Stephen Jacobi: A trade policy for our times
OPINION: The Government’s “refresh” of its Trade Policy Strategy is both timely and appropriate. Hopefully it will prove substantive as well.
The existing strategy coined a generation ago by former Trade Minister Tim Groser, while still an MFAT official, has served New Zealand well.
It saw in the successful conclusion of the Uruguay Round, the inauguration of the World Trade Organisation (WTO) and led to the negotiation of a suite of high quality FTAs, including the as yet unratified Trans Pacific Partnership (TPP).
The world looks vastly different today, but no less uncertain.
Back then it was unknown whether the Uruguay Round would be concluded. Today we face the same uncertainty with TPP.
Back then we were worried about rising protectionism and being excluded from new trading blocs. What’s new?
In the interim business has changed profoundly.
Global value chains are transforming business models. Products are no longer made in one country and shipped to another in finished form but made “in the world” in multiple jurisdictions. Trade in services is growing faster than trade in goods, and has done so for the last decade.
The challenges faced by business today are also different. There is still the urgent, unfinished business of tariff elimination especially for agricultural goods.
Even if TPP is enacted the NZ dairy industry will have duty free access only to around 13 percent of global consumption. Beef also faces ongoing barriers. TPP delivers duty free access for most other products including horticulture and wine, but sanitary, phytosanitary and other technical barriers to trade routinely arise.
Non-tariff barriers are the highest priority for our agricultural producers as well as for manufacturers and the forest industry. The needs of other industries are also becoming more prominent.
New priorities include improved conditions for a new generation of services industries, better conditions for outward and inward foreign investment, new rules for the digital economy and e-commerce and new ways of fostering innovation.
SMEs have long complained they find it hard to take advantage of new market openings. New Zealand’s fast moving technology and creative sectors also want in. There are new pressures for a better integration of environmental and labour disciplines in trade agreements.
The existing Trade Policy Strategy established a number of “tracks” for achieving better outcomes for New Zealand – the unilateral track focused on domestic reform; the multilateral track established primacy for the GATT and its successor the WTO; the bilateral track targeted individual countries with a focus on Asia, although with the mantra “Asia first, not first and last”; the regional track looked forward to the establishment of a new Asia Pacific Community derived from APEC.
This “multi-track” approach remains relevant. But here too things have changed.
New Zealand now has FTAs with all the Asian economies except Japan, which would be delivered by TPP, and India, where our negotiation for a new FTA is languishing. The three amigos of NAFTA – the US, Canada and Mexico – are also covered by TPP. Outside the Asia Pacific we are making progress with the EU and may succeed in launching a negotiation next year. Once the UK leaves the EU, we may have another willing partner, though this is likely to take some time.
A refreshed strategy could usefully help identify who our new partners for high quality FTAs might be – if not by naming them, then at least establishing some criteria about how to recognise them, including by considering regions of potential trade growth rather than simply looking to current trade flows.
The new strategy could also address the current situation of the WTO and offer some thinking about how its role as trade liberalising body can be strengthened even while it retains centrality as the holder of global trade rules and settler of disputes.
The big unknown remains TPP and the outlook for ratification in the US.
President Obama hopes TPP can be ratified in the lame duck session of Congress; if not, then the options are bleak.
The incoming President could declare TPP dead and buried, thereby turning her/his back on generations of American leadership on trade. Or s/he could initiate a re-negotiation, which will be far from easy and will take considerable time.
Or TPP could be adopted, possibly after some ritual face-saving, by the new Congress. Hope springs eternal in trade policy.
If we have learnt anything about the fractious debate about TPP, it is surely that we have to do more to explain the benefits of trade and investment to a sceptical public.
Those benefits include jobs and livelihoods, a richer variety of goods and services, and new opportunities at all levels.
Yet clearly we have to make trade work even better for people, especially those who face the challenges of adjustment. That means more and better structures for consultation, more openness where possible, more involvement by business and other stakeholders, and, where justified, carefully-crafted policy approaches that moderate the risks of that adjustment.
Trade Minister Todd McClay has made a good start by holding public meetings about the strategy around the country. Hopefully these are occasions for listening as well as talking.
The times require a new strategy to respond both to the new demands of business and also the public disquiet about the pace and extent of globalisation. That requires more than just a tweaking of what’s there already.
Stephen Jacobi is exceutive director of the New Zealand China Council and the New Zealand INternational Business Forum.