Good morning.

Charles has asked me to speak on some of the significant outcomes and developments in our trade agenda in recent months.  

I also want to outline to you why during the current economic crisis the Government remains fully committed to a proactive and energetic trade policy agenda. 

Trade has always been a key driver of New Zealand's economic growth, and thus a fundamental contributor to our prosperity and well-being.  

Recent research from the OECD now suggests that a ten per cent increase in trade is associated with a four per cent rise in per capita income, demonstrating a clear linkage between trade and overall prosperity.

Now, more than ever before, gaining and maintaining access to export markets is critical for New Zealand firms.

The Importance of the Multilateral System

Let me begin by restating our top trade priority - our commitment to achieving an outcome from the Doha Round of the WTO.

For a small, export-reliant country like New Zealand, the rules-based multilateral system is the only mechanism that allows us to address global trade barriers - such as agriculture subsidies - on a global basis. 

A Doha Round outcome, based on the texts currently on the table, would reform world agriculture, including setting new ceilings for domestic subsidies, eliminating export subsidies and reducing tariffs.

Such an outcome would clearly be of great benefit to New Zealand exporters. 

However, at this particular juncture, as we find ourselves in the midst of the greatest financial crisis since the Great Depression, the importance of the multilateral trading system for the international economy cannot be understated. 

This is feeding through to the real economy: the WTO has predicted that global trade flows will shrink by 9 per cent this year. This significant contraction in trade could be compounded further by protectionism measures which will impact on trade.

Here again, I believe that completing the Doha Round is our best hope of stimulating growth and reducing the threat of protectionism through trade.

A March 2009 World Bank publication noted that 47 trade restrictive measures have been imposed since the beginning of the global financial crisis, by 17 of the G20 members present at the November G20 Summit. 

Tariffs only account for a third of these, with Non-Tariff Measures and subsidies/support packages making up the balance.

We all stand to lose from protectionist measures which have an impact on trade and investment flows. 

WTO Director General Pascal Lamy, who was in New Zealand last month, has been intensifying the WTO's role in monitoring protectionism, and reminding members of need to comply with notification requirements. 

I welcome the Director General's efforts in this regard. 

However, it is also very important to make the point that protectionist measures through non-WTO compliant measures are only part of the protectionist threat.

The threat of protectionist measures needs to be considered in a far wider context than what is ‘legal' and what is not.

Informal estimates indicate that the gap between legally-binding bound tariff rates and the much lower tariff rates currently applied by most countries could, on average, be halved, significantly increasing tariff rates around the world without violating a single WTO law. 

There is, therefore, great scope to introduce what are essentially protectionist measures - and thus deepen the world trade crisis - without breaking WTO commitments. 

Breaches of the so-called "stand-still" principle that countries should not introduce new protectionist measures, a principle most recently re-stated by G20 Leaders, can lead to outcomes just as damaging to international trade as the introduction of non-WTO consistent measures. 

Conclusion of the Doha Round based on the current texts would significantly ameliorate this risk. 

It is therefore clear that a swift conclusion to the Doha Round is an essential part of the solution to the economic crisis.

We are not far away from achieving this. A so-called "landing-zone" is apparent.   We got agonizingly close last July. 

Completing agriculture and manufactured goods - or "NAMA" - modalities remains the key. 

Crawford Falconer, New Zealand's Special Ambassador to the WTO, and current chair of the Agricultural Committee, returns to New Zealand at the end of April, having done a superb job overall. His December draft negotiating text provides a strong basis for completion of the agriculture negotiations.

With the WTO, however, nothing is ever simple.  The pace of progress will depend on speed and nature of US re-engagement.

President Obama's Administration is under significant pressure from key industry interests and some within its own Party to review their approach to "free trade". 

A review is underway of its approach to the WTO and trade policy, but it is not clear how long that will take.

Until the US clarifies its position, and the upcoming elections in India have been completed, the Round will remain in a "comfortable deadlock". 

In the meantime, the economic crisis has muddied the waters in a dangerous way.  Some are now arguing strongly for revisiting the existing negotiating texts. 

If countries decide that they are unable to move forward on the basis of the December draft texts, the shock to the Round would be traumatic.  

It is very important that when the G20 meets in London in April it strongly endorses the current draft negotiating texts, and reiterates its commitment to rejecting trade protectionism and concluding the Doha Round as quickly as possible.

Our bilateral trade agenda

Driven partially by the reality that a Doha outcome will not deliver all the market access gains we would like and, secondly, our defensive concern that competitors might gain an advantage by beating us to their own bilateral deals, we are progressing an ambitious bilateral and regional trade agenda. 

The Asia Pacific region is a top priority for the Government in this context.

I have recently returned from Hua Hin in Thailand where I signed the ASEAN - Australia - New Zealand Free Trade Agreement.

This is a significant agreement that binds New Zealand into one of the world's most dynamic regions. In South East Asia, the ASEAN economies together represent total trade with the rest of the world of over US$1.4 trillion. 

A market of more than 575 million people, ASEAN is an increasingly important destination for New Zealand goods, service suppliers and outward investment.

ASEAN is now New Zealand's third largest export market for merchandise goods - worth NZ$4.6 billion in the year to June 2008.

Our exports have grown a staggering 121 percent since the year 2000 with seven of the ASEAN countries now featuring in New Zealand's list of top 30 bilateral trading partners.

I do not want to go into too much detail on this agreement today, but I would encourage you all to attend next week's seminar on the outcomes of the ASEAN FTA being held here in Wellington in conjunction with the Chambers of Commerce and a number of industry organisations.

What I will say however is that for New Zealand, this twelve country FTA creates significant new opportunities for exporters of goods and services and investors with our third largest export market.

Within twelve years, 99 percent of New Zealand's current trade with Indonesia, Malaysia, the Philippines and Viet Nam will be duty free.

The Agreement facilitates trade in goods and services by eliminating barriers, providing greater certainty and transparency, reducing associated transactions costs for New Zealand businesses wishing to operate in the ASEAN markets.

AANZFTA is also of significant strategic significance to New Zealand.  It represents an important building block in the growing East Asia trade and economic architecture and underscores our strategic commitment to greater regional integration.

New Zealand is strongly committed to being an integral part of a more highly integrated set of trade and economic arrangements in the Asia-Pacific, and we will do what we can to ensure that regional integration remains open and outward looking.

While AANZFTA represents the most ambitious and comprehensive FTA that  ASEAN has concluded to date, negotiating with so many diverse countries simultaneously means there remains scope for New Zealand to further broaden and deepen its economic relationships in the region through bilateral FTAs.

New Zealand is currently negotiating a high quality, comprehensive bilateral FTA with Malaysia, which will build on the AANZFTA platform to bring further commercially meaningful benefits to New Zealand goods and services traders and investors.  Negotiations are now in their closing phase.

Alongside the conclusion of the ASEAN FTA, 2009 has seen several promising announcements with new or renewed negotiations with Korea, India and Hong Kong.

Korea is another country with which we have made solid progress towards an FTA with.

Last month during the visit to New Zealand of the Korean President Lee Myung-bak and Prime Minister John Key were able to jointly announce the launch of negotiations.  The first round of negotiations is due to be held in early June in Seoul.

Korea is our sixth largest export market and an FTA is a goal that we have been working towards since 1999.

New Zealand exporters currently face substantial trade barriers in Korea.  New Zealand's fruit and vegetable growers, for example, pay more than NZ$34 million in tariffs to Korea - for kiwifruit the tariff costs each New Zealand grower approximately $8,000 per year. 

Tariffs on other important products such as meat and dairy can often be as high as 89 percent.

The FTA is also important to address the risk of trade diversion as a result of Korea's existing FTAs with Chile and ASEAN.  

Korea's agreement with the US, when ratified, will exacerbate this risk, as will the agreement Korea is about to conclude with the EU.

With a highly complementary trade relationship, an FTA with Korea offers real opportunities for New Zealand businesses, and I am very focused on working closely with my Korean counterpart to conclude this important negotiation quickly.

Last month, my Indian counterpart Kamal Nath and I announced the tabling of a joint study to investigate prospects for a free trade agreement between New Zealand and India.

We also agreed that, subject to the approval processes of our respective governments, bilateral FTA negotiations will commence as soon as possible.

This is a significant step in our relationship. I am confident that that the FTA negotiations will proceed later this year, regardless of the outcome of the upcoming Indian elections.

The joint study demonstrates the potential that exists to substantially develop New Zealand's trade and economic relationship with India. 

It also finds that trade between our two countries would be significantly enhanced by a free trade agreement.  An FTA would increase countries' real GDP, welfare and bilateral merchandise exports. 

The benefits to New Zealand would be greater given the size of the potential market in India.

And the size and potential of India is staggering.  With a population of over 1.1 billion, a middle class of over 250 million, and the 12^th largest economy in the world -it is much larger in terms of purchasing power parity - India is emerging as a regional and international economic superpower.

India's GDP growth has been predicted to remain higher than 8% until 2020 and some predict that India will become the world's second largest economy by 2050.

India is already our second fastest growing market - notwithstanding the prohibitive barriers faced by many of our traditional primary sector exports. 

Since 2002, bilateral merchandise trade between India and New Zealand has tripled from US$168 million to US$469 million, with an average growth rate of 23.5% per year.

However it remains an under-developed trading relationship but there is great potential for continued development with improved market access.

An FTA with India provides a clear foundation upon which our bilateral trade and economic relationship can rise to the next level.

I do not want to suggest that this will be a straightforward negotiation.  The reality is that it may end up being very difficult, and that we may have to settle in for the long-haul. 

However - and some officials will shake their heads when I say this - the astounding economic transformation that India is in the midst of means that we cannot automatically accept that this conventional view will end up becoming reality. 

After all, even five years ago few would have predicted that a comprehensive, high quality FTA with China would be possible.   

In India's case, the combined drivers of economic growth, and increased domestic demand, and the growing - though grudging - acceptance of a need for agriculture reform could create impetus for change in India's approach to FTA negotiations. 

I do not want to underplay in any way the domestic political sensitivities for India on agriculture.  They are real and deep. 

However, I think it will become increasingly clear to both sides that an enhanced agricultural relationship can mutually beneficial.  

New Zealand and India's agriculture sectors are highly complementary, due to countercyclical seasons and different target markets.  New Zealand produces very few of India's sensitive domestic crops - such as rice.

Furthermore, India confronts critical food security issues.  New Zealand can be an efficient and safe supplier of food for India, but is also too small to ‘flood' a market of India's size. 

New Zealand's agricultural technology and "know-how" could play a major role in reform of the Indian agriculture sector. 

Hong Kong

New Zealand first entered CEP negotiations with Hong Kong in 2001 but negotiations were suspended after five rounds in late 2002.

Following informal discussion both Parties are now confident that it will be possible to find a way through the difficulties which led to that suspension.

Preparatory talks were held in Hong Kong this month, with a view to resuming negotiations in early May.

Hong Kong is the world's 12^th largest trading economy and is a key services and investment hub for North Asia.  It is also the second largest source of Foreign Direct Investment (FDI) in Asia.

More secure and open access to the Hong Kong market will place New Zealand in a good strategic position to capitalise on new trade and investment opportunities in this region, including into China. 

Hong Kong currently maintains zero tariffs on all imports, so there are no immediate commercial gains from tariff elimination.  Importantly, however, a Closer Economic Partnership would lock this position in for us.  

There are also good potential opportunities for us in Hong Kong in areas such as services, investment, non-tariff barriers and government procurement.

While we have a full and challenging bilateral FTA agenda before us, we are also continuing to work concurrently on our plurilateral FTA negotiations.

Our negotiations with the Gulf Cooperation Council are proceeding well.  

And, as you are all aware, we are eagerly awaiting the commencement of the Trans-Pacific negotiations that will extend the P4 Agreement beyond the current four Parties - Brunei Darussalam, Chile, New Zealand and Singapore.

The United States has requested that the first meeting between the eight negotiating partners be postponed so that the new Administration would have time to get trade officials in place and give some thought to US trade policy and priorities.

I understand the reasons for the delay and am confident that the United States will confirm its participation before too long. 

An FTA with the United States has been a top trade policy goal for New Zealand for many years. The United States is the world's largest economy, with over 300 million consumers.

The expansion of the existing agreement to include the US offers New Zealand a good opportunity to achieve free trade and stronger investment flows with the United States.

The Trans-Pacific negotiation also gives New Zealand an opportunity to help shape future trade arrangements in the wider Asia-Pacific region. As we move toward the goal of fuller economic integration in the region we want to preserve the high-quality benchmarks set by the original P4 agreement.

Having new participants in the Trans-Pacific agreement - not just the United States, but Australia, Peru and Viet Nam - will help to generate momentum in the moves towards achieving the goal of greater economic integration in the region.