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New Zealand Associate Trade Negotiations Minister Jim Sutton has cautiously welcomed a recent proposal by Japan to create a 16-nation free-trade zone in Asia-Oceania, saying further research is needed to examine its feasibility.

Sutton said in a recent interview with Kyodo News in Tokyo that New Zealand “very much welcomes” the suggestion by Economy, Trade and Industry Minister Toshihiro Nikai for a regionwide FTA, even though it requires “a lot of research, examination and discussions to see whether it is feasible.”

Nikai proposed earlier this month that Japan should ask the 10-member Association of Southeast Asian Nations, plus China, South Korea, India, Australia and New Zealand, to consider launching regional FTA talks in 2008. Those 15 nations and Japan comprise the East Asian Summit, inaugurated in December in Kuala Lumpur for eventual creation of a regional community.

Sutton suggested that inclusion of New Zealand in the proposed regionwide FTA is a relief for the country, because as a “small and vulnerable economy,” it could suffer disadvantages by “trade displacement” were it to be left out of preferential agreements between major economies.

“The thought that we might be faced with exclusion from main market gains is pretty fearful,” he said.

Sutton said he is aware of skepticism about the idea’s feasibility even from within the Japanese government, as the country’s heavily protected agricultural sector could suffer damage from cheap farm produce imports as a result of an expanded FTA.

But Sutton indicated he has seen positive signs. “There might have been a time when such a notion would have been shot down, but this has not occurred, and as far as I know, the response has been constructive,” he said.

Sutton said he believes there is now readiness among Japanese protectionists to look at the sensitivity and “see if there are ways of making this a win-win situation.”

New Zealand has experienced problems with sensitive sectors in its own FTA negotiations with other trading partners, but in some cases addressing those issues has “proved as a recipe for advancement in the sectors concerned,” he said.

For example, New Zealand’s FTA talks with Chile have led to technology transfers to the benefit of the Chilean farm sector, he said.

On adverse effects from trade displacement, Sutton raised as an example an FTA between South Korea and Chile.

The pact has put New Zealand kiwi fruit producers in an awkward position as 40 percent tariffs are imposed on their products, while Chilean fruit enter the market tariff-free. Northeast Asia is an important market for New Zealand farmers because opposite seasons facilitate their export, he said.