NEW ZEALAND ANNOUNCES CONCLUSION REACHED ON

UNCLAS SECTION 01 OF 02 WELLINGTON 000290 SENSITIVE SIPDIS STATE FOR EAP/ANP, EEB, INR, STATE PASS TO USTR, PACOM FOR J01E/J2/J233/J5/SJFHQ E.O. 12958: N/A TAGS: ECON ETRD PGOV PREL NZ SUBJECT: NEW ZEALAND ANNOUNCES CONCLUSION REACHED ON ASEAN-AUSTRALIA-NZ FREE TRADE AGREEMENT Ref A) WELLINGTON 121 Ref B) WELLINGTON 180 Ref C) WELLINGTON 285 WELLINGTON 00000290 001.2 OF 002 ¶1. (SBU) Summary. New Zealand's Trade Minister Phil Goff recently announced that a "substantive conclusion" was reached at the negotiations between ASEAN, New Zealand and Australia for a Free Trade Agreement (AANZFTA) held during the 13th annual meeting of the ASEAN Economic Ministers-Closer Economic Relations (AEM-CER) in Singapore on 28 August 2008. Leaders from New Zealand, the 10 ASEAN nations, and Australia initially agreed in Laos in 2004 to launch negotiations on an FTA with the first round of negotiations held in March 2005. The accord is expected to be signed at the ASEAN leaders' summit in Bangkok in December 2008 and is expected to be "comprehensive" (i.e., dealing with all market sectors). Whether a full and "comprehensive" trade agreement can be signed by year's end remains ambitious but New Zealand's immediate concern remains its trade goal of securing greater market access for agriculture, meat and dairy exports into the ASEAN economies. End Summary. Expanded Trade Between ASEAN, New Zealand -------------- ¶2. (U) After concluding last month's AEM-CER meetings in Singapore, Trade Minister Phil Goff stated, "this was the first time New Zealand and Australia have been involved jointly in negotiating an FTA with third countries (multilaterally) and it was the first time ASEAN has embarked on "comprehensive" FTA negotiations covering goods, investment, trade in services, financial services, telecommunications, electronic commerce, and movement of natural persons, intellectual property, competition policy and economic cooperation." According to Goff, the agreement represents a huge milestone in New Zealand's engagement with "the world's most economically dynamic region." ¶3. (U) The ASEAN economies represent a market of more than 575 million people and are seen as an increasingly important destination for New Zealand goods, services and investments. Currently, New Zealand exporters pay up to $NZ50 million in tariffs annually to ASEAN countries which the anticipated agreement should eliminate. The bloc represents a portion of global trade worth approximately $1.5 trillion and was New Zealand's third largest export market for merchandise goods in the year to June 2008 - worth $4.6 billion. According to Goff, the agreement is seen as critical to New Zealand's longer term strategic engagement and interactions with the Asia-Pacific region. ¶4. (U) The AANZFTA marks the latest in a series of trade agreements that are part of the Labour government's strategy to expand trading networks between New Zealand and the pan-Asian economies. In April 2008, New Zealand became the first OECD country to sign an FTA with China (see Ref. A). In May, Prime Minister Helen Clark also led a trade delegation to Japan and South Korea to begin preliminary discussions on the start of free trade talks with both countries while Trade Minister Goff announced simultaneously that progress is being made on securing a trade agreement with India (see Ref B). ¶5. (U) In addition to AANZFTA and the China-NZ FTA, New Zealand has the following FTAs in force: the Closer Economic Relations Agreement with Australia (1983),an agreement with Thailand (2005) and the "P4" Agreement with Singapore, Chile and Brunei (2005) (see Ref C). New Zealand is currently negotiating free trade agreements with Malaysia and the Gulf Cooperation Council. Progress on ASEAN FTA Over Past Year -------------- WELLINGTON 00000290 002.2 OF 002 ¶6. (SBU) Last year, MFAT officials told us that the ASEAN FTA had undergone over a dozen rounds since 2005, but that a number of issues remained. Both New Zealand and Australia were prepared to lift 100% of their tariffs over time; ASEAN countries were prepared to commit to roughly 90%. Another issue centered on an ASEAN desire to exclude a portion of current trade products from the agreement. Indonesia reportedly wanted to exclude all meat trade; Vietnam and the Philippines also wanted to protect some of their products. On investment and services, GNZ officials noted that the ASEAN Framework Agreement on services was as much as ASEAN was willing to go at the time. New Zealand had tried to inject as much standard language from its existing high quality agreements as possible, but was uncertain how much ASEAN would accept. Agricultural Sensitivities -------------- ¶7. (SBU) Embassy Ag Officer queried contacts at MFAT and Ministry of Agriculture and Fisheries (MAF) for greater details regarding the market access requirements for dairy and beef exports, which have proven problematic with some of the ASEAN members in past negotiations. GNZ officials remain reluctant to share details at this point in negotiations about nature and scope of market access issues/compromises. As was the practice during the China-NZ FTA discussions, NZ officials will be keeping the particulars a close hold until the official signing. ¶8. (SBU) Greater market access for NZ agriculture, meat and dairy exports ("ag sector") remain the paramount immediate goal of MFAT with the ASEAN countries accounting for 10% of New Zealand's current ag sector exports and which are continuing to grow rapidly. New Zealand's agricultural exports to Indonesia, its seventh largest agricultural market, were up 37% in 2007. Agricultural exports to the Philippines, New Zealand's eight largest market, were up 39% in 2007 and agricultural exports to Malaysia, New Zealand's twelfth largest market jumped 43% in 2007. New Zealand's agricultural exports to Thailand and Vietnam increased 16% and 49%, respectively, in 2007. Dairy products, beef and sheep meat products and food preparations are the leading exports to the region. Comment -------------- ¶9. (SBU) The AANZFTA provides NZ and Australia with the opportunity to achieve greater economic integration in the Asia-Pacific region. This asserted effort is driven in part by frustration resulting from the inconclusive Doha Round. NZ's attentions will most likely shift to advancing the cause of the P4 which would need to be of a higher trade liberalization standard than AANZFTA. With the signing of the AANZFTA scheduled for December 2008, New Zealand's political calendar includes getting past a general election expected in November and the political interests/priorities that will shape the new government. MCCORMICK