Ministers may be sleepless till Seattle

By Brian Fallow

Between the lines

The Apec trade ministers' meeting is producing a lot of hot air.

But hot air, as balloonists know, can take you places you want to go - given a fair wind.

The fair wind in this case is blowing towards Seattle. It is the growing support for a broad-based Millennium Round of world trade negotiations, to be launched in Seattle later this year, encompassing agriculture, services and industrial goods.

Inevitably Apec is overshadowed by the prospect of a World Trade Organisation round.

As the prospects for a comprehensive, binding multilateral trade round grow, the prospects of voluntary undertakings to liberalise trade in specific areas diminish.

Why concede something now - especially something hard to sell to domestic interest groups - that could be used in the horse trading of a WTO round?

The trade ministers are expected to send to the WTO the issue of eliminating tariffs in the so-called "back six" sectors: oilseeds, food, rubber, fertiliser, civil aircraft and the automotive sector.

Two years ago, Apec leaders identified 15 sectors for early voluntary liberalisation - early in the sense of ahead of the overall Apec free trade deadlines of 2010 for developed, and 2020 for developing, member economies.

The first nine sectors, including two (fish and forest products) of special interest to New Zealand, were kicked to touch by being sent to the WTO from last year's Apec leaders meeting in Kuala Lumpur.

New Zealand is helping to push for agreement in the WTO on some of these sectors as an "early harvest" in the multilateral trade round but the odds look long.

That the other six sectors could also be heading for the WTO should not be a surprise, nor taken as failure on Apec's part.

It is already envisaged, according to the Apec secretariat, that those six sectors will be referred to the WTO.

The live issue is the details of timetable and comprehensiveness in each sector which would define the tariff agreement Apec would seek within the WTO.

The Americans favour the WTO as the forum for tariff negotiations because its agreements are binding and enforceable (up to a point), and because they avoid the "free rider" problem.

Any trade liberalisation the US agreed to within Apec would have to be extended to the many non-Apec countries with which the US has most favoured nation (MFN) treaties. They would be able to free ride on the concession without giving up anything in return.

The Japanese have also said they will not negotiate tariffs within Apec.

Trade Minister Lockwood Smith on Monday lamented the policy of quid pro quo, which he summed up as the "I'll take my trousers off if you remove your skirt" approach.

But the reality is that is how the world works. Thus, New Zealand's unilateral approach to opening its markets has more admirers than mimics.