Rt. Hon Helen Clark: Keynote address to the OECD Forum

Keynote address to the OECD Forum

It is an honour and a privilege for New Zealand to be chairing the OECD Ministerial Council Meeting (MCM) this year, and for me as New Zealand Prime Minister to address this major parallel forum.

Much has changed since a New Zealand Prime Minister last chaired the MCM twenty years ago. In 1983 there was still a Cold War and a nuclear arms race, and the Berlin Wall was intact. In New Zealand itself, there was an economic crisis as a heavily regulated and protected system creaked at the seams, and the government's budget deficit approached eight per cent of GDP. In this address I will comment on how the greatly changed international and New Zealand domestic circumstances of today relate to the themes of this year's OECD MCM's Agenda for Growth and Development.

The 2003 MCM takes place in a world where for under-thirty year olds the rivalries of the Cold War are ancient history. But in today's international environment there is still insecurity, albeit for many different reasons. That insecurity casts a shadow over the ability of all our countries to grow and develop sustainably. While we can and should tackle the manifestations of insecurity, such as global terrorism, we must also tackle its root causes, some of which lie in underdevelopment and in a maldistribution of wealth and opportunity between nations.

We know that if we neglect such problems within our own nations, we suffer from a breakdown of social cohesion, the development and maintenance of underclasses and high crime rates, and the spread of preventable diseases. It is scarcely surprising therefore that insufficient attention to such problems at a global level has provided a context within which bitterness, envy, hate, and resentment have flourished, and have been manifested in their most extreme forms in terrorism attacks.

It is appropriate therefore that this week's OECD Ministerial Council meeting considers not only the growth prospects for developed countries, but also how to speed up growth in the developing world. More development there is not only fair and equitable, but also can help create the conditions for a world which is more secure in every sense. With that security comes the opportunity to create the kinds of societies which can meet the aspirations of our peoples to live full and satisfying lives.

Events over the past twenty months have demonstrated the extent to which security is a precondition for sustaining prosperity in a globalised world. Economies do not operate in a vacuum. Geopolitical uncertainty is quite simply bad for growth and development. The terrorist attacks of 11 September brought growth to a stand still and caused economic forecasts to be revised downwards. Uncertainty over how the Iraq crisis would be resolved has also had an adverse effect on world growth prospects, compounding the problems caused by other underlying economic weaknesses

At a time like this, it is important not to lose sight of the extent of international agreement which has been growing around key goals and objectives to speed up the development process.

Since the Millenium Summit of the United Nations in year 2000, a series of remarkable international meetings and initiatives have set out a pathway for change.

Africa's needs were prioritised at the Millenium Summit and advanced through the G8's backing of the New Partnership for Africa's Development. The Monterrey Conference on Financing for Development produced more funding commitments; and the FAO's World Food Summit and the World Summit for Sustainable Development set clear targets for reducing hunger and poverty while conserving natural resources for future generations.

The development agenda depends a good deal on the willingness of the affluent world, represented by the OECD, to fund the process. It also depends on a commitment to good governance in developing countries so that effective growth and development strategies can be implemented. But there is also a third leg to the agenda, which this OECD MCM is in a position to advance, and that is agreement on fair trade rules. The current WTO Doha Round of trade negotiations needs to deliver to the developing world, and if it can't, it is unlikely to succeed.

A substantial session at this week's OECD MCM is being devoted to trade issues, and ministers from key developing countries have been invited to contribute to the debate. The MCM will be followed by a high level mini-ministerial meeting which also forms part of the road to the WTO's Cancun conference later this year.

The launch of the Doha round in November 2001 gave a timely boost to global economic confidence following the 11 September terrorist attacks. Now the world economy needs the fresh injection of confidence which could come from momentum in the Doha Round. To date, the story has been one of missed opportunities and deadlines. I hope that from the discussions here this week, some new momentum can be injected into the Round.

New Zealand's top priority in this round is to get fair rules established for trade in agriculture. That is also a top priority for developing countries.

Agriculture has long been discriminated against in world trade rules. For example, while export subsidies for non-agricultural goods have been prohibited since the beginning of GATT in the late 1940s, they are still permitted in agriculture. The global average agriculture tariff stands at around 62 per cent and much agricultural trade is still limited by import quotas. Conversely the global average tariff on industrial products is four per cent, and import quotas for such products have essentially been abolished.

As New Zealand sees it, the world's major industrial exporters have benefited for more than half a century from rules development and trade liberalisation in those areas where they have a comparative advantage. What we seek now are the same trade benefits for agricultural producers, and we believe the Doha Round has an explicit mandate to negotiate to that end.

While it is true that New Zealand would benefit more from progress on agriculture in the Doha Round than any other developed country, by far the greatest benefit overall would go to developing countries. Only last week the OECD's Development Assistance Committee's High Level Meeting of Development Co-operation Ministers and Heads of Aid Agencies resolved to report to this week's MCM on how to maximise the synergies between overseas development assistance (ODA), private investment, and trade. They point out that a dynamic interaction between all three components, and a scaling up on all three fronts, are conditions for meeting the Millenium Goals of the United Nations.

What is clear is that aid and investment on their own won't produce adequate results. Trade expansion is an integral part of the development agenda.

In my view therefore, much is hanging on a successful Doha Round. By opening up markets and reducing subsidies, it will assist development and give a boost to global economic confidence. More better functioning national economies open up opportunities for all trading economies to prosper. Multilateral engagement over the past 2½ years has produced an ambitious and achievable agenda for sustainable growth and development. Multilateralism, however, has been deeply scarred by the Iraq crisis. The world needs multilateralism back on track, so that the level of agreement which does exist on the way ahead can be maximised.

The message which needs to come from this week's MCM is that the major players in the trade debate are prepared to engage to make it a success. This meeting is not a negotiating one, but it can act strategically to identify the obstacles and how to overcome them, in order to have a productive WTO Ministerial meeting in Cancun in September and contribute to the successful conclusion of the Round on schedule by 1 January 2005.

I turn now to how the discussion at the MCM relates to the situation of developed economies like New Zealand's. I referred earlier to the state our economy was in when New Zealand last chaired the MCM twenty years ago. We have moved since then to an open economy, with much less regulation, and to one which, with some modification to the former reform model, is producing credible and broadly acceptable results.

In the year to December our economy grew by 4.4 per cent, and unemployment at 4.9 per cent is at its lowest level is almost fifteen years. Inflation remains low at 2.5 per cent. We are experiencing strong net inward migration as economic, security, and lifestyle factors work in New Zealand's favour.

The gains we are seeing now come after many years of pain, during which the reform pendulum swung out further and faster than in any other developed economy. Indeed the task of my government has been to adjust the pendulum to a more mainstream position to achieve a better policy balance. I believe that a lesson to be taken from the New Zealand experience is that first world societies must set limits to the extent of deregulation, privatisation, and tax cutting they engage in, if they are to avoid both a race to the bottom of the living standards ladder and a loss of social cohesion. To say this is not to advocate no reform, but rather to argue for well designed and balanced policies.

Our task in government in New Zealand in more recent years has been to strike a better balance between head and heart. Too much head in the form of economic rationalism can crush the spirit of the community. Too much heart, on the other hand can break the bank. Neither is desirable nor sustainable.

The policy balance we are seeking aims to build and sustain solid levels of economic growth, to enable us to fund high living standards and high quality public services and infrastructure sustainably.

Over the second half of the twentieth century New Zealand saw its living standards decline from around third in the world to a ranking in the low twenties. In today's global economy, relative economic decline leads to an exodus of skilled people to other countries offering more opportunity, thus compounding the problem. New Zealand suffered from a brain drain off and on for many years, until the present upturn has resulted in a net brain exchange, to our benefit.

Our government has a central focus on growth and innovation. We know that New Zealand's future prosperity is linked to the extent to which we can link new knowledge and technology to all aspects of our economy and society. We aim to lift our economy further up market and further lessen its commodity dependence.

While New Zealand has long had world class education and research institutions, historically we haven't been sufficiently adept at capturing their innovations for our own advancement. Now we are very focused on doing just that, and on forming the international alliances and joint ventures which will make that possible.

Our formal Growth and Innovation Framework leads us to prioritise education and skills training, and a flow of skilled migrants to fill workforce skills gaps quickly. Immigration is fast becoming a necessity for the Western world's aging societies, and is made more so by the international shortage of skills in key areas of economic development and social and health services. Unfortunately the political understanding of this reality in many societies is not yet as widespread as it needs to be if economic and social decline and sclerosis are to be avoided.

As part of our economic change process in New Zealand we are moving rapidly to boost our innovation system, and to provide more support for science and research in general, and for new centres of research excellence and public-private sector research initiatives in particular.

The government has helped facilitate the development of incubators and early stage capital for new and innovative companies, and also of clusters and industry and regional growth strategies.

We have new initiatives to promote exporting, including the establishment of offshore export platforms and supporting our businesses getting readier access to international expertise and innovative technology.

We have identified three key sectors whose growth and development has the potential to spread benefits widely across other sectors. These three: information and communications technology; biotechnology; and creative industries are each involved in a government facilitated process of sector strategy development which has created a good deal of optimism about the contribution they can make to our economic growth prospects.

For the Growth and Innovation Framework to be successful, the government must keep its own house in order. We do that through our commitment to transparent and stable macroeconomic policies, and by maintaining sustainable spending. The government is presently running sizeable surpluses.

New Zealand uses the OECD's work to help benchmark its own performance. The OECD brings together the interdisciplinary expertise of its secretariat with the experience of representatives of national governments. Through that interaction it has been able to measure and compare different experiences and distill common understandings for policy makers. Its work stands as a resource for all to draw on.

This MCM takes place at a difficult time in the world economy. Ministers will have the opportunity not only to share perspectives on the short term outlook, but also to look ahead to what might make a difference in restoring confidence and enhancing growth.

The OECD Secretariat's background papers challenge us to remove barriers to employment and productivity growth, and to strengthen financial markets and corporate governance. We are urged to give more attention to well designed, active labour market policies, and to recognise the role of information and communications technologies and of research and development as drivers of innovation and productivity. New Zealand looks forward to the discussion, to sharing its own experiences, and to learnng from others.

The lesson my government derived from our country's 1980s and 1990s experience of reform was the importance in the future of promoting a shared vision and as much consensus as possible around economic goals and the path to reaching them.

The earlier reform path, which had opened up the economy at high speed, failed to put in place proactive strategies to facilitate labour market adjustment and the emergence of sunrise sectors to replace the sectors on which the sun had set. The result was a rugged transition which strained society to the limits and brought the political process into disrepute.

Now, in our 21st century change agenda, we seek to work with communities and sectors, not against them, and to build the maximum possible consensus around vision and direction. That sees us promoting innovation, enterprise, and participation, along with the importance of the social dividend which growth makes possible. We seek to build partnerships for growth which are inclusive of business and unions, regions and communities, and of all ethnicities in our multicultural country with its sizeable indigenous population. We seek to promote the concept of sustainability across economic, social, and environmental policy. We want policies and funding to be sustainable over the long term.

This path has required us to define a new role for the state, which sees us chart a new way between the hands on and hands off excesses of the past. We see the role of government as one of leadership and strategy; and of using its ability to facilitate, partner, co-ordinate, broker, and fund to promote the development of a stronger economy.

The OECD's forecasts for the year ahead see New Zealand's growth slowing from its present high level, but picking up again in 2004 as the global economy recovers. Our task in government is to stay focused on our medium term strategy of building a skilled and productive workforce, capitalising on our innovations, and improving our capacity to export high value goods into the world market.

We in the New Zealand government are confident about the ability of our people to build a vibrant, competitive economy with strong links to the global market. We look forward to that market being enhanced by a successful WTO round. We look to this week's meetings to provide momentum for achieving that and for renewing our common commitment to the growth and development agenda. No single nation can grow and develop to its full potential in an insecure world with a sluggish economy.

We owe it to our peoples to pursue broad based prosperity which is sustainable over the long term and helps make our world a more secure place.

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