Fran O'Sullivan: The trade winds in our sails

COMMENT

If we invested as much in securing international trade as we apply to the America's Cup, the nation would be on a roll.

Fund roving trade envoy Mike Moore at an appropriate rate - not the derisory amount the Government's foreign affairs officials currently give him; establish high-level door opening exercises and lift ambition to the levels which we chide other nations for failing to achieve and New Zealand might be in a very different space.

Let's take the Government's budget as a starting point.

I was in Geneva when Finance Minister Michael Cullen delivered his May budget.

Two aspects stood out which prompted me to get my calculator.

First, the Government's willingness to embrace risk by investing up to $33.75 million in Team New Zealand's bid for the 2007 America's Cup.

Cullen confirmed the Government would play the role of "marketing partner", giving the team $1 for every $2 it raises in sponsorship dollars, but capping its own contribution at $33.75 million. On top of the $5.6 million the Government had already extended to Team New Zealand managers - to ensure talent did not bolt for greener overseas pastures after the team's pathetic cup final loss to the clearly superior Alinghi team - this could appear a rather foolhardy move. After all there it is not an even bet that New Zealand will win the cup back in 2007, let alone even make the final.

Sports Minister Trevor Mallard justified the investment by saying the 1999-2000 challenge was estimated to have brought an additional $640 million to New Zealand in jobs and economic growth (the 2002-2003 figures have yet to be released) - so taxpayers' previous investments in Team New Zealand had certainly been worthwhile.

What the ministers neglected to add was that their major investment - which comes after the cup has bolted - would have been more adroitly applied if made in early 2000 to give then Team New Zealand trustees the cash to appropriately reward Coutts and Butterworth to ensure their winning team stayed put.

Contrast the Government's America's Cup investment with the sum of $14.2 million budgeted over four years to support the World Trade Organisation negotiations and bilateral economic partnerships (including the Closer Economic Partnership with Australia) and trade agreements.

What we do know is that the gains from the last major round of global trade negotiations - the Uruguay Round - have been conservatively estimated at $500 million to $600 million a year. Other estimates put the true figure at some $9 billion of economic benefits delivered to New Zealand in the first decade since the round concluded.

These gains must also be protected from the onslaught of others in the global trade game, but they will continue whereas the America's Cup tap was turned off in March.

Gains from agriculture liberalisation in particular in the current Doha Development Round, if successfully completed, are predicted to run out at an even higher annual return.

Then ask yourself whether the relative investment is logical.

For the America's Cup, the Government stands to invest some $40 million for a potential one-off return of $600 million - with a minor chance of success.

For the WTO round and bilateral deals, the Government will invest some $14.2 million over four years for a potential return of at least $600 million annually from the Doha investment alone, let alone the substantial returns that would be gained if New Zealand nets a free trade deal with the United States or takes CER to the next level.

There is also a potential downwards adjustment if New Zealand fails to secure the "WTO-plus" rewards associated with bagging free trade deals with the United States, Asian countries like Hong Kong and possibly China, and South American countries such as Chile and Mexico.

Will a future Government find itself having to open its coffers bigtime if this horse bolts too?

Visiting experts such as Leeds University's Chris Dent - in New Zealand last week as part of a study of the burgeoning Asia-Pacific Rim trade agreements - suggest that we do in fact under-invest.

Dent's study illustrates New Zealand, once a pioneer in this area, has fallen well behind other nations on the bilateral trade deal front, although he concedes it takes time to grow trade negotiation expertise.

What is abundantly clear is that New Zealand could also do a lot more to secure its interests if it beefed up its constituency-building and negotiating efforts in key markets such as Australia, the US, the European Union and Asia.

If this seems far-fetched then think about two wake-up calls in the past week alone.

First, CER talks in Sydney which indicate we will need to get a steamroller moving (difficult as the minority partner) to persuade Australia to lift the 20-year-old agreement to the next level in quick time;

Secondly, some disturbing figures outlined by Prime Minister Helen Clark at the launch of the Asia 2000's "Seriously Asia" initiative. These show a worrying decline in New Zealand's position relative to Asia.

On the CER front, participants such as Auckland Regional Chamber of Commerce chief executive Michael Barnett were heartened at the ability of Commerce Minister Lianne Dalziel in adopting a cut-through approach. But while energy levels are lifting, Australian officials "do not really get" the message that a single market would enable both nations to quickly achieve greater value. A project management approach is needed if we are ever to achieve parity with Australia on income levels.

On the Asia front, as Clark outlines, the value of New Zealand merchandise exports to Asia fell from calendar year 2001 to 2002 in 10 out of 12 markets. The trend appears to be continuing with a decline of 12 per cent in the year to June.

So let's take the lessons from the America's Cup and apply them to international trade: Employ a charismatic leader like Sir Peter Blake (Moore with his established cachet as a former WTO Director-General is as good as it gets) and apply the investment when it is needed, not after the prize eludes us.