Government cautious about calls for NZ to join Nafta pact

By BRIAN FALLOW economics editor

Suggestions from former Canadian Prime Minister Brian Mulroney that New Zealand should join the North American Free Trade Agreement (Nafta) have drawn a guarded response from Trade Minister Jim Sutton.

He said yesterday that it was unclear that this was the best way to meet New Zealand's needs and objectives.

"Chief among these is that any arrangement we enter into needs to be comprehensive. Nafta excludes dairy, an important sector for New Zealand."

Nafta also included complicated legal and dispute settlement processes, especially in foreign investment, Mr Sutton said.

"Simply adopting these is not a viable option. New Zealand would want to have our say in this type of mechanism."

Addressing business and political luminaries in Wellington yesterday, Mr Mulroney said he was not there to tell New Zealand what it should do, rather to record the benefits that had flowed to Canada from first its bilateral free trade agreement with the United States and then the wider Nafta pact, both negotiated during his nine-year stint as Prime Minister.

There were several ways New Zealand could seek improved access to US markets: a bilateral agreement with the US, either alone or with Australia, or accession to Nafta, either alone or with Australia.

Mr Mulroney's point - and he was preaching to the choir - was that Nafta accession, giving unfettered access to a market that accounts for a quarter of world GDP, was a prize worth pursuing.

President George W. Bush was a strong free trader, a vigorous proponent of both a Free Trade Area of the Americas and a new multilateral round in the World Trade Organisation, Mr Mulroney said.

To close any trade deals, President Bush would need a broad negotiating authority from the Congress. Despite the Democrats now holding the ascendancy in the Senate, Mr Mulroney believed he would get it.

He said later that he recognised the importance of agricultural, especially dairy, trade to NZ. This was an obstacle but should not be seen as an insuperable one.

"When negotiating a free trade agreement, you have to look at the whole thing. They usually turn out to be imperfect, in the eyes of both parties," Mr Mulroney said.

"But an imperfect deal with the United States is a thousand times better than no deal at all. Once you have a deal, it can be changed."

There were advances from the Canadian perspective between the original free trade agreement he negotiated with the Reagan Administration and the Nafta agreement, which includes Mexico.

It was essential, Mr Mulroney said, for the smaller country to make it clear to the Americans that this was a top priority to which they were committed.

And any temptation to wag censorious fingers at the US on other issues should be resisted, at least in public.

"At the time we were having these negotiations with the Reagan Administration we were invited to participate in SDI [the strategic defence initiative, or "Star Wars"].

"We decided that was not in Canada's interest and I called Reagan to tell him our decision. He respected that and we moved on to talk about other things. But there was no press conference."