Apec Schools: How free trade affects you and me

By Hannah Jubb, Jill Rolston and Nick Russell

People are talking about free trade, but what is it? How does it affect you? And what's Apec got to do with it?

Well, cars, clothes and televisions are cheaper but some New Zealand industries are struggling, and this means Kiwis may lose their jobs.

Apec aims to advance free trade. Some countries protect their own industries by making the cost of imported goods higher with tariffs. Free trade calls for countries to remove the protection of tariffs and regulations so all countries can compete equally. For countries that compete on a world market, those that produce the cheapest goods will benefit. Countries focus on the products they can produce the most efficiently. Japan specialises in electronics and cars while New Zealand produces cheap dairy and meat products. If free trade works, consumers win as they can buy cheaper products.

The average New Zealand household is $22 dollars richer because of free trade due to the reduction of import tariffs over the past 12 years. Cars are now 16 per cent cheaper, household appliances cost 9 per cent less, shoes 5 per cent and clothes 15 per cent, according to the New Zealand Institute of Economic Research.

Studies have shown that free trade can result in economic growth. Trade allows countries to import better technology, and foreign competition encourages companies to be more productive.

Federated Farmers policy manager Susan Redward said: "Vehicles, tractors, motorbikes and fuel are now affordable due to importing." The manager of domestic policy for the Wine Institute of New Zealand, Kate Cumarich, said free trade had allowed the wine industry to grow more quickly than it would have otherwise.

"The success of our exports determines the success of our industry." This resulted in more jobs.

Free trade still has a long way to go. Although New Zealand has lowered all restrictions on imports, many countries have yet to do so, in a bid to protect their local industries. This protectionism disadvantages our exporters as their goods are subject to tariffs in many countries. For example, the United States has recently imposed tariffs on our lamb.

Opponents of free trade say that such policies are costing New Zealanders jobs. In 1998 the Government removed import tariffs on cars and as a result the last four New Zealand car factories closed down.

Manufacturing Union president Robert Reid estimates 15,000 jobs were lost in the car industry. A similar trend is occurring in the clothing and footwear industry. Free trade supporters acknowledge that although jobs are lost in some industries they are gained in others. Mr Reid said that while this might be true, the new jobs created were mostly casual, part time and low paid. Green Party co-leader Rod Donald quoted Business Economic Research: "For every one million dollars worth of consumer good imports, 20 New Zealanders lose their jobs."

What does this mean for the person in the street? More choice, cheaper goods or fewer jobs? Whatever the answer, free trade still has a long way to go. Only the cooperation of trading nations will determine its success.

* Hannah Jubb, Jill Rolston and Nick Russell are journalism students from the Auckland Institute of Technology.