This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 02 WELLINGTON 000915 
 
SIPDIS 
 
STATE FOR EAP/ANP, EAP/BCLTV AND EB/TPP/BTA/ANA 
STATE PASS TO USTR - BWEISEL 
COMMERCE FOR 4530/ITA/MAC/AP/OSAO/GPAINE 
 
E.O. 12958: DECL: 11/03/2014 
TAGS: ETRD ECON PREL TH NZ
SUBJECT: NEW ZEALAND AND THAILAND AIM TO CONCLUDE 
FREE-TRADE AGREEMENT 
 
 
Classified by DCM David R. Burnett.  Reasons: 1.4 (b) and (d). 
 
¶1. (C) Begin summary: New Zealand and Thailand have begun the 
fourth and possibly final round in negotiations for a 
free-trade agreement, which New Zealand hopes to conclude by 
November 19, before the next APEC summit.  The New Zealand 
government acknowledged that its effort has been hampered by 
the fact that the Thais stand to gain little from an 
agreement.  New Zealand also has had difficulty surpassing 
the achievements of Australian negotiators in their 
free-trade deal with Thailand, which provided for limited 
liberalization for agriculture.  New Zealand's experience may 
hold some lessons for Washington as U.S. negotiators work 
toward a free-trade agreement with Bangkok.  End summary. 
 
¶2. (U) In October 2003 during the Asia-Pacific Economic 
Cooperation (APEC) Leaders meeting in Bangkok, the prime 
ministers of New Zealand and Thailand made a commitment to 
begin free-trade negotiations.  After holding informal 
discussions in March and May, the two governments began an 
ambitious schedule of formal negotiations in June, meeting 
every six weeks in each other's capitals.  The fourth round, 
which started November 1, is being held in Bangkok.  New 
Zealand hopes this will be the final round of negotiations, 
with an agreement signed before the November 20-21 APEC 
summit in Santiago. 
 
¶3. (C) Shortly before leaving for Bangkok, Rachel Fry, New 
Zealand's chief negotiator in the talks, told post October 28 
that access to the Thai market for goods -- particularly 
agricultural commodities -- was the principal New Zealand 
issue remaining to be resolved.  In turn, Thailand was 
seeking to gain access to the New Zealand market for 
specialist Thai chefs and traditional Thai masseurs.  While 
the Thais presented that goal as a services issue, Fry said 
New Zealand views it as an immigration matter it proposes to 
be addressed through a side letter. 
 
Obstacles to New Zealand 
------------------------ 
¶4. (C) Fry said that New Zealand encountered a number of 
challenges in the negotiations.  Among the most important, 
Thailand's across-the-board high tariffs made a free-trade 
agreement (FTA) very attractive to New Zealand, while 
Thailand had far less to gain from a deal.  Sixty-five 
percent of Thailand's products already can enter the New 
Zealand market duty-free.  Nonetheless, Fry said that the 
Thai government considers FTAs as a way to promote 
competitiveness among its industries.  The Thai prime 
minister also sees himself as a regional leader on trade 
issues and views bilateral trade agreements as a means to 
bolster Thailand's stature in such forums as the Association 
of Southeast Asian Nations (ASEAN).  New Zealand expected 
that, under the agreement, a large number of Thai tariffs on 
New Zealand products would be removed on implementation, with 
others phased out over five years. 
 
¶5. (C) Fry noted that Thailand's free-trade pact with 
Australia -- concluded in October 2003 and signed July 5, 
2004 -- had provided a useful template for the Thai-New 
Zealand agreement and had helped enable the two sides to keep 
to the ambitious negotiating schedule set by leaders.  But 
using this template also has set the bar low on what New 
Zealand negotiators can achieve.  Thailand essentially 
expected that an agreement with New Zealand would replicate 
the one it signed with Australia.  New Zealand negotiators 
considered the Australian-Thai agreement as a general model 
but weak on market-access issues, specifically on 
agriculture.  For example, the Australia-Thailand agreement 
provided lengthy timeframes for the phaseout of tariffs on 
beef and dairy products, which are to end in 2020 and 2025, 
respectively.  There also will be delays in Thai tariff 
reductions for other "sensitive" products, including honey 
and potatoes.  Fry said that while 10 percent of Australia's 
exports to Thailand are composed of such sensitive items, 30 
percent of New Zealand's exports fall into that category. 
New Zealand is trying to shorten the tariff phaseout times 
for beef and dairy products in particular, but Fry recognized 
that as a difficult challenge. 
 
¶6. (C) Thailand's desire to shelter its dairy farms poses a 
particular problem for New Zealand, whose largest export 
earner is dairy.  Fry said that, because the Thai government 
had been accused of ramming through the Australian agreement 
without public consultations, it has made a concerted effort 
to consult stakeholders on the New Zealand negotiations.  The 
result was that the relatively small but well-organized Thai 
dairy industry had significant impact on Thailand's position 
on dairy access.  Fry posited that U.S. negotiators would 
face similar problems. 
 
¶7. (C) In the agreements with Australia and New Zealand, 
Thailand rebuffed any provision that would require a change 
in legislation.  Fry expected that Thailand would need to 
change its stance on this issue in its negotiations with the 
United States.  Fry added that Thailand's lack of trade 
statistics and deficiencies in its tariff schedule also 
hindered the talks.  New Zealand may have been disadvantaged 
by agreeing with Thailand to use each other's import 
statistics, she said.  For example, Thai statistics appear to 
understate imports of New Zealand goods compared to reports 
by New Zealand exporters.  That disparity could harm New 
Zealand, since proposed agricultural safeguards would be 
triggered by the growth in import volumes. 
 
¶8. (C) Fry said the agreement will include chapters on 
technical barriers to trade and sanitary and phytosanitary 
measures.  New Zealand hopes these provisions will create 
mechanisms through which such issues could be addressed 
through the FTA.  The Thais have asked New Zealand to develop 
certain import health standards for tropical fruit, which do 
not now exist.  A chapter on intellectual property will 
reiterate both countries' obligations under the Agreement on 
Trade-Related Aspects of Intellectual Property Rights and 
include a commitment to cooperate on enforcement. 
 
¶9. (C) New Zealand had hoped to gain access to Thailand's 
hugely restrictive services market, but now expects to pursue 
further negotiation on the issue in three years, according to 
Fry.  New Zealand also hoped to include chapters on 
environmental and labor protections, but the Thais objected. 
Instead, the agreement will include nonbinding, political 
commitments, which Fry said Thai negotiators classify as 
"hortatory," stating that each party will not depart from 
labor and environmental standards to gain a trade advantage. 
 
Negotiating tips 
---------------- 
¶10. (C) Fry characterized the Thais' negotiating style as 
"cautious," although some of the members of the Thai team are 
very energetic.  Many of the team members were prior 
participants in the negotiations with Australia, and Fry 
expected they also would play roles in talks with the United 
States.  She identified Ms. Chutima, who took the lead on 
policy issues, as a particularly tough negotiator. 
 
¶11. (C) Fry also noted that the Thai Agriculture and Commerce 
Ministries do not appear to coordinate their messages well. 
The Ministry of Agriculture in particular has tried to keep a 
tight rein on its issues, leading to mistakes and confusions 
in the Thai government's presentations at negotiating 
sessions, especially at the working level.  At times, the 
Agriculture Ministry presented positions that the Commerce 
Ministry appeared to not have closely reviewed.  The Thai 
negotiators then changed their negotiating positions. 
 
¶12. (U) Two-way goods trade between New Zealand and Thailand 
totaled about NZ $900 million (US $617 million) in 2003, with 
New Zealand's exports to Thailand pegged at NZ $329.72 
million (US $222 million) and imports at NZ $572.73 million 
(US $393 million).  Thailand is New Zealand's 15th-largest 
trading partner. 
 
¶13. (U) New Zealand -- which has free-trade partnerships with 
Australia and Singapore -- is currently holding three-way 
talks with Chile and Singapore.  It also is preparing for 
negotiations with China and is considering such talks with 
Egypt, Malaysia and Mexico.  In addition, ASEAN has proposed 
free-trade negotiations with New Zealand and Australia. 
Swindells