Submission to the Ministry of Foreign Affairs and Trade – “Trade for All Consultation”

SUBMISSION TO THE MINISTRY OF FOREIGN AFFAIRS AND TRADE

“TRADE FOR ALL CONSULTATION” SEPTEMBER 2018

This submission is made on behalf of the NZ International Business Forum (NZIBF), whose members are listed at Annex A1. NZIBF is a forum of senior business leaders working together to promote New Zealand’s engagement in the global economy. As a leadership body, NZIBF leaves to its members the task of identifying specific sectoral issues. This submission therefore comments on cross-sectoral or wider issues arising from “Trade for All”.

Summary

NZIBF supports the goals of “Trade for All”. Recommendations arising from this initiative should focus on change to make trade policy work better as well as reflecting continuity to extend, where possible, the achievements of recent years.

NZIBF continues to see the World Trade Organisation (WTO) as the “first best” approach to comprehensive trade liberalisation. NZIBF also sees negotiation and effective implementation of high quality, ambitious and comprehensive Free Trade Agreements (FTAs) to be critical for New Zealand’s economic success, addressing market access barriers and putting in place more effective rules for trade and investment. NZIBF supports the existing trade negotiating agenda, but sees a continuing need to incorporate measures to facilitate and protect foreign investment.

NZIBF supports measures to address gaps in policy to address the “externalities” of trade and ensure greater inclusiveness.

NZIBF supports steps to improve transparency and accountability in the implementation of trade policy notably through a commitment to share more information during the course of trade negotiations and a re-invigorated Ministerial Advisory Group.

About the New Zealand International Business Forum

NZIBF provides a voice to articulate the needs and priorities of New Zealand’s international business community, and in particular the importance of open markets, to the New Zealand Government and public stakeholders. The NZIBF Board brings together leaders from amongst New Zealand’s largest internationally oriented companies and peak business organisations. (A list of Board Members is at Annex A.)

Incorporated in May 2007, NZIBF works with companies, business organisations and government agencies to implement projects in the international trade and economic sphere, including working to develop NewZealand’s key international business relationships and conducting research relative to New Zealand’s competitiveness.2 NZIBF receives no direct government funding for its core operating budget, but from time to time receives funding for jointly-funded projects. Funding is also provided in respect to the policy advice and support NZIBF provides to the New Zealand members of the APEC Business Advisory Council (ABAC).

NZIBF supports the goals of “Trade for All”

NZIBF welcomes the Government’s consultation with the New Zealand public about the future parameters of trade policy contained in the “Trade for All” initiative.

NZIBF sees both change and continuity arising from this initiative. On the one hand, NZIBF hopes that “Trade for All” will result in enhancing public understanding and support for trade, rebuilding political bipartisan consensus for trade policy and addressing perceived gaps in policy design and delivery. On the other hand, NZIBF also hopes that “Trade for All” will confirm New Zealand’s long-established support for openness and international connectedness, including on-going commitment to seeking enhanced market access and better trade rules through the WTO and negotiating high quality, ambitious and comprehensive FTAs, combined with new approaches for achieving success in international markets.

Ensuring continuity of policy

Securing access to new markets, enhancing access to existing ones and improving the rules of international trade and investment are all critical to boosting returns from overseas markets and enhancing the innovation, productivity and competitiveness of the New Zealand economy. Tariffs and border restrictions continue to place barriers to the development of exports especially for added-value products. The rapid development of global value chains, the expansion of services trade (including through digital channels) and foreign direct investment have also increased the significance of behind- the-border non-tariff barriers (NTBs) and regulatory issues.

Underpinning all of New Zealand’s trade policy must be continued strong support for the WTO. The multilateral rules-based system has been the foundation for our sustained prosperity, even as New Zealand has sought to negotiate a range of FTAs. NZIBF welcomes the energy and attention that the Government is giving to shoring up the WTO, including by continuing to devote resources to unfinished Doha Development Agenda business (notably in agriculture), engaging in creative thinking and discussions about potential WTO reform, and participating in WTO-coherent plurilaterals, including for services trade reform, digital trade and e-commerce. NZIBF supports a robust response to addressing global protectionism through use of the WTO dispute settlement system.

NZIBF supports the continuing negotiation of high quality, ambitious and comprehensive agreements, which not only address tariffs and other market access issues at the border, but also focuses on behind-the-border issues such as NTBs, regulatory coherence and alignment, strong science-based sanitary and phytosanitary (SPS) and technical barriers to trade (TBT) dsiciplines, deeper and broader commitments in respect of trade in services, the digital economy, investment flows, intellectual property, environment and labour. Finding practical ways to increase the relevance and value of FTAs for micro, small and medium sized enterprises (MSMEs) is also important (see further below).

In recent years NZIBF has drawn attention to the prevalence of NTBs which persist also in markets where New Zealand already has FTAs such as China and ASEAN. NTBs are top of mind issues for NZ exporters. NZIBF welcomes the allocation of additional government resources in recent years to address NTBs along with continuing attention to tariffs, subsidies and other issues. NZIBF believes this work could be enhanced by establishing public/private sector task forces in key markets to devise and implement strategies. This would provide a useful mechanism for monitoring progress, leveraging additional resources and communicating outcomes and results to the business community. NZIBF welcomes the attention MFAT has paid to building on the APEC Business Advisory Council (ABAC) work programme in relation to NTBs and to recommending the adoption of ABAC’s set of high level principles in relation to NTBs in APEC economies.

Foreign direct investment is a key element in New Zealand’s sustained prosperity, supplementing our relatively shallow capital base, fostering the development of productive businesses and infrastructure, facilitating the innovation that drives domestic competition and productivity growth, and generating new employment opportunities. There is also scope to increase NewZealand business investment offshore. NZIBF is accordingly a longstanding strong supporter of foreign investment in New Zealand and of provisions in our trade agreements which provide appropriate protection for foreign investment (both inward and outward), while also recognising the Government’s continuing right to regulate in the public interest.

NZIBF recognises that the New Zealand Government opposes the inclusion of Investor-State Dispute Settlement (ISDS) in future FTAs. NZIBF does not share this view. We note that experience shows that as a stable democracy with strong governmental and judicial institutions New Zealand has little if anything to fear from ISDS. On the other hand New Zealand companies investing offshore need as much protection as possible in many countries. We urge the New Zealand Government to continue to seek meaningful negotiated outcomes which not only foster increased inward investment, but which also addresss the need for greater certainty and security for both outward and inward investment flows.

NZIBF supports the Government’s efforts to deepen the single market with Australia, to ratify and expand CPTPP, to conclude RCEP and the China, Singapore and ASEAN FTA upgrades, and to achieve FTAs with the Pacific Alliance, the EU and eventually post-Brexit Britain.

Alongside the existing FTA negotiations, consideration is needed as to what future FTA negotiating partners New Zealand should be working towards, including emerging markets in Latin America, Africa and the Middle East, as well as a putative “Commonwealth” trade agreement. The Government and the private sector should work together to identify and invest in developing relationships in order to be able to capitalise on future opportunities. New Zealand currently has limited capacity to develop the relationships needed to progress FTA negotiations in Africa and parts of the Middle East as well as Commonwealth-wide. NZIBF would welcome an opportunity to discuss possible new FTA partners and approaches.

NZIBF also strongly supports ongoing New Zealand engagement with key organisations such as APEC and the OECD. New Zealand sees real value in New Zealand’s hosting of APEC 2021 to build and strengthen regional economic integration in the Asia-Pacific, not just through the ongoing work of APEC and ABAC but also eventually through the development of a Free Trade Area of the Asia Pacific (FTAAP).

NZIBF accepts that the negotiation of FTAs will not alone solve all issues relating to New Zealand’s trade competitiveness and to ensuring that the benefits of further trade reform can be more broadly shared by our communities and are mutually-reinforcing with broader societal goals. NZIBF draws attention in this regard to a study completed by the USC Marshall School of Business for ABAC which offers a number of useful recommendations3. The “Trade for All” Advisory Board has been established to consider what changes are required in the enabling environment for trade and NZIBF also looks forward to the recommendations of this group.

“Progressive and inclusive” elements

The “Trade for All” initiative seeks also to address perceived gaps in policy design and implementation which may contribute to unrealised potential or uneven outcomes among certain groups as well as a broader public sentiment that is not convinced about the benefits of trade reform. NZIBF welcomes the opportunity to contribute ideas to this conversation, noting that some of the solutions are likely to lie outside the immediate scope of trade policy.

Progressive elements

NZIBF agrees that trade policy should aim to incorporate new policy objectives particularly in relation to certain “externalities” closely associated with trade:

Climate change and the environment

    • NZIBF agrees that the objectives of trade and sustainable development should be mutually reinforcing and that existing provisions relating to trade and the environment need to be continuously strengthened
    • NZIBF believes that ways to mitigate and reduce the impacts of climate change could be more specifically addressed through FTAs including preambular language outlining key objectives, further liberalisation where possible in relation to climate change-related services and technologies and climate-friendly goods and services, and further disciplines on subsidisation and other practices which contribute to overproduction or overuse of resources and hence indirecty to climate change

Labour

  • NZIBF accepts that the objectives of trade and the achievement of internationally agreed labour standards should be mutually reinforcing and that existing provisions relating to trade and the labour need to be continuously strengthened

Digital economy

  • NZIBF recognises the transformative power of the digital economy and encourages the negotiation of forward-looking, ambitious digital trade- friendly outcomes in FTAs, including in relation to facilitating electronic commerce and to unrestricted cross-border data flows, subject to appropriate provisions to protect consumer privacy, enhance trust and promote cyber security, designed in such a way that those protections do not act as a disguised barrier to trade.

Inclusive elements

NZIBF agrees that trade policy should aim to ensure that the benefits of trade are spread more widely and in particular to encompass those groups which may not previously have been empowered for success in trade:

Micro-, small- and medium-sized enterprises

  • NZIBF supports the negotiation of specific chapters in FTAs, such as in CPTPP, which address the needs of MSMEs in cross-border trade
  • NZIBF suggests that the Government’s newly established Advisory Group on Small Business should be consulted formally about ways of providing for the needs of MSMEs in trade negotiations and eventual trade agreements, and be invited to submit a report, to form part of the Government’s National Interest Analysis, on the extent to which negotiated FTAs have met these objectives
  • NZIBF suggests that representatives of MSMEs should be included alongside representatives of larger companies on official delegations participating in FTA negotiations and trade missions

Women

  • NZIBF welcomes further discussion about the ways in which women entrepreneurs may be encouraged and incentivised to participate more – and more successfully – in international trade
  • NZIBF supports the development of appropriate policy solutions including potentially the negotiation of specific provisions in FTAs which help to empower women and women-led businesses to be more successful in cross-border trade
  • NZIBF recommends that all negotiating teams should, as far as possible, include equal gender balance and that MFAT should be required to report annually on steps taken to ensure that women are appointed to Lead Negotiator roles
  • NZIBF further suggests that women business representatives should be included as part of official delegations participating in FTA negotiations and trade missions

Maori

  • NZIBF supports the continuing safeguarding of the Treaty of Waitangi in all New Zealand FTAs
  • NZIBF supports the negotiation of specific chapters in FTAs, which seek to facilitate trade and investment between indigenous groups and the development of other policy measures which support capacity-builidng for indigenous groups to participate more successfully in trade
  • NZIBF suggests that an appropriate body of Maori representatives should be consulted formally about ways of providing for the needs of Maori in trade negotiations (and trade agreements) and be invited to submit a report, to form part of the Government’s National Interest Analysis, on the extent to which negotiated FTAs have met these objectives.

Transparency and accountability

NZIBF welcomes the increased attention the Government has placed in recent years on developing outreach to business and public stakeholders. NZIBF has itself expanded its own outreach building on its established communications platform, notably through the TradeWorks website and social media.

NZIBF believes the Government could usefully make more background information available to the public about trade negotiations. While negotiating texts cannot be released, it should not be disadvantageous to provide plain language summaries of key issues, relevant background documents including where possible negotiating proposals and regular updates on the negotiating process in an accessible format. This would help to dispel some of the myths around trade policy making and develop public understanding and support for the negotiating effort. It would also be consistent with the approach used by many of our negotiating partners.

NZIBF sees scope to improve the overall governance framework for conducting trade policy especially in relation to engagement with business and other stakeholder groups. NZIBF recommends the re-instatement of the former Ministerial Advisory Group, first established during the earlier Labour- led Government and continued under National, to bring together key business interests with the Government at a senior level. To enhance its effectiveness and independence of thought, the Group should be co-chaired by a government representative and a Co-chair elected from the membership. Participants in this group could be expected to:

  • meet on a regular basis
  • include representatives of larger businesses as well as MSMEs, Maoriand women as well as members of civil society
  • be security-cleared to receive confidential updates on trade policy issues
  • assist the Government to determine prioritisation and resource allocation
  • have the scope and resources to commission and publish independent research relevant to trade policy
  • participate actively in the trade policy outreach programme to stake holders
  • participate in overseas missions and negotiating rounds.This would be a practical way not only to enhance the involvement of business and civil society representatives in strategy formulation and implementation, but also to empower business representatives to support the Government and agencies directly in the outreach effort.

Recommendations to the Ministry of Foreign Affairs and TradeNZIBF recommends that the Ministry:

  1. note the NZIBF’s support for the objectives oft he“Trade for All”initiative
  2. note NZIBF’s support for continuity in trade policy as outlined
  3. consider NZIBF’s proposal to establish public/private working parties to address non tariff barriers in key markets
  4. consider NZIBF’s specific suggestions for the inclusion of progressive and inclusive elements
  5. consider NZIBF’s proposal that more information be shared in the course of trade negotiations
  6. consider NZIBF’s proposal that the former Ministerial Advisory Group should be reinstated with a renewed and re-invigorated mandate. 

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