Aussie-US free trade deal has silver lining for NZ, says Fonterra

3.00pm - By KENT ATKINSON

Australia's "modest" outcome for its farmers from the big bilateral free trade agreement (FTA) with the United States has hidden benefits for New Zealand and other nations keen to reform world trade, Fonterra chief executive Andrew Ferrier says.

"Even with perhaps the best possible relationship with the US, Australia gained only a very modest outcome on agriculture," Mr Ferrier said today.

Australia's Trade Minister Mark Vaile has estimated the improved US access for Australian dairy farmers is worth A$1.6 billion ($1.8 billion), beef farmers would be A$3 billion better off, and orange growers stood to gain up to A$1 million. Critics of the deal have said the US only gave small improvements in dairy access, while it will take 18 years before Australia gets an extra 70,000 tonnes of beef into America tariff-free.

But Mr Ferrier said today the "harsh reality of agricultural politics" was not bad news for the stalled World Trade Organisation Doha negotiations, in terms of lowering the level of expectation of what can be achieved.

"I think it strengthens both the chances of a result, and the size of the outcome," he said.

If Washington and Canberra had agreed on a big liberalisation package for agriculture, other nations would have been encouraged to seek bilateral deals, reinforcing the sense that the WTO cannot deliver, and possibly consigned the Doha Round to a longer period of "non-achievement".

"A disappointing result on the Australia/US FTA may be just what the doctor ordered in Geneva," Mr Ferrier told the American Chamber of Commerce in Auckland. "We are therefore likely to see very soon a reiteration of commitment to the WTO from many sides. "

He said in speech notes that a key consequence of the failure of ministerial talks on the Doha round at Cancun, last September, had been renewed interest in bilateral trade agreements.

Such a tendency was not good news for New Zealand, whose relatively open and small economy deprived it of two key points of leverage in such negotiations.

But Fonterra supported bilateral deals that could deliver market access improvements earlier and more cleanly than more complicated negotiations, and if done properly, provide a model for full liberalisation between economies.

New Zealand's November 2003 bilateral trade deal with Russia -- the first for a Western country in relation to its WTO accession -- was a good deal for NZ and important for Fonterra because dairy products made up more than 8 per cent of the total value of exports to Russia.

Fonterra was also "delighted" that in China, New Zealand seemed to be well on track to what could be the first FTA signed by China with a Western country.

China's potential was quickening the pulse of dairy marketers worldwide: Euromonitor's June 2003 dairy market report showed the China market increased by 53 per cent in real value terms in 2002 to hold 1.8 per cent of the global market, up from 1.2 per cent in 1998.

China spent only about US$3 per head of population on dairy produce in 2002, compared with US$132 in Japan and US$171 in the United States, but was actively promoting domestic consumption.

"We strongly support the closer economic partnership with China," Mr Ferrier said. "And we continue to believe that a FTA with the US is a prize well worth striving for".

Tying in the NZ economy with the world's largest, most innovative and competitive economy remained critical for its long-term prosperity.

In the meantime, New Zealand needed to take advantage of moves to expand its Closer Economic Relations deal with Australia in a fully open Australasian economic area.

New Zealand also needed to push ahead aggressively with economic linkages into Asia. The developing network of bilateral deals involving New Zealand, Australia, Singapore, Thailand, China and others should be built into a grouping of countries around East Asia and Oceania.

"We should grasp the opportunity to leverage the CER relationship with ASEAN (the 10-member Association of Southeast Asian Nations), with China and perhaps with others," Mr Ferrier said.

Through CER, Australia and New Zealand was a single market of more than 22 million people with a combined economy equivalent in size to those of all the countries of ASEAN put together.

ASEAN nations -- Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam -- and India, China and Japan were already talking of linkages.

- NZPA