NZ stitches up Singapore deal

By Colin James

What does New Zealand do while it is waiting for Mike Moore to get results from the World Trade Organisation's new trade round?

It tries to stitch together some bilateral free trade agreements. Singapore is first on the list; Korea is in negotiators' sights.

The Singapore deal to be announced tomorrow by Prime Ministers Jenny Shipley and Goh Chok Tong follows a whirlwind romance.

When Singapore Trade and Industry Minister George Yeo was in Wellington on July 1, International Trade Minister Lockwood Smith popped the question and Mr Yeo faxed back a "yes" when he got back home.

Officials had an agenda for negotiation ready by last week - lightning progress by the yardstick of trade talks.

Moreover, the deal to be announced by Mrs Shipley and Mr Goh goes far beyond preliminaries: it is a commitment to reach a free trade deal unless insuperable difficulties develop.

Why the deal? And why Singapore?

First, recall Mrs Shipley's frustration with the stalling in trade liberalisation at the Kuala Lumpur summit. She raised her concerns with Mr Goh after that summit. She and Dr Smith see this move as helping to inject life into the Apec process and the World Trade Organisation (WTO) round.

Dr Smith says: "The whole idea is to act as a catalyst within Apec and with respect to WTO and to bring more focus to P5." (P5 is a now-stalled New Zealand initiative for a free trade area involving the United States, Australia, Chile, Singapore and us.) The Singapore deal is "a small step but an excellent one. You have got to start somewhere."

In other words, the value of the deal with Singapore lies much less in the limited commercial opportunities it offers than in the potential to unlock other doors.

Those doors might lead into other nations besides Singapore in the 10-member Association of South-East Asian Nations (Asean).

The deal is understood to be Singapore's first free trade commitment outside the faltering Asean Free Trade Area proposal. Thus it is a major shift in trade policy strategy.

Once Singapore is in, New Zealand hopes other Asean or East Asian countries might want to join.

Alternatively, a Singapore-New Zealand deal might: make a free trade deal with either country more attractive to the United States; revive the possibility of a deal with Chile (which has rejected a bilateral deal with New Zealand because of dairy industry sensitivities); revive P5.

The P5 deal foundered on Australian scepticism and United States distraction. Mrs Shipley will be trying to breathe life into it in her talks with President Bill Clinton next week, hoping he might agree to get officials to start preliminary work on the P5 project or a bilateral deal with New Zealand - though Dr Smith says even that limited beginning is "in the lap of the gods."

The Singapore deal lays down a gauntlet to Australia. Australia has taken a national self-interest approach to trade deals. It has also taken the view that bilateral or regional deals potentially undermine the WTO process.

When, in the absence of interest from the United States in P5, New Zealand proposed a "P4" of the rest (in which Chile had indicated interest), Australia rejected it as not offering enough trade pickings. But it did move a little during this year's joint transtasman prime ministerial taskforce on what to do next with and beyond CER and agreed in August to "consider" free trade arrangements with "other significant economies or regional groupings," provided they "reflect CER principles and are WTO-consistent."

New Zealand thinks that bilateral and regional deals enhance the WTO process, enhance the trade liberalisation process and produce a benefit for us in that indirect way, regardless of direct benefits.

Since 1993 a four-strand path to liberalisation has been followed: support multilateral negotiations through the WTO; support regional trade initiatives, such as Apec or multi-country free trade agreements; do bilateral deals with other countries; continue to liberalise the domestic economy.

And a host of other regional and bilateral deals are being done. Chile and Korea will confirm a free trade agreement during Apec. The North American Free Trade Agreement links Canada, Mexico and the United States. Even Japan, which has so far eschewed bilateral arrangements, has agreed to talk with Mexico.

As for the Singapore deal, the pickings for our exporters are not large, though just having an agreement may boost sales because exporters put in more effort. Both countries are already very open to imports of goods and Singapore has apparently agreed to eliminate tariffs on day one of an agreement.

More important are: the elimination of restrictions on our services exports (which may be a sticking point in negotiations); getting equal treatment with other countries in Government purchasing; mutual recognition of standards to eliminate costly retesting of products; and the creation of a paperless trading regime.

Small, yes. But also significant. And a feather in Jenny Shipley's diplomatic cap in a year not rich in feathers.