Dialogue: The leftward lean towards free trade

Is free trade dead? Not yet. A new World Trade Organisation trade liberalisation round may be (temporarily?) stalled. But bilateral and regional initiatives abound - and that's a bother for us.

New Zealand is small and distant. It scarcely registers on foreign capitals' radars. Why should Korea, still less the United States, bother with us if they can talk turkey with Japan?

This is no bother to the Greens' or the Alliance's rank-and-file who don't want a bar of free trade at any level. The Greens idealise small and local. They recently published a detailed case against the free trade agreement with Singapore, now only a whisker away from signing.

The Alliance remains wary. Senior Labour ministers say the agreement has been exhaustively and constructively discussed in the cabinet, but Jim Anderton says the Alliance will not define its position until it has the final agreement in front of it.

In any case, Labour ministers are confident of getting endorsement. They see it as confronting the awful fact of our isolation and inconsequentiality.

They did freeze tariffs for five years in May. But only 5 per cent of our imports by value carry any tariffs and the sensitive industries have all but adjusted to zero tariff anyway.

Few manufacturers, having made the transition to the open economy, want to go back to protection. They look now for low-level facilitative assistance and competitive and stable economic policy settings.

The deep reasons for the revived business anger at the Employment Relations Bill is fear that it might diminish our fragile competitiveness in an unforgiving trading world.

The realistic, as distinct from idealistic, option is more trade liberalisation. Only that way can New Zealand business get better access to wider markets and create jobs. That is the argument this Government of mostly non-free-traders has bought.

Helen Clark is no right-wing acolyte, as the Employment Relations Bill shows. But she is a realist on trade.

The Singapore free trade agreement has been the catalyst. It was well under way when the Government took office. A decision had to be made to kill it or keep it going. Ministers chose to keep it going.

And that led to bigger issues. The Singapore agreement is a state-of-the-art deal, encompassing - besides goods trade, which will be little affected - services (phased in over 10 years and our main potential gain), investment, technical trade barriers and recognition of professional qualifications. But its greater importance is as a strategic manoeuvre.

Its architects in the Ministry of Foreign Affairs and Trade, mainly Tim Groser, now head of the Asia 2000 Foundation, saw in the agreement - and sold the idea to Singapore - a means of nudging Australia and the 10 countries of the Association of South-east Asian Nations (Asean) towards a regional hookup. Singapore is frustrated at slow progress by its Asean neighbours in the Asean free trade area (Afta).

And they got movement. At the annual dialogue last September between Afta countries and Australia and New Zealand, a taskforce was set up to study the feasibility of an Afta-CER free trade arrangement. Sir William Birch is New Zealand's member and it is headed by Cesar Virata, a former Philippines Prime Minister.

The taskforce meets this week to tick off a draft report proposing to ministers a phased agreement: Australia and New Zealand to dismantle tariffs by 2005, the "core" (richer) Asean nations by 2010 and the others by 2015 or 2018.

This is more ambitious than the Apec timetable of zero tariff for the likes of the United States, Canada, Australia and New Zealand by 2010 and the rest by 2020. And the Apec process is voluntary. An Afta-CER deal would be contractual.

The potential benefits for New Zealand have been calculated at $7 billion.

Pie in the sky? Australia has shifted its ground dramatically in the past 12 months and now favours bilateral and regional deals. Even left-wing Labor MPs have argued against tariff rises.

Singapore's protectionist Asean mates (Thailand excepted) are a different matter. But Singapore's dalliance with New Zealand and, recently, musing about a similar deal with Australia, has rattled the cage. Who knows what might come out.

Colin.James@synapsis.co.nz