From Chapters 13 and 14 of the memoir Compass Points

Antarctica, Economic Instruments, and the World Travel and Tourism Council (WTTC)
APEC and PATA Codes of Conduct

I did not quite leave tourism altogether when I departed the ministry of tourism in 1994, but my involvement over the following years was mainly international.

I continued my interest in Antarctic tourism, which had started to take off. Average visitor numbers were around 3000 a year during most of the 1980s but jumped to 6500 in 1991–92. While most of this growth was ship-borne tourism from South America to the Antarctic Peninsula, there was still merit in retaining opportunities for growth from New Zealand. Ship visits to the Ross Sea took in our sub-Antarctic Islands on the way. Three ships made that trip in that year. But the numbers led to growing pressure from the scientific community to impose additional constraints on tourism on the grounds that tourists were damaging the continent’s environment. There was a push to have a new Protocol or Annex to the Antarctic Treaty restricting tourism.

I thought this was nonsense: it was science that required permanent bases in Antarctica with all the attendant environmental risks of humans in long-term habitation, air bases, waste disposal, electricity generation, drilling, fossil removal and much else. Tourists on the other hand for the most part slept on their ship, went ashore in small boats for only a few hours, were briefed and supervised by trained guides, took their photos of penguins and returned to the self-contained ship taking their waste with them. There was an oil spill from a ship with tourists on board between Chile and the Peninsula, and that really stimulated the outrage against tourism, but the ship and its oil cargo was actually resupplying a science base and the passengers were an incidental add-on.

I liaised closely with two international organisations taking a similar line, PATA and the American-based International Association of Antarctic Tour Operators (IAATO). The issue came to a head at the 1992 Antarctic Treaty Conference in Venice, where I was able to be part of the Foreign Affairs-led New Zealand delegation for some items, and PATA’s representative for others. We succeeded in ensuring there was no consensus to proceed with the idea of an annex of that sort.

New Zealand then introduced its own Antarctic Environmental Protection Act. It was a good text and made clear that its new and stricter requirements applied even-handedly to all human activity in Antarctica. By 1995 there was a somewhat similar outcome in the Antarctic Treaty consultations.

Antarctica was in a sense a sub-set of my main interest throughout these years, which was tourism’s sustainable development. I had worked on it for New Zealand throughout and spoke on it at PATA and World Tourism Organisation conferences. In 1990 an American travel magazine gave me an award for this work. In the years at the ministry in the early ’90s I was frequently asked to speak about sustainable tourism at venues such as the Globe ’92 Conference in Vancouver, the Australian Tourism Outlook Forum in Queensland, the Massey University Walding lecture in Palmerston North, the World Tourism Organisation in Indonesia and other venues. I was deeply engaged with drafting codes for sustainable tourism for international organisations.

In a new direction I became strongly interested in how economic instruments could be applied to ensure environmental sustainability. These applied the principle that firms and individuals would always respond to financial incentives, positive and negative, in their resource use and other behaviours, and we commissioned the NZ Institute of Economic Research to prepare a discussion document on how they might be applied to the tourism sector in our national parks and reserves. It was an excellent report but did not get its due time in the sun because when we distributed an early draft of it on a confidential basis to the NZ Conservation Board for feedback, one of them leaked it to the press, with resulting headlines about tourism planning economic exploitation of our national parks and the like. One of my ministers was particularly annoyed to read this — we were awaiting the feedback and a more final text before briefing him and others.

Pricing and property rights were the key instruments identified on the report. Some were simple and already in some use, for example differential pricing, such as charging more to go to Milford Sound in summer than winter, which helped even out high season pressures. But most of the instruments were more complicated than that. Issuing a permit or concession, say to run a walking trip in a national park, was one thing; to make it a saleable permit was another, effectively creating a tradeable property right. The exclusive right and saleability encouraged investment in track upgrading and facilities and provided clear incentives to carefully protect the surrounding environment. The long established tradeable fishing quotas that New Zealand is admired for are a classic economic instrument applied for environmental management in a different sector.

Various user charges, emission charges, deposit-refund systems, reverse auctions (bidding down not up), taxes and subsidies were all in the bag of options, and we talked about these with the Department of Conservation and anyone else relevant, and wrote about them and addressed meetings on them. Years later the full potential for this approach in tourism has yet to be realised.

I was able to continue my engagement with international tourism throughout this time, and developed a link with the recently formed World Travel and Tourism Council (WTTC), a powerful body representing the CEOs of many of the world’s largest tourism companies such as American Airlines and the Accor Hotel chain, and its president Geoffrey Lipman. He invited me to two events in London, the first a meeting to discuss the implications for world tourism of Agenda 21, the outcome of the Rio Earth Summit. I listened to various speakers talk about the impact that one or another of the 21 resolutions would have on tourism, but eventually spoke to say that I thought they were missing the most important one, which identified the need to cut back on carbon dioxide and other greenhouse gases to reduce climate change and global warming. In time this would have a high impact particularly on transport, including aviation, which was central to tourism. Geoffrey and the others agreed which usefully led to climate change mitigation being placed on the top of the WTTC’s agenda.

The second invitation was to be a keynote speaker at a major conference discussing aviation deregulation and airline privatisation. Geoffrey proposed my topic be about developments in this field in Asia-Pacific. I rather diluted this, saying at the outset that the only country in the region that had progressed significantly in these areas was New Zealand, and if I talked about Asia-Pacific broadly I would just be citing countries that were still protectionist with little thought of deregulating, and which still held their national carrier in state ownership. New Zealand’s recent history in these fields was a bit of an eye-opener for most of the audience.

At question time I was told by one listener that he didn’t believe it, in the sense that New Zealand needed a national carrier and if Air New Zealand, then privatised, went into receivership the government would buy it back … and therefore it was not truly privatised. I told him not to be so sure — the government was sufficiently committed and doctrinal on these matters that it could just let it go, if that circumstance arose. Time, however, proved him to be right. When a few years later Air New Zealand paid too much for Ansett Australia the government did indeed buy it back, and it has remained substantially state-owned ever since.

The episode brought to mind another in Britain nearly ten years earlier. I was invited by the British Council to a two weeks’ course on the business environment at the Templeton School of Business at Oxford, which included an address by John Redwood, recently Margaret Thatcher’s principal adviser on privatisations. He believed in the likelihood of increased efficiency after privatisation, with two basic conditions: that there was genuine competition — ‘there is one thing worse than a public sector monopoly and that is a private sector monopoly’ — and that the sale must be real — a genuine ‘life or death situation without the assumption of a government buy-back or bailout if the company strikes difficulty.’ The Air New Zealand sale clearly did not meet his criteria.

He also said the British government offered the shares in the planned privatisations to all-comers, with the expectation that they would be taken up by the financial City of London. But in fact the British public took them up with surprising enthusiasm with demand outstripping supply — another lesson not learned in New Zealand.

And as an irrelevancy, we were introduced at one session to the view that all Japanese marketing is based on the Lanchester marketing strategy. We eventually found that this was a reference to a British aviation expert writing in World War One who, in crude summary, argued that you should concentrate your power and if you get enough aeroplanes in the air at a particular point you would win that battle, then go on to the next. Japanese industry after World War Two led by W. Edwards Deming had elaborated in this: you don’t fight the market leader head on; you concentrate on particular points and perhaps smaller competitors, put large resources into these, say by discounting heavily, developing high dealer density or flooding the market with product, and build market share. Don’t be afraid to use a sledgehammer to crack a nut; superior firepower always wins. Only tackle the market leader when you are close to him. The near-term objective is not profitability, the focus should always be on larger market share.

I was much less engaged with the other global travel body, the UN-affiliated World Tourism Organisation, because it seemed mainly concerned with aid to tourism in developing countries, but was invited to speak at its annual conference in Bali. A strong case was made for charging tourists to visit sensitive ecosystems — Rwanda was charging $200 for a one-hour visit to see gorillas, and there were many other examples. But what intrigued me most had little to do with sustainable or New Zealand tourism. An announcement was made that a group of countries across central Asia had agreed to work on re-opening the Silk Road, primarily as a new tourist route. This was a remarkable vision with huge potential and I vowed then to do it some time. Twenty years later in 2012, feeling time was running out on me, I achieved the bits of it that were of most interest, a venture I totally recommend.

At this time too PATA elected me its president, for a standard one-year term. It was a far from optimum time, when I was settling in with the new ministry, but it would not come twice and John Banks the minister proved very supportive that I should take it. It involved chairing three board meetings, each about 60-strong, in Lahore, Pakistan; in Auckland (I was determined that they all come to New Zealand for one of them); and in Hong Kong. The Lahore meeting was incredibly tedious because it was required to implement a report on restructuring PATA and rewriting its rules. Resolution after resolution had to be proposed, debated and approved. But the Pakistanis were wonderful hosts and it was all quite glamorous.

One night was a gala dinner attended by the Pakistani Minister of Tourism Afridi. I sat with him most of the evening without realising the significance of his name. He asked me if I was going on a post-conference tour, and I told him I had a particular wish to go up the famous Khyber Pass. The next day I was told it had been arranged, and that was now an additional tour option. A fleet of military vehicles pulled up at the hotel the following morning and off we went — Rachel was with me and some other PATA leaders— as far as the military camp of the Royal Khyber Rifles, where we were royally entertained. Because there was war in Afghanistan at the time we could not go further, but at a lookout we could with binoculars see into Afghanistan. It was only on the trip, and looking at maps, did I see that Afridi was the name of the tribe that was dominant in the mountainous country on both side of the pass.

The Auckland PATA board meeting was a roaring success, including a last-night dinner at which I asked Howard Morrison to compère and perform. On the substantive front I was able to get PATA to lock in its sustainable approach to tourism and pass its Code of Environmentally Responsible Tourism.

At Hong Kong I recall more a WTTC-PATA world tourism ‘summit’ that immediately preceded the board meeting. Geoffrey Lipman had suggested it and arranged to have one of his board meetings in Hong Kong around the same time as PATA’s, to enable it to happen. While it was easy for him to take his board as his delegation into the summit, I couldn’t do the same because the PATA board was too large and diverse. So I selected a delegation of the best people in PATA regardless of whether they were on the board, such as the head of Japan Travel Bureau, the world’s largest tour company, who I thought could match the World Travel and Tourism Council people.

We had an intense discussion, but not exactly a meeting of minds. When I put forward suggestions of supporting liberal or ‘open skies’ aviation policies, the head of a major American airline denounced this and articulated the need for the meeting to adopt the most absurd one-sided position, that Asian countries should open up to let his airline fly into and beyond those countries without the United States giving reciprocal rights.

I set myself one other major goal, besides advancing sustainable development, for my year as president, and that was to gain the admission of the People’s Republic of China, the PRC, to PATA. When PATA was formed in the early 1950s, Taiwan joined as the Republic of China (ROC). The PRC back then was irrelevant to tourism, but by the 1990s it was a growing force. It was a fundamental weakness of PATA that it did not include the PRC as a member, but the PRC’s one-China policy meant it could not contemplate joining an organisation that recognised Taiwan as China. Taiwan for its part had spent decades building constructive relations with other PATA members and was itself a most useful source of tourists. So no one in PATA was disposed to push it out to make way for the PRC. From my perspective, apart from the benefits to PATA, it also seemed useful for the future of New Zealand/China tourism relations if New Zealand played a high profile role in gaining its admission to PATA.

I was lucky that on the eve of my PATA appointment, APEC negotiated an agreement, the first of its sort, in which both entities became members, with Taiwan functioning under the name of Chinese Taipei. I set my goal as a similar arrangement within PATA. Unfortunately the pressures in Wellington were such that I could not start on this project until several months into my term, and nor could I travel to Beijing to start it off. I asked the Ministry of Foreign Affairs if I could utilise the New Zealand ambassador in Beijing as my negotiator and it and he, Michael Powles, readily agreed. So I sent Michael a brief of the issue and asked him to sound the Chinese out. His first reply was a bit pessimistic — the Chinese did not really like the APEC formula and would not lightly agree to replicate it. Their preference would be to simply replace Taiwan in PATA. I replied that I thought Taiwan would have even more reservations about being Chinese Taipei again, and that it was highly improbable that I could get China into PATA in a better arrangement than that. In the end Michael confirmed that if Taiwan and PATA would accept that deal, China would too.

I briefed most of the board of PATA, which at that time by rotation did not include Taiwan, at an informal meeting in Auckland, and gained its support for the negotiation and the desired solution. I was then able to visit Taipei for the trickiest part. On the eve of my arrival I felt it desirable to forewarn them, and sent them a proposed agenda of items, mainly PATA-related, with ‘Possible admission of PRC to PATA’ as item 4 of 6. I landed and was received with full courtesy, but a few hours later was advised that the Minister of Tourism and Communications was called away on important business and my appointment with him that afternoon had to be cancelled. Instead, senior officials would entertain me during the afternoon at a hairdresser and massage salon, and I would be taken to dinner that night.

The afternoon drifted on and the evening dinner commenced with endless ‘toasts’ of mai tai cocktails. I interrupted the proceedings early on and said there was a serious matter I must tell them about. I made my statement — the broad base of PATA membership was very keen to see the admission of the PRC, to complete its coverage of all major Asia-Pacific tourism countries, but all members were equally respectful of the Republic of China on Taiwan and wanted to maintain its role too. The APEC formula offered a solution and I was sure I could get PRC and PATA support for this. I asked them to consider this seriously and let me know. It would be most advantageous to PATA to have both as members, and was likely to be advantageous to Taiwan too in terms of pre-empting any more damaging solution to the PRC membership issue. I was met with silence, then the festivities resumed.

When I was advised later that they rejected the approach, I wasn’t surprised. The situation was not really analogous to APEC, where a new organisation was being formed with a clean slate and with both Chinas wanting to join, and where technically the members were ‘economies’ not countries. In contrast, PATA was a body where Taiwan was solidly established with the title of ROC which was the last thing it wanted to relinquish. Nevertheless I remained convinced that ‘my’ formula, the APEC wording, was the only viable solution.

I ran out of time. My remaining board meeting in Hong Kong was overloaded and complicated by being part of the PATA annual conference — too much of a bunfight to deal with the subject. So I briefed my successor from India, Inder Sharma, and found him in his own frame of mind determined to ensure the admission of the People’s Republic of China. The Chinese, with whom by then I had established direct links, and who had become very positive about being admitted, were highly nervous over my departure, thinking that negotiations would fall through. I was not able to go to Inder’s first board meeting, which was in Europe, but was seriously disconcerted to receive a message from him beforehand, addressed to all board members, saying that he proposed to put a motion to the board approving the admission of PRC, and with a number of options for retaining and renaming the ROC. I replied urgently that none of his options would be acceptable to the PRC, Taiwan could only be called Chinese Taipei. He has my fullest admiration for putting the resolution in those terms and seeing it through, and deserves the credit for the successful admission of the PRC.

My efforts, though, achieved the secondary purpose of establishing in Chinese eyes a New Zealand commitment to its tourism interests at the highest level. They subsequently invited me to a 12-day escorted tour of China as an official guest of government.

Both APEC and PATA called me from time to time. In both I continued with the theme that tourism must be sustainable — that is, it had to be developed in ways that were protective and not destructive of natural environments. The culmination of that was the adoption at PATA’s 50th anniversary conference in Kuala Lumpur in 2000 of a Code for Environmentally Responsible Tourism, and in 2001 of a joint APEC/PATA Code, both of which, with much help from Robert Sowman, I had helped draft and negotiate.

At the Kuala Lumpur PATA annual conference the organisation made me a life member, its highest award — and that almost saw the end of my 14 years in tourism.