Speech by John Adank, NZ

SPEECH NOTES FOR JOHN ADANK, NZ PERMANENT REPRESENTATIVE TO
THE WTO (GENEVA)
FOR ANZMEX SEMINAR “TRADING WITH ASIA”,
MEXICO CITY, 17 APRIL 2012
� Thank you for the opportunity to talk today about New Zealand’s trading
relationship with the Asia-Pacific region and the positive impact of our free
trade negotiations on our economic links across the Asia-Pacific region.
� Mexico and New Zealand are of course not only both part of the Asia-Pacific
region but are also direct neighbours across the Pacific. Mexico’s Pacific
Coast is just as close to New Zealand as its Atlantic Coast is to Europe.
� And In the last twenty or more years, in addition to our cooperation in the
WTO, we have both been involved in a range of FTA initiatives.
� New Zealand is, however, further ahead than Mexico in developing
relationships with our Asian neighbours, and our experience in this area which
I’ll talk about today is useful to consider as Mexico seeks to broaden its own
links into the region.
� First, a few facts about Asia and why it has increasingly figured so highly on
New Zealand’s economic agenda:
o Importantly, Asia is a diverse region – it is not homogeneous. There
are huge geographic, economic, political, social and religious
differences across the region. This makes for considerable dynamism.
o Asia - including the world’s most populous nations of India and China -
has a combined population of more than 3.8 billion - over half of the
world’s population.
o Asia has led the world in economic growth in the past 20 years. The
region is expected to contribute 43% of the world’s economic growth by
2020. By 2030 China and India are projected to be the world's largest
and third largest economies, jointly accounting for about 35 per cent of
global population.
o Asian G20 members include China, India, Japan, South Korea and
Indonesia.
o Asia’s average life expectancy is rising as are levels of education and
wealth.
o China is set to become the world’s second biggest consumer market,
and India will be rivalling the bigger European markets by 2020.

o Asia’s vast and increasingly wealthy customer base is shaping the
region into a centre of innovation and influence upon consumer trends.
� This is why Asia is fundamentally important to NZ’s economic wellbeing. Asia
accounted for more than 41% of our total two-way trade in the 2009 calendar
year. Six of our current top 10 trading partners are in Asia. In sum, Asia
looms very large on NZ’s horizon strategically, economically, socially, and
culturally. And I should just note here that based on recent survey findings,
NZers seem to be increasingly conscious of just how important Asia is to our
future prosperity. This includes a finding that 4 out of 5 NZers believe that
Asian migrants contribute significantly to the country and bring valuable
cultural diversity.
� Yet for many decades NZ’s geographical location on the rim of the Asia-
Pacific region was seen as a major strategic disadvantage. Particularly in
this 21st century, it has become a major strategic advantage. For example,
New Zealand is located halfway between Latin America and Asia and can
provide a useful gateway into the Asian market for some Latin American
businesses, as well as travellers.
� Let me now explain how New Zealand has strategically sought to create a
template for Asia Pacific trade and investment integration over the last ten
years. And to tell you about some of the results of that vision.
ANZ Trade integration
� The beginning of this story starts with Australia. NZ’s closest and broadest
trading relationship is naturally with Australia. These days we take this for
granted. But it’s important to remind ourselves of just how long it took for the
two Trans-Tasman neighbours to recognise the value of free trade.
� Some of you might be surprised to hear that the first ever trade agreement
utilising the NAFTA acronym was in fact the “New Zealand Australia Free
trade Agreement” concluded in 1965, at a time when NZ in trade terms was
very much Britain’s farm in the South Pacific.
� This antipodean NAFTA was an attempt to promote diversification of our trade
profile. Sadly, it was not a great success, having only a modest impact on
trade given the highly complex and only limited trade liberalising aspects of
the agreement.
� But we learned a number of lessons from this, and the subsequent ANZ
Closer Economic Relations Agreement (CER) concluded in 1983 has
proved to be a stellar success. At the time of signature it was considered the
most comprehensive economic partnership agreement in the world. Free
trade in goods between Australia and New Zealand was achieved in 1990 and
we are now working towards the long term vision of creating a seamless
trans-Tasman economy – known as the Single Economic Market agenda. The
success of CER has served to reinforce New Zealand’s commitment to high
quality, comprehensive free trade agreements and win/win scenarios.

� The closer integration of the ANZ economies was an important pre-requisite
to the wider ANZ push into Asia. This took some time to commence,
however, and for over a decade and a half after the conclusion of CER neither
we nor Australia concluded substantive FTAs with Asian countries. During
this period of course Mexico was very much preoccupied with the FTA
arrangements in its own immediate neighbourhood under NAFTA. So we had
to play catch-up.
ANZ Integration with ASEAN
� But we eventually began this process. And the beginning of all of this was the
decision taken by Singapore and New Zealand to negotiate an FTA – called a
Closer Economic partnership - which was concluded in 2001. It’s fair to say
that some wondered at the time what was the point of this given that both NZ
and Singapore were very open economies with very few real trade barriers.
� But the strategic significant of this initiative should not be underestimated. For
it provided the first step in what would eventually see the deeper integration of
the ANZ CER relationship with ASEAN through the conclusion of a number of
additional bilateral and plurilateral agreements involving ASEAN members.
This includes in NZ’s case not only bilateral agreements with Thailand (2004)
and Malaysia (2010) but also the Pacific-4 Agreement involving NZ, Brunei,
Singapore as well as Chile (2005).
� The most concrete manifestation of CER/ASEAN trade integration is the
ASEAN-Australia-NZ-FTA (AANZFTA) concluded in 2010. This
Agreement extends the original building block of the CER with Australia to
include the 10 economies in South East Asia (ASEAN).
� Collectively, ASEAN is now NZ's third-largest export market for merchandise
goods; one in every eight export dollars is earned in ASEAN; one in five of
New Zealand dairy export dollars earned is in ASEAN. And this is going to
get better as the FTA means within 12 years 99% of NZ's current trade with
Indonesia, Malaysia, the Philippines and Viet Nam will be duty free.
� For NZ businesses operating in these markets this is a major advancement in
terms of their market access into these major and growing markets. But
AANZFTA does more than simply address tariff lines for merchandise trade.
One of its key strengths is its comprehensiveness, in that it covers services,
investment and other areas.
� AANZFTA is now firmly established as one of the key building blocks for the
promotion of closer regional economic integration.
� But there are a number of other initiatives that NZ has pursued with other key
Asian economies well beyond our cooperation with ASEAN.
NZ/China FTA

� The New Zealand-China FTA has been a great success for both parties.
Here are just a few examples of what having an FTA with China has meant for
New Zealand:
o Since the FTA entered into force in October 2008, New Zealand’s trade
with China has increased by more than 50 per cent.
o China is New Zealand’s second largest trading partner (NZ$12.9
billion) and in 2011 became our largest source of imports – overtaking
Australia for the first time. Exports have tripled in the three years since
the China FTA entered into force in October 2008.
o Total merchandise trade with China is growing faster than for any of
our other major trading partners and is on track to double to NZ$20
billion by 2015.
o We now trade with China in less than five hours what we traded with
China in a year back in 1972 when New Zealand established
diplomatic relations with China.
o Growth in trade with China has helped NZ offset the worst effects of
the global economic recession.
� The FTA is an excellent example of a high quality, 21st century agreement.
Our two-year review of the FTA reiterated its relevance to both economies
and our commitment to continual improvement in our bilateral trade
structures.
� It is complemented by a genuine Closer Economic Partnership between
New Zealand and Hong Kong which was signed in March 2010.
� Although China is New Zealand’s 2 nd largest trading partner, we are only
China’s 52 nd trading partner. But China recognises NZ for the so-called “Four
Firsts”. New Zealand was the first nation to support China's accession to the
WTO; the first to formally recognize China as a market economy; and the first
to commence, then complete, free trade negotiations with China. NZ’s
willingness to be a pioneer in these areas has been clearly appreciated by
China and contributed to the considerable goodwill at the heart of the trade
relationship.
Our Longer Term Vision
� The Agreements concluded to date represent in our view important building
blocks towards our longer term vision which is to address the complex
network of free trade agreements spanning the Asia-Pacific – the so-called
“noodle bowl” of overlapping and sometimes contradictory regimes.
� New Zealand and Mexico work together in APEC – and this network has done
some valuable work in untangling the noodle bowl. In fact it was APEC
leaders that first endorsed the long term goal of a Free Trade Area for the
Asia Pacific.

� There are also other integration proposals in the Asia region. The East Asia
Summit has agreed to look at the prospects for a Comprehensive Economic
Partnership in East Asia (CEPEA) – the ASEAN + 6 which would involve the
ten ASEAN countries, plus the three north Asian economies of China, Korea
and Japan, as well as Australia, New Zealand and India.
� These are bold concepts which are proceeding steadily and incrementally,
through technical work, although no political decisions have yet been taken
on how to translate these concepts into a mandate for an actual trade
negotiation.
� These efforts are all important responses to the realities of global and regional
trade and investment patterns. There is a sense that each of our economies
needs to move forward on the trade agenda where it can, especially given
that we are stuck at the WTO level.
� For all of these reasons New Zealand is an enthusiastic supporter of the
various regional economic integration initiatives under way. Importantly, we
see these as complementary - as potential pathways towards the same
ultimate strategic objective of free trade across the Asia Pacific region.
TPP
� And that brings me to – the Trans Pacific Partnership – which I know, now,
is a key focus for Mexico.
� When the Pacific 4 negotiations (between Chile, New Zealand, Brunei and
Singapore) finished in 2005, its parties agreed to begin negotiating on
financial services and investment within two years of its entry into force. This
P-4 Agreement was a significant one again strategically, as it encompassed
countries from within CER, ASEAN and Latin America.
� It opened people’s minds up to a vision of a broader based negotiation from
across these sub regions and into others. Hence, soon after the revised P-4
negotiations began in 2008 the United States announced it wanted to
participate fully in the negotiations, and Australia, Peru, and Viet Nam
followed suit. And this gave birth to the TPP process.
� In November 2009, President Barack Obama said that the United States
would engage with TPP countries "with the goal of shaping a regional
agreement that will have broad-based membership and the high standards
worthy of a 21st century trade agreement".
� Negotiations for an expanded agreement began in March 2010 and later that
year Malaysia joined the negotiations. TPP now involves a total of nine
APEC economies.
� At the APEC Leaders’ Meeting in Honolulu last November, the nine APEC
members involved in TPP were able to take some important decisions to
consolidate politically the TPP negotiations.

� Trade Ministers defined the broad outlines of a deal and this was endorsed by
Leaders. It represents the base from which the negotiations will proceed.
� There is a lot of difficult work still to do in order to overcome the sensitivities in
the negotiation, but the broad outlines agreed in Honolulu are an important
milestone in that process.
� As we enter this more intensive phase of the negotiations, every participating
economy has committed to delivering a high quality, comprehensive outcome
in TPP.
� At the Honolulu meeting, Leaders also directed negotiators to finalise the TPP
agreement this year. That is an ambitious timetable, but nonetheless one to
which the group is working to deliver on.
� The eleventh negotiating round took place in March in Melbourne, Australia.
Subsequent rounds will be held at six to eight week intervals during the year.
Many of the individual working groups have also been meeting
intersessionally in order to maintain the momentum.
� While we are aiming for a 21 st century trade agreement – there remain some
outstanding issues from the 2oth century trade agenda. It is important to
appreciate therefore the commitment in the TPP Trade Ministers’ Report
(endorsed by Leaders in Honolulu) to eliminate tariffs and other barriers to
trade, with the goal of “comprehensive duty free access to each other’s goods
markets”.
� All of the TPP negotiators understand that this will not be easy. This is the
political challenge facing TPP members. WTO-consistent transitional
arrangements will be necessary.
� With respect to the sensitive agriculture sector, it may well take a decade to
allow for gradual and progressive liberalisation. But “elimination” of tariffs is
the aim.
� I wanted to comment here on New Zealand’s dairy objectives in the TPP and
related contexts, which we know is a topic of interest to the agriculture sector
here in Mexico.
� There are a number of realities about this which are not well understood:
New Zealand is a small producer of dairy products. We produce only 2.5 per
cent of world milk, which is equivalent to the same amount that the Indian
state of Uttar Pradesh produces. There is scope to increase production. Our
exports could therefore increase by around 2-3 per cent per annum. Based
on these projections, New Zealand could produce another 4 to 7 million
tonnes of wholemilk equivalent by 2025.
� But that increase in production is far outstripped by the projected growth in
demand for milk – especially from the likes of China and India. New Zealand
will not be flooding TPP dairy markets. There is a great future for all dairy

producers. (And New Zealand has a lot of technological expertise to share in
this sector. We have a long history of agri-business innovation).
� Returning to the ambition of TPP, the TPP Trade Ministers Report commits
each TPP member to establishing a single schedule – a technical term used
to describe legal commitments to open markets to imports – for all the other
TPP partner countries.
� The report also states there will be common rules of origin in TPP that will
make it easier for businesses to take advantage of the agreement as well as
encourage the use of TPP inputs.
� Recent OECD research has shown that 56 per cent of overall goods trade
flows are in intermediate products, i.e. parts or components that are traded
across national borders before becoming part of a final traded product. (A
recent report on US/Mexico trade under NAFTA illustrates this point. The
study, entitled Working Together: Economic Ties between the US and Mexico,
by Christopher E Wilson of the Woodrow Wilson International Center for
Scholars, informs us that a full 40% of the content of US imports from Mexico
is actually produced in the United States)
The new nature of trade – Global and Regional Supply Chains
� To be globally competitive, businesses need to lower operating costs and to
be close to their markets and customers. The old concept of selling vertically
integrated products manufactured in one country is outdated. There are huge
productivity gains from this intra-industry trade leading to global supply chains
which now dominate world trade.
� We already have examples of New Zealand firms setting up plants in Mexico
for this very reason, and I’m sure there will be more in the future. Two
companies, Fisher and Paykel Healthcare and Fisher and Paykel Appliances,
have established factories in the north of Mexico, which sell primarily to the
US market. Another company, Avohealth, is currently establishing a plant in
Jalisco, with a Mexican partner, to produce avocado oil for export.
� This increased economic interdependency and complex production and
distribution patterns requires clear and coherent rules for trade and
investment. The TPP negotiation is addressing this challenge.
� This includes examining “behind the border” issues such as regulatory and
non-tariff barriers that pose major hurdles for businesses in the 21 st century.
� Maintaining and enforcing this complex array of regulations is costly and
resource-consuming and increasingly there is a need to harmonise standards
and regulatory requirements to facilitate trade.

� This should allow businesses to operate in a competitive, innovative
environment with low compliance costs. This is a key objective for TPP.
Mexico’s interest in TPP
� So that is the TPP story so far, and what I hope it illustrates is how TPP did
not just happen overnight but evolved from a range of earlier “building block”
initiatives that New Zealand negotiators and other partners have pursued
doggedly over the last ten years.
� But a discussion of TPP here today would of course not be complete without
noting also the interest expressed by Mexico in joining TPP which New
Zealand has welcomed.
� Mexico – as well as Japan and Canada – have begun the process of
engaging with the TPP members. It is not a straightforward process. Any
decision on new members will need to be made by Ministerial consensus
among the nine members of TPP. Before that, each of the three interested
countries needs to complete a process of bilateral consultations with each of
the nine current TPP members.
� For New Zealand’s part, we have told each of the three that we are keen to
ensure that any expansion of membership does not result in a dilution of the
high quality objectives expressed by TPP Leaders and Trade Ministers at
APEC. Essentially any new member needs to commit to that vision.
� This is especially important in reference to comprehensive market access
through the elimination of tariffs and other non-tariff barriers to trade in goods
and services. We will need to see clear commitment in this respect.
� We are also keen to ensure that there is no slow-down in the pace of
negotiations.
� New Zealand stakeholders have been consulted about expanding the
membership of TPP and agree with this. Companies trading with Mexico,
Canada and Japan highlighted the advantages to their trade and economic
objectives of bringing those partners into the negotiations, provided that there
is no dilution of the current ambition as regards scope and timeline for the
negotiations.
� As regards Mexico specifically, our two countries have both long been
committed to seeking ways of promoting greater trade and economic links,
and indeed there has been progress over the years in increasing our
economic relationship: but there is potential for much more.
� Our economies are complementary and, as I’ve pointed out, we’re both
partners in the broader Asia-Pacific community. Both governments have in the

Conclusion
past carried out studies on the feasibility of a bilateral FTA, but current
regional dynamics and particularly the evolution of the TPP point to another
route that, sooner or later, will bring our economies closer together and
enhance opportunities for both of us.
� In conclusion, I have outlined the evolution of a model for economic
integration across the Asia Pacific, culminating in the current TPP negotiation.
This is an ambitious undertaking – both in terms of content and pace – and
will, no doubt, require some hard political and economic challenges as
regional integration advances. Mexico remains a key partner in the
Asia/Pacific and we are keen to deepen our conversation with Mexico on how
we can expand cooperation across our shared neighbourhood.