Climate Change Minister James Shaw at the University of Auckland Trade and Economic Policy School on trade

It sounds simple. Trump goes; vaccines neutralise Covid, and by the end of next year, foreign trade is back to what we used to know as normal.

But maybe not.

A low-key but high-powered conference at the weekend hosted by the University of Auckland’s Public Policy Institute set out to look at the future of trade.

Within minutes of it opening it was clear there were three big elephants in the room; obviously Covid but then Trump and what Biden might do and then, possibly problematically,  how the US and China relationship might unfold.

And overlaying the big global issues was the theme of the conference; how could trade be made more inclusive and more sustainable.

But sustainability could be a double edged sword for New Zealand because while it seeks to lead it is now lagging behind international greenhouse gas reduction norms and could find itself facing tariffs as a consequence.

That was an acknowledgement that the traditional pre-TPP political bipartisan consensus that any trade agreement that achieved better access for New Zealand’s primary industry exports was a good agreement no longer holds.

That breakdown was evident in the widespread opposition to the Trans Pacific Partnership agreement.

Greens Co-Leader James Shaw, one of two Ministers to address the conference wryly conceded that he had yet to vote in Parliament in favour of a trade agreement.

POLITIK Trade Minister, Damien O’Connor

What Biden might do

Ironically on Friday, when the conference began, while trade experts were assembling at the University, across town, the New Zealand China Council was holding a private meeting with the Prime Minister.

That meeting took place against a background of heightened concern among some of our major exporters that New Zealand risked getting drawn into Australia’s escalating war of words and trade sanctions with China.

In a sense, it demonstrated how much trade is inextricably bound up inside broader diplomatic relationships; squeeze trade and you endanger the whole relationship and vice versa.

One of the United States lead negotiators on the TPP, a former Assistant US Trade Representative and currently, the Managing Director of the Asia Society’s Washington office, Wendy Cutler, offered a blunt assessment of how the politics of foreign policy might change under President Joe Biden.

“Very clearly, our overall relationship with China is very tense, and I think Biden is going to be tough on China as well,” she said.

“But he may find areas in which to cooperate, particularly with respect to global issues.”

She was not confident the Biden administration would be interested in any new trade deals.

During the primaries, the President-elect did mention that if he was going to rejoin the Trans Pacific Partnership (TPP), he would need to seek revisions,” she said.

“I think he’s very serious that before entering into new trade agreements he really wants to focus on restoring economic recovery in the United States and strength at home and building our competitiveness with respect to education, infrastructure, innovation, and research and development.”

Cutler suggested that what a Biden administration might be more interested in was joining up with other countries in the East Asian region on narrower agreements “such as digital trade supply chains and medical equipment or the whole issue of trade and the environment and climate change.”

If the United States is reluctant to get involved in regional trade agreements, Britain is not.

Not only is it seeking a bilateral  free trade agreement with New Zealand but it also wants to join the Comprehensive and Progressive Trans Pacific Partnership (The CPTPP)

Confirming this, Greg Hands, UK Minister of State for Trade Policy said the Uk was “delighted” that New Zealand was supportive.\

“Together we can champion and modernise the free trading system, work towards a low carbon economic recovery and build a better and more resilient trade culture,” he said.

POLITIK Attendees at the University of Auckland Trade and Economic Policy School on trade.

How the EU is planning to deal with climate backsliders — like NZ

At first glance, New Zealand would seem a natural to line up on incorporating a mechanism to combat climate change into trade agreements.

And former New Zealand trade diplomat, Alice Tipping, told the conference that with the United States withdrawing from leadership on trade, there was room for small countries like New Zealand to offer “thought leadership’.

And it is doing that; building on the approach used to build the TPP from an initial grouping with Chile and Singapore to now propose a  Climate Change, Trade and Sustainability (ACCTS) agreement which it is currently negotiating with, Fiji, Norway, Costa Rica and Iceland.

The theory is that the agreement is initially drafted among small like-minded countries who can easily reach an agreement and then it is taken out to the world for larger countries to join.

But “thought leadership” is not necessarily as easy as it looks and New Zealand faces some major challenges on the climate change front.

The European Union is proposing a “carbon border adjustment mechanism” more commonly referred to as a carbon border tax.  

The tax would reflect the amount of carbon emissions attributed to goods imported into the EU.

Producers in countries with carbon-pricing mechanisms that the EU agreed were compatible with its own could be exempt.

Ours might not be.

New Zealand is committed to reducing biogenic methane emissions by 10 per cent by 2030, but the EU has committed to a 29 per cent reduction.

The relative performance of the EU and New Zealand underlines a growing perception that New Zealand is lagging behind other countries on climate change and that what the EU is proposing may be only the beginning of a wider use of border tariffs against traders who don’t have the same tough climate change standards as the customer country.

Climate Change Minister, James Shaw, told the conference that China’s decision to set a target for a net-zero level of carbon dioxide emissions by 2060 was huge and  “utterly transformational.”

Japan and South Korea have adopted net zero all gases targets for 2050 which now means that every member of the G7 has a net-zero 2050 target,” he said.

“And now they are looking at us sideways because we do not have a net-zero all gases target.

“Now people are saying actually that may not be good enough and if you are the European Union and you have decided that you are going to have some form of border adjustment then that exposes us to risk. “

POLITIK Rachel Laulelei, chair APEC Business Council and CEO, Kono.

Being a good ancestor

New Zealand is also seeking to take a leadership role on indigenous people and trade and is intended to make this one of the key themes of its year chairing the Asia Pacific Economic Co-operation (APEC) forum.

Chris Karamea- Insley, the Chair of Te Taumata, which represents Maori exporters on trade issues with the Government said Maori businesses were different. They carried little debt and looked at the world from a longer time span.

Rachel Tauleilei, the Chair of the APEC Business Advisory Council, a former Diplomat and CEO of the Nelson-based Maori food company, Kono, said her company asked itself all the time whether it was being a  “good ancestor”.

It was these values that Karamea-Insley said needed to be brought into trade negotiations.

Arguments like this have been made more pointed by the backlash over the TPP and were reinforced by the “Trade for All” report commissioned during the last term, of the Government.

In short, trade negotiators need social licence.

POLITIK Assoc Professor Damon Salesa, University of Auckland

Misunderstanding the Pacific

And there was a sobering reminder to the conference from the University of Auckland’s Pro-Vice-Chancellor (Pacific), Associate Professor Damon Salesa.

Salesa reminded the conference that New Zealand liked to think of itself as a small nation, but in the Pacific, it was the big country.

He said New Zealand had tended to see security as the number one issue for the Pacific Islands Forum. But Pacific nations believed climate change was their biggest security issue.

New Zealand has seen security through a different lens to Pacific nations, and whenever trade talks have come up, including Pacer Plus and others, the number one question from Pacific nations has been labour mobility,” he said.

“That misalignment between Pacific leadership and New Zealand leadership has been growing over the years.” 

POLITIK MFAT Dep Sec (Trade and Economic) Vangelis Vitalis

How NZ can lead

As the weekend progressed, it became clear that the days when trade agreements were simply about what tariff would be applied to, however, many tonnes of dairy products or meat were gone.

Now trade agreements were being called on to address all of the flashpoints in the contemporary political economy.

That is evident in the so-called Kuala Lumpur Declaration issued last month by APEC leaders after their virtual meeting chaired by Malaysia.

They pledged to work together to support five key priorities in recognising the challenges the region’s economies face amidst the Covid-19 pandemic.

The five are combatting and mitigating the impacts of Covid-19; improving the narrative of trade and investment; inclusive economic participation through digital economy and technology; driving innovative and inclusive sustainability, and strengthening stakeholder engagement.

New Zealand has now taken over the chair of APEC for the next 12 months and the Deputy Secretary (Trade and Economic) of the Ministry of Foreign Affairs and Trade, Vangelis Vitalis, told the conference that New Zealand’s main role as chair would be to convert the declaration into action.

That is the document, that one-page document that we will take and convert into the action plan that will then carry APEC forward for the next 20 years,” he said.

“This is an enormous responsibility that we carry.

“We’ve got then pen on what the region is going to do over the next 20 years.

“Of course, we have to get consensus and work that through.”

Vitalis said the APEC was the “ecosystem that delivers norms and standards” in trade.

It acted as an incubator of ideas which were then picked up in the hard rules of the free trade agreements that member countries negotiated.

Trade Minister Damien O’Connor summed up the Government’s trade policies and addressed the issues that the conference had focussed on.

He said the  Trade for All process recognised and respected those things that were important to New Zealand – that trade negotiations would be more consultative and that agreements would share the benefits of trade more widely so that they were felt amongst all New Zealanders.

“It is a trade policy that supports greater engagement and inclusion,” he said.

“And one that ensures that the things that New Zealanders care about – like the environment; labour rights; and gender equality – are reflected in our trade policy.

“It is a trade policy that fundamentally recognises the role and voice of Māori as treaty partners.

“We need to ensure the strength of the Māori economy and its trade and investment potential are supported, and that trade delivers for Māori.”

In short, as the weekend showed, trade is now central not just to purely economic policy but to social cohesion and inclusion as well.

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