Trade Agenda 2030 Keep­ing friends close while build­ing new bridges

The fu­ture of trade for New Zealand ex­porters was the broad topic of a pre­sen­ta­tion given at the Hor­ti­cul­ture New Zealand con­fer­ence by Clare Kelly, an expert in in­ter­na­tional trade ne­go­ti­a­tions.

NZ Grower - - Election 2017 - By Denise Landow

She works for the Min­istry of For­eign Af­fairs and Trade (MFAT) as the di­vi­sional man­ager of trade ne­go­ti­a­tions.

Kelly’s talk cov­ered emerg­ing shifts in to­day’s global trading en­vi­ron­ment, and the chal­lenges MFAT sees for ex­porters. She out­lined how our cur­rent trade pol­icy is po­si­tion­ing ex­porters to min­imise risk and max­imise op­por­tu­ni­ties.

“You all know, as ex­porters, about the chal­lenges we face in our trading en­vi­ron­ment,” she said.

There are his­tor­i­cal chal­lenges Kiwi ex­porters have al­ways faced in terms of scale, dis­tance from mar­ket and global sup­ply chains. The high pro­por­tion of ex­ports from the pri­mary sec­tor means a greater than nor­mal ex­po­sure to trade bar­ri­ers, be­cause glob­ally, agri­cul­tural prod­ucts are some of the most pro­tected.

“What is new over the last five to ten years is what I call a global rise in pro­tec­tion­ist sen­ti­ment. That is at a na­tional level, but it’s also some­thing that’s com­ing up from the grass roots,” Kelly ex­plained. Many peo­ple to­day link glob­al­i­sa­tion with the prob­lems they en­counter with trade, and are blam­ing the later for the for­mer. Kelly re­called a United States trade rep­re­sen­ta­tive say­ing that trade is be­ing blamed for sit­u­a­tions it doesn’t cre­ate, and trade agree­ments are be­ing ex­pected to solve prob­lems that they can’t solve. Glob­al­i­sa­tion is a fac­tor trading nations such as New Zealand have to grap­ple with, she said.

NEW BAR­RI­ERS

“We’re also see­ing the emer­gence of new bar­ri­ers. Al­though the agri­cul­tural sec­tor re­mains very pro­tected, tar­iff bar­ri­ers to our ex­ports are drop­ping through­out the world. But as they’re de­creas­ing, non-tar­iff bar­ri­ers are be­com­ing more im­por­tant.

“Some of them come from the un­in­tended con­se­quences of laud­able ob­jec­tives such as sus­tain­abil­ity and en­vi­ron­men­tal pro­tec­tion, but cer­tainly these (non-tar­iff bar­ri­ers) are is­sues that have to be looked at now.”

An­other phe­nom­e­non in re­cent years is the with­drawal of some key play­ers in the in­ter­na­tional mul­ti­lat­eral trading sys­tem from their tra­di­tional role as free-trade champions, she said. “That is mak­ing it dif­fi­cult in the World Trade Or­gan­i­sa­tion (WTO) in par­tic­u­lar, to ad­vance trade lib­er­al­i­sa­tion agen­das. But it’s also cre­at­ing some new op­por­tu­ni­ties as coun­tries and re­gions look for part­ner­ships in ar­eas they haven’t fo­cused on be­fore.”

Draw­ing on her re­cent ex­pe­ri­ence in Mex­ico, she says that Mex­ico has an enor­mous trade depen­dence on the United States, with 70% of its ex­ports go­ing there. Re­cent events are now forc­ing Mex­ico to look more broadly than it ever has be­fore at di­ver­si­fy­ing its mar­kets. It’s now ex­tremely in­ter­ested in the Asia-Pa­cific re­gion, amongst oth­ers.

“In terms of New Zealand, we’re pretty well placed to face these chal­lenges,” she said.

“We’ve been di­ver­si­fy­ing our mar­kets for a long time and we are ex­pe­ri­enced traders. We’ve seen these chal­lenges from some way off and have been pre­par­ing our­selves to meet them. In par­tic­u­lar, the gov­ern­ment’s re­ac­tion to our trading en­vi­ron­ment is the re­freshed trade strat­egy – Trade Agenda 2030.

“Our pre­vi­ous trade pol­icy strat­egy was in place for 20 years and it served us very well. But in light of the new en­vi­ron­ment we’re fac­ing, the gov­ern­ment de­cided it was time to re­fresh the trade strat­egy.

FOUR SHIFTS

“It sets an over­all spe­cific tar­get – an am­bi­tious one – to have 90% of our goods trade cov­ered by free trade agree­ments by 2030. It also out­lines four shifts in the fo­cus of New Zealand’s trade pol­icy.”

Shift one is about in­ten­si­fy­ing free trade agree­ment (FTA) ne­go­ti­a­tions but also max­imis­ing the use­ful­ness of ex­ist­ing FTAs, and mak­ing them as ef­fec­tive as pos­si­ble to ex­porters.

“We have an am­bi­tious ne­go­ti­a­tions agenda un­der­way. It in­cludes some new free trade agree­ments and up­grad­ing ex­ist­ing trade agree­ments such as the China one, which has been such an ob­vi­ous suc­cess,” she ex­plained.

Ne­go­ti­a­tions work­loads are high to en­sure the agree­ments are as up-to­date, mod­ern, state of the art, and use­ful as they pos­si­bly can be to New Zealand ex­porters.

Shift two fo­cuses on non-tar­iff bar­ri­ers.

“This is dig­ging down into the next level of bar­rier. Busi­nesses are find­ing more and more that once you re­move tar­iffs, they’re en­coun­ter­ing other ob­sta­cles to ac­cess mar­kets. Gov­ern­ment agen­cies are ramp­ing up their en­gage­ment on this.”

CLEAR­ING HOUSE

A ‘clear­ing house’ has been cre­ated for the col­lec­tion of in­for­ma­tion re­gard­ing non-tar­iff bar­ri­ers. The aim is to ac­tion these quickly. This en­tails work­ing with busi­nesses to get as much in­for­ma­tion about any bar­ri­ers ex­porters are find­ing in mar­kets, and work­ing hard to re­solve mat­ters in good time.

Shift three is about ac­knowl­edg­ing the grow­ing and fun­da­men­tal im­por­tance of ser­vices in dig­i­tal trade to our en­tire econ­omy, she said.

This is also ex­tremely im­por­tant to goods ex­port, be­cause goods ex­port is un­der­pinned by ac­cess to good, ef­fec­tive ser­vices.

Kelly said that trans­port and lo­gis­tics are core parts of the ex­port of New Zealand goods, so our trade pol­icy has to en­sure it does not ‘skimp’ on its at­ten­tion to ser­vices trade. That in­cludes ad­vanc­ing the con­di­tions for the pro­vi­sion of ser­vices, and en­sur­ing that gov­ern­ment is do­ing ev­ery­thing pos­si­ble to en­able ex­porters to have ac­cess to the ser­vices re­quired in or­der to trade ef­fec­tively.

“More and more, we’re find­ing that goods trade is see­ing the value in IP (in­tel­lec­tual prop­erty) which de­vel­ops around meth­ods of trading. Par­tic­u­larly in the lo­gis­tics and sys­tems de­vel­oped to get their high-qual­ity prod­uct to mar­kets. We want to en­sure that all these op­por­tu­ni­ties are be­ing thor­oughly ex­plored.”

Shift four is busi­ness fa­cil­i­ta­tion – or what ne­go­tia­tors like to call ‘mar­ket ac­cess to mar­ket suc­cess’. This fo­cuses on help­ing com­pa­nies ac­cess the ben­e­fits that have been ne­go­ti­ated for them, and New Zealand Trade and En­ter­prise (NZTE) is ex­tremely in­volved in this work.

“To give a con­crete ex­am­ple in terms of MFAT, this is where we’re of­ten able to help busi­nesses in their mar­kets. If you are in an em­bassy over­seas, you are in a po­si­tion to fol­low the do­mes­tic po­lit­i­cal and eco­nomic en­vi­ron­ment more closely than many other peo­ple are. “Em­bassies have a par­tic­u­lar role in in­ter­pret­ing the shifts and the ben­e­fits or neg­a­tives in mar­kets, and are able to in­ter­pret and pass that in­for­ma­tion onto New Zealand busi­ness. It’s a par­tic­u­lar area we’re in­volved in with the shift in trade pol­icy,” she said.

MORE EN­GAGE­MENT

Un­der­pin­ning the four shifts is en­gage­ment, and this is a par­tic­u­lar fo­cus for MFAT.

“At the con­clu­sion of the TPP (Trans-Pa­cific Part­ner­ship) there was con­sid­er­able public re­ac­tion. That re­ally re­in­forced for us, as a min­istry, that we have to do more to step into the per­mis­sion space around trade, given how im­por­tant trade is for our econ­omy.

“We have cre­ated a par­tic­u­lar unit within my di­vi­sion, trade ne­go­ti­a­tions, to look at im­prov­ing our en­gage­ment with civil so­ci­ety in par­tic­u­lar. But there are also other parts of the public with whom we haven’t had the best en­gage­ment.

“MFAT has al­ways been able to ac­tively en­gage with the rest of gov­ern­ment, agribusi­ness, and our big pro­duc­ers and ex­porters. I’d say where we’ve had less con­spic­u­ous suc­cess would be with civil so­ci­ety groups. Also per­haps we haven’t fo­cused as we should have on small to medium en­ter­prises, so that, go­ing for­ward, is an area we’ll be look­ing to add real value to.”

A new trade pol­icy en­gage­ment unit has also been cre­ated with spe­cific man­dates, and sits along­side MFAT’s reg­u­lar en­gage­ment with busi­ness and out­reach work on spe­cific trade ne­go­ti­a­tions.

It’s tak­ing time and en­ergy, but is ab­so­lutely worth it, she stated. One prac­ti­cal step is the pro­vi­sion of fo­rums to reg­is­ter any con­cerns and have frank con­ver­sa­tions with ex­porters. >

TPP PO­TEN­TIAL

A num­ber of ne­go­ti­a­tions are cur­rently tak­ing place, which takes con­sid­er­able amounts of re­sourc­ing, she said.

One ne­go­ti­a­tion in which many peo­ple are ex­tremely in­ter­ested is the Tran­sPa­cific Part­ner­ship (TPP). Kelly clar­i­fied the cur­rent state of af­fairs with New Zealand’s in­volve­ment to date.

“We have an am­bi­tious goal of hav­ing 90% our goods trade cov­ered by free trade agree­ments by 2030. One of the im­por­tant build­ing blocks for achiev­ing that is a TPP. When the Trump ad­min­is­tra­tion came into power at the be­gin­ning of the year, it sig­nalled the United States’ with­drawal from that ne­go­ti­a­tion.

“Since then, the re­main­ing 11 mem­bers have been ex­plor­ing op­tions for cap­tur­ing the ben­e­fits of the agree­ment. There’s been a lot of dis­cus­sion at se­nior of­fi­cials level about this be­cause while New Zealand’s pref­er­ence is to have the United States in the TPP, there still re­mains a lot of value in the agree­ment with­out it – given that it will im­prove ac­cess for New Zealand ex­porters and lower tar­iffs in mar­kets where we do not cur­rently have free trade agree­ments, such as Canada, Mex­ico, Peru and very im­por­tantly, Ja­pan,” she said.

The TPP, re­gard­less of United States par­tic­i­pa­tion or not, con­tin­ues to have an enor­mous amount of re­gional value, in that it cre­ates a com­mon set of rules amongst an im­por­tant group of Asia-Pa­cific economies. These economies cur­rently ac­count for 31% of New Zealand’s goods ex­ports.

“We are talk­ing with our 10 coun­ter­parts about how to bring the agree­ment into ef­fect in the short term and we hope to reach a de­ci­sion on that by the end of this year.” BREXIT, UK AND EU

Kelly also pro­vided head­lines on the Brexit, and ne­go­ti­a­tions with the United King­dom (UK) and the Euro­pean Union (EU).

The UK in­voked Article 50 of the Treaty of the Euro­pean Union on March 29, 2017 which started a two-year process for the with­drawal of the UK from the EU.

“In the mean­time, our trading ar­range­ments which have served us so well, re­main in place,” Kelly said re­as­sur­ingly.

Ne­go­ti­a­tions are un­der­way around the EU’s com­mit­ments un­der the WTO, and what that means for New Zealand. Work is be­ing done on the im­pact of the UK’s with­drawal from the EU for New Zealand’s trade in­ter­ests, con­sis­tent with WTO rules.

Dur­ing the next 18 months, both the UK and the EU are ne­go­ti­at­ing over the terms of the exit.

“I’m sure you’ve been fol­low­ing the news of the var­i­ous com­plex­i­ties of that. Our gov­ern­ment is fo­cused on two as­pects aris­ing from the Brexit.”

“One is to en­sure our core trade and eco­nomic in­ter­ests, as well as qual­ity of ac­cess to both the EU’s 27 mem­bers and the UK are pre­served through the WTO.

“At the same time, we’re also look­ing to the fu­ture of the New Zealand/ United King­dom trade re­la­tion­ship af­ter the Brexit.

“In this re­gard, there have been dis­cus­sions be­tween our re­spec­tive min­istries of trade around mov­ing on to free trade ne­go­ti­a­tions at the ap­pro­pri­ate time. Our min­istries have es­tab­lished a trade pol­icy di­a­logue with the UK to cover ex­ist­ing and fu­ture trade re­la­tions.

“In par­al­lel, we have a ne­go­ti­a­tion go­ing on, that we were al­ways pur­su­ing, which was New Zealand’s bi­lat­eral ne­go­ti­a­tion with the EU.”

SIG­NIF­I­CANT MAR­KET

The re­la­tion­ship be­tween New Zealand and the Euro­pean Union is im­por­tant, and Europe is a sig­nif­i­cant mar­ket.

“This is a goal which we’ve been work­ing to­wards for over 20 years, fi­nally we’ve got the EU to the point where they are will­ing to sit down and ne­go­ti­ate with us,” she ex­plained.

In Oc­to­ber 2015, both sets of lead­ers an­nounced that we were work­ing to­wards the launch of a free trade agree­ment. Joint scop­ing dis­cus­sions on the pa­ram­e­ters of a FTA were com­pleted this March, and a scop­ing paper has been re­leased by the gov­ern­ment, which is de­signed to in­form those who are in­ter­ested, what we are set­ting out to achieve and the key is­sues in the ne­go­ti­a­tion.

“It’s a pretty high-level doc­u­ment and worth a read if you are in­ter­ested in this. The EU is now work­ing to­wards de­vel­op­ing a man­date to­wards ne­go­ti­a­tions, and both we and the EU are very keen to get started this year.”

The ex­tent of the EU op­por­tu­nity and why it’s so im­por­tant to New Zealand is high­lighted by some in­ter­est­ing facts. The EU is New Zealand’s third big­gest trading part­ner and our third largest ex­port des­ti­na­tion. The two-way trade in ser­vices, val­ued at $20 mil­lion, is New Zealand’s largest source of im­ports.

“It’s also our sec­ond largest in­vest­ment part­ner, and I think that’s some­thing that we for­get,” Kelly said.

“The EU is our most im­por­tant sci­ence and in­no­va­tion part­ner, which is an

im­por­tant con­nec­tion – ac­count­ing for nearly 40% of our in­ter­na­tional re­search col­lab­o­ra­tion. So there’s much to play for in a free trade agree­ment with the EU.

“Not least, it would level the play­ing field for New Zealand ex­ports in that mar­ket with our com­peti­tors in­side the EU, and those that al­ready have agree­ments with the EU.”

NEW DI­REC­TION – PA­CIFIC AL­LIANCE

Clare Kelly also of­fered an in­di­ca­tion of a new di­rec­tion in terms of trade ne­go­ti­a­tion. It’s called the Pa­cific Al­liance – it’s an agree­ment be­tween four of the most out­ward-look­ing and dy­namic economies of Latin Amer­ica, namely, Mex­ico, Chile, Peru, and Colombia.

Latin Amer­ica is a vast and var­ied re­gion, and for years its coun­tries have been try­ing to ne­go­ti­ate some form of eco­nomic and po­lit­i­cal in­te­gra­tion through var­i­ous ef­forts. One by one they’ve mostly rolled over and died, but it seems that the Al­liance is dif­fer­ent, she said.

The Al­liance is an am­bi­tious, fast­mov­ing and out­ward-look­ing re­gional in­te­gra­tion process that even­tu­ally looks to link Latin Amer­ica to the Asi­aPa­cific re­gion as the two most dy­namic eco­nomic re­gions in the world, she said.

For ex­am­ple, amongst them­selves, the agree­ment has elim­i­nated 90% of tar­iffs, and tar­iffs on all but a small sub­set of agri­cul­tural prod­ucts. The Pa­cific Al­liance cre­ates a mas­sive mar­ket of 220 mil­lion peo­ple, which is big­ger than Brazil.

“Given that we are con­stantly di­ver­si­fy­ing and want­ing to do bet­ter in terms of other ge­ogra­phies, this is an im­por­tant op­por­tu­nity. Cur­rently we only ex­port $722 mil­lion to those coun­tries so there’s room to grow.

“There’s also a geo-strate­gic rea­son why we’d like to take this op­por­tu­nity. We’ve had a big fo­cus on Asia in our for­eign and trade pol­icy over the last 30 years, which has been en­tirely ap­pro­pri­ate and it’s worked re­ally well.

“It’s time to look more at the West­ern Hemi­sphere. We see the Pa­cific Al­liance as pro­vid­ing us with a sound plat­form to be able to lift our per­for­mance in the re­gion. These coun­tries are also look­ing to strengthen their democ­ra­cies and they see New Zealand as one of the coun­tries that can help in that process.”

The Al­liance has at­tracted 52 ob­server states, and ear­lier this year it an­nounced the cre­ation of a new cat­e­gory of ob­server which it called an ‘as­so­ciate mem­ber’. These are coun­tries that the Al­liance is invit­ing to launch trade ne­go­ti­a­tions that will en­able them to end up with the sta­tus of as­so­ciate mem­ber.

At a re­cent Pres­i­den­tial sum­mit meet­ing in Colombia, the four pres­i­dents an­nounced that four coun­tries would be launch­ing trade ne­go­ti­a­tions to be­come as­so­ciate mem­bers: New Zealand, Aus­tralia, Sin­ga­pore and Canada.

The next step is a meet­ing in Septem­ber to agree on the terms of the ne­go­ti­a­tion.

New Zealand is of in­ter­est to the Al­liance for a num­ber of rea­sons, said Kelly.

“They know we’re am­bi­tious and able to move quickly when we ne­go­ti­ate free trade agree­ments – that’s been their ex­pe­ri­ence so far. They’re in­ter­ested in what­ever we can teach them about good gover­nance, strong in­sti­tu­tions, and im­prov­ing democ­racy. They also have a strong in­ter­est in our agri­cul­tural tech­nol­ogy, they see us as a coun­try that they can co­op­er­ate with in that space.”

FU­TURE HOPES

Kelly men­tioned the WTO as some­thing that MFAT’s trade ne­go­ti­a­tion di­vi­sion never for­gets.

“It’s the or­gan­i­sa­tion which even­tu­ally we hope all this mul­ti­plic­ity of re­gional and bi­lat­eral ne­go­ti­a­tions will come back to one day.

“It’s where these ne­go­ti­a­tions should be tak­ing place be­tween the 160 mem­bers of the WTO. But due to var­i­ous chal­lenges in the cur­rent global mul­ti­lat­eral trading en­vi­ron­ment, there’s not a lot of con­sen­sus around us­ing the WTO for ad­vances and ob­jec­tives at the mo­ment.”

The dispute ac­cess mech­a­nism of the WTO re­mains ex­tremely im­por­tant for a trading na­tion such as New Zealand. One re­cent ex­am­ple was New Zealand’s suc­cess­ful dispute with In­done­sia on meat and hor­ti­cul­tural prod­ucts.

“Even though the ne­go­ti­at­ing mech­a­nism of the WTO is not work­ing as it should, the ex­is­tence of the dispute set­tle­ment mech­a­nism in a legally en­force­able means to en­sure that our ex­port­ing mar­kets stick to their WTO obli­ga­tions to pro­vide us with ac­cess, is in­cred­i­bly im­por­tant and is some­thing that New Zealand will al­ways look to pro­tect and sup­port.”

We have an am­bi­tious goal of hav­ing 90% our goods trade cov­ered by free trade agree­ments by 2030.

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