Speeches and Articles
For the greater good
Rt Hon James Bolger and John E. Mullen
NZ Magazine, 30 September 2006
The British politician Richard Cobden once described free trade as “God’s diplomacy”. In 1857 he claimed “there is no other certain way of uniting people in the bonds of peace”.
With such divine endorsement, it’s hard to see why the United States and New Zealand, two countries completely aligned on the merits of free trade, have not yet moved to start negotiations for a free trade agreement (FTA).
Free trade makes goods and services cheaper and more widely available for consumers and manufacturers. It does this by removing the barriers countries put up that restrict the free flow of goods, services and investment.
Trade negotiations can be complex involving both “tariff” and “non-tariff” barriers. The former usually are more straightforward – tariffs, duties and taxes that are applied to make imported goods more expensive, therefore making it more difficult for them to compete with domestic goods.
Non-tariff barriers are a lot more subtle, and more difficult to address. They include everything from subsidies, to technical regulations and red tape, to intellectual property laws, to quotas, anything in fact which restricts what is known as “market access.”
While making it easier to do business in another country, free trade does not mean anything goes – it involves the introduction of trade rules which provide the legal framework under which trade and investment can take place.
Two way trade between New Zealand and the United States is valued at around US$ 5 billion annually.
The US is New Zealand’s second largest export market overall and a major market for exports of beef, dairy products, lamb, seafood and timber.
US investment in New Zealand is rather more significant with major US involvement in forestry, information technology, energy, manufacturing and food processing.
Beyond this, the two countries share a deep and abiding interest in opening global markets.
New Zealand’s interest is a matter of economic survival as trade is the country’s lifeblood.
For the United States, free trade ensures American exporters can compete on an equal basis with other countries that enjoy good access into the huge American consumer market.
As Cobden suggests, freer trade also leads to greater economic freedom and greater engagement between countries which in turn promotes stability, security and peace.
Enhancing trade and investment was among the topics discussed at the first ever US NZ Partnership Forum organised by our two Councils in Washington DC last April.
The Forum brought together 70 or so business leaders, politicians, senior officials and academics to talk in depth about key issues in the relationship between our two countries.
Other topics under discussion included business challenges in the post 9/11 world; the importance to both countries of the rise of China and India; the challenge of meeting new security requirements for the shipment of goods; the future direction of economic integration in the 21st Century, and sound energy policy, among others.
The trade experts and business and government leaders who participated in the Partnership Forum are among the world’s foremost champions of free trade generally and the World Trade Organisation’s Doha round in particular.
The WTO establishes the rules under which global trade takes place and acts as a referee when trade disputes occur.
The WTO has 149 countries as members and the Doha Development Agenda seeks to eliminate trade barriers between all of them. The process is inevitably time-consuming and progress is slow.
Provided they keep to WTO rules, FTAs between individual countries or among countries in specific regions can achieve deeper cuts in trade protection, spur regional growth, and maintain momentum on free trade when global approaches falter.
Our two Councils believe an FTA between New Zealand and the United States would expand two way trade and investment by opening up new opportunities for business as well as serve to promote the cause of open markets globally.
There are at least three good reasons why the United States and New Zealand are well suited to begin FTA negotiations - shared values, complementary resources, and the support that already exists for a negotiation in American business and political circles.
The two countries share fundamental values – more so, in fact, than the United States does with current FTA partners in the Americas, Asia and the Middle East.
Apart from common language and status as fully developed “new world” economies, the two nations have stood shoulder to shoulder in every regional conflict in the 20th century and now in the war on terror.
In an uncertain world, they continue to seek progress on many of the same global issues, such as the need to spread democracy and human rights around the globe, the advantages of open markets, and the importance of the rule of law and sustainable development.
They are close allies in the WTO and committed to the goal of free trade and investment amongst developed economies in the APEC region by 2010.
They see eye to eye on issues like respecting labour laws and protecting the environment.
What’s more, both countries are dancing with the same partners: both have free trade agreements with Australia, Chile and Singapore; New Zealand has an FTA with Thailand and the US hopes to restart a stalled negotiation soon; both countries are negotiating with Malaysia.
The two countries possess complementary resources.
Possible US-New Zealand synergies would see American investment, innovation and entrepreneurship matched with New Zealand’s lower cost, but highly skilled labour market and highly competitive, natural resource-based industries - agriculture, food processing, biotechnology, forestry and fishing – as well as leading edge software, telecommunications and film industries.
In the United States, New Zealand’s case continues to be strongly supported by business interests, including major corporates, the National Association of Manufacturers (NAM), the Chamber of Commerce and the National Foreign Trade Council, representing 300 member companies.
Tom Donohue, President and CEO of the US Chamber, who spoke at the Partnership Forum, said in an earlier statement:
“New Zealand is a friend of our country, is a good trading partner and shares our view on the importance of open markets. We vigorously believe that a free trade agreement with New Zealand would advance relations with this country and serve to bolster our ties with the Asia Pacific region. ”
New Zealand also enjoys strong support in the Congress - both in the House and the Senate.
A Friends of New Zealand Congressional Caucus was established in the House in February 2005 led by Representatives Kolbe (R-Arizona) and Tauscher (D-California).
In March this year they wrote a further letter to (then) US Trade Representative Ambassador Rob Portman advocating an FTA with New Zealand.
Two US Senators, John McCain (R-Arizona) and John Sununu (R-New Hampshire) also recently spoke out in favour of beginning negotiations in a letter to President Bush.
Congressional support, particularly among Democrats, is enhanced by the absence of any difficulty New Zealand might pose in terms of non trade issues such as environment or labour.
While the advantages for a small export-oriented country like New Zealand might seem rather obvious, the traffic is by far from one way.
In March 2002 a report prepared by Fred Bergsten and Rob Scollay estimated that US exports to New Zealand would rise by about 25 percent and virtually every US sector would benefit.
Bergsten and Scollay concluded that the largest gains, especially for the US would come from the strategic benefits: an FTA would help accelerate the momentum of trade liberalisation by inducing other trading partners to participate more actively in a trade liberalisation process.
An agreement between New Zealand and the United States can be seen as a stepping stone towards more open trade in the Asia Pacific region. Many of these countries apply higher tariffs and other barriers than New Zealand and the United States.
Although the number of contentious issues between our two countries is relatively small, the Administration’s view is that New Zealand is not a priority at present.
American negotiating resources are currently stretched with commercially significant negotiations underway with Thailand, Malaysia, Korea and a number of other partners.
The Administration continues to assert that there are no political issues impacting on this decision, for example as a result of differing views on nuclear issues or the conflict in Iraq.
A further complicating factor is the expiry on 30 June 2007 of Trade Promotion Authority (TPA) under which Congress authorises the President to negotiate trade agreements.
This puts in place an effective cut-off date for new negotiations which generally take at least a year to complete.
The recent Partnership Forum reflected on the words of former US President Jimmy Carter who once said “we must adjust to changing times and still hold to unchanging principles” .
The recent Partnership Forum examined in depth those “changing times” and served to highlight the fundamental values and interests that New Zealand and the United States have in common.
While these go beyond economics, the two countries are united in the belief that expanded trade and investment are a force for good in the world, bringing opportunity, prosperity and security.
A comprehensive, forward looking free trade agreement between New Zealand and the United States would demonstrate to countries in the Asia Pacific region the economic gains that can be realised when two economies of vastly different size and strength choose to align themselves economically to the benefit of their workers and consumers.
The open nature of both economies and the relatively few trade issues between them suggest a negotiation could be completed within a shorter time frame than other negotiations.
In our view these factors suggest that the time to start these negotiations, and to further the work of what Cobden called “God’s diplomacy”, is now.
The New Zealand United States Council (www.nzuscouncil.com) is a non partisan organisation funded by business and government to promote the strongest possible relationship between New Zealand and the United States.
The United States New Zealand Council (www.usnzcouncil.org) is a non profit organisation dedicated to strengthening United States-New Zealand relations through enhanced communications between the two nations.
