Dialogue: Pact with dynamic partner secures our place in Asia

JOHN MAASLAND* says the Government's proposed trade deal with Singapore should be seen not as a threat but as an important opportunity.

In a recent Dialogue article, Jane Kelsey urged the Alliance Party to oppose its senior coalition partner's stance on a trade deal with Singapore.

The agreement would, she said, make a mockery of democracy and sovereignty. Labour, she added, had to recognise that it could not have global free markets and nation building, and the Alliance had to remember what it stood for.

I was relieved when the Deputy Prime Minister, Jim Anderton, categorically rejected an ideologically based view of the proposed agreement: "The [Alliance] Party will judge the Singapore deal on whether it was good for the country ... It would be ridiculous of me to say, 'I don't care what's in it. I am opposed to it."'

Integrating our economy into the global marketplace over the past 15 years has not been good for every New Zealander.

If you owned a factory putting together car parts imported from overseas and flogged off some very expensive cars, you will not have done well out of trade liberalisation. If you worked in that factory, you might feel likewise, particularly if you were not able, or prepared, to take up one of the 200,000 new jobs that the economy has generated since 1987.

The real issue here is the overall impact of trade liberalisation. The average household has benefited by some $1140 a year from tariff reductions since 1987.

And while trade liberalisation has hit manufacturing hardest, we needed to shift its focus from a small, highly protected domestic market to world markets. Manufacturing has made that shift.

The rest of the world is forging ever-closer economic ties in the World Trade Organisation and through CER-type agreements, but imagine if we decided to stop the world and get off.

Without these dreaded international impediments to our "sovereignty," we could reimpose, under the name of economic nationalism, all sorts of subsidies, tariffs and quantitative restrictions of the type we have just got rid of. Wonderful. What would the response be?

New Zealanders have just spent 15 years adjusting from uncompetitive activities and are now focused on what they can do best. That has involved real pain.

Now, having marched with real difficulty all the way to the top of the hill, Professor Kelsey wants us to march all the way down again. Sorry, but New Zealand won't go down that path.

It is inconceivable that investment would flood back into the very areas the private sector has just got out of. Would carmakers rebuild factories in Thames? Would there be interest in metal pressing in Greymouth? A few fly-by-nighters might see that they could turn a dollar by subsidy-farming until a future Government had to face the bill, but not many.

Professor Kelsey is also worried about the negotiating process, which is, of course, confidential.

Negotiation involves exploring a range of solutions, many of which will be highly sensitive. Every serious negotiation has two faces: the domestic face, where domestic concerns are laid on the table, and the detailed negotiation, which must proceed out of the public eye.

Then, and before ratification, the final negotiated agreement is put on the table for a democratic debate. That is exactly what Mr Anderton has been saying.

I have not yet seen details of the proposed closer economic partnership but I already know from what is public that this is an opportunity for New Zealand.

The structure of protection in both Singapore and New Zealand is sufficiently well known (neither of our economies have much protection to speak of) to know that the adjustment required by industry here will be negligible.

We already have contractual free trade with Australia and having contractual free trade with Singapore (with a higher per capita income than Australia) will not make any difference.

The so-called threat to employment in the textiles, clothing and footwear industries (the only areas where we have protection left) is a myth. Less than 1 per cent of our total imports of these items comes from Singapore.

The corresponding gains for exporters into Singapore will be modest. But a major advance is likely to be achieved through the reciprocal recognition of professional qualifications, where New Zealand engineers and other consultants will finally be able to engage in projects in Singapore in their own right.

The main point, however, is that the agreement would lock us into Asia through our first CER-type agreement with a dynamic Asian economy. Behind this agreement is the possibility of a far broader agreement that would involve significant gains: the concept of an Afta/CER agreement, linking the economies of Australia, New Zealand and those of South-east Asia.

I am optimistic that the Government will proceed with this strategy. Mr Anderton's most recent comments suggest that Professor Kelsey's views are on the extremities and that Alliance MPs and their Labour counterparts will judge this proposal on its very real merits.

* John Maasland is chairman of the Asean/NZ Combined Business Council.