economist. Philip Meguire, an American living here, suggests New Zealand should work to persuade the North American Free Trade Association to expand its membership to include this country as well as Australia.

"The world is clustering into clubs," he said. "If New Zealand isn't proactive, it won't have any choices, and it will end up being part of a club it doesn't want to have anything to do with."

It's a refrain heard here last year by former Canadian Prime Minister Brian Mulroney.

Securing free trade deals is an important aspect of the Government's agenda. It quickly sealed a deal with Singapore that its National predecessors had begun.

But the Hong Kong bilateral talks struck problems.

Sutton said New Zealand would back away if the deal was not clean. The grand-daddy of all free trade deals is an agreement with the US.

Prime Minister Helen Clark will raise that prospect this week in Washington.