Scoop Feature: A NZ-US Free Trade Agreement?

Every few days, opposition parties tell us that Prime Minister Helen Clark’s policies and comments have taken us another step away from the holy grail of a free trade agreement (FTA) with the US. Yet the fact is that a year ago these parties were saying we had no chance at all, and now the US embassy says we do have a chance. So what’s really going on? Nick Turner looks at the US’s position and whether it has really changed.

On 23 May, last Friday, the NZ Herald published an alarming report under the front-page headline "PM’s comments death knell to trade deal says US".

The first paragraph said: "A US official’s extraordinary attack on the Prime Minister makes it clear that Helen Clark’s personal criticism of President George W. Bush cost New Zealand any chance of a free trade deal."

The unidentified US official said Miss Clark’s comments about Al Gore were a personal attack on President Bush and had been the "coup de grace" for an FTA.

No one has yet explained exactly how comments by Miss Clark about Al Gore constituted a personal attack on President Bush, and the record shows that her surmise about Mr Gore’s position on the war was factually correct.

However, we have to accept the fact that the Bush administration is extremely sensitive to any mention of Mr Gore, who after all is still believed by many in the US to have been cheated out of victory in the 2000 presidential election.

Accordingly, Miss Clark conveyed her apologies to Washington for any offence caused.

That is the background to recent events which have created a hysteria among opposition politicians and the media about the doom that has befallen New Zealand because of her comments, as witness the Herald report of 23 May.

According to the Herald, solely because of Miss Clark’s comments New Zealand now had no chance whatever of a free trade agreement. Yet the official record has long shown that for a whole host of reasons New Zealand has never even been close to getting an FTA with the US.

For example, the deputy chief of mission in the US Embassy in Wellington, Philip Wall, speaking on behalf of the US government to the Employers and Manufacturers Association on 13 February this year, said: "I have to report that, as of now, the United States government is not prepared to commit to bilateral trade negotiations (with New Zealand)".

He went on to explain that "a variety of issues come into play", including New Zealand’s anti-nuclear legislation, but also added: "The United States has a very full plate of bilateral negotiations already planned or under way with several other countries and regions. And in the final analysis, we have to consider the potential benefits of bilateral negotiations, not just to New Zealanders but also to the citizens, both producers and consumers, of the United States. For now, both sides will continue to look at the matter."

So Mr Wall, speaking several weeks before frictions developed over New Zealand’s policy on Iraq, laid it on the line that there was no plan whatever to enter FTA talks with us.

And he wasn’t saying anything we didn’t already know. Almost a year earlier, National Party leader Bill English reported after a visit to the US that he had been told "NZ isn’t on the list" for an FTA.

And in March 2002, Miss Clark also visited Washington and raised the issue with both President Bush and US Trade Representative Robert Zoellick (effectively the US minister of trade). Mr Zoellick said afterwards that "we’ve got some difficult issues on both sides" but the idea would be looked at. Miss Clark told the US Chamber of Commerce that "we just wanted to keep our hand up to get in the queue."

A few months later, Act leader Richard Prebble reported, on 18 November, that the message from Washington was that "there is no way New Zealand will be included in the US-Australia free trade talks until we confront the nuclear issue".

So throughout last year we had been told there was no short-term prospect of a free trade deal with the US.

Actually, Mr Prebble’s reference to the idea of New Zealand being "included in the US-Australia free trade agreement" is misleading. This is not what has been proposed. Miss Clark and Trade Negotiations Minister Jim Sutton have consistently said they expected the US and Australia would negotiate an FTA bilaterally, and separate negotiations between the US and New Zealand would follow.

The government has recently been accused of not recognising a connection between our chances of getting a US free trade agreement and other factors, a linkage that has become much stronger under the Bush administration.

But Miss Clark specifically acknowledged it back in November last year. She announced that New Zealand was dispatching a frigate to the Persian Gulf and weapons inspectors to Baghdad, and lo and behold, three days later Mr Zoellick announced that he would seek the views of Congress on an FTA with New Zealand, a tentative step towards a possible decision to put New Zealand in the queue for eventual negotiations.

And Mr Zoellick has spelled out in numerous speeches and official reports that the US takes a whole list of criteria into account, including security issues, in deciding which countries it will engage in FTA negotiations.

But a major US concern in relation to New Zealand has always been that the agriculture sector, which wields extraordinary lobbying power in Washington and can swing the vote in several key states, fears the competitive impact of our agricultural products, especially dairy. Farming and political leaders from these states have emphasised that despite their appreciation of Australian and New Zealand support in the war against terrorism, they oppose FTAs that would open up the US to our agricultural products.

So it could be difficult to get an FTA through Congress, even for Australia which offers a significant market for US products. Getting approval for a US-NZ agreement would inevitably be much harder, since our small market can offer the US very little benefit.

As the NZ Herald’s economics editor Brian Fallow has put it: "Why would we expect the Bush administration, even if it were cordially disposed towards New Zealand, to expend political capital by taking on one of the most ferociously protectionist elements of the US farm lobby, the dairy industry?"

The Bush administration, under an agreement reached with Congress, is empowered to negotiate FTAs and then to present them to Congress for approval. Congress cannot amend them, it can only approve or reject them. The administration will not waste its time negotiating FTAs that are sure to run into problems when presented to Congress, unless it has very powerful reasons for doing so.

At the opening of the US-Australian FTA negotiations just as the Iraq war was being launched, Mr Zoellick noted that "sensitive products" would be involved. But acknowledging Australia’s role in Iraq he said: "Frankly there’s not many times that a country like the United States has to ask for help from others, and when we do, it matters when friends stand by us."

But Australia was already in the queue for an FTA long before the Iraq war, due to its special relationship with the US which goes much further than merely being a good member of ANZUS.

The ANZUS treaty requires members to "consult" if one of them considers itself threatened "in the Pacific area". But recently Australia has extended its ties with the US under what is known as the "Howard doctrine", which says essentially that Australia’s interests are identical to those of the US worldwide, and therefore Australia will automatically support the US if the US feels under threat anywhere in the world, not just "in the Pacific".

Such a commitment to support the US willy-nilly is unique, and even the National Party has said it would not advocate such a stance by New Zealand.

The contrasting positions of Australia and New Zealand were summed up by the present US ambassador to New Zealand, Charles Swindells, as quoted in The Australian on 28 April. He said Australia was getting an FTA with the US because it was an "ally" and New Zealand was not getting one yet, because it was merely a "friend". He added: "New Zealand will get its turn — you just can’t really predict when. There’s just a lot on our plate right now."

This was after his embassy had criticised Miss Clark for her comments about Al Gore and the Iraq war, and after she had been forced to apologise to Washington.

Three days later, Mr Zoellick gave a news conference in Paris after the OECD meeting chaired by Miss Clark. He was widely reported in New Zealand as putting the eternal kibosh on any FTA with our country, but this was a misrepresentation of what he said.

In response to a question referring to Miss Clark’s chairing and to NZ-US cooperation on trade liberalisation in the WTO, he replied as follows:

"Well as you’ve said this is a meeting that’s been focused on the WTO. And we’ve worked very well with Minister Sutton. Prime Minister Clark did a very good job in chairing the meeting. And so that’s the area where we’ve been cooperating not only on agriculture, but as you may know New Zealand and the United States have a very similar approach in terms of the goods area. In the bilateral area, as you know, we’re proceeding with Australia. I had noted at the time that we proceeded with Australia about testing the waters for other interests, but right now our primary focus is on this and the bilateral agreements we’re moving forward."

In other words, Mr Zoellick was appreciative of the roles of Miss Clark and Mr Sutton, the US and New Zealand were working closely on the Doha round, and he had tested the waters with Congress about a deal with New Zealand, but "right now" the primary focus was on the WTO negotiations and on the bilateral FTA negotiations already under way.

But that is not how it was interpreted by some opposition politicians and by most of the New Zealand media. For example, according to National’s foreign affairs spokesman Wayne Mapp, Mr Zoellick’s comments "clearly dashed any hope of New Zealand getting a free trade deal with the US while Helen Clark is prime minister". Really?

The next event to boggle our opposition politicians and media was a briefing Mr Zoellick gave to the US House of Representatives committee on agriculture on May 21. And once again many of our media were happy to parrot the opposition in pretending Mr Zoellick was burying all chances of a NZ-US free trade deal instead of looking at what he actually said.

If one were to accept Mr Prebble’s view, "the rejection of a New Zealand/US free trade agreement is the most serious trade setback since Britain joined the EC. The trade nightmare is about to occur". And this was due to "reckless popularist (sic) criticism of the USA, UK and Australia" by the PM. Remember, last year he was saying we didn’t have the remotest chance of an FTA anyway because of the anti-nuclear legislation he helped draft.

But what had Mr Zoellick in fact said?

He was addressing the agriculture committee of Congress, a group notoriously unfriendly towards New Zealand agricultural imports. The main thrust of his briefing related to the WTO negotiations which he said were a much better solution than FTAs.

In question time afterwards, he was asked whether the proposed FTA with Australia would be extended to New Zealand, and he replied that this was not his "present expectation". Any other answer could have created problems for the FTA with Australia. He pointed out the obvious, that a lot of New Zealand’s agricultural exports "are very sensitive here," including dairy products and lamb.

He then added that "there’s been some things done recently" that would make it more difficult to take a New Zealand FTA to Congress for approval. Presumably this was a veiled reference to Miss Clark’s comments.

Mr Zoellick had not ruled out an FTA. He said it was not his present expectation that New Zealand would be included in the Australian one (which had never been envisaged anyway), and he said it would be "more difficult" to bring a New Zealand FTA to Congress, not impossible or out of the question.

As noted by the president of the US-NZ Council, Fred Benson, who is well informed and well connected in Washington, it was disappointing that the matter of "some things done recently" was mentioned openly by Mr Zoellick.

But Mr Benson said Mr Zoellick’s answer ended with the phrase "at this time", which was not widely reported in the New Zealand media. So once again the situation remained the same: "As of now, the US government is not prepared to commit to bilateral trade negotiations".

Right on top of Mr Zoellick’s comments came the report in the Herald of 23 May which quoted "a US official" as saying Miss Clark’s comments about Al Gore had sounded the "death knell" to New Zealand’s chances of an FTA.

We were not told who this "US official" was, although the Herald also referred to him as "a US Government spokesman". It sounded like someone reasonably high up in Washington. But other New Zealand media identified him as Philip Wall, the embassy official quoted earlier in this article.

Whoever the anonymous "official" was, the US embassy within hours issued a formal denial that the US had ruled out an FTA with New Zealand. Here is the exact wording of that statement, which you won’t find in the news media:

"There has been much comment in the press regarding the prospects for a free trade agreement between the United States and New Zealand and about recent comments made by U.S. Trade Representative Robert Zoellick.

"As we have repeatedly stated, New Zealand’s desire for an FTA is understood, and the issue has been discussed by our two governments on several occasions.

"The United States is not prepared to enter into FTA negotiations with New Zealand at this time, though we have not ruled out the possibility of an FTA with New Zealand at some point in the future.

"The United States takes into account a wide range of factors when examining the merits of potential FTAs. These factors include trade, political, security and other elements of the bilateral relationship. Contrary to recent suggestions in the press here, U.S. decisions on free trade agreements are not based solely on any one factor."

In other words, we are still in the same situation as back in February when Mr Wall made his statement: "As of now, the US government is not prepared to commit to bilateral trade negotiations". But we are not ruled out, and Helen Clark’s comments haven’t destroyed our chances.

You would think this message was incapable of being misconstrued. Except by the Herald.

Next morning, the Herald declared that far from rejecting the US official’s assertion that our chances of an FTA were absolutely dead, the embassy statement was actually confirming and underlining it.

In a front-page banner headline report by its political editor Audrey Young, the Herald said the embassy statement was the "clearest indication yet that the door has been firmly closed on New Zealand’s hopes of free trade talks". Full stop.

But if so, why did the embassy statement say that an FTA with New Zealand was "not ruled out"? This was a flat rebuttal of the reported comments of the US official. Moreover, this rebuttal was the only possible reason for the statement being issued at all.

Yet the Herald’s political editor told us we should not believe what the embassy’s statement said in plain English, but should instead interpret it as meaning the opposite.

Apparently someone on the Herald began to realise late on Friday night that there was something pretty wrong with this story, and some changes were made between editions, but only after many copies of the paper had already been printed.

For example, the words "for now" were added to the opening sentence which had said there was no chance of a free trade agreement, full stop. That in itself was a major change, but the general impact of the report still remained much the same, and the Herald did not issue any correction for readers of its earlier editions. Nor did it change the version on its website, which is available worldwide and stands as a record of the Herald’s content.

In fact the late edition contained a new paragraph which was plain wrong. It said the embassy statement was "the clearest indication yet that non-trade issues such as New Zealand’s position on Iraq were not quarantined but were, in fact, key factors in the decision".

Rubbish. The embassy statement made no allusion whatever to New Zealand’s position on Iraq, whereas Mr Zoellick had specifically done so 24 hours earlier. If anything, the embassy statement could be seen as a reassurance to New Zealanders that they should not get overly concerned about Mr Zoellick’s comments to the agriculture committee.

By any reckoning, the Herald’s political editor could hardly have got it more wrong. Contrast this with the paper’s economics editor, who in a column in Friday’s Herald had said "the prospects of improved access to the United States are no better or worse today than they were before Zoellick’s statement of the obvious".

His view, which also happens to be that of Miss Clark and Mr Sutton, was that while an FTA would be very welcome, the prospects of one that would give us genuine free access to the US for our agricultural produce were always remote anyway, and New Zealand had much more to gain from helping bring about multilateral free trade in agriculture through the current WTO negotiations. Which also coincides exactly with Mr Zoellick’s views.

Meanwhile, the Sunday Star-Times’s political editor Guyon Espiner has reported that his paper contacted three of the 19 US senators who signed a letter to President Bush a few weeks ago strongly favouring a free trade agreement with New Zealand, and asked them whether they have changed their minds following the fallout over Miss Clark’s comments. They haven’t.

This is interesting, partly because Guyon Espiner some weeks ago quoted an anonymous "US official" (sound familiar?) as saying no US legislator in his right mind would support a New Zealand FTA in the light of Miss Clark’s views on Iraq.

And even Lockwood Smith, National’s former trade negotiations minister who keeps close tabs on the FTA situation, also holds out some hope despite his own party leader’s doomsaying.

He is quoted by Guyon Espiner as saying that "if Helen Clark was to discipline her mouth then I think the damage could be repaired in time for New Zealand to be offered a deal". It might be a slightly modified version of the deal being negotiated with Australia, scheduled for completion at the end of this year.

Miss Clark has in fact disciplined her mouth, to the extent of not even defending her past statements when continually goaded and misrepresented by the opposition.

One cannot say quite the same of Mr Anderton, but one hopes the US would realise that his views when issued in the name of his party do not purport to represent those of the government.

Potentially more damaging could be Foreign Minister Phil Goff’s decision to meet Palestinian Authority chairman Yasser Arafat during his current Mideast. The Bush administration regards Chairman Arafat as the devil incarnate and an active promoter of terrorism.

But at this writing (27 May), we seem to be pretty much in the same position we were in six months or a year ago: "As of now, the US government is not prepared to commit to bilateral trade negotiations". So one might ask why have I written 4,000 words to say so.

I have no party allegiance, and I am far from being an ardent supporter of all of Helen Clark’s positions on Iraq or on defence generally, or of her handling of the situation. I have noted her reluctance to defend herself, saying she has "turned the other cheek and moved on". It is not my purpose to be her defender.

But as a longtime observer of international affairs I have seen the damage that can be done when important foreign affairs questions become mired in lies, distortion and shameless political opportunism. In a further article I will detail some of the lies and distortions relating to this issue.

- Nick Turner is a Wellington journalist and observer of international affairs. He welcomes your feedback.

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