The Doha development agenda - a New Zealand perspective
Freer trade between the US and NZ would build on our shared values and common views on the way we each, and the world as a whole, need to go.
---------------------------------
Address to the US Chamber of Commerce, Washington DC, delivered 9 May
Myron Brilliant, Vice President of the Chamber, John Mullen, President of the US NZ Council, distinguished guests, ladies and gentlemen, friends of New Zealand.
In his message to Congress in January 1941, one of the United States' greatest presidents, Franklin Delano Roosevelt, set out the kind of values that countries such as ours should champion.
He called for likeminded countries to work for four freedoms: freedom of speech, freedom of worship, freedom from fear and - surprising many at the time - freedom from want.
Recognizing the leadership failures of the Depression era, Roosevelt set out an ambitious internationalist agenda that included a commitment that the United States would work for the basic human right of economic security.
In doing so, Roosevelt set a new agenda for global US economic leadership in the post-war period. For those who chose to support the system, there would be a more level playing field, largely liberated from economic nationalism.
This called for new architecture, which came together only after Roosevelt's death: Marshall Plan aid, the Bretton Woods institutions of the International Monetary Fund and World Bank and a new set of rules for global trade.
Today's World Trade Organisation is part of this legacy. The open international economy that developed under the GATT and WTO is part of the liberty that was hard won by the democracies in World War Two and the Cold War.
The principle of openness is not to be taken for granted. Those of us engaged in trade negotiations are faced daily with pressure to protect rather than open up, along with calls to favour local over foreign.
These pressures are not new but we can learn from history. In the Depression years of the 1930s policies of mercantilism were taken to extremes. Germany adopted a policy of autarky.
In this country the Smoot-Hawley Tariff Act had such dramatic effects on American trade that even protectionist interests were forced to accept that beggar-thy-neighbour policies carried unacceptable costs.
Even so, the decision by the United States to lead a push for a post-war global trade system founded on principles of non-discrimination and progressive liberalisation was remarkable. It combined visionary diplomacy with political courage.
The authors of the GATT were right to envisage a more open global trade regime. We have seen that openness to trade and competition fuels economic dynamism and innovation and raises productivity and standards of living.
President Bush in his State of the Economy report earlier this year made the point that, since World War II, the opening of global trade and investment had resulted in income gains of about US$9,000 a year for the average American household.
Globally engaged US companies accounted for more than half of US productivity growth between 1977 and 2000, and 83% of corporate investment in research and development. It is important that organisations like this Chamber continue to promote the benefits of open markets and trade.
Similar conclusions can be drawn from our own experience. Following a series of far-reaching economic reforms New Zealand is now among the world's most open economies, in the top tier for economic freedom and ease of doing business.
Our unemployment is amongst the lowest in the OECD. Among mature OECD economies we have enjoyed one of the highest growth rates over the past decade. On the back of this economic performance we have been able to enhance the social policies that make New Zealand a fair as well as a free society.
The evidence from other countries that have followed open policies - such as our free trade partners, Australia and Chile - is likewise positive.
The reason I rehearse this background is that the big players in the WTO Doha negotiations - the G-4 of the United States, EU, India and Brazil - right now face tough choices between protection and reform. Experience and logic argue that each should make the compromises needed to help pull together a deal.
But all face a temptation to take the soft option and stick with their current defensive positions. This makes the risk of failure high.
The immediate test is whether we can cut a deal on agriculture. I know the politics of agriculture are acutely difficult in Washington, as they are in European capitals and, as I heard at first hand when I visited India last month, in New Delhi.
It is for that reason that I want to share something of our own experience with farm reform. I think it has some relevance to the tough calls facing your leaders in government and industry over the next few months.
During my first years in parliament, in the early 1980s, New Zealand agriculture was protected and subsidised. And the sector was in deep trouble. Output was driven by subsidies rather than markets. We could not find markets for what we produced. Farmers struggled to achieve profitability.
We decided on radical change. We slashed protection and support, and did so quickly. We now rate under the OECD producer support index as the least-subsidized agricultural producer in the developed world.
It was hard for farmers in the short term. But the benefits have been substantial. Agriculture became a driving force in New Zealand economic growth. It stimulated the development of a biotech and agritech sector. We saw that a grass-based industry can be as much a part of the knowledge economy as a silicon-based industry.
The achievement is all the more significant when you take into account the barriers we face. Meat and dairy products, which, as American farmers know, face high tariff barriers and heavily subsidised competition in foreign markets, dominate our exports.
What surprises me in this Doha Round is that countries contemplating cutting subsidies and tariff protection for agriculture regard taking these actions as something others should pay them for in terms of trade concessions.
New Zealand took this step unilaterally, not in order to benefit others, but because we knew that these actions would provide major benefits for the productivity, innovation, adaptation and market-responsiveness of our own agriculture and manufacturing.
Agriculture Secretary, Mike Johanns, had a chance to see the results at first hand when he visited New Zealand two years ago. Like other visitors, he was challenged to find a New Zealand farmer who wanted to go back to policies of protection and subsidy - and could not find one.
I know that Secretary Johanns' recent proposals for farm programme reforms were based mainly on what he heard in a series of farm forums around rural America. But I would like to think that what he saw in New Zealand encouraged him to be ambitious. I certainly admire the leadership he has shown in mapping out a way forward for US agriculture.
I also much admire the role Ambassador Susan Schwab has played since taking on the role of US Trade Representative a year ago. She inherited a tough brief.
As an exporter, New Zealand owes Ambassador Schwab a special debt for the way she has pressed for ambition on market access, noting that the success of the Round must be measured in new trade flows, and insisting that others offer real new access opportunities.
To achieve the conclusion of the Round the United States faces some difficult judgments on what it is prepared to put on the table as part of the end game. It is important for others to know that the US does have flexibility and is prepared to contribute as part of a balanced package.
President Bush's statement last week confirming US readiness to cut farm spending is important and very welcome.
The challenges of completing a Doha deal are well known. We have a complex agenda. We need agreement among 150 members ranging from the world's richest countries to the least developed. That agreement needs to be a consensus: there will not be a vote. We have missed deadlines already.
Many people are predicting failure. My own view is that there is an even chance of success. In the last few weeks I have talked to counterparts from all the G4 countries as well as Pascal Lamy. All understand the urgency. All seem serious about getting a deal this year. They have a process in place, which can deliver breakthroughs.
They recognise the need to feed their results into the process in Geneva. It is there that the chairs of the negotiating groups need to work up texts with input from the wider membership.
None of this will be simple. In New Delhi last month, for example, I gained a vivid sense of the challenge India faces in this negotiation.
Kamal Nath and his colleagues know that India's economic future depends on integration with the global economy. They understand that that has implications for India's trade and economic policies. But they are clearly wrestling with the political difficulties that flow from that.
On the other side of the Atlantic I believe that Peter Mandelson is personally committed to getting a deal. His own economic instincts are liberal. He is ready to take risks. But I know from experience how reluctant European governments are to look at serious market opening in agriculture. So as EC trade commissioner Peter Mandelson faces challenges of his own.
The responsibility goes beyond the big four. New Zealand's contribution includes making our ambassador in Geneva, Crawford Falconer, available to chair the agriculture process. As a result we have lost the services of our top negotiator.
But it was the right thing to do. The "challenges" paper Crawford put out last week on key issues in the agriculture negotiation will no doubt have left everyone unhappy. That is inevitable if he has succeeded in putting his finger on the hard choices we collectively now have to confront.
The message I would like to leave with you is one that goes back to my earlier point about the origins of the GATT and the WTO. There are times when the United States has accepted a special responsibility to show leadership on the international economic agenda, even at some political cost or risk.
I believe this point in the Doha process is another one of those occasions. I encourage you to offer leadership. The stakes justify the risks.
And it would be a gesture of strength and confidence. This is after all the world's most dynamic economy. I believe American farmers and producers have the energy and competitiveness to thrive without current levels of protection or support.
Having been part of a New Zealand government that took hard policy decisions in these areas, and saw the rewards, I feel I have some basis for urging the US likewise to be bold.
Other big players - including the EU, China, Brazil, India and Japan - need to match that boldness.
One necessary step along the way will be a new Trade Promotion Authority. This is a domestic issue for the United States but I hope that the Administration and Congress can find a way to ensure that the US is able to play a full role in concluding the Doha negotiations, as well as developing other trade agreements.
In the meantime countries are free to press ahead with bilateral and regional initiatives.
In New Zealand we are actively negotiating free trade agreements. After completing a number of smaller deals we are now well advanced in a negotiation with China. I hope this will be completed this year.
The US-Korea free trade agreement is the big news of recent weeks. The deal will clearly have a big commercial impact in both countries. But it has wider significance as a signal that even agriculture sectors as highly protected as that of Korea will in future have to face up to competition.
That sends an important message to others who face decisions in the near future on their bottom lines in the WTO negotiation.
You will understand from what I have said today that we work closely and well with the United States in trade forums and elsewhere in the international agenda.
Our already close and wide-ranging cooperation has intensified further since I last visited Washington in April 2006 for the inaugural US-New Zealand Partnership Forum.
The two governments have been working with a shared will to identify new areas where we can do more together to mutual benefit.
The Prime Minister and President Bush took the bilateral relationship to a new level when they met in Washington in March.
The US Ambassador to New Zealand, Bill McCormick, in an important speech in Wellington last week, stated that: "The Prime Minister's visit clearly shows that the relationship between the United States and New Zealand is now the strongest it has been in decades."
The Ambassador considered the bilateral relationship to be "in very good working order." The United Sates and New Zealand, he said, "have a good partnership marked more than ever by predictability, mutual respect and cooperation."
The New Zealand Government views the relationship in very similar terms. A strong a mature relationship has been reinvigorated. And looking to the future, we would like to get even closer.
New Zealand sees an FTA negotiation as a logical next step.
Many in the room today, including the Chamber, have been supportive of a US-New Zealand Free Trade Agreement - support, which we value. We also have a good level of support from Congress.
There are some obvious constraints at present - notably the expiry of Trade Promotion Authority and uncertainty over its renewal. When it is renewed, however, we are keen for our two countries to agree to negotiate an FTA.
Freer trade between us would build on our shared values and common views on the way we each, and the world as a whole, need to go.
Thank you for the opportunity to discuss these issues with you today.
---------------------------------
Address to the US Chamber of Commerce, Washington DC, delivered 9 May
Myron Brilliant, Vice President of the Chamber, John Mullen, President of the US NZ Council, distinguished guests, ladies and gentlemen, friends of New Zealand.
In his message to Congress in January 1941, one of the United States' greatest presidents, Franklin Delano Roosevelt, set out the kind of values that countries such as ours should champion.
He called for likeminded countries to work for four freedoms: freedom of speech, freedom of worship, freedom from fear and - surprising many at the time - freedom from want.
Recognizing the leadership failures of the Depression era, Roosevelt set out an ambitious internationalist agenda that included a commitment that the United States would work for the basic human right of economic security.
In doing so, Roosevelt set a new agenda for global US economic leadership in the post-war period. For those who chose to support the system, there would be a more level playing field, largely liberated from economic nationalism.
This called for new architecture, which came together only after Roosevelt's death: Marshall Plan aid, the Bretton Woods institutions of the International Monetary Fund and World Bank and a new set of rules for global trade.
Today's World Trade Organisation is part of this legacy. The open international economy that developed under the GATT and WTO is part of the liberty that was hard won by the democracies in World War Two and the Cold War.
The principle of openness is not to be taken for granted. Those of us engaged in trade negotiations are faced daily with pressure to protect rather than open up, along with calls to favour local over foreign.
These pressures are not new but we can learn from history. In the Depression years of the 1930s policies of mercantilism were taken to extremes. Germany adopted a policy of autarky.
In this country the Smoot-Hawley Tariff Act had such dramatic effects on American trade that even protectionist interests were forced to accept that beggar-thy-neighbour policies carried unacceptable costs.
Even so, the decision by the United States to lead a push for a post-war global trade system founded on principles of non-discrimination and progressive liberalisation was remarkable. It combined visionary diplomacy with political courage.
The authors of the GATT were right to envisage a more open global trade regime. We have seen that openness to trade and competition fuels economic dynamism and innovation and raises productivity and standards of living.
President Bush in his State of the Economy report earlier this year made the point that, since World War II, the opening of global trade and investment had resulted in income gains of about US$9,000 a year for the average American household.
Globally engaged US companies accounted for more than half of US productivity growth between 1977 and 2000, and 83% of corporate investment in research and development. It is important that organisations like this Chamber continue to promote the benefits of open markets and trade.
Similar conclusions can be drawn from our own experience. Following a series of far-reaching economic reforms New Zealand is now among the world's most open economies, in the top tier for economic freedom and ease of doing business.
Our unemployment is amongst the lowest in the OECD. Among mature OECD economies we have enjoyed one of the highest growth rates over the past decade. On the back of this economic performance we have been able to enhance the social policies that make New Zealand a fair as well as a free society.
The evidence from other countries that have followed open policies - such as our free trade partners, Australia and Chile - is likewise positive.
The reason I rehearse this background is that the big players in the WTO Doha negotiations - the G-4 of the United States, EU, India and Brazil - right now face tough choices between protection and reform. Experience and logic argue that each should make the compromises needed to help pull together a deal.
But all face a temptation to take the soft option and stick with their current defensive positions. This makes the risk of failure high.
The immediate test is whether we can cut a deal on agriculture. I know the politics of agriculture are acutely difficult in Washington, as they are in European capitals and, as I heard at first hand when I visited India last month, in New Delhi.
It is for that reason that I want to share something of our own experience with farm reform. I think it has some relevance to the tough calls facing your leaders in government and industry over the next few months.
During my first years in parliament, in the early 1980s, New Zealand agriculture was protected and subsidised. And the sector was in deep trouble. Output was driven by subsidies rather than markets. We could not find markets for what we produced. Farmers struggled to achieve profitability.
We decided on radical change. We slashed protection and support, and did so quickly. We now rate under the OECD producer support index as the least-subsidized agricultural producer in the developed world.
It was hard for farmers in the short term. But the benefits have been substantial. Agriculture became a driving force in New Zealand economic growth. It stimulated the development of a biotech and agritech sector. We saw that a grass-based industry can be as much a part of the knowledge economy as a silicon-based industry.
The achievement is all the more significant when you take into account the barriers we face. Meat and dairy products, which, as American farmers know, face high tariff barriers and heavily subsidised competition in foreign markets, dominate our exports.
What surprises me in this Doha Round is that countries contemplating cutting subsidies and tariff protection for agriculture regard taking these actions as something others should pay them for in terms of trade concessions.
New Zealand took this step unilaterally, not in order to benefit others, but because we knew that these actions would provide major benefits for the productivity, innovation, adaptation and market-responsiveness of our own agriculture and manufacturing.
Agriculture Secretary, Mike Johanns, had a chance to see the results at first hand when he visited New Zealand two years ago. Like other visitors, he was challenged to find a New Zealand farmer who wanted to go back to policies of protection and subsidy - and could not find one.
I know that Secretary Johanns' recent proposals for farm programme reforms were based mainly on what he heard in a series of farm forums around rural America. But I would like to think that what he saw in New Zealand encouraged him to be ambitious. I certainly admire the leadership he has shown in mapping out a way forward for US agriculture.
I also much admire the role Ambassador Susan Schwab has played since taking on the role of US Trade Representative a year ago. She inherited a tough brief.
As an exporter, New Zealand owes Ambassador Schwab a special debt for the way she has pressed for ambition on market access, noting that the success of the Round must be measured in new trade flows, and insisting that others offer real new access opportunities.
To achieve the conclusion of the Round the United States faces some difficult judgments on what it is prepared to put on the table as part of the end game. It is important for others to know that the US does have flexibility and is prepared to contribute as part of a balanced package.
President Bush's statement last week confirming US readiness to cut farm spending is important and very welcome.
The challenges of completing a Doha deal are well known. We have a complex agenda. We need agreement among 150 members ranging from the world's richest countries to the least developed. That agreement needs to be a consensus: there will not be a vote. We have missed deadlines already.
Many people are predicting failure. My own view is that there is an even chance of success. In the last few weeks I have talked to counterparts from all the G4 countries as well as Pascal Lamy. All understand the urgency. All seem serious about getting a deal this year. They have a process in place, which can deliver breakthroughs.
They recognise the need to feed their results into the process in Geneva. It is there that the chairs of the negotiating groups need to work up texts with input from the wider membership.
None of this will be simple. In New Delhi last month, for example, I gained a vivid sense of the challenge India faces in this negotiation.
Kamal Nath and his colleagues know that India's economic future depends on integration with the global economy. They understand that that has implications for India's trade and economic policies. But they are clearly wrestling with the political difficulties that flow from that.
On the other side of the Atlantic I believe that Peter Mandelson is personally committed to getting a deal. His own economic instincts are liberal. He is ready to take risks. But I know from experience how reluctant European governments are to look at serious market opening in agriculture. So as EC trade commissioner Peter Mandelson faces challenges of his own.
The responsibility goes beyond the big four. New Zealand's contribution includes making our ambassador in Geneva, Crawford Falconer, available to chair the agriculture process. As a result we have lost the services of our top negotiator.
But it was the right thing to do. The "challenges" paper Crawford put out last week on key issues in the agriculture negotiation will no doubt have left everyone unhappy. That is inevitable if he has succeeded in putting his finger on the hard choices we collectively now have to confront.
The message I would like to leave with you is one that goes back to my earlier point about the origins of the GATT and the WTO. There are times when the United States has accepted a special responsibility to show leadership on the international economic agenda, even at some political cost or risk.
I believe this point in the Doha process is another one of those occasions. I encourage you to offer leadership. The stakes justify the risks.
And it would be a gesture of strength and confidence. This is after all the world's most dynamic economy. I believe American farmers and producers have the energy and competitiveness to thrive without current levels of protection or support.
Having been part of a New Zealand government that took hard policy decisions in these areas, and saw the rewards, I feel I have some basis for urging the US likewise to be bold.
Other big players - including the EU, China, Brazil, India and Japan - need to match that boldness.
One necessary step along the way will be a new Trade Promotion Authority. This is a domestic issue for the United States but I hope that the Administration and Congress can find a way to ensure that the US is able to play a full role in concluding the Doha negotiations, as well as developing other trade agreements.
In the meantime countries are free to press ahead with bilateral and regional initiatives.
In New Zealand we are actively negotiating free trade agreements. After completing a number of smaller deals we are now well advanced in a negotiation with China. I hope this will be completed this year.
The US-Korea free trade agreement is the big news of recent weeks. The deal will clearly have a big commercial impact in both countries. But it has wider significance as a signal that even agriculture sectors as highly protected as that of Korea will in future have to face up to competition.
That sends an important message to others who face decisions in the near future on their bottom lines in the WTO negotiation.
You will understand from what I have said today that we work closely and well with the United States in trade forums and elsewhere in the international agenda.
Our already close and wide-ranging cooperation has intensified further since I last visited Washington in April 2006 for the inaugural US-New Zealand Partnership Forum.
The two governments have been working with a shared will to identify new areas where we can do more together to mutual benefit.
The Prime Minister and President Bush took the bilateral relationship to a new level when they met in Washington in March.
The US Ambassador to New Zealand, Bill McCormick, in an important speech in Wellington last week, stated that: "The Prime Minister's visit clearly shows that the relationship between the United States and New Zealand is now the strongest it has been in decades."
The Ambassador considered the bilateral relationship to be "in very good working order." The United Sates and New Zealand, he said, "have a good partnership marked more than ever by predictability, mutual respect and cooperation."
The New Zealand Government views the relationship in very similar terms. A strong a mature relationship has been reinvigorated. And looking to the future, we would like to get even closer.
New Zealand sees an FTA negotiation as a logical next step.
Many in the room today, including the Chamber, have been supportive of a US-New Zealand Free Trade Agreement - support, which we value. We also have a good level of support from Congress.
There are some obvious constraints at present - notably the expiry of Trade Promotion Authority and uncertainty over its renewal. When it is renewed, however, we are keen for our two countries to agree to negotiate an FTA.
Freer trade between us would build on our shared values and common views on the way we each, and the world as a whole, need to go.
Thank you for the opportunity to discuss these issues with you today.