Hon Phil Goff
Minister of Foreign Affairs and Trade
Speech Notes

ADDRESS TO THE PNG AND FIJI/NZ BUSINESS COUNCILS
AUCKLAND, 22 SEPTEMBER 2000

Thank you for the invitation to meet with you today.
I want to share some of my thoughts with you today primarily on economic issues relating to the Pacific, first looking at Fiji and Papua New Guinea and then looking more broadly at trade with the region. I would be happy to answer questions afterwards and hear your views as business people.
Much of the news coming out of the Pacific in the past few months hasn't been good. The Fiji crisis, the conflict in the Solomon Islands and problems in Timor.
Conflict and instability have damaged those countries directly and may indirectly have harmed the reputation of the region as a whole.
Tourism and investment have been affected. The sharply negative image played nightly on the news undermines the effects of years of positive promotion.
Infrastructure has been damaged and, in the case of Fiji, there will likely be an outflow of the best qualified and most entrepreneurial of its citizens.
The instability of the region as a whole highlights the need to address the underlying problems across the Pacific.
Colonial boundaries pulled together diverse groups without a sense of national identity or unity.

Poor governance, corruption and a feeling by regions that they were not getting a fair share of their resources have had a further dis-unifying effect.

Overpopulation, growing unemployment and poverty fuelled discontent and lawlessness. Limited natural resources and underdevelopment of human resources have meant an inability to sustain living standards.

Distance, small scale populations, instability and land tenure systems have discouraged outside investment and job creation.

All of these factors have undermined confidence in, and support for, the democratic systems of government belatedly set up by departing colonial powers.

Democratic conventions have not taken root in the population.

Westminster democracies with adversarial traditions have been artificially grafted on to the traditional tribal structures and the two have often been incompatible.

I want to briefly address the situation in each of the countries covered by your councils. Because of their relative size, both countries are pivotal to the political and economic well-being of the region.

Fiji
The coup in Fiji has had a disastrous effect on that country.
New Zealand has consistently condemned the illegal overthrow of the Chaudhry Government by force and called for those responsible to be brought to justice.

Speight and his closest supporters are being tried for treason. That action has our support along with the reassertion of law and order to curb violence, racist intimidation and lawlessness.

We do not, however, recognise the interim government as constitutional. It is self-appointed and unrepresentative and has no democratic mandate. While condemning Speight for treasonous actions it cannot be content to remain the beneficiary of what he has done.

We will deal with the interim government because it is the defacto authority in Fiji.

But we have stated our expectations that it should stay in power only for the minimum time necessary to ensure a stable transfer of its power back to a democratically elected body.

The interim government is neither constitutional nor democratic. It includes only two former Peoples Coalition Government ministers and only one Indian minister out of a total of 35 ministers.

If it is to fulfil the key role of caretaker government, seeking to achieve national reconciliation and unity between ethnic groups and political parties, then its composition should include all of those groups.

Yet so far it has shown no willingness to do so.

Interim Prime Minister, Mr Qarase, told the Commonwealth Ministerial Action Group meeting that I attended in New York last week that he now expects his government to hold office for at least two years. We strongly believe it should last no longer than a year.

His government plans to replace the 1997 Constitution. We believe the 1997 Constitution should be retained. That constitution was established by consensus after widespread consultation. It passed unanimously through both houses of an indigenous dominated parliament and was supported by the Great Council of Chiefs.

It cannot be changed by an unelected government and most particularly by a Review Group dominated by Speight's supporters and boycotted by the Indian community. Neither the processes nor the outcome of such a review could possibly have any credibility.

The New Zealand Government has, however, resisted calls to impose comprehensive economic sanctions against Fiji. These would deny innocent people their livelihoods. They would destroy the Fijian economy and with it the authority of the state with the real risk of a slide into anarchy and all that that would entail.

Trade sanctions would also hurt NZ companies trading with Fiji and other PICS, and hence our own economy.
There is little point in implementing a policy which would damage our own interests while not ensuring restoration of democratic, constitutional and non-racially biased government in Fiji.
New Zealand has instead chosen to apply smart sanctions, targeted at individuals and measures designed to reinforce to Fiji the unacceptability of what has happened there. We have applied a visa ban on the coup perpetrators and those closely associated with them.

We have banned Fiji sports teams from coming to New Zealand. We have severed military co-operation, cut development assistance projects to Fiji government departments, and proscribed contact with Ministers and officials in the Interim Government who were associated with the coup.
We cannot maintain our pre-coup relationship. Contrary to what the tourist industry advertisements would have you believe – that nothing has changed in Fiji since the coup but the prices – a great deal has changed. Democracy, constitutional government and human rights have been undermined and many have suffered from being forced from their homes or having their businesses burned.

PNG
PNG also continues to have problems, including significant law and order difficulties, separatist tendencies and governance issues. We can only begin to imagine the problems involved when there are more than 700 languages in a country of just 4 million people.

There is, however, also more positive news from PNG as it celebrated its 25th anniversary of independence last weekend. Prime Minister Morauta is providing solid leadership and has worked hard to regain international economic credibility.

A reform programme has gained IMF and World Bank approval and funds are flowing as a result.

The economy has been depressed but is now beginning to lift. Despite the external shocks from the Asian economic problems, PNG last year surpassed expectations and grew at 3.8%.

Debt and inflation levels are falling. The PNG Kina has gained in value this year, against our dollar and also the Australian dollar and the US.

Privatisations are planned, which could well open up some new opportunities, especially in the consultancy area for New Zealanders with the right expertise. New Zealand is participating in the Friends of PNG group, and in response to a request from the PNG Government we are working out how we might best assist the privatisation programme.

The situation in Bougainville again appears on track. There was good progress on the peace process following the talks in Rabaul last month.

While PNG tends to have a high tariff structure – certainly by our standards – most tariffs are being progressively reduced towards 2006. Again, this could open other prospects for New Zealand exporters.

Yet despite these positive trends, the most recent data I've seen indicates New Zealand exports to PNG fell by 8% in the year to June 2000 to around $88million. Our main exports are basic foodstuffs, lamb flaps, fish, and some dairy products. Trade New Zealand is working on why this decline has occurred.

Trading with the Pacific
More generally, we are actively engaged in working with our Pacific neighbours. The Pacific takes 3% of our exports valued at $678million, more than our exports to South America and the Carribean or what we export to the People's Republic of China. A high proportion of that total is manufactured goods that is important for businesses and jobs in New Zealand.
We are moving closer to a Pacific Regional Trade agreement - known as the PARTA - that I think will be very positive.
At last year’s meeting of the Pacific Forum, Leaders endorsed the principle of a free trade agreement amongst Forum members. Much of the impetus for this comes from a view within the Pacific that economic partnerships in the future, particularly with regional “blocks” such as the EU, will need to be conducted via collective trading arrangements.
The exact nature of the PARTA is currently being negotiated, including how New Zealand and Australia, the two “developed economies” in the region, will fit into it. The PARTA will need to be designed to ensure the more fragile and vulnerable economies of the Pacific can prosper from trade liberalisation.
Its benefit in the short term is likely to be more in trade facilitation – the harmonisation of customs and quarantine regulations to make trading with the Pacific economies easier. The next PARTA negotiating session will be early next year.
The opportunity to trade has allowed the economies in East Asia and Latin America to prosper and helped fund the health, education and social services their people require.
Often their comparative advantage is cheap labour.
That is not a euphemism for exploitation. We must distinguish between low-wage economies on the one hand and exploitation of workers on the other. Exploitation of workers and child labour is not acceptable.
The ILO should be the agency that establishes minimum acceptable standards. However, if we are to exclude countries from trading with us because of the cheapness of their labour, we prevent their development.
That is the hypocrisy of some first world vested interest groups and protesters who block the development of emerging countries while pretending to support them.
Fair trade requires that countries are able to utilise their own advantages – and cheaper labour can be one – in a world market with open access. That is why New Zealand is such a strong supporter of strengthening the WTO’s rules-based system.
It will be worth the effort if the Pacific can be drawn more beneficially into the global economy. If not, small isolated states risk being marginalised, a recipe for further economic decline and instability.
Overall the Pacific's economic performance has been pretty average. During the 1980s average GDP growth was around 2% rising in the 1990s to around 3.5%. That is barely sufficient to cover their rapidly growing populations.
Increasing business and trading links, therefore, is vitally important.
Conclusion
All of us in the Pacific have an interest in seeing the region improve its economic and political reputation. The two things progress hand in hand. In politics, New Zealand will continue to promote democracy and the rule of law in the region.
In economics, we will promote the benefits of trade liberalisation in the region, in a manner that will allow the region's economies to prosper.
Thank you once again for the opportunity to speak with you today, I look forward to your questions.

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