Business breathes sigh of relief
Early engagements show coalition Government committed to trade stability — with tweaks, where required
For decades now, the business community has supported the broad political consensus around our international trade and engagement policy. That consensus led to successive and different governments completing free trade agreements with China, Asean, Korea and others.
It also led to negotiations commencing on the Regional Comprehensive Economic Partnership with China and India, and the start of what became the TPP, as well as the beginnings of a free trade agreement with the European Union.
However, that broad consensus had recently broken down with TPP being a particular flashpoint. Before the election, and during the election campaign itself, Labour, the Greens and NZ First all argued fervently against TPP, and many New Zealanders protested over their concerns about the deal.
The business community, among others, feared a breakdown of our long established consensus on trade could have a massive impact on our capacity to do business in the world. One of our most important competitive advantages as a nation trading globally is that our policy settings are stable, consistent and well understood by our trading partners.
Any change to this could result in New Zealand being immediately
I think we saw the first marks of an attempt to build a new consensus around trade.
seen as a far less attractive place to invest and to do business. The actions taken last weekend in Da Nang, Vietnam, therefore, are highly significant. In successfully moving closer to a newly formed TPP (now renamed the Comprehensive and Progressive Trans Pacific Partnership or CPTPP), the new Government has taken an important step for business, and New Zealand generally. What I saw in Da Nang, as an Apec Business Advisory Council member, was our new Government very energetically pushing forward what it saw as New Zealand’s interest, but in the context of attempting to reach an eventual settlement. The Government wasn’t walking away from this deal: it was working towards it. In doing so, I think we saw the first marks of an attempt to build a new consensus around trade. I believe this new consensus is still emerging, but it has at least some of the following elements. It explicitly recognises that some asset classes (eg, existing housing stock) should not be available for foreign investment. It proposes changes in the way New Zealand gives rights to foreign investors. It proposes very high enforceable standards for things like trade and labour and “new age provisions” such as environmental issues. It supports much more openness about trade negotiations themselves. It has at least a nod to the idea of lessening immigration which, while strictly speaking has nothing to do with a trade agreement, nevertheless plays to concerns about jobs being taken by foreigners.
Critically, from a business perspective, this new attempt to build consensus also continues to involve energetically working to conclude and make appropriate use of free trade agreements (FTAs). This does not appear to be a Government saying fine words about trade and FTAs and doing nothing about it.
Indeed, the next big FTA in the pipeline for us is with the EU and we are already seeing our Prime Minister push for getting on with this.
So building this new consensus appears to be more about the issues we include in FTAs and the underlying paradigm around foreign investment, immigration and all the rest.
However, in developing this new consensus, I know many business people will be uncomfortable about various aspects of it. Many will oppose foreign investors being unable to invest in certain asset classes. Business will also harbour deep concerns about cuts to immigration levels.
Despite this, it cannot be denied this new Government is genuinely pursuing a new consensus on trade which is tradefriendly and which still keeps New Zealand’s face very much pointing out towards the rest of the world. I think this should be welcomed by the business community, which I hope will engage in trying to achieve a new consensus around trade that will be just as long-lived as the one we have enjoyed over the past several decades.
The prize is substantial. If we can build a solid consensus, even if it is different from the last one, then we will continue to benefit from policy stability and broad public support for our ongoing trade agenda.
Times are changing around trade, New Zealand is lucky to still have a broad social and community consensus around it. Some other countries are not in this position. Now is the time to be thinking about how we forge a consensus based on maintaining broad community support in a world with concerns about issues like foreign direct investment, asset ownership, and the rights of foreign multinationals in New Zealand. I look forward to the discussion.