Ministry Statements & Speeches:
Tēnā koutou katoa. Good morning.
Worrying about the global trading environment could be a full-time job at the moment. And I could easily fill 10 minutes with a lot of doom and gloom on that front (new tariffs on another US$260 billion of trade were announced last week). But instead I’ll try to talk only briefly about the challenges we see, and then update you on our broader trade negotiating agenda – which, happily, remains on track.
Challenging times
For the first time since the creation of the World Trade Organisation in 1995 and the pivotal inclusion of agricultural products in global trading rules, we face a global trading system where trading conditions may not inevitably improve over time. We’ve put a lot of work into this system ourselves over the years. But we’ve relied on major powers throwing their weight behind it too.
For those of you too young to remember the pre-1995 world, it was one where we wondered if the internet would catch on, a world where mobile phones had antennae (my first work phone came in a backpack), and tariffs on New Zealand’s key exports could change overnight. Today, every time a container crosses a border unhindered at a predictable level of duty, it is the rules-based trading system working.
Unfortunately we are now living in a world where big players are challenging that system in an unprecedented way (unless you go back to the Great Depression). During the global financial crisis, major powers swung in behind the system – aiding the recovery. Which is interesting – and worrying – if you consider the alarm bells ringing in the global economy today and what might happen if we face another crisis.
But back to us. The point is that the survival of the rules-based trading system is hugely important to our small open economy. And that is why the current escalating and substantial trade conflict worries us immensely. At the same time, the European Union and the United Kingdom are also trying to decide what rules will apply after Brexit – a negotiation with significant implications for us too. And, if that were not enough, at a global level protectionism continues to increase. For every protectionist measure that has been removed around the world since the global financial crisis, four new protectionist measures have been introduced.
We cannot know now the full implications of these forces, but we do know that the uncertainty alone is significantly affecting sentiment in global trade and in business generally - both at home and globally.
New Zealand’s trade agenda
But it’s not all bad news. At home, our economy is relatively strong. And out in the world, we are busy negotiating a wide variety of trade agreements. By the time these are ratified, 79% of New Zealand’s goods exports will be covered by trade agreements. This is extremely important when the WTO rules-based system is under threat – it gives us other enforceable and legally binding rules for our key trade relationships.
Let’s start with the two free trade agreements currently being examined by Parliament – PACER Plus and CPTPP:
PACER Plus includes nine other countries (Australia and either Pacific Islands nations). It has a development focus, more than market access, but it will ensure that New Zealand businesses won’t be disadvantaged in future if our Pacific neighbours do trade deals with others.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the successor agreement to the TPP, is an extremely important agreement because it keeps New Zealand in a key trading bloc. Also the idea is that CPTPP will evolve and other countries will want to join – we have already had indications of interest from a number of countries. CPTPP is currently being examined by select committee and will be debated in Parliament after that – it is likely to enter into force in 2019.
Now I’ll talk about our five active negotiations. First the upgrades – China and Singapore.
New Zealand was the first (developed country) to get a free trade agreement with China in 2008, but China has since done trade deals with others which cover some products excluded from our agreement (like processed wood and paper) and which include wider guarantees of access for services exports.
The upgrade is about addressing those aspects, tackling where we can the barriers exporters are concerned about, and broadening our agenda with China (by bringing issues like e-commerce and environment into the FTA). We are making progress and we want to complete the upgrade quickly, but our priority is achieving real gains with China.
Secondly we have the Singapore Enhanced Partnership, where we are close to conclusion. It includes many aspects of our relationship - but upgrading our FTA is also part of this process. We expect to have something to announce on this soon.
The Pacific Alliance includes Chile, Colombia, Mexico, and Peru (this will be NZ’s first FTA with Colombia). Together the Pacific Alliance is the world’s sixth largest economy and home to over 220 million people. In this agreement we want to build on CPTPP, both in market access terms and rules. We also see an opportunity to advance inclusive elements - we have made significant progress, for example, on New Zealand’s first-ever gender chapter in a free trade agreement. In terms of timeframes, Round 6 is happening as we speak right here in Auckland and we are aiming to conclude negotiations this year.
Meanwhile, the RCEP agreement includes ASEAN, the three big North Asian countries (China, Japan, Korea), India, Australia and New Zealand. In total, over half of the world’s population is covered and the agreement is an opportunity for us to gain preferential access to India’s market for the first time. Substantive conclusion is expected by the end of this year.
A European Union-New Zealand Free Trade Agreement will ultimately cover 12% of our exports and NZD22 billion of two way trade. New Zealand and the EU are like-minded on many trade issues and are both strong supporters of the rules-based system. We are both seeking ambitious market access outcomes, but it is clear we will face challenges in some areas of agriculture.
That said, New Zealand is resolute that the agreement needs to address the high barriers that we currently face. Interestingly, New Zealand and the EU both have Trade for All agendas providing us with an opportunity to advance sustainable development provisions such as on labour rights, environment, gender, indigenous peoples and regional development.
Finally, as the Brexit process evolves, we’re taking an active role in ensuring the EU and UK live up to their current WTO commitments to us, including on the key issue of tariff quotas. With the UK, we are both committed to launching negotiations on a high quality FTA once the UK has left the EU. In the meantime, we have welcomed the UK’s recent launch of public consultations on a free trade agreement with New Zealand.
Keep in contact with us
So that’s what we are busy doing on the negotiating front. But given the underlying turbulence, working with you as you navigate these complex waters is more important than ever. So with that I want to do a quick advertorial for two online services we provide that may come in handy.
The first is tradebarriers.govt.nz(external link) – lodge your trade barrier and we’ll be back in touch in 48 hours with a response – and if the barrier is complex then we’ll develop a plan to address it in six weeks. It doesn’t have to be an issue in an FTA market. In fact, we’ll respond to any trade query we receive.
The second is tariff finder(external link) – this site enables you to look up and compare preferential tariffs that apply in different markets for your export products. Soon to include more tariffs - for example, those that apply in markets where we don’t have free trade agreements. We are also working on a similar tool for services exporters which we plan to launch next year.
You can find out more about these at our booth later on – we’d love to talk to you. But right now I’m looking forward to hearing from my fellow panellists and to the discussion.