Wednesday, March 29, 2006

Fran O'Sullivan: Blair could be ally in trade negotiations

It's a fair bet that one of the key items on Helen Clark and Tony Blair's agenda today will be the potential stalemate on world trade talks.

With next month's deadline for setting new World Trade Organisation tariff rates looming, the British Prime Minister used his speech to the Australian Parliament this week to renew his appeal to major trading nations to make the concessions needed to clinch the "development" round.

Blair - who is a major actor at this stage of the WTO's lengthy game - argued that "if we can't put a decent trade round in place, this will be a failure with multiple consequences, all of them adverse".

The issue was "open or closed" as far as the world's markets were concerned.

But Clark's officials - who still argue that a successful WTO round provides the best opportunities for New Zealand's exporters - have already covered their bets in event of failure. They have quietly elevated a Plan B option, to quickly deepen our bilateral trade relationships, to share frontline status with the multilateral initiative.

Japan and South Korea have been targeted as the new objects of our ardent trading affections.

What's at stake is not the big bang notions of old: The full-on free-trade agreements, or, "closer economic partnerships" as Clark's more ideological colleagues prefer to call them. They were comprehensive deals which covered trade in agriculture, industrial goods and services, and also moved towards liberalising investment rules.

Instead, the new terminology talks about these prospective agreements with big North Asian powers as being "deeper vehicles for greater economic co-operation". It's a pragmatic "get what you can now and try again later" approach, which one trade official likened to our initial Closer Economic Relations talks with Australia.

There's a soft logic to the Government's agenda, even if it does worry major agricultural exporters who fear we will lose our nerve at the WTO just when it's needed most.

Fonterra, in particular, is concerned that dairy exporters' demands will be set to one side as officials move to score "down and dirty" deals with the more protectionist Asian countries.

Others worry that China's Ministry of Agriculture will push New Zealand into accepting a free-trade deal that is "agriculture lite" - that is, a deal that ring-fences big chunks of so-called "sensitive products", such as dairy, from fast-track liberalisation.

But other countries are also courting these big Asian partners. If we don't follow suit some of our less powerful sectoral exporters could quickly find themselves "Tailend Charlies" if Japan and South Korea seal deals that create preferential access for our competitors and Australia gets ahead of us with China.

The US has made it clear that New Zealand will not get a place on its free-trade queue. And the European Union, which is a huge market for New Zealand, is not yet on our prospecting list.

But Clark would be passing up a golden opportunity if she failed to at least pop the "How about it?" question to Blair, asking him to use his influence with Brussels and longtime political ally Peter Mandelson - now the EU trade czar - to talk about opening bilateral negotiations to expand our access.

Kiwis tend to view the EU as the Great Satan of global trade. But Europe has made great strides towards reducing its protectionist system, which basically paid French farmers, in particular, as pets. The Common Agriculture Policy is being progressively deconstructed - at the WTO's recent Hong Kong ministerial jamboree Mandelson agreed to an expiry date for EU export subsidies.

Blair made the point while in Australia that EU agriculture protection was a "policy born of another age and it's time to end it".

He also called on the US, Japan, Brazil and India to take the lead.

The underlying issue for both these Labour Prime Ministers is the implications for the global economy, particularly the poorer nations, if the WTO cannot forge a deal.

Blair talks about the tide of protectionist sentiment that is flowing. The commitment to relieving world poverty is now at stake, but so is the idea of of multilateral action to achieve common goals.

Senior diplomats at the WTO's Geneva headquarters, where the mood is seen to be uniformly negative, argue that little substantive has emerged.

In Hong Kong, negotiators set a target of the end of April for what are known in WTO jargon as "full modalities" - formulas and other guidelines for reducing trade barriers, which would eventually form part of a formal treaty at the end of the round.

But Crawford Falconer, the New Zealander who chairs the agriculture committee, said little material had emerged.

WTO director-general Pascal Lamy was expected to make an assessment of the state of the current talks overnight, which will be available to the two prime ministers when they meet today.

Blair has also suggested a major international summit to push things along. But he was not vocal on the issue while in Australia.

This is again another area where Clark could usefully chivvy her Labour colleague to take action and invite New Zealand along for the ride.

Trade Negotiations Minister Jim Sutton, who still sits in Cabinet, pointed out that New Zealand was now being omitted from the meetings of some very influential recent WTO member country officials.

He is not so impolitic as to suggest that New Zealand's absence is because Clark took the senior part of the portfolio off him and gave it to Phil Goff. But it may well be an issue.

What is clear is that right now we do lack a senior voice within top WTO circles and Goff has too much on his plate here to spend endless time on lobbying his peers.

If Clark and Blair can get use this visit to ginger up local energy to help push the WTO round to a successful conclusion it will be in our exporters' interests. And Plan B should stay just that.


Unions fear cheap Indian labour

Trade union boss Ross Wilson and Wellington diplomat-turned-business lobbyist Charles Finney are scrapping over a World Trade Organisation initiative that unionists fear might open the way for Indian workers to undercut New Zealanders for work done here.

At issue is India's desire for negotiations under what is known as Mode 4 - the movement of peoples.

Finney, CEO of the Wellington Chamber of Commerce, has described India's participation in the limited discussions on this score as positive.

But Wilson says India's request to remove the "wage parity condition" when its workers go overseas to support specified service industries suggests "business groups are supporting the use of cheap labour to undercut local pay and conditions".

Not much has been said publicly about the services negotiations. But New Zealand is actively participating in discussions over freeing up trade in a number of areas ranging from private education to logistical services.

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