NZ trade ‘at risk’ as rules collapse

A warning that the ‘‘golden weather’’ for New Zealand trade may be over has been delivered in a newly released briefing to Associate Trade Minister Nanaia Mahuta.

In a paper originally prepared for Trade Minister David Parker in January, Foreign Affairs and Trade Ministry deputy secretary Vangelis Vitalis warned protectionism was on the rise and the World Trade Organisation could lose the ability to hear appeals after December.

That is as a result of the block United States President Donald Trump has placed on new appointees to the WTO’s appellate body, which is supposed to have seven members but is now down to its minimum quorum of three.

Two of the three remaining judges – US lawyer Thomas Graham and the body’s Indian chairman, Ujal Singh Bhatia – will end their terms in December, leaving just Chinese lawyer Hong Zhao on the body, meaning it would not be able to settle any trade disputes.

Vitalis’ paper said the WTO could not currently hear appeals involving the US, China or India because at least one of its judges would need to be recused.

Parker agreed rising protectionism was a concern.

‘‘We think we will be affected by the downturn in growth and confidence as a result, and that flows through to commodity prices, and investment flows have already slowed down internationally.

‘‘Although exports are still growing internationally, the rate of growth has dropped.’’

He said New Zealand had not so far suffered from closed market access and had instead opened new markets thanks to the CCTPP trade agreement while also progressing negotiations for a new trade agreement with the European Union.

Vitalis said there was no doubt the WTO and its rules were in need of modernisation to reflect dramatic changes in the way trade now occurs. ‘‘The risk, however, is that members will again fail to agree a reform pathway this year, leading to the gradual erosion of existing rules and the WTO itself.

‘‘That will signal the beginning of the end of the current world trading order,’’ Vitalis said.

He warned that could have consequences ‘‘far beyond trade’’ in other areas of international cooperation. ‘‘This includes transboundary issues like climate change, the ability to tax multinational and other firms, privacy protections and settings, and so on. There is a risk that we ... actively go backwards as a small country at risk of not being able to enforce rules against both states and indeed multinationals in some areas,’’ Vitalis said.

Parker said the existing inability of the WTO to hear appeals involving the US, India or China had not had a practical impact on New Zealand and was not a factor in it not joining complaints against the US over tariffs on steel and aluminium that were imposed last year.

New Zealand’s permanent representative to the WTO, David Walker, was seconded to chair the WTO’s dispute settlement body in Geneva in March to try to achieve a breakthrough.