Presentation to NZ US Council 10th Anniversary Conference
4 May 2012
It’s a pleasure to be here today.
Along with others in the room I was a participant at the inaugural conference in December 2001 which led to the launch of the NZ US Council the following year.
I’d like to congratulate Jim Bolger and all associated with the Council on its 10th anniversary. In particular I would like to acknowledge our Chair for this session, Fran O’Sullivan who was the early driver for the establishment of the US Council in NZ – her passion back in 2000 for this big idea was a part of what has led us to today.
This morning I’d like to share some thoughts about where we have come from in the last decade, where we hope we’re headed with the Trans Pacific Partnership and why a successful conclusion to TPP is in the strong interest of New Zealand business.
When I look at the support that New Zealand has provided to the United States internationally, both in war and at peace, I do have difficulty in understanding why we are not sitting here today refining an agreement and celebrating five years of the benefits of the free trade principles we say we live by.
I understand the difficult nature of the discussions that surround dairy and agriculture; or with pharmaceuticals and IP; but this is the territory of negotiators and those who can find compromise and agreement. For most of us, and for many of the businesses that the Chamber represents, there is a strong belief that if there is an alignment of values – and I think there is – if there is a compelling reason for agreement to be found and I think there is, then can someone please explain why we are now looking like achieving an agreement not because we are that proud New Zealand brand, but because we are a part of a region in which our intended partner has an interest.
Nevertheless, here we are TEN YEARS ON
Ten years ago New Zealand was emerging from a period of significant economic restructuring. Our concern was how to bring about a transformation of the economy to position us to compete more effectively in international markets.
We were already mindful of the enormous opportunities that lay in the dynamic markets of the Asia-Pacific region. We were also very aware of the opportunities that deeper alignment with our then second largest trading partner, the United States, and the benefits it would bring in terms of strategic alliances, investment and business ideas could bring.
Since then some things have changed.
In the last decade, the New Zealand economy has continued to diversify with the emergence of new technology and service sectors, alongside the continued expansion of our highly competitive and internationally oriented natural resource-based industries.
Something else happened too – in the void of progress with a US FTA and in the absence of a conclusion to the WTO Doha round, New Zealand wisely interpreted the economic action of the fast growing Asia world, negotiating ground- breaking agreements with P4, China and the ASEAN. As a result New Zealand’s external economic focus has continued to shift towards China which has now surpassed the United States as New Zealand’s second largest economic partner – and let’s not forget India with whom New Zealand is well advanced in free trade negotiation.
But I come back to my key point – one thing has not changed in the 10 years since the establishment of the NZ US Council: New Zealand still does not have a free trade agreement with the United States.
For various reasons, mostly political, but also to do with the small size of the New Zealand market, New Zealand has not been able to move forward to realise the decade-long vision for an FTA with what is still a major partner; the world’s largest consumer market, source of investment, technology and business ideas.
Ten years ago we felt this was a situation that could not be allowed to continue.
Ten years on, against the background of our consistent advocacy and our work in helping transform the relationship with the United States, we have an opportunity to address this anomaly.
There are some who argue that with the rise of the importance of China and ongoing economic difficulties in the United States, we no longer need an FTA.
I do not share this view.
Long ago New Zealand learned some lessons about putting all our trade eggs in one basket, and we know the advantages of developing an open and flexible economy.
Just as New Zealand needs – and can benefit from – the deepest possible relationship with China, we also need that sort of relationship with other economies including the United States.
So where to with the TPP?
TPP of course is about more than New Zealand and the United States. TPP is all about the power of a big idea.
That idea is to create a freer, more coherent, seamless economic space in the region.
To achieve this TPP will need to finish the old trade negotiating agenda of market access and achieve comprehensive liberalisation over a reasonable timeframe for all products, goods and services included with flexible rules of origin.
TPP will also need a strong market integration agenda focused especially on services, investment, behind the border issues and regulatory coherence and co-operation.
If it is to be successful TPP will need to help all businesses meet the needs of our customers by making it easier to do business and reduce costs.
I know President Obama has spoken about TPP being good for the US and good for US firms. What New Zealand must do is ensure that the TPP is comprehensive, good for New Zealand and good for those partners who initially saw the wisdom of this agreement and the potential of the Asia Pacific.
If we can get this right, then the implications of TPP will be significant for business in all TPP member economies, and in particular the small and medium sized enterprises that make up the bulk of business in New Zealand and elsewhere.
To live up to its promise as a “high quality” agreement, TPP needs to create an environment that provides ease of market access, low compliance costs, simplicity of rules and transparent regulation that provides certainty and security for business. This will particularly benefit SMEs with limited resources as they venture into foreign markets, and will help them to deal with the enormous obstacles they face.
What’s in it for New Zealand?
I’m sometimes asked whether it matters that New Zealand is negotiating with the United States in the context of TPP rather than bilaterally.
I think it matters very little what instrument we use to bring about the deeper alignment we seek with the United States.
Even the economic study undertaken by Fred Bergsten and Rob Scollay back in 2002 saw that the greater benefits would come from a bilateral FTA providing a model and a benchmark for other trade liberalisation initiatives in the region.
This is essentially what we have in TPP.
When it comes to assessing the business case for TPP we can identify at least five key deliverables from a purely New Zealand perspective.
First, TPP should expand two-way trade and investment, open up new opportunities for business around the region and reduce costs to consumers, thereby accelerating economic growth and fostering investment and entrepreneurship in the New Zealand economy.
Second, TPP should lower the costs of doing business by eliminating or reducing tariffs for dairy products, beef and a range of other products. Clearly the market access benefits are greater if more members such as Japan can be admitted to the agreement.
Third, TPP should work to optimise the efficiency of supply chains by reducing costs, eliminating chokepoints and providing for greater alignment of regulations and regulatory practices around the region.
Fourth, TPP should enable New Zealand’s economic relationship with the United States to be put on the same footing as key competitors Australia and Chile, both of whom already have FTAs. In the United States also, TPP should make it easier to sell into federal government procurement programmes which in the absence of an FTA can be a costly exercise.
Fifth, TPP should provide greater security for existing business by making it more difficult for new protectionist measures to be applied to New Zealand products or to New Zealand’s offshore investments.
If I was to add a sixth, it would be that TPP must be outward looking and be designed to allow other APEC economies to join over time. It should eventually lead to the achievement of the free trade agreement for the Asia Pacific.
My remarks might suggest that TPP is all upside for New Zealand.
Clearly, as in any trade negotiation, there are potential risks that need to be taken account of; there is a need to pay close attention to the detail of the negotiation and the proof of the pudding is in the eating of the final agreement (so to speak).
I expect we will hear more about these issues today. It is right that those sectors likely to be affected by TPP make their views known to the Government so that these concerns can be addressed by negotiators.
I began this morning by painting a picture of the context in which some of us first came together to establish the NZ US Council and to advocate the basis for a deeper economic alignment with the United States.
Today that work finds its expression in TPP.
TPP is not the whole relationship. There is more to what binds us together than business.
But business is an important part of the mix and the ability to do business successfully together is what will provide the economic resources for the co-operation we need to address today’s global challenges and sustain the relationship in years to come.
For business to be successful we need an environment which promotes openness and opportunity, removes barriers and lowers costs.
And because today, more than ever before, we are doing business globally, often through global supply chains, we need that environment to be as seamless as possible across our own region and beyond.
That essentially is why a successful conclusion to TPP in 2012 must be of keen interest to business in New Zealand, the United States and elsewhere in the region.
Ten years more is too long to wait!