Dialogue: Trade pact with US will happen

A rising tide of warmth suggests a free-trade agreement between New Zealand and the United States is achievable, writes FRED BENSON*.

As highly interested observers of Helen Clark's successful round of meetings in Washington, United States corporate interests can only conclude that the relationship between the US and New Zealand has been elevated to a higher plane.

The robust sessions with President George W. Bush, Secretary of State Colin Powell, National Security Adviser Condoleezza Rice and many other top US officials present clear evidence of the respect in which New Zealand and its Prime Minister are held.

But this rising tide of warmth has not yet reached the diplomatic high-water mark necessary to ensure a free-trade agreement between New Zealand and the US. There are many challenges ahead - none that cannot be surmounted - but they most assuredly must be dealt with. First and foremost is passage of the trade promotion authority (previously known as fast-track) legislation in the Congress. Without such authority, trade pacts would be subject to amendment when reviewed by Congress. With trade promotion authority in place, trade deals can only be voted up or down and not altered.

While not impossible, it is hard to imagine other nations being willing to subject their hard-earned agreements to the vagaries of constituency-minded elected officials, many of whom would try to remove language deemed harmful to voters in their districts.

The trade promotion authority is expected, but not guaranteed, to pass this year. Until it does, movement on many free-trade agreements will be delayed.

When Australia conducted an intense Australia-US free-trade lobbying campaign before Prime Minister John Howard's visit to Washington last September, it triggered a hostile response from US agriculture interests. More than 40 farm groups wrote to President Bush threatening to withhold support for trade promotion authority legislation if the US entered free-trade talks with Australia.

While New Zealand's agricultural issues are smaller in scope and scale than those of Australia, we should anticipate a similar response.

The US pharmaceutical industry, upset with Pharmac pricing policies and practices, has taken a strong stance against a free-trade agreement with New Zealand. The Pharmaceutical Manufacturers Association would oppose the agreement until changes are made in those practices.

Still smarting from the passage of the heavily contested North American Free Trade Agreement (Nafta) a few years ago, US labour can be expected to weigh in against all agreements that run counter to its direct interests.

The clear preference for many in the US and New Zealand is to pursue a trilateral free-trade pact that includes Australia. If the US were to reach agreement with one CER partner and not the other, it would be highly damaging to the excluded party.

Repeated attempts to encourage Australia to join New Zealand efforts to encourage such a pact have not been successful and, for now, the two countries are on parallel but separate tracks.

The US has raised the nuclear issue more frequently over the past weeks. While she was not asked to do so during her Washington meetings, Helen Clark has clearly rejected changing the policy.

There are, however, other options short of changing the existing policy that could ease tension and lower the barrier for a free-trade agreement.

It is highly doubtful that free-trade negotiations would be announced before the US elections set for November. Raising the profile of trade issues close to any election is difficult enough without the added complexity of trade promotion authority passage.

Decisions to raise steel and lumber tariffs have clouded the external view of US commitment to free trade. These decisions will be challenged, but it is not certain how they might affect future free-trade pacts.

The aggregate effect of these challenges appears daunting. But all free-trade agreements have similarly difficult issues. That is both the nature of the negotiating process and the reason for its existence. In the case of an agreement between the US and New Zealand, the positives are many and should prevail.

At the head of the list of strengths is our long-term relationship. For more than a century we have been close in peace and war. New Zealand has fought alongside the US in every major engagement since World War I; during Helen Clark's visit, President Bush enthusiastically mentioned the outstanding contribution of Kiwi troops in Afghanistan.

We share leadership in the push for global trade liberalisation, we have a common heritage, and we enjoy a long list of shared values. As Colin Powell said: "We are very, very, very close friends."

Despite the challenges, a free-trade pact between the US and New Zealand would be one of the least difficult to accomplish. A study by Dr C. Fred Bergsten, of the Institute for International Economics, concluded that economic and trade policy and political gains will result from an agreement, benefiting both nations, and at minimal cost to any sector.

There is steadily growing corporate support in both countries for an agreement. The US-New Zealand Council, based in Washington, has launched a US-New Zealand Free Trade Coalition of almost 80 members, including industry leaders AT&T, Boeing, Caterpillar, Kodak, EDS, Exxon Mobil, Federal Express, General Electric, International Paper, Motorola, Coca-Cola and Weyerhaeuser.

The counterpart NZ-US Council, led by Fonterra chief executive Craig Norgate, has become the focal point for corporate activity in New Zealand. Several members of the council accompanied Helen Clark to Washington and held their own meetings with congressional and White House officials to reinforce their interest in a pact. Both councils are co-ordinating their efforts closely.

There is also strong support among many congressional leaders for a free-trade pact between the US and New Zealand. Congresswoman Jennifer Dunn and 20 other pro-trade members, including five key committee chairs, have written to President Bush urging him to begin talks. Similar interest has been expressed in the Senate.

New Zealand Ambassador John Wood is now serving his second term as Wellington's emissary to Washington. He and his predecessor, Jim Bolger, have created a positive environment for enhanced relations and for a trade agreement.

US Ambassador Charles Swindells has also indicated that he holds similar goals for his tenure in Wellington.

Last, and far from least, New Zealanders should be proud of the respect and warmth shown to Helen Clark by America's leaders. The evidence is clear that the relationship between the US and New Zealand, and between the respective heads of state, is warming.

For these reasons, a US-New Zealand free-trade agreement is a goal that can be achieved and that is worth pursuing, but only if those who support it work assiduously to address the challenges in a fully co-ordinated manner.

When both nations come to the common conclusion that a free-trade pact is in their mutual best interests, it will happen. Our respective corporate communities are prepared to help to achieve that.

* Fred Benson is president of the US-NZ Council in Washington.