Trade Minister Damien O’Connor is flying this weekend to an APEC trade ministers’ meeting in Bangkok which will be the first major international meeting since the Ukraine invasion scheduled to include Ministers from the United States, China and Russia.
The presence of the Russian Minister, Denis Manturov, (if he comes) will pose a challenge to O’Connor and Ministers from Canada, the US, Japan, Singapore, South Korea and Australia.
Those countries have all imposed sanctions on Russia over the invasion and therefore may decide not to engage with any Russian delegation at the meeting.
In March their diplomats walked out of a United Nations General Assembly meeting in protest at a Russian delegate speaking and last month several countries including the US and Canada walked out of a G20 finance officials meeting when Russian delegates spoke.
But New Zealand will also make a more subtle protest about Russia’s actions.
Last week New Zealand invoked the formal Comprehensive and Progressive Trans Pacific Partnership (CPTPP) dispute procedures, accusing Canada of breaking its promises on dairy imports under the agreement.
The chair of the Dairy Companies Association of New Zealand, Malcolm Bailey, says Canada is a highly protected market for dairy products with tariffs as high as 300%.
CPTPP outcomes for access to the Canadian dairy market were limited to a series of reduced tariff rate quotas. (TRQs)
Major global dairy exporters, including New Zealand and the United States, welcomed the concession from Canada.
But soon, they were complaining that Canada had found a loophole by handing out the majority of the TRQs to Canadian dairy processors.
By doing so, trading partners argued, Canada makes sure only low-value milk and cheese are brought in.
Bailey says that despite raising concerns about Canada’s administration of these quotas over several years, Canada has shown no willingness to address New Zealand’s concerns over poor quota usability.
“Launching dispute settlement with Canada is the next logical step to defend our right to fair treatment under the Agreement,” Bailey said.
But New Zealand officials also believe that by using the CPTPP disputes procedure, New Zealand is underlining its faith in the international rules-based order; a message hopefully heard in Moscow.
Despite the dispute, O’Connor is scheduled to have breakfast in Bangkok with his Canadian counterpart, Mary Ng.
And in his public comments on the dispute, he has been careful to be respectful.
“New Zealand has an excellent relationship with Canada, who are one of our closest partners in the world,” he said a week ago.
“We have appreciated Canada’s engagement on this issue at different levels over a number of years, and these proceedings will not come as any surprise to them.
“Occasionally even good friends disagree, and for that reason, dispute settlement mechanisms in free trade agreements such as CPTPP exist to provide a neutral forum for settling such disputes when they arise.”
Canada was notified last Thursday of the dispute and has seven days to respond, after which the two countries will begin formal consultations.
If those don’t resolve their differences, New Zealand can request a panel to adjudicate the dispute.
But strictly speaking, the dispute with Canada is outside APEC even though Canada is a member.
Instead, the meeting will have a global significance.
It will be the first in which Ministers from China, the US and Russia have attended the same meeting since the Ukraine invasion.
O’Connor is expecting to meet with the US Trade Representative, Katherine Tait, but though no meeting has been scheduled with the Chinese Minister, the Minister’s delegation is hoping one will take place.
The meeting with Tait is likely to include a discussion on the Biden administration’s proposal for an Indo Pacific Economic Framework. (IPEF)
The US will chair APEC next year and is hoping to unveil the Framework at the leaders’ summit in November next year. It is, therefore, likely to be a major topic this weekend.
Public details remain scarce, but the administration has now made clear that the Framework will consist of four “pillars” of work: fair and resilient trade; supply chain resilience; infrastructure, clean energy, and decarbonisation; and tax and anti-corruption.
But Biden is proposing to implement the Framework by Executive action rather than through the Congress, which means it cannot offer increased market access or any other concessions that would require changes to US law.
Given that New Zealand’s major economic issues with the United States relate to market access, it is likely to be of limited relevance to us.
Nevertheless, O’Connor is going to Bangkok optimistic that the meeting will benefit New Zealand.
“This is the most important annual trade meeting for the region,” he said yesterday.
“Front of mind for APEC economies this year will be economic recovery in the post-Covid era, navigating the economic fallout of Russia’s war on Ukraine and other key trade issues for the Indo-Pacific region, such as demonstrating support for World Trade Organization ahead of its Twelfth Ministerial Conference in June.
“More than ever, the world needs strong multilateral rules-based systems for trade because it benefits all countries, especially as we all recover from the Covid pandemic.”