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### Viewing cable 08WELLINGTON180, NEW ZEALAND SEEKS FREE TRADE AGREEMENTS WITH JAPAN, SOUTH

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
08WELLINGTON180 | 2008-06-09 04:37 | 2011-04-28 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Wellington

`

    VZCZCXRO4133
    RR RUEHAG RUEHCHI RUEHDF RUEHFK RUEHHM RUEHIK RUEHKSO RUEHLZ RUEHNAG
    RUEHPB RUEHRN RUEHROV
    DE RUEHWL #0180/01 1610437
    ZNR UUUUU ZZH
    R 090437Z JUN 08
    FM AMEMBASSY WELLINGTON
    TO RUEHC/SECSTATE WASHDC 5263
    INFO RUEHNZ/AMCONSUL AUCKLAND 1678
    RUEHBY/AMEMBASSY CANBERRA 5185
    RUEHKO/AMEMBASSY TOKYO 0711
    RUEHUL/AMEMBASSY SEOUL 0300
    RUEHNE/AMEMBASSY NEW DELHI 0168
    RUEHDN/AMCONSUL SYDNEY 0683
    RHHMUNA/CDR USPACOM HONOLULU HI
    RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
    RUEHSS/OECD POSTS COLLECTIVE
    RUCPDOC/USDOC WASHDC 0233
    RUEATRS/DEPT OF TREASURY WASHDC
    RUEHRC/DEPT OF AGRICULTURE WASHDC
    RUCNMEM/EU MEMBER STATES COLLECTIVE

` `

    UNCLAS SECTION 01 OF 03 WELLINGTON 000180

    SENSITIVE
    SIPDIS

    STATE FOR EAP/ANP, EB, INR, STATE PASS TO USTR, PACOM FOR
    J01E/J2/J233/J5/SJFHQ, STATE PASS TO USTR

    E.O. 12958: N/A
    TAGS: ECON ETRD PGOV PREL NZ
    SUBJECT: NEW ZEALAND SEEKS FREE TRADE AGREEMENTS WITH JAPAN, SOUTH
    KOREA AND INDIA

    Ref A) WELLINGTON 121

    WELLINGTON 00000180  001.2 OF 003

    ¶1.  (SBU) Summary. In what has been predicted to be her last
    official overseas trade mission as Prime Minister ahead of the
    upcoming general election, Helen Clark traveled last month to Japan
    and South Korea to discuss securing free trade agreements (FTAs)
    with both countries.  The timing of Clark's visit - just weeks after
    signing the NZ-China FTA (Reftel) in Beijing and just one week after
    President Hu Jintao's first official visit to Tokyo - was intended
    to strengthen New Zealand's hand in broadening its trade relations
    with other major Asian economies in advance of the East Asian Summit
    and to reinforce the Labour Party's trade credentials.  Shortly
    after the PM's return, Trade Minister Phil Goff announced that
    "strong progress" is also being made towards a free trade agreement
    with India after talks held with Indian Commerce Minister Kamal Nath
    at the end of May.  End summary.

    Trade Mission to Japan
    ----------------------

    ¶2.  (U) PM Clark met Japanese Prime Minister Yasuo Fukuda and senior
    members of the Japanese Cabinet on May 14 in Tokyo with the goal of
    advancing closer bilateral and regional co-operation.  Clark secured
    a commitment from the Japanese Government to undertake a study of
    the benefits of a free-trade agreement between both countries.  The
    commitment by Japanese PM Fukuda comes in stark contrast to fears
    that protectionist Japan would never consider such a prospect.  It
    is understood by commentators that the Japanese Government was
    persuaded by Clark's suggestions that a deal with New Zealand could
    help secure supplies of quality food to Japan as a world food crisis
    looms.  Prior to leaving, Helen Clark said Japan remained the
    world's second largest economy - taking almost twice as many New
    Zealand exports as China - and a deal would provide huge benefits to
    New Zealand's economy.  "No one is saying the road forward is quick
    and simple, but we've never been able to get that started before and
    in trade policy terms it is very exciting," exclaimed Clark.

    ¶3.  (U) Today New Zealand goods enjoy a somewhat higher profile in
    Japan than they have in the past.  Japan is New Zealand's
    third-largest export market and two-way trade now amounts to NZ$7.3
    billion which has grown from around NZ$2.6 billion back in 1984 and
    New Zealand sends 15 per cent of its exports to Japan, almost three
    times the amount currently sent to China.  Aside from key
    agricultural goods, other exports from New Zealand include aluminum,
    forestry products and meat.  Japan's main exports to New Zealand are
    cars, precision machinery and electronics.  Despite this growth, the
    prospects for greater trade access to the Japanese market remain
    somewhat difficult with contentious issues on remaining on both
    sides.  New Zealanders are apt to have concerns over Japan's whaling
    policies while Japanese farmers are not likely to welcome increased
    competition from New Zealand's agricultural exports.

    ¶4.  (U) Anticipating possible negative reaction by domestic press in
    NZ that closer economic links with Japan would come with political
    costs, Clark preemptively raised the whaling issue with Mr. Fukuda,
    stating New Zealand's opposition to Japan's "scientific whaling
    program" in the Southern Ocean remains.  She had a more detailed
    private discussion on the issue with Japan's chief Cabinet Secretary
    Nobutaka Machimura - the equivalent of New Zealand's Deputy Prime
    Minister.  Mr. Machimura reportedly said the Japanese Government
    would be bringing together all the ministers with some input into
    whaling before June's International Whaling Commission meeting in
    Chile to assess its position.

    ¶5. (SBU) Japanese protectionist sentiment may prove more difficult
    for New Zealand trade negotiators to overcome. The current state of
    FTA negotiations between Australia and Japan have come to a
    standstill in the fourth round on such key products as wheat, beef,
    dairy, sugar and rice concessions.  In the hope of softening similar
    Japanese resistance to increased NZ imports, New Zealand business
    leaders are exploring mechanisms to better strengthen their
    relationship with top Japanese business people, politicians and
    officials through the newly created Japan-New Zealand Partnership
    Forum whose motto is "New Thinking - New Partnership."  Furthermore,
    New Zealand Business and Industry Federation (NZBIF) chairman Graeme

    WELLINGTON 00000180  002.2 OF 003

    Harrison, who also chairs Anzco Foods, confronted the claimed New
    Zealand threat to Japan's agriculture at celebrations to mark the
    50th anniversary of a Treaty of Commerce signed between the two
    countries.  Said Harrison, "I know that some in Japan perceive NZ's
    agriculture as a threat but in reality our production systems are
    complementary and NZ plays a key role in ensuring food security and
    sustainable supply for Japanese consumers all year round."  (Note:
    The NZBIF's brief is to maximize New Zealand's global competitive
    position and ensure NZ enterprises are fully integrated in the
    global economy.  End note.)

    Trade Mission to South Korea
    ----------------------------

    ¶6.  (U) PM Clark's delegation continued on to South Korea, where she
    met with newly-elected President Lee Myung-bak and senior Cabinet
    ministers on May 16.  Ahead of her talks with President Lee, Clark
    spoke to a joint Korea, New Zealand, and Australia business function
    and met Korea's Minister for Tourism and Culture.  Two-way trade
    between New Zealand and Korea is worth more than NZ$2.4 billion a
    year.  Korea is New Zealand's sixth-largest export market; importing
    NZ$1.33 billion of goods and services from NZ in 2007.  However,
    Korea has trade barriers hampering NZ exports with an average
    agriculture tariff rate of 52 percent.  A study into the benefits of
    a possible FTA between the two countries found such an agreement
    would be worth NZ$4.5 billion to New Zealand over 20 years.  New
    Zealand and Korea have already completed a trade study and Clark
    said, "negotiations were now a question of not if but when."

    ¶7.  (U) Clark would not give a likely start date for negotiations,
    but said going by Korea's successful track record with Chile and the
    United States, once negotiations started they could move quickly.
    Trade Minister Phil Goff, who accompanied Clark on the Japan leg of
    the trip, said "free trade negotiations with Korea were now looking
    likely in the near future - we are moving in a very positive
    direction with Korea and I think it's now a matter of timing rather
    than if we have a free trade agreement."  Goff did proffer that the
    timing would not be dealt with until later in the year, after the
    Korean parliament had ratified its free trade deal with the United
    States.  In their closing declaration, Clark and Lee said they had
    also discussed ways to expand investment between the two countries,
    as well as greater co-operation in education, science and
    technology, agriculture and the film industry.

    Possible NZ-India FTA
    ---------------------

    ¶8.  (U) Briefing a group of Indian business representatives in
    Auckland on his recent visit to New Zealand, India's Commerce and
    Industry Minister Kamal Nath said that both countries are completing
    a feasibility study and developing a time frame to begin
    negotiations on an India-New Zealand free trade agreement by the end
    of 2008.  He said there was scope for greater cooperation in a
    number of areas, including education, telecommunications,
    biotechnology and information technology.  Commenting on the
    progress towards a bilateral FTA, New Zealand Trade Minister Phil
    Goff said, "with food shortages in key commodity areas like dairy
    around the world, including in India, now is a good time to address
    how we can cooperate more in trade in these areas."  The present
    bilateral trade is NZ$630 million between New Zealand and India, but
    "there is a large untapped potential for increasing it," said Goff.
    He further declared, "there were still tariff and technical barriers
    for New Zealand agriculture products in India including sanitary and
    phyto-sanitary restrictions, besides the customs/tariff barriers."

    New Zealand Fears Regional Exclusion
    ------------------------------------

    ¶9.  (U) The unspoken behind-the-scene story to Clark's Japan and
    Korea trip is a growing concern that New Zealand is being left out
    of a historic regional integration process.  The number of FTAs in
    the East Asia region has dramatically increased over the last four
    years.  According to some estimates, there are now 20 major trade
    agreements in action in the East Asian area and at least another 35
    under negotiation.  Talk of superseding these bilateral agreements

    WELLINGTON 00000180  003.2 OF 003

    with a massive multilateral trade pact covering the entire East
    Asian area has been mentioned.  Japan is proposing at the
    nongovernmental level that Australia, New Zealand, and India be
    included in any such zone but some other Asian nations are reported
    to oppose the idea.  Clark has stated her support for the Japanese
    position in the past and reiterated it when she met her Japanese and
    Korean counterparts.

    ¶10.  (SBU) There is a risk that New Zealand (along with Australia
    and India) will not be invited to join the proposed major Asian
    trading pact irrespective of Japan's initiatives to widen it to
    include the trio of nations.  To combat the threat of exclusion, New
    Zealand has focused mainly on advancing trade liberalization issues
    with the East Asian Summit (ASEAN plus Three) while quietly sending
    think-tank policy experts to consult with likeminded Japanese and
    Korean counterparts.  The focus in both Japan and Korea talks has
    been on how to work together to get good results from the East Asian
    Summit (EAS) in December.  To this end, Helen Clark has also
    reiterated New Zealand's desire for bilateral FTAs with Japan and
    Korea and for an Asia-wide pact based around the 16 member countries
    (ASEAN plus Three (China, Japan, S. Korea) plus New Zealand,
    Australia, India)of the EAS.

    Trade and Domestic Politics
    ---------------------------

    ¶11.  (SBU) Trade policy is unlikely to be contentious as elections
    near, since the two dominant parties have publicly stated that New
    Zealand must pursue every available negotiating avenue, multilateral
    or bilateral, to open up greater opportunities for NZ exports. Both
    the Labour and National Parties supported the NZ-China FTA.  If
    National unseats Labour, it is more likely to continue where Labour
    left off in trying to advance free trade agreements with Japan,
    South Korea and India.  National MO Tim Groser has told us that his
    party supports free trade agreements with New Zealand's major
    trading partners, so there is little daylight between National and
    Labour on trade policy objectives.

    ¶12.  (U) Other NZ political parties have yet to articulate positions
    on potential deals with Japan, South Korea and India, but there is
    likely to be some resistance from the minor parties.  If Foreign
    Minister Winston Peters' New Zealand First Party, which opposed the
    NZ-China FTA on the grounds that trade deals with low wage economies
    threaten NZ businesses, follows similar logic then it is likely to
    oppose any deal with India (see Reftel).  The Green Party is also
    likely to resist any deal with Japan as long its controversial
    whaling policy continues.  Meanwhile the onus will be with the
    business consulting groups charged with preliminary feasibility
    studies to keep the FTA prospects alive until after the general
    election.

    ¶13.  (SBU) Comment. With growing food shortages intensifying
    internationally and following the successful signing of the NZ-China
    FTA, New Zealand now sees itself as poised to enhance its
    business/trading relationship with Asia's dominate economies.  A new
    found sense of optimism is running through both business and
    government circles, that formerly intractable trade barriers are now
    open to discussion and possible resolution.  While the GNZ slips
    into caretaker mode as the general election approaches, it seems
    assured that whichever political party forms the next government,
    Labour or National, will take up the challenge of securing FTAs with
    Japan, South Korea and India following the election. End comment.

    MCCORMICK

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