Between the lines: Sceptics' trade worries misplaced

Singaporean and New Zealand trade officials meet in Auckland next week for their sixth and, it is hoped, final set of negotiations on a closer economic partnership between the two countries.

The process is looked upon with scepticism, even suspicion, by some business people, especially in the textile, clothing and footwear (TCF) sector, the last to enjoy significant tariff protection.

Although Singaporean wages are substantially higher than ours and only a tiny proportion of New Zealand's TCF imports come from there, the concern is that the rules of origin in the agreement will open a back door to product from the sweatshops of Asia.

Rules of origin specify the minimum proportion of value added in Singapore needed for goods to qualify for tariff-free entry into New Zealand and vice versa.

Fears of a sell-out on the rules of origin threshold seem to be groundless, however.

Though the Singaporeans wanted 20 per cent, it is understood a threshold of 40 per cent ex-factory cost was agreed between Trade Minister Jim Sutton and his Singaporean counterpart, George Yeo, in Darwin last month.

Under CER, the threshold is 50 per cent but New Zealand has been advocating 40 per cent to the so-far-unmoved Australians for years.

A related worry is whether goods produced in Singapore-controlled "free trade zones" in neighbouring countries, principally Indonesia's Batam Island, will qualify as Singaporean under the rules of origin.

Batam Island houses an industrial park where about 200 firms, not all of them Singaporean, use cheap Javanese workers in labour-intensive but often high-tech manufacturing.

Again the concern is misplaced. It is sovereignty which counts for rules of origin, and the island is Indonesia's territory, not Singapore's.

The sceptics' next concern is enforcement.

Can we trust Singaporean certification of the origins of imported goods? Indeed, can we trust our own officials to track down breaches of the rules? Or will it end up in the too-hard basket next to the wound-back odometers?

Customs authorities can probably rely on watchful competitors to alert them to any upsurge in imports of dubious origin (remember that the vast majority of Singapore's exports to New Zealand already attract no duty; nor ours to them).

Doubts about whether the authorities have sufficient resources to police the agreement argue for greater resources, not for abandoning the agreement.

New Zealand, for its part, is seeking more liberal treatment of trade in services like education, and recognition of professional qualifications.

As New Zealand and Singapore are already among the most open economies to be found, the further direct gains from a free trade agreement between them is limited.

The real point is to act as a catalyst to a wider trade agreement between the Association of South-east Asian Nations and Australia and New Zealand - a grouping with a $US1 trillion economy.