The sky is definitely not blue for the global trading system. Are these the worst of times? Perhaps. Can they get better – who knows?
In his annual report to the AGM of the NZ International Business Forum, Chair Malcolm Bailey writes:
“Around the world New Zealand exporters continue to undertake profitable business, somewhat against the odds, but the outlook for trade liberalisation is bleak.”
US team blows whistle on global trade referee
At the apex of widespread concern about the outlook for trade is the crisis in the World Trade Organisation’s Appellate Body. The Economist says the Appellate Body is “one of those institutions that most people have never heard of, but which will be missed when it is gone”. The Appellate Body hears appeals from the WTO’s trade dispute settlement system and the US Administration is blocking new appointments to the body to replace members who are retiring. Come 10 December, the Appellate Body itself will no longer be operational and the whole system risks slowly grinding to a halt. Some WTO members are trying to find a work-around, but there is little if any likelihood this can happen before the end of the year.
Does this matter? Yes, it does. While the US and other large economies might be able to foot it as the law of the jungle gradually prevails over trade law, smaller economies like New Zealand cannot. Using the current dispute settlement system we have taken on some of the world’s most powerful economies and won. We face a looming dispute with the EU and post-Brexit Britain about our tariff rate quotas for sheepmeat, beef and dairy products. We need the protection and rule of law that the WTO provides.
There is no argument that the dispute settlement system needs to be reformed. Indeed New Zealand, through Ambassador David Walker in Geneva, is leading this work. But blowing up the current system is not the answer.
Trade wars are not so easy to win after all
Meanwhile the trade war rumbles on. “Phase one” of a deal between the US and China is proving elusive. It now seems most unlikely that this sorry saga will be resolved before the end of the year. Other trade relationships may get caught up in the row.
Markets remain unsettled by the prolonged nature of the dispute. This has not led to global recession as some fear, but forecasts for global trade growth continue in the doldrums.
Market disruption has affected New Zealand exports of horticultural products, wool and wood. And no relief has yet been granted to the US tariffs applied on “national security” grounds to the tiny NZ exports of steel and aluminium.
Is there any hope for trade left?
That New Zealand exporters continue to do well in the current environment is testament to their smart thinking and the resilience of our small, open economy. There have even been some notable gains – a modest upgrade to the China FTA has been announced and an outcome to RCEP is on the cards, albeit for the time being without India. It seems trade liberalisation may yet be possible for those who seriously put their mind to it.
But time is running out at the WTO in Geneva. A number of negotiations have been mandated for conclusion by the end of the year, including fish subsidies and the long-standing moratorium on tariffs on electronic transmissions (eg streamed movies, e-books or even digitally-supplied services). In advance of the next WTO Ministerial Meeting in Kazakhstan in June, work continues on other important negotiations including on e-commerce, agricultural domestic support and domestic regulation of services.
What’s a grown trade advocate to do?
Tradeworks was established by the members of the NZ International Business Forum to explain the background to trade and to advocate for more open global markets and better trade rules. This past year along with other material we posted 26 blogs and videos on current topics including the trade war, Brexit, the NZ/EU FTA negotiations, WTO, APEC and digital trade.
Next year we will continue to pay close attention to the range of negotiations in which New Zealand is involved and we will work with our partners in New Zealand and around the world to create a more secure environment against which to do business. We’ll also be thinking ahead to New Zealand’s chairing of APEC in 2021 and stepping up our work with the APEC Business Advisory Council.
No, these may not the best of times for trade, but somewhere, over the rainbow, we may yet find that pot of gold !
This post was written by Stephen Jacobi, Executive Director of the NZ International Business Forum. Associate Directors Fiona Cooper and Stephanie Honey join Stephen in wishing all our readers the best for the holiday season and 2020.