MULTILATERALISM, REGIONALISM, BILATERALISM – WHAT WILL BE THE ASIA-PACIFIC CONTEXT FOR NEW ZEALAND Presentation to Asia Forum Wellington, 27 May 2003 By Gary Hawke Chair, NZPECC, and Head of the School of Government, VUW

PECC six-monthly meeting of the PECC Standing Committee Washington DC, 22-4 April. six-monthly meeting of the PECC Standing Committee Washington DC, 22-4 April. Seminar of the PECC Trade Forum on Regional Trading Agreements Seminar of the PECC Trade Forum on Regional Trading Agreements inaugural meeting of the Asia-Pacific Council of the US, inaugural meeting of the Asia-Pacific Council of the US, major speeches from Secretary of State, Colin Powell, and USTR, Bob Zoellick. major speeches from Secretary of State, Colin Powell, and USTR, Bob Zoellick.

Fred Bergstrom IIE – APEC EPG - adviser to Administration. IIE – APEC EPG - adviser to Administration. Competitive liberalization. Competitive liberalization. RTAs and the multilateral process – complementary, mutually supporting and if properly managed, catalytic. RTAs and the multilateral process – complementary, mutually supporting and if properly managed, catalytic. Doha and FTAA are now on a timetable that ends in May 2007 – RTAs provide main action in meantime Doha and FTAA are now on a timetable that ends in May 2007 – RTAs provide main action in meantime

Fred Bergstrom cont. East Asian RTAs driven less by co-operation than by conflict between Japan and China. less likely to proceed to multilateralisation? East Asian RTAs driven less by co-operation than by conflict between Japan and China. less likely to proceed to multilateralisation? RTAs as the 4th attempt to find a strategy to implement the Bogor Goals? RTAs as the 4th attempt to find a strategy to implement the Bogor Goals? On this analysis, the Asia-Pacific context for NZ will be reasonable pressure to co-operate in a WTO round but with a relaxed timetable until 2007, and a need to manage a process of RTAs designed to speed up and go beyond the multilateral process. On this analysis, the Asia-Pacific context for NZ will be reasonable pressure to co-operate in a WTO round but with a relaxed timetable until 2007, and a need to manage a process of RTAs designed to speed up and go beyond the multilateral process.

Robert Zoellick Background: Background: Administrations success with Chinas accession to the WTO while not unaware of problems, generally positive about its subsequent implementation Russia and Vietnam accession – on timetables they decide. Russia and Vietnam accession – on timetables they decide. focus in the multilateral area is on market access focus in the multilateral area is on market access regional priorities are FTAA, ASEAN, and the Middle East. regional priorities are FTAA, ASEAN, and the Middle East.

The bilateral agenda is The bilateral agenda is Singapore and Chile, where negotiated FTAs await submission to Congress, Central America, Morocco, South Africa and Australia. Zoellick knows the dangers of bilateralism, but is not willing to proceed in the WTO only when it is subject to veto by every member Zoellick knows the dangers of bilateralism, but is not willing to proceed in the WTO only when it is subject to veto by every member Whatever was the case in the 1980s trade policy now will not be decoupled from political goals Whatever was the case in the 1980s trade policy now will not be decoupled from political goals APEC has the interesting feature of involving business - it is a post Cold War economic institution APEC has the interesting feature of involving business - it is a post Cold War economic institution

Colin Powell an adviser to a president with a vision of a world at peace, using all the tools at his disposal for that purpose, drawing on the best possible advice all his advisers can provide, and making the decisions he has been elected to make. an adviser to a president with a vision of a world at peace, using all the tools at his disposal for that purpose, drawing on the best possible advice all his advisers can provide, and making the decisions he has been elected to make. Asia versus Europe? it is both diplomatic and true that both are important, but in the 21st century the correct answer is that all big issues are global. Asia versus Europe? it is both diplomatic and true that both are important, but in the 21st century the correct answer is that all big issues are global. The Asia Pacific Region acknowledged as having participated in the war on terrorism, in finance, travel, intelligence, and agreements in APEC. The Asia Pacific Region acknowledged as having participated in the war on terrorism, in finance, travel, intelligence, and agreements in APEC.

Colin Powell cont. There is no reduced US commitment to the Region, including Korea and China Powell is impressed by Chinas willingness to assist on Korea and reflected on how far the relationship has changed since the Hainan Island incident. There is no reduced US commitment to the Region, including Korea and China Powell is impressed by Chinas willingness to assist on Korea and reflected on how far the relationship has changed since the Hainan Island incident. Differences of Perspectives to be mediated, but New Zealands problem is that it is seen to deny the morality of the US vision. Differences of Perspectives to be mediated, but New Zealands problem is that it is seen to deny the morality of the US vision.

RTAs Does their liberalizing effect for members outweigh the damage they do to the multilateral system? Does their liberalizing effect for members outweigh the damage they do to the multilateral system? pragmatism versus principle? proponents of liberalisation will use RTAs pragmatism versus principle? proponents of liberalisation will use RTAs

RTAs cont. Assessments of 38 agreements. mostly promote welfare of the members, especially small members mostly promote welfare of the members, especially small members expansion to new members usually benefits existing members (but may not when enlargement is outweighed by dilution of preferences as could happen for Canada and Mexico) expansion to new members usually benefits existing members (but may not when enlargement is outweighed by dilution of preferences as could happen for Canada and Mexico) ins gain while outs lose, which is especially concerning for Australia, New Zealand and Taiwan in relation to East Asia, and ins gain while outs lose, which is especially concerning for Australia, New Zealand and Taiwan in relation to East Asia, and it is possible that there are positive effects from new age elements of RTAs and from productivity growth. it is possible that there are positive effects from new age elements of RTAs and from productivity growth.

RTAs cont. Rules of Origin – impact exaggerated? Main danger may be use as protectionist instrument. Rules of Origin – impact exaggerated? Main danger may be use as protectionist instrument. Diversion – including investment and more generally through information flows – the international economy worth considering may come to be those economies which have the stamp of approval of an RTA. Diversion – including investment and more generally through information flows – the international economy worth considering may come to be those economies which have the stamp of approval of an RTA.

Preferentialism and Reciprocity RTAs, not FTAs – politicians can fool themselves and others with language – RTAs, not FTAs – politicians can fool themselves and others with language – How important are they? Tariffs – WTO process. Peaks, and cascades. Access for services, conditions of investment. NZ and US-Aust. How important are they? Tariffs – WTO process. Peaks, and cascades. Access for services, conditions of investment. NZ and US-Aust. Case for free trade. World income is maximised when there are as few constraints as possible on the allocation of resources to their most productive use. National boundaries are constraints on the allocation of resources and therefore world income is maximised by minimising the effect of national boundaries Case for free trade. World income is maximised when there are as few constraints as possible on the allocation of resources to their most productive use. National boundaries are constraints on the allocation of resources and therefore world income is maximised by minimising the effect of national boundaries

So why RTAs? -slow pace of WTO -anxiety about markets and desire for assurance of political control So why RTAs? -slow pace of WTO -anxiety about markets and desire for assurance of political control APEC and Alcoholics Anonymous APEC and Alcoholics Anonymous

APEC Failure? Failure? Cf GATT in 1961 Cf GATT in 1961 Politics of APEC – meetings of leaders. But still real economic significance. Politics of APEC – meetings of leaders. But still real economic significance. Economic integration, not reciprocal exchange of concessions among national economies.

Business and economic policy more mature understanding of relations between business and governments? more mature understanding of relations between business and governments? Lobbying, but mere access to powerful office-holders will often not be the best way to influence policy decisions. Lobbying, but mere access to powerful office-holders will often not be the best way to influence policy decisions.

Business and economic policy cont. The intellectual effort of developing knowledge and considering how to use collective decisions to benefit communities is an essential component of influencing policy. The intellectual effort of developing knowledge and considering how to use collective decisions to benefit communities is an essential component of influencing policy. So is capacity to engage in the economic integration which provides business opportunity. Economic and technical co- operation is not a concession but a central element of economic integration. So is capacity to engage in the economic integration which provides business opportunity. Economic and technical co- operation is not a concession but a central element of economic integration.

The main story US political system, US policy vision – key to the Asia Pacific context US political system, US policy vision – key to the Asia Pacific context Context will be slow progress of WTO to 2007, action on regional and bilateral front which could be either beneficial or disastrous for the world economy and for New Zealand. Context will be slow progress of WTO to 2007, action on regional and bilateral front which could be either beneficial or disastrous for the world economy and for New Zealand. Main game remains economic integration. Main game remains economic integration. For which APEC and therefore PECC remains important. International economic policy requires mutual understanding of business, community and government. There should not be a gold rush to any particular RTA For which APEC and therefore PECC remains important. International economic policy requires mutual understanding of business, community and government. There should not be a gold rush to any particular RTA