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ZNR UUUUU ZZH
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FM AMEMBASSY WELLINGTON
TO RUEHC/SECSTATE WASHDC 5263
INFO RUEHNZ/AMCONSUL AUCKLAND 1678
RUEHBY/AMEMBASSY CANBERRA 5185
RUEHKO/AMEMBASSY TOKYO 0711
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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