Murray Denyer Cooney Lees Morgan

Murray Denyer of Cooney Lees Morgan

The brace of free trade agreements (FTA) the Asian and Australasian regions have seen in recent months is continuing to grow, most recently with New Zealand and South Korea in roundtable discussions for a possible FTA, and the announcement the India-ASEAN FTA will be signed in August.

The rate of trade deals being put on the table has increased in recent years in Asia and Australasia – roughly 30 have been put into effect in the last six years, with more negotiated and yet to be enforced and still more on the discussion table.

To explain the rate of FTAs in the region, Fruitnet turned to Murray Denyer of New Zealand-based consultant Cooney Lees Morgan. Mr Denyer was a member of the New Zealand business delegation recently sent to Korea to discuss an agreement between the two nations, and has been involved in negotiations for New Zealand’s previous FTAs in the region.

What has spurred on the rate of free trade agreements in the region recently?

MD: Over the past five or so years, there has been a significant rise in the number of bilateral and regional/sub-regional FTAs in the Asia-Pacific region. In New Zealand’s case, FTAs have been completed with Singapore, ASEAN, Malaysia, China, and negotiations are underway with Korea.

In my view the reasons for the growth in proliferation of FTAs in the region are twofold. The first is slow progress in the World Trade Organisation (WTO): while most countries still believe the multilateral WTO track to be the best outcome, and continue to pour effort and resources into concluding the current round, they also want to continue to move forward on trade liberalisation, and are taking opportunities to do that through regional and bilateral FTAs.

Secondly, in response to emergence of other regional trade blocs: countries in our region are of course outside the established trade blocs of the EU and NAFTA, and excluded from the economic benefits generated within those agreements. As a result I believe the countries of our region have looked to gain trade liberalisation advantages through bilateral and regional arrangements within the Asian region so as to generate economic benefits for themselves, and also to counter the dominance that might otherwise emerge from the EU and North America.

APEC was something of a circuit-breaker in this regard, and in my view got countries in this region thinking more seriously about how they might liberalise trade in the region.

In the context of a global recession, what implications does widespread free trade have for Asia and Australasia?

MD: I think the implications are largely positive. Recourse to protectionism was what exacerbated the Great Depression last century. To the extent that FTAs limit the degree to which countries can move backwards from trade liberalisation by increasing tariffs, subsidies, or implementing non-tariff barriers, they will keep markets open for the export-oriented Asian/Australasian economies, and therefore limit the impact that the global recession has on our economies. More liberalised trade access is also likely to expedite the pace of recovery as the global economy turns the corner.

What are the big benefits fresh produce traders can get out of these kinds of deals?

MD: The major and most obvious benefits are improved market access from reduced border tariffs. Fresh produce, like any other agricultural goods, face some of the highest tariffs in international trade. It’s different for different fresh produce products and for different markets, but overall there are significant gains to be had.

Secondly there are benefits to be had from SPS provisions in the WTO, but also in regional/bilateral FTAs. While there are some real and practical shortcomings with SPS provisions in FTAs, they do at least establish mechanisms through which countries can have formal dialogue on SPS issues short of having to go to dispute settlement under the WTO.

Other areas of FTAs such as freeing up customs clearance procedures and documentation, foreign investment rules and trade in services can also be of benefit to exporters and marketers of fresh produce.

What role can the industry play compared to the role of government in FTA negotiations, and in particular the New Zealand-Korea negotiations you’re currently participating in? 

MD: FTA negotiations themselves are absolutely the domain of government officials and trade ministers, and are conducted very much behind closed doors. That said, to a varying degree all governments consult closely with representatives of their relevant export and import industries that are likely to be impacted (positively or negatively) by the FTA in question.

In the New Zealand-Korea FTA case, New Zealand’s key industries trading with Korea (dairy, meat, horticulture, forestry, energy, automotive and education) have been very active in coordinating and showing strong support for the negotiations.

We held a high level business-to-business roundtable discussion in Seoul 9-10 June to coincide with the first round of negotiations. The object of this was to raise the profile and the benefits of the FTA within the Korean business sector, to build support from within Korean business for the FTA, but also to demonstrate to the New Zealand government the degree of support for the deal from within the country’s business community. We each meet regularly with the government, and officials are well aware of our respective industry-specific interests in the negotiations.

Murray Denyer will be speaking on trade issues at this year’s Asiafruit Congress, which takes place in Hong Kong on 2-4 September 2009.