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    Asia-Pacific leaders vow to work for freer trade

    Asia-Pacific leaders vow to work for freer trade

    (AP) – 2 hours ago

    YOKOHAMA (AP) — Asia-Pacific leaders endorsed a blueprint for future growth Sunday that calls for pushing ahead with free trade agreements and rolling back protectionist measures put in place during the financial crisis.

    Wrapping up the annual Asia-Pacific Economic Cooperation, the leaders of 21 economies put aside differences over currency policies to voice a strong commitment to increasing the trade and investment crucial to the region's growth and resilience.

    Leaders representing the U.S., China, Japan, Russia and other regional economies also agreed on the need to reduce trade imbalances and government debt and avoid sharp, potentially disruptive fluctuations in exchange rates.

    While many participants remained at odds over currency policies and other issues, they appeared to agree on the vital role freer trade can play in sparking growth.

    "We reaffirm our unwavering commitment to achieving free and open trade and investment in the region," the leaders said in a declaration released after the talks ended Sunday.

    The leaders also agreed to take "concrete steps toward realizing a Free Trade Area of the Asia-Pacific," but set no timetable. The declaration said this goal should build on regional groupings such as the Trans-Pacific Partnership, a U.S.-backed free trade agreement that nine APEC members are negotiating.

    At APEC, where congeniality usually trumps conflict, leaders of the world's three largest economies pledged Saturday not to backslide into retaliatory trade tactics, after discord over such issues marred the meeting of the Group of 20 major economies in Seoul, South Korea, late last week.

    The 21 APEC members, whose economies account for more than half of all world commerce, have agreed to refrain from imposing any fresh barriers to trade and investment, or measures to stimulate exports, until the end of 2013.

    "We commit to take steps to roll back trade distorting measures introduced during the crisis," said the declaration titled "Yokohama Vision" after the Japanese port city where the summit was held. The statement acknowledged that some economies may have resorted to emergency tactics to blunt the impact of the global slowdown.

    Asia's robust and resilient growth has hinged on trade, and APEC, founded in 1989, has made knitting the region closer together its main objective.

    The document also notes a need to reduce trade imbalances and government debt to help ensure stable and sustainable economic growth. In a rare reference to contentious currency issues, it includes a pledge to move toward more "market-determined exchange rate systems."

    Washington contends that China's currency, the yuan, is significantly undervalued, giving Chinese exporters an artificial advantage in overseas markets and contributing to the huge U.S. trade deficit. China and some other countries have slammed the U.S. for printing money to help spend itself out of recession, a policy they say is driving the value of their own currencies higher, flooding their markets with excess cash and fueling inflation.

    But APEC's focus is mainly on long-term goals, such as working toward a vast region-wide free trade zone that would encompass all its member economies, from giants China and the U.S. to tiny Brunei and Hong Kong.

    Forging such a free trade area, an idea first floated by the U.S. in 2006, would happen outside the confines of APEC, which is not a negotiating body. One possibility would be to build on the Trans-Pacific Partnership, which currently includes only four small economies — Brunei, Chile, New Zealand and Singapore. The U.S., Australia, Malaysia, Vietnam and Peru are in talks to join them.

    Other countries such as Japan are exploring the possibility of joining these trade talks — although Japanese farmers are vehemently opposed because they worry an influx of cheaper agricultural goods would ruin them.

    For the first time, the leaders also approved a growth strategy calling for balanced, sustainable and innovative growth both in the region and within their own borders. Countries should provide better access to credit and social services for women, the poor and other vulnerable groups, it said. They also intend to improve energy security and reduce carbon emissions that contribute to global warming.

    Although APEC's focus is mainly economic, it noted the need to combat terrorism and other threats to security and stable growth, such as corruption, food shortages, disease and natural disasters.

    APEC also said that 13 of its member economies had made "significant progress" toward a goal set out in 1994, in Bogor, Indonesia, to achieve free and open trade and investment by 2010 for industrialized economies, while conceding more work was needed.

    Developing economies in the region were given until 2020 to reach these so-called "Bogor goals." However, eight such members volunteered to be evaluated along with five industrialized ones, the U.S., Canada, Japan, Australia and New Zealand.

    Associated Press writers Jim Gomez, Eric Talmadge, Tomoko A. Hosaka, Malcolm Foster and Mari Yamaguchi contributed to this report.

    Copyright © 2010 The Associated Press. All rights reserved.
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    Asian-Pacific leaders vow to create region-wide free trade zone by 2020
    Bill Curry
    Yokohama— Globe and Mail Update
    Published Saturday, Nov. 13, 2010 10:58PM EST
    Last updated Sunday, Nov. 14, 2010 12:01AM EST





    The 21 leaders of APEC signed off on a plan to create a Free Trade Area of the Asia-Pacific by 2020, a long-promised and long-debated effort to open up trade between some of the world’s largest economies.

    Gathering in this port city on the heels of a G20 summit that failed to resolve concerns over protectionism and currency disputes, the leaders of the Asia-Pacific Economic Cooperation agreed to similar language as the G20 on the need to work together.





    “As APEC enters its third decade, it has become an engine for progress in the world's most economically dynamic region whose growth has driven rising prosperity for all across the globe,” states the final communiqué released Sunday. “We will take concrete steps toward realization of a Free Trade Area of the Asia-Pacific (FTAAP), which is a major instrument to further APEC's regional economic integration agenda.”

    On the disputes over currencies and trade imbalances that dominated the G20, the final APEC communiqué uses similar language to what the G20 agreed to Friday in Seoul.

    The APEC leaders pledged to rebalance and strengthen global demand, pursue sound fiscal management and enhance finance to key sectors such as infrastructure, small and medium enterprises, households and green investment.

    “We remain committed to maintaining open markets and fighting protectionism,” the leaders stated. “We reaffirm our common resolve to support the recovery in a collaborative and coordinated way.”

    Some of the main developments at the two-day APEC summit largely took place in the side rooms of the Intercontinental hotel where APEC leaders hold one-on-one sessions.

    Prime Minister Stephen Harper repeatedly used his one on one sessions to discuss the issue of human smuggling, which was not on the official APEC agenda.

    Among the developments reported by news agencies over the weekend:

    *
    Russian President Dmitry Medvedev discussed nuclear disarmament with U.S. President Barack Obama, where the President promised to ratify a bilateral treaty by the end of the year.
    *
    South Korea’s President Lee Myung-bak discussed North Korea with Japanese President Naoto Kan.
    *
    Japan’s trade minister Akihiro Ohata expressed hope that Chinese delays in exporting rare earth – a key component used in electronics – would soon be addressed after meeting with his Chinese counterpart, Zhang Ping.
    *
    Malaysia and Chile also signed a trade agreement in Yokohama.

    Following the meeting, Mr. Harper heads to central Tokyo for dinner with the Emperor of Japan before returning to Ottawa.
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    Japan is test case for Pac Rim free trade zone
    (AP) – 1 hour ago

    YOKOHAMA, Japan (AP) — Although Asia-Pacific leaders have committed themselves to achieving a Pacific-wide free trade zone following an annual summit, host Japan may prove a key test case for how realistic that vision is.

    Acknowledging that Japan's economic power is declining, Prime Minister Naoto Kan declared his country must open up its markets and embrace free trade — or risk getting left further behind other regional rivals.

    "Japan is determined to reopen itself," Kan said at a press conference Sunday that wound up the Asia-Pacific Economic Cooperation forum, alluding to the historic role that Yokohama, which hosted the summit, played more than 150 years ago as one of the first Japanese ports to open up to the West.

    That bold declaration represents a change for Japan, which for decades had been ruled by conservative administrations that were reluctant to engage in trade liberalization and were closely tied with farmers who fiercely oppose lowering protective tariffs. Imported rice, for example, is subject to a 778 percent tariff.

    Japan and the other 20 members of APEC will face many such tough choices as they strive to execute their shared commitment to free trade and greater regional integration as outlined in the leaders' communique issued at the end of the weekend meeting.

    Their overarching goal: To work toward establishing a Free Trade Area of the Asia-Pacific that would envelope all members, from behemoths China and the U.S. to tiny Brunei and New Zealand. Slashing tariffs and other barriers to imports and investments, the so-called FTAAP would cover half the world's global commerce and two-fifths of its trade. Kan said the rough target date was 2020.

    The Asia-Pacific region has led the world's still-weak recovery from the financial crisis, and the region's leaders are convinced that open markets are a sure way to ensure future growth. Still, creating such a huge free trade zone is a highly complicated endeavor given the region's diversity and vested interests opposed to opening markets.

    China's transformation into the world's second-largest economy — overtaking Japan this year — and the dynamism that has helped it lead the global recovery, was made possible mainly by opening to foreign trade and investment. While Washington complains that Beijing keeps its currency artificially low, giving China's exports an unfair price advantage, consumers have benefited enormously from lower-priced imports.

    Japan's economy, meanwhile, has been stagnant for two decades, stymied by weak demand and a shrinking population even as regional rivals such as South Korea — which is racing ahead of Japan in free trade deals — are becoming formidable competitors.

    "Other Asian economies are catching up to or surpassing Japan," Kan said Sunday after the summit ended.

    "Japan would like to stay as a country with vigor, and to survive in this context, we really need to have economic integration with Asian and Pacific Rim friends and countries so that together we can grow," he said.

    Although Japan has long sought to boost demand at home, the resource-scarce country remains strongly dependent on exports.

    Driven by a sense of urgency, Japan's government — led by the ruling Democrats, who overthrew the long-ruling conservatives last year — announced a striking new openness toward free trade in a policy paper last week, just before the APEC meetings, as a way to revive growth.

    Calling the present a "watershed moment," Tokyo promised to "open up the country." It pledged to wrap up free trade negotiations with Australia, resume suspended trade talks with South Korea, and seek new free trade partners, warning the country needed to become a more attractive place to invest. On Sunday, Japan signed a free trade deal with Peru.

    Japan must now decide whether to join a U.S.-backed free trade grouping called the Trans-Pacific Partnership, which the APEC leaders held up as a building block for an eventual Pacific-wide free trade zone. The U.S., Australia, Malaysia, Vietnam and Peru are negotiating to join the TPP bloc, which currently brings together the small economies of Chile, New Zealand, Brunei and Singapore.

    Big Japanese corporations are urging Kan to join or put Japan at a disadvantage, but he is already facing an intense fight from farmers who fret that a flood of cheaper agricultural products will ruin them.

    "We small-scale farmers cannot compete with large-scale growers abroad," said Ryoichi Fujimaki, a 43-year-old vegetable farmer near Yokohama.

    While Kan has also promised to revitalize Japan's farming industry and overhaul agricultural policy, but hasn't given details.

    Some APEC leaders urged Japan to consider the big picture.

    "You cannot guide your integration policy on only one sector," said Chilean President Sebastian Pinera, noting that agriculture represented less than 2 percent of Japan's economy. "If the country as a whole will win because of the FTA, that means it can compensate the losers and still there will be something for the winners."
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    Call me idealistic, that is the reason i don't believe there will be a shooting war between the ROK, JP, Russia and the PRC
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    Quote Originally Posted by xinhui View Post
    Pari,

    Call me idealistic, that is the reason i don't believe there will be a shooting war between the ROK, JP, Russia and the PRC
    Isn't it fantastic? Europe's mired in spending cuts and recriminations but the Asia/Pacific is looking at the best way to increase trade. Nothing like mutual interests to bring greater harmony.
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    Quote Originally Posted by Parihaka View Post
    Isn't it fantastic? Europe's mired in spending cuts and recriminations but the Asia/Pacific is looking at the best way to increase trade. Nothing like mutual interests to bring greater harmony.
    While this is true, Europe on the other hand has a few decades advantages over Asia when it comes to creating a commen market.

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    Quote Originally Posted by Tarek Morgen View Post
    While this is true, Europe on the other hand has a few decades advantages over Asia when it comes to creating a commen market.
    To a certain extent. The EU is heavily protectionist against anyone not a member. It's an economy slightly larger than the US but we've been pretty much excluded from that market since Britain joined and there's little chance of that changing in the near future. I'm just pleased to see the Asia/Pacific region getting it's arse into gear finally for a bit of mutual prosperity, and as Xinhui implied, there's nothing like a bit of interdependence to tone down nationalistic rhetoric.
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    Pari,

    Wrote the following last week.


    Writing for the current issue of the Foreign Affairs, Leslie H. Gelb, President Emeritus of the Council on Foreign Relations, proposed an argument: “GDP Now Matters More Than Force.” Influence is now gained not only by traditional military hard-power but also through economic power between states. Small states benefit from greater competition as part of the global supply chain and major states do not risk threatening these supply chains via armed conflict as their very power is based on this economic interdependence. Deterrence comes into play in that any threat to globalization could result in mutually assured economic destruction. This is a welcome break from last century's model where Germany and Japan used military force to seek hegemony.



    Case-in-point -- Obama’s recent Asia trip is more of a “sales” trip than an attempt to form “neo containment” in that region; surely a disappointment to some geopolitical hawks. It is easy for the Westside of the Pacific to view the as "Us vs. Them" where everyone lines up to remind China to stay “inline” as noted recently by an NYT pundit. To counter Obama's Indonesian trip, China offered to invest $6.6 billion in Indonesia’s infrastructure a week prior to Obama’s visit. To quote a different New York Times article: China “laid down a not-so-subtle challenge to Mr. Obama: Show your Indonesian hosts the money.” (here) http://www.nytimes.com/2010/11/10/wo....html?ref=asia



    The question is, why would smaller players want to choose sides (West/US vs. East/China) when they can play one side against other? This is not an argument in favor of “peace rise” as there is inherent danger in economic hegemony. But for Indonesia, it is still nice to have several suitors.





    Leslie H. Gelb’s GDP Now Matters More Than Forcehttp://www.foreignaffairs.com/print/66767


    “Germany and Japan placed their industrialized economies at the disposal of their military ambitions. For them, the military domination of others was a cost-effective way to control resources, and it did not strain their internal control. China could not afford such an aggressive military strategy, as Beijing has to subordinate almost everything to upgrading its economy. Because half of China's population is still poverty-stricken -- a reality with explosive, revolutionary possibilities -- the Communist Party feels that it must produce economic growth to stay in power.


    Also reducing the likelihood of conflict today is that there is no arena in which the vital interests of great powers seriously clash. Indeed, the most worrisome security threats today -- rogue states with nuclear weapons and terrorists with weapons of mass destruction -- actually tend to unite the great powers more than divide them. In the past, and specifically during the first era of globalization, major powers would war over practically nothing. Back then, they fought over the Balkans, a region devoid of resources and geographic importance, a strategic zero. Today, they are unlikely to shoulder their arms over almost anything, even the highly strategic Middle East. All have much more to lose than to gain from turmoil in that region. To be sure, great powers such as China and Russia will tussle with one another for advantages, but they will stop well short of direct confrontation.

    
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    Quote Originally Posted by Parihaka View Post
    To a certain extent. The EU is heavily protectionist against anyone not a member.
    This is not completly true. There several countries that have acces to the common market but are not EU members (Switzerland was an example we discussed recently). Then there are also treaties with a lot of former Colonies in South America and Africa which have a privileged trade partner status. Though is general true that the EU is designed to create trade with eacher, and less with the rest of the world.

    It's an economy slightly larger than the US but we've been pretty much excluded from that market since Britain joined and there's little chance of that changing in the near future.
    Would the market in Asia and Ocenania not be more important to you anyway due the distances? And looking at New Zealands main export, there is not much that Europe could not get somewhere closer (and hence usually cheaper).

    I'm just pleased to see the Asia/Pacific region getting it's arse into gear finally for a bit of mutual prosperity, and as Xinhui implied, there's nothing like a bit of interdependence to tone down nationalistic rhetoric.
    Generally I agree with you, but trade is sadly not a 100% gurantee for peace. 1938 Germany traded a lot with France, and 1940 the Soviet Union was the biggest trade partner. Then again I think we can agree on people like Hitler being the exception and not the norm in politics nowadays..or at least we should hope so.

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    Generally I agree with you, but trade is sadly not a 100% gurantee for peace. 1938 Germany traded a lot with France, and 1940 the Soviet Union was the biggest trade partner. Then again I think we can agree on people like Hitler being the exception and not the norm in politics nowadays..or at least we should hope so.
    might be the case, but in today's world, it is difficult to find allies willing to conduct a full-scale, nation-state type of war-of-aggression with you. especially over few rocks as in the case of the Pacific.
    Last edited by xinhui; 15 Nov 10, at 21:15.
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    Quote Originally Posted by Tarek Morgen View Post
    Would the market in Asia and Ocenania not be more important to you anyway due the distances? And looking at New Zealands main export, there is not much that Europe could not get somewhere closer (and hence usually cheaper).
    As for the first part you're quite correct. The last thirty years in NZ have been characterised by weaning ourselves from historical markets and developing new ones. We've been hampered by Japans heavy protectionism in agricultural products but with the development of multiple Asian markets that problem is lessening. The other problem we've faced is our own reputation as a former colony and vassal of the west. It's taken us a long time to overcome that and be seen as an independent player firmly located in the Pacific. Our FTA's with China, Korea and now Russia are examples of the success we've had in that area, and that we are regarded as a safe pair of hands to practice the negotiation of minor FTA's before they take on bigger economies.

    The second part, not really. Through efficiencies we can still put primary produce in your markets at a lesser price than your local producers even with the tarrifs charged. It's the restrictions on the volumes we can export to you that hamper us, not competiveness. Fonterra for instance controls over a third of the worlds dairy production.
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    Quote Originally Posted by xinhui View Post
    Pari,

    Wrote the following last week.


    Writing for the current issue of the Foreign Affairs, Leslie H. Gelb, President Emeritus of the Council on Foreign Relations, proposed an argument: “GDP Now Matters More Than Force.” Influence is now gained not only by traditional military hard-power but also through economic power between states. Small states benefit from greater competition as part of the global supply chain and major states do not risk threatening these supply chains via armed conflict as their very power is based on this economic interdependence. Deterrence comes into play in that any threat to globalization could result in mutually assured economic destruction. This is a welcome break from last century's model where Germany and Japan used military force to seek hegemony.



    Case-in-point -- Obama’s recent Asia trip is more of a “sales” trip than an attempt to form “neo containment” in that region; surely a disappointment to some geopolitical hawks. It is easy for the Westside of the Pacific to view the as "Us vs. Them" where everyone lines up to remind China to stay “inline” as noted recently by an NYT pundit. To counter Obama's Indonesian trip, China offered to invest $6.6 billion in Indonesia’s infrastructure a week prior to Obama’s visit. To quote a different New York Times article: China “laid down a not-so-subtle challenge to Mr. Obama: Show your Indonesian hosts the money.” (here) http://www.nytimes.com/2010/11/10/wo....html?ref=asia



    The question is, why would smaller players want to choose sides (West/US vs. East/China) when they can play one side against other? This is not an argument in favor of “peace rise” as there is inherent danger in economic hegemony. But for Indonesia, it is still nice to have several suitors.





    Leslie H. Gelb’s GDP Now Matters More Than Forcehttp://www.foreignaffairs.com/print/66767
    Xinhui, I've always been unsure how the US is going to adjust. I've had it in my head that the historical military approach has been not just because of the cold war but also the US's role in protecting trade routes, so they're heavily slanted to a military approach. On the other hand Nixons engagement with China speaks of a different attitude.
    I see the US as caught between two philosophys at the moment and I'm unsure of where they're going to go. I'm also interested to see whether China sees the value in the US being strong militarily and is willing to pay the 'protection' money or go to the much greater cost of having it's own true blue water navy.

    As to the Pacific, the biggest threat to us and the region as a whole is control and utilisation of fisheries. I see a potential for a few minor wars to be fought over this.
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    Quote Originally Posted by Parihaka View Post
    The second part, not really. Through efficiencies we can still put primary produce in your markets at a lesser price than your local producers even with the tarrifs charged. It's the restrictions on the volumes we can export to you that hamper us, not competiveness. Fonterra for instance controls over a third of the worlds dairy production.
    I did not know that, thanks. I did believe that that the cost of the transport alone (and added with the cost of not being an EU member) would have been enough tio have those markets dominated by European suppliers.

    Has NZ ever tried to get a preveliged trade partner status like other former colonies with the EU (though those are usually aimed at developingnations)? Or are such steps avoided on porpuse to avoid looking like a western client state?

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    Quote Originally Posted by Tarek Morgen View Post
    I did not know that, thanks. I did believe that that the cost of the transport alone (and added with the cost of not being an EU member) would have been enough tio have those markets dominated by European suppliers.
    As long as it's by ship transport costs are negligible. Because we have better growing conditions and more efficient sustainable farming methods the carbon miles (to use a current buzzword) are less for a kilo of NZ butter or meat in a European supermarket than produce from 60 kilometers away from that supermarket. Strange but true.
    Quote Originally Posted by Tarek Morgen View Post
    Has NZ ever tried to get a preveliged trade partner status like other former colonies with the EU (though those are usually aimed at developingnations)? Or are such steps avoided on porpuse to avoid looking like a western client state?
    We did try but were on a hiding to nothing as the UK wasn't about to go to bat for us when they joined. While we had links to the UK, we didn't with continental Europe in the same way as a French or German or Dutch former colony. Then the whole 'nuclear free' thing came up along with the Rainbow Warrior bombing, the embargos etc and we've been progressively frozen out ever since.
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    Tarek, to give you an example of the problems we face...


    Butter imports spread new discord with New Zealand
    David Barber in Wellington, New Zealand and Charlie Bain


    Tuesday, 12 November 1996
    Relations have soured between Britain and New Zealand amid allegations of a Europe-wide campaign to protect home producers against butter imports.

    The row centres on the import of spreadable butter, which is malleable straight from the fridge and has quickly become a popular alternative to blocks of spread hard enough to bend knives and tear bread. Anchor is at present the only company selling the product in the United Kingdom and has enjoyed booming sales as a result.

    This success was soured last week when several New Zealand Dairy Board executives in Britain were technically "arrested" by UK Customs and Excise officers who claimed that technically the product was not butter as defined by the European Union. Although the raw materials are the same, the manufacturing process for the new product is different.

    Sir Dryden Spring, chairman of the New Zealand Dairy Board, reacted angrily to the claim, saying that British customs were trying to block imports of spreadable butter from New Zealand by alleging that it did not qualify for entry under the EU quota for reduced import duty.

    Under international trade rules, New Zealand has been allowed to export nearly 77,000 tons of butter a year to the EU. The board saw last week's move as part of a bid to erect trade barriers and protect European dairy farmers. Sir Dryden said it was another example of the dairy trade being "subject to interference, control and distortion by foreign governments".

    Sir Dryden likened trading with the EU to peeling "the layers of an onion - there is always another restriction underneath".

    Neville Martin, a spokesman for the New Zealand Dairy Board, added: "Under the British investigation, officials are looking at everything they can get their hands on in relation to New Zealand butter. Some of it smacks strongly of attempts to slap non-tariff trade barriers on New Zealand."

    The board refused to say how many of its officials were being questioned by British customs.

    UK Customs and Excise were equally cagey. Although officials spent yesterday morning deep in discussion on the subject, they later refused to give details, saying that they did not comment on individual cases.

    However, they did confirm that they had received a written ruling from the European Commission four months ago saying that spreadable butter from New Zealand did not meet the qualifying conditions to benefit from the reduced import duty. The ruling said that the reason for this was apparently because it is not "directly manufactured from milk and cream", a spokeswoman said yesterday.

    The move could spell disaster for Anchor, which has seen sales rise sharply by 33 per cent, year on year since the new butter was launched in Britain in 1993. The firm sold 5,000 tons of spreadable butter last year.

    If the British move succeeds, spreadable butter would be subject to a punitive rate of duty which would remove it from British shops. The New Zealand government has taken up the issue with the European Commission in Brussels.

    The British inquiry follows the seizure of a shipment of New Zealand Anchor butter by Dutch customs in September last year. The Dutch claimed that tests showed the butter contained too much fat to qualify for entry under New Zealand's EU quota and imposed an extra duty of NZ$1.8m. New Zealand has lodged an appeal and the case is continuing.
    The British Customs arrested six Dairy Board (Fonterra) employees, confiscated and destroyed all shipments and tried to extradite an NZ executive. After two years while European manufacturers caught up on how to make spreadable butter, all charges were dropped but NZ exports were only allowed back in in much smaller quantities. No reason given.



    Customs drops charges in butter fraud case26 May 1998

    .
    Customs & Excise has dropped all criminal charges in the largest ever European fraud case, apparently blaming the investigator formerly in charge of the case.

    But the lawyer defending the charges, Neil Gerrard, of Dibb Lupton Alsop, said: "I believe there are other reasons which they just haven't told us yet."

    Gerrard and his counsel Antony Shaw QC were due to apply for his costs at a hearing at the Old Bailey last Friday. Customs insists that it did have evidence for the charges.

    Customs arrested four directors and two managers of UK-based subsidiaries of the New Zealand Dairy Board, including Anchor Butter, in a dawn raid on their Reigate and Swindon premises in April 1996.

    The men: Alan Absolon, Colin Bell, Fernando Guerra, Jens Haugstrup, Edmond Verschueren and Gulab Sharma were charged with five counts of fraudulently importing butter over the permitted fat limit and two counts of deliberately exceeding the butter quota.

    Customs also commenced proceedings to extradite the New Zealand Dairy Board's external policy manager Nigel Mitchell from New Zealand.

    Customs had begun the investigation of the subsidiaries - Milk Products Europe, Milk Products New Zealand and Anchor Butter - a year earlier in April 1996. The directors had hired Gerrard, a former policeman who heads a "corporate defence" unit across Dibbs' London and Manchester offices, to defend them. Gerrard called the arrests "aggressive" and pointed out that the defendants had voluntarily attended interviews by customs some months before they were arrested.

    Customs will not say what triggered the investigation. But in 1996, the European Court of Auditors began examining the way British customs checked imports of New Zealand dairy products. It issued a series of verbal "observations", believed to be critical of customs for not checking butter and other imports.

    Its final report, published in April this year, said that New Zealand had underpaid levies on dairy imports to the EU by ECU410m, of which ECU118m was recoverable.

    In early 1996, Dutch customs seized a shipment of New Zealand Anchor Butter. The Dutch claimed that the butter contained too much fat to qualify for a reduced levy under New Zealand's EU quota.

    In July 1997, the defendants were committed for trial. Their counsel made no submissions.

    In September 1997, customs dropped the five charges relating to fat content after offering no evidence. Extradition proceedings for Nigel Mitchell were dropped.

    Mark Perlstrom, who was leading the investigation, left customs in October 1997 to work for niche forensic accounting firm Lee & Allen, where he is advising companies on handling raids by customs officers. His role as investigating officer was taken over by Joan Fraser.

    At the beginning of this month customs dropped the last two criminal charges. In the Old Bailey, customs' counsel Julian Bevan QC said that following Perlstrom's departure, Fraser had reviewed the evidence when a junior prosecution counsel had queried the provenance of "at least two" documents.

    The review found, Bevan said, that "the prosecution is substantially hampered in proving the origin/provenance of many important documents which have been included in the core bundle".

    A customs spokesman later explained to The Lawyer: "A number of key documents that we were relying on couldn't be linked to the particular shipments of butter under dispute."

    In court Bevan also said that the "standing of the original investigating officer, Mr Perlstrom", may have been "substantially" affected by a "scathing and wholly inaccurate attack on the investigating arm of Customs & Excise" that Perlstrom made at a conference in February 1998.

    Perlstrom had warned companies to assume that customs had "prosecution as an ultimate goal", saying "if you desire peace, make ready for war" - and that if a settlement could not be reached "litigation and warfare in a criminal court will follow".

    Bevan claimed: "The impact upon any jury hearing this, in my view, would be profound."

    However, The Lawyer has learnt that the parts of Perlstrom's speech that Bevan quoted were taken, almost word for word, from a January 1995 article in the magazine Accountancy by former customs solicitor Malachy Cornwell-Kelly. Cornwell-Kelly, now at Titmuss Sainer Dechert, gave Perlstrom permission to use the particular phrases.

    Gerrard said: "If you believe that Customs & Excise is dropping its largest fraud investigation in Europe because of a couple of documents and the remarks of an officer who left Customs & Excise... well you can draw your own conclusion."

    He added: "What he [Perlstrom] said is absolutely true. If you read that to any lawyer who does my sort of work he will say "yes, so what?'"

    A Customs & Excise spokesman stressed that "We did have plenty of evidence, or we wouldn't have brought the case in the first place".

    In a separate civil action, British customs alleged that the new "spreadable" butter, which the New Zealand Dairy Board had begun importing in 1995, did not qualify for the reduced levy quota.

    A customs VAT tribunal ruled in favour of the Dairy Board at the beginning of this year but customs is appealing.
    In the realm of spirit, seek clarity; in the material world, seek utility

    Gottfried Leibniz

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