Away from the spotlight of the government formation talks, down the road in Symonds Street at the University of Auckland, a group of academics, government officials, lawyers, consultants, and lobbyists spent yesterday trying to formulate a refresh of New Zealand’s overseas trade policies.
The background to their work at the University of Auckland‘s Public Policy Institute “Trade and Economic Policy School” could best be described as what to do now that the era of “big bang” trade agreements is over.
Sarah Salmond, a partner at law firm Minter Ellison Rudd Watts, acknowledged that trade agreements had “done wonders” for New Zealand’s international trade performance over the past 30 years.
“But I just think they’re not going to be a panacea for New Zealand going forward,” she said.
“As a result, I think the Government needs to do a review of New Zealand’s trade policy, and I believe the fundamental objective of this should be to identify trade policy initiatives that are going to deliver the best commercial returns on our collective investment.
“Surely we should focus on those because trade policy is not about trade agreements; it’s about trade opportunities.”
That is a view that would be contested by both the outgoing Labour and incoming National governments, who cling tenaciously to the idea that one Ministerial trip and a bit of hard bargaining can produce a trade agreement that will transform some part of the economy.
Incoming Prime Minister Christopher Luxon said back in April that reaching a trade agreement with India would be a major strategic priority for his government..
“Doing a trade deal with India won’t be easy; no trade deals ever are easy,” he said.
“But Australia has achieved one with India, the UK is about to achieve one, and the EU is closing in on negotiations.
“I will not have New Zealand be left behind.”
Salmond questioned this strategy.
She said that wasn’t because trade barriers had gone.
“It is because the low and medium market access fruit has been harvested and the trade barriers that remain, they’re going to be extremely difficult to shift via traditional trade agreements,” she said.
“I think there’s a lot of great things we do with India, but a free trade agreement is not realistic in the immediate term.”
Michael Fox, Global Affairs Manager for Zespri, is the chair of the India-New Zealand Business Council, and he conceded that both business and trade were getting more complex, but he acknowledged that Zespri had been a huge beneficiary of trade agreements.
However, he suggested we might be at a turning point.
“I think we need to recognise for a long time we’ve done really well on trade agreements with a weak hand,” he said.
“We don’t have a large market.
“I think in some markets where we’ve really benefited from external things; take China, they wanted to prove that they could do deals, it was the same with the UK and Europe, wanted to put a line on the sustainability side of things as well.
“They wanted to send a message they could do deals on the right terms.
“But now, think the world is becoming more divided, and we’re seeing emerging economies saying don’t tell us what to do, thanks.”
That is why Zespri is now seeing how it can form relationships with Indian growers in the hopes that eventually that could lead to the Indian government granting concessions for New Zealand Kiwifruit.
It is an example of initially an industry-to-industry agreement rather than a government-to-government agreement.
“So we think it’s a win-win across the board and essentially a pathfinder for New Zealand,” said Fox.
“So the business community has to be willing to invest and build the relationship; it is not something that is just going to be opened up for us.”
Vangelis Vitalis, Deputy Secretary, Trade and Economic, Ministry of Foreign Affairs and Trade, believes that there is still life in our existing Free Trade Agreements and that they can be modified to make them more relevant to current political and business conditions.
New Zealand is leading negotiations with five other countries to develop an Agreement on Climate Change, Trade and Sustainability. (ACCTS)
This first-of-its-kind agreement will use trade rules to tackle climate change and other environmental issues.
“It’s an international trade agreement essentially that does some classical trade things, like addressing like tariffs on solar panels which would make them cheaper, that kind of thing, but also to try to remove barriers and lock in access for environmental services.
“And then, which I think is probably the most groundbreaking, is to try to use the trade agreement to discipline and reform fossil fuel subsidies.”
New Zealand is working on the agreement with Costa Rica, Fiji, Iceland, Norway and Switzerland.
That leadership role is one New Zealand frequently plays in international trade.
It was one of the three founders of what is now the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and, with Chile and Singapore, has developed the Digital Economic Partnership Agreement (DEPA).
The strategy with the CPTPP, DEPA, and now ACCTS is to develop the original template with a small group of like-minded countries and then move the agreement out to the broader world for other countries to sign.
The CPTPP has been the showpiece for this strategy, with the United Kingdom being the first non-Pacific nation to join.
And CPTPP members, meeting in San Francisco last week during APEC, have decided to review the agreement next year.
Vitalis believes that the CPTPP can become the standard-setter for world trade.
“There is something known as the Brussels effect, which is the idea that the EU sets a standard, and the rest of the world locks into it,” he said.
“I think we have something of an emerging challenge to the Brussels effect, which is in CPTPP as we review the agreement.
“Is there an opportunity there for us, and I’m talking about New Zealand here, to take the opportunity to shape those rules and standards that then gradually, as the Brussels effect withers, and I’m talking about the next 10, 15, 20 years the norms guidelines and principles that we might have been able to develop in the CPTPP could replace the Brussels effect. “
But while much of Vitalis’s emphasis was on bi or pluri-lateral agreements, he said New Zealand still needed the multi-lateral World Trade Organization. (WTO)
Salmond was not so sure.
“The WTO has been very, very useful,” she said.
“It has locked in some fundamental rules of trade. It’s given us guaranteed access to other countries, and it has given us a mechanism to resolve certain types of disputes.
“But its usefulness right now is increasingly questionable.”
Vitalis, however, said that the WTO was the “foundational bedrock” on which the rest of our system was built.
“The other thing the World Trade Organization does that is very important is that it deals with subsidies,” he said.
“It is really the only place that can deal with agricultural subsidies. And that is a major.”
Vitalis said subsidies were colossal sums that other countries were putting into their farmers, which our exporters then had to compete with.
Back in the 1990s, there were two sources of subsidies: the EU and the United States.
Now it was China and India, he said.
Government subsidies directly impact New Zealand sheep meat exporters’ attempts to export to India.
The Indian Government is trying to increase sheep farming as an economic development and employment-generating activity. It offers subsidies of between 25 and 35 to farmers establishing sheep flocks.
It is the prevalence of sorts of non-tariff barriers that are not covered in conventional trade agreements that partly lies behind the claim that we have now reached “peak trade agreement time”.
That will be the big challenge for the next trade minister: how to claim success in a world where the wins will be small and complex.