MULTILATERALISM, MULTILATERALISM, REGIONALISM, BILATERALISM – REGIONALISM, BILATERALISM –

 WHAT WILL BE THE ASIA- WHAT WILL BE THE ASIA-PACIFIC CONTEXT FOR NEW PACIFIC CONTEXT FOR NEW

ZEALANDZEALAND

Presentation toPresentation to

Asia ForumAsia Forum

Wellington, 27 May 2003Wellington, 27 May 2003

ByBy

Gary HawkeGary Hawke

Chair, NZPECC, andChair, NZPECC, and

Head of the School of Government, Head of the School of Government, VUWVUW

PECCPECC

• six-monthly meeting of the PECC six-monthly meeting of the PECC Standing Committee Washington DC, Standing Committee Washington DC, 22-4 April. 22-4 April.

• Seminar of the PECC Trade Forum on Seminar of the PECC Trade Forum on Regional Trading Agreements Regional Trading Agreements

• inaugural meeting of the Asia-Pacific inaugural meeting of the Asia-Pacific Council of the US, Council of the US,

• major speeches from Secretary of major speeches from Secretary of State, Colin Powell, and USTR, Bob State, Colin Powell, and USTR, Bob Zoellick.Zoellick.

Fred BergstromFred Bergstrom

• IIE – APEC EPG - adviser to IIE – APEC EPG - adviser to Administration. Administration.

• ““Competitive liberalization”. Competitive liberalization”. • RTAs and the multilateral process – RTAs and the multilateral process –

“complementary, mutually supporting “complementary, mutually supporting and if properly managed, catalytic”.and if properly managed, catalytic”.

• Doha and FTAA are now on a Doha and FTAA are now on a timetable that ends in May 2007 – timetable that ends in May 2007 – RTAs provide main action in meantimeRTAs provide main action in meantime

Fred BergstromFred Bergstrom cont.cont.

• East Asian RTAs driven less by co-operation East Asian RTAs driven less by co-operation than by conflict between Japan and China. than by conflict between Japan and China. less likely to proceed to multilateralisation?less likely to proceed to multilateralisation?

• RTAs as the 4th attempt to find a strategy RTAs as the 4th attempt to find a strategy to implement the Bogor Goals? to implement the Bogor Goals?

• On this analysis, the Asia-Pacific context for On this analysis, the Asia-Pacific context for NZ will be reasonable pressure to co-NZ will be reasonable pressure to co-operate in a WTO round but with a relaxed operate in a WTO round but with a relaxed timetable until 2007, and a need to manage timetable until 2007, and a need to manage a process of RTAs designed to speed up a process of RTAs designed to speed up and go beyond the multilateral process.and go beyond the multilateral process.

Robert ZoellickRobert Zoellick • Background:Background:

Administration’s success with China’s Administration’s success with China’s accession to the WTO while not unaware accession to the WTO while not unaware of problems, generally positive about its of problems, generally positive about its subsequent implementation subsequent implementation

• Russia and Vietnam accession – on Russia and Vietnam accession – on timetables they decide.timetables they decide.

• focus in the multilateral area is on market focus in the multilateral area is on market access access

• regional priorities are FTAA, ASEAN, and regional priorities are FTAA, ASEAN, and the Middle East. the Middle East.

• The bilateral agenda is The bilateral agenda is Singapore and Chile, where negotiated FTAs Singapore and Chile, where negotiated FTAs await submission to Congress,await submission to Congress,Central America, Central America, Morocco, Morocco, South Africa and South Africa and Australia. Australia.

• Zoellick knows the dangers of bilateralism, but Zoellick knows the dangers of bilateralism, but is not willing to proceed in the WTO only when is not willing to proceed in the WTO only when it is subject to veto by every member it is subject to veto by every member

• Whatever was the case in the 1980s trade Whatever was the case in the 1980s trade policy now will not be decoupled from political policy now will not be decoupled from political goals goals

• APEC has the interesting feature of involving APEC has the interesting feature of involving business - it is a “post Cold War economic business - it is a “post Cold War economic institution” institution”

Colin PowellColin Powell • an adviser to a president with a vision of a an adviser to a president with a vision of a

world at peace, using all the tools at his world at peace, using all the tools at his disposal for that purpose, drawing on the disposal for that purpose, drawing on the best possible advice all his advisers can best possible advice all his advisers can provide, and making the decisions he has provide, and making the decisions he has been elected to make. been elected to make.

• Asia versus Europe? it is both diplomatic and Asia versus Europe? it is both diplomatic and true that both are important, but in the 21st true that both are important, but in the 21st century the correct answer is that all big century the correct answer is that all big issues are global. issues are global.

• The Asia Pacific Region acknowledged as The Asia Pacific Region acknowledged as having participated in the war on terrorism, having participated in the war on terrorism, in finance, travel, intelligence, and in finance, travel, intelligence, and agreements in APEC. agreements in APEC.

Colin Powell cont.Colin Powell cont.

• There is no reduced US commitment to There is no reduced US commitment to the Region, including Korea and China the Region, including Korea and China Powell is impressed by China’s Powell is impressed by China’s willingness to assist on Korea and willingness to assist on Korea and reflected on how far the relationship has reflected on how far the relationship has changed since the Hainan Island incident. changed since the Hainan Island incident.

• Differences of Perspectives to be Differences of Perspectives to be mediated, but New Zealand’s problem is mediated, but New Zealand’s problem is that it is seen to deny the morality of the that it is seen to deny the morality of the US vision.US vision.

RTAsRTAs

• Does their liberalizing effect for Does their liberalizing effect for members outweigh the members outweigh the damage they do to the damage they do to the multilateral system? multilateral system?

• pragmatism versus principle? pragmatism versus principle? proponents of liberalisation will proponents of liberalisation will use RTAs use RTAs

RTA’s cont.RTA’s cont.Assessments of 38 agreements. Assessments of 38 agreements.

• mostly promote welfare of the members, mostly promote welfare of the members, especially small membersespecially small members

• expansion to new members usually benefits expansion to new members usually benefits existing members (but may not when enlargement existing members (but may not when enlargement is outweighed by dilution of preferences as could is outweighed by dilution of preferences as could happen for Canada and Mexico) happen for Canada and Mexico)

• ““ins” gain while “outs” lose, which is especially ins” gain while “outs” lose, which is especially concerning for Australia, New Zealand and Taiwan concerning for Australia, New Zealand and Taiwan in relation to East Asia, and in relation to East Asia, and

• it is possible that there are positive effects from it is possible that there are positive effects from “new age” elements of RTAs and from “new age” elements of RTAs and from productivity growth.productivity growth.

RTA’s cont.RTA’s cont.

• Rules of Origin – impact exaggerated? Main Rules of Origin – impact exaggerated? Main danger may be use as protectionist danger may be use as protectionist instrument.instrument.

• ““Diversion” – including investment and Diversion” – including investment and more generally through information flows – more generally through information flows – the international economy worth the international economy worth considering may come to be those considering may come to be those economies which have the “stamp of economies which have the “stamp of approval” of an RTA.approval” of an RTA.

Preferentialism and Preferentialism and

ReciprocityReciprocity

• RTAs, not FTAs – politicians can fool RTAs, not FTAs – politicians can fool themselves and others with language – themselves and others with language –

• How important are they? Tariffs – WTO process. How important are they? Tariffs – WTO process. Peaks, and cascades. Access for services, Peaks, and cascades. Access for services, conditions of investment. NZ and US-Aust.conditions of investment. NZ and US-Aust.

• Case for free trade. World income is maximised Case for free trade. World income is maximised when there are as few constraints as possible when there are as few constraints as possible on the allocation of resources to their most on the allocation of resources to their most productive use. National boundaries are productive use. National boundaries are constraints on the allocation of resources and constraints on the allocation of resources and therefore world income is maximised by therefore world income is maximised by minimising the effect of national boundariesminimising the effect of national boundaries

• So why RTAs?So why RTAs?-- slow pace of WTOslow pace of WTO-- anxiety about markets and anxiety about markets and desire for desire for assurance of assurance of

political controlpolitical control

• APEC and Alcoholics APEC and Alcoholics AnonymousAnonymous

APECAPEC

• Failure?Failure?• Cf GATT in 1961 Cf GATT in 1961 • Politics of APEC – meetings of leaders. Politics of APEC – meetings of leaders.

But still real economic significance. But still real economic significance.

Economic integration, not Economic integration, not reciprocal reciprocal exchange of concessions exchange of concessions among national among national economies.economies.

Business and economic Business and economic

policypolicy

• more mature understanding of more mature understanding of relations between business and relations between business and governments? governments?

• Lobbying, but mere access to Lobbying, but mere access to powerful office-holders will powerful office-holders will often not be the best way to often not be the best way to influence policy decisions. influence policy decisions.

Business and economic Business and economic policy cont.policy cont.

• The intellectual effort of developing The intellectual effort of developing knowledge and considering how to use knowledge and considering how to use collective decisions to benefit collective decisions to benefit communities is an essential component communities is an essential component of influencing policy. of influencing policy.

• So is capacity to engage in the economic So is capacity to engage in the economic integration which provides business integration which provides business opportunity. Economic and technical co-opportunity. Economic and technical co-operation is not a concession but a operation is not a concession but a central element of economic integration.central element of economic integration.

The main storyThe main story

• US political system, US policy vision – key to US political system, US policy vision – key to the Asia Pacific contextthe Asia Pacific context

• Context will be slow progress of WTO to 2007, Context will be slow progress of WTO to 2007, action on regional and bilateral front which action on regional and bilateral front which could be either beneficial or disastrous for the could be either beneficial or disastrous for the world economy and for New Zealand.world economy and for New Zealand.

• Main game remains economic integration.Main game remains economic integration.• For which APEC and therefore PECC remains For which APEC and therefore PECC remains

important. International economic policy important. International economic policy requires mutual understanding of business, requires mutual understanding of business, community and government. There should not community and government. There should not be a gold rush to any particular RTA be a gold rush to any particular RTA