NZIBF releases Brief to the Incoming Minister of Trade

DECEMBER 2023

Introduction                                                                       

This paper provides a briefing to the incoming Trade Minister, Hon Todd McClay. It sets out the collective views of the New Zealand International Business Forum (NZIBF) on the purpose and future of trade policy.  It reflects discussion with political parties prior to the 2023 general election.

About NZIBF

• 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 representing many exporters of all sizes  (a list of Board Members is in 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 New Zealand’s key international business relationships and conducting activities to promote New Zealand’s competitiveness. NZIBF receives no direct government funding for its operating budget, but from time to time receives funding for jointly funded projects. Funding in respect to the policy advice and support which NZIBF provides to the New Zealand members of the APEC Business Advisory Council (ABAC) is provided by both NZIBF and the Ministry of Foreign Affairs and Trade (MFAT).

• The NZIBF Board appreciates the opportunity to meet with the Minister on a regular (at least six-monthly) basis which has been the pattern for some years now.

Background and context

• The successful implementation of New Zealand’s trade policy over the last thirty years has provided for continuing improvement in the ability of New Zealand companies to do business internationally. New market opportunities have been opened up as tariffs and other barriers have been reduced. Exporters have been able to trade with greater certainty due to an improved framework of rules.  The work of Ministers and government agencies, especially MFAT and MPI is highly appreciated and needs to continue to be well-resourced in what has become a highly contestable environment.

• NZIBF does not subscribe to the notion of “peak FTA”. The long period in which New Zealand has been able to negotiate transformative free trade agreements (FTAs) is, however, drawing to a close and securing further trade liberalisation from similar arrangements with significant partners is likely to prove more difficult.  Even so, NZIBF has not given up on the cause of trade liberalisation or securing future, high quality and comprehensive[1] agreements, which can take considerable time to develop, and which continue to create significant opportunities for exporters. In this context, we were disappointed that our June 2021 research into possible new FTA partners[2]. was not taken more seriously by the previous Government and we welcome the incoming Government’s ambition in this area. 

• New Zealand is signatory to a number of plurilateral agreements including CPTPP, RCEP and DEPA[3], for which there is continuing interest in accession, expansion and future upgrades.  Accessions hold out opportunities for further liberalisation (for example the prospect of Sri Lanka seeking to join RCEP, or Korea to join CPTPP). Accessions can also raise risks to current market access gains, with the UK’s accession to CPTPP being a case in point[4].  It is important that future accessions do not further diminish the quality of existing market access outcomes.

• New Zealand’s own trade policy positions are also influenced by public stakeholder concerns about climate, inclusion and other issues.  NZIBF supports initiatives aimed at securing public understanding and support for trade and itself devotes resources to that end through its TradeWorks website and public commentary, as do individual NZIBF Members.

• The issue of digital sovereignty has also arisen in relation to the Treaty of Waitangi Commission findings on the CPTPP e-commerce chapter.  NZIBF is concerned that in seeking to respond to the Commission’s findings, New Zealand’s long-standing positions supporting free flow of data and opposing data localisation may have been weakened without adequate public discussion and input from a wider range of business interests, including Māori and non-Māori digital businesses.  Seeking to re-negotiate past commitments, such as in the context of the current review of CPTPP, also runs the risk that our partners may seek to re-negotiate areas of particular interest to New Zealand such as market access.  

• Meantime, for New Zealand exporters, the trading environment remains turbulent: they continue to face increasing geo-political risk and a range of barriers and distortions in international markets, particularly remaining high tariffs in some sectors, non-tariff barriers (NTBs) and trade-distorting subsidies. New areas of concern in the digital economy (e-commerce, paperless or data driven trade and cross border data flows) and in the nexus between trade and sustainability (including but not limited to carbon border adjustment mechanisms or CBAMs) are becoming apparent and will require more attention by the incoming Government.  NZIBF Members are involved in trade and climate-related initiatives such as green shipping and carbon accounting.

What is the purpose of trade policy?

• Successive governments have recognised that trade underpins the success of the NZ economy by providing jobs and livelihoods, sustaining local communities and making available the resources that are deployed for investment in social policy.  During the Covid-19 pandemic, trade helped to sustain the domestic economy while in lockdown.

• While Governments inevitably have multiple, sometimes competing, policy objectives to pursue, NZIBF Members agree that the primary objective of trade policy should be to deliver commercially meaningful value by removing or reducing barriers to trade and investment and reducing the costs and complexity of doing business internationally.   In this way value can be created for exporting (and importing) companies and for their workers, for local companies seeking input into manufacturing processes or foreign investment capital to expand, for consumers who gain access to a wider range of goods and services at competitive cost and for the country as a whole, through improved resource allocation and job creation.

• While it is accepted that trade and other policy objectives such as care for the environment need to be pursued in a complementary way, NZIBF is of the view that a better balance between commercial and other policy objectives needs to be restored.  The primary goal of trade policy should be trade creation – for trade to be more sustainable or more inclusive, trade has to take place. Trade agreements are not primarily designed to address environmental issues or promote social inclusion or equity, which can also be addressed directly by domestic policy measures or other international agreements. 

What should be the incoming NZ Government’s trade priorities?

Market access barriers for both goods and services remain the fundamental concern for NZIBF and New Zealand exporters generally.  NZIBF Members believe the incoming Government should continue to attach high priority to maintaining and expanding trade relationships, removing tariffs and trade-distorting NTBs, establishing effective trade rules and reducing the costs of doing business through effective trade facilitation – through whatever means seems the most effective.  Actions the incoming Government could take include:

• Reinforcing the importance of the WTO and the rules-based trading system, including by continuing to engage in multilateral rule-making and dispute settlement, participating in plurilateral negotiations in the WTO where there is a strategic or business interest in doing so, and communicating more with business about the WTO agenda
• Continuing to expand and upgrade the suite of NZ’s existing FTAs, including through accessions to plurilateral agreements (CPTPP, RCEP and DEPA) and maximising the benefits from existing agreements, especially where some sectors continue to face trade prohibitive tariffs in some FTA markets, utilising enforcement mechanisms/dispute settlement where necessary
• Concluding comprehensive and ambitious outcomes from existing negotiations (including with the Pacific Alliance and Gulf Cooperation Council) and negotiating new FTAs where this is possible: where it is not possible, putting in place processes and resources for strengthening economic relationships with target markets
• Maintaining involvement in voluntary and non-binding fora such as APEC and OECD, and their corresponding business advisory bodies such as ABAC, which provide the opportunity for exploring new ideas with major partners and promoting well-informed international discussion about the economic advantages of trade
• Exploring new avenues for co-operation such as through IPEF on trade facilitation, digital and NTBs, provided these initiatives complement, and there is coherence with, existing commitments and approaches (see also paragraph 21 below).

Non-tariff barriers, which are costly to resolve, will require increased attention.  NZIBF Members welcome the support MFAT, MPI, MBIE, NZTE and other agencies pay to assisting exporters to understand regulatory settings in offshore markets and to addressing issues notified by exporters.  Actions the incoming Government could take include:

• Expanding the information made available to exporters about market access requirements in offshore markets
• Continuing to resource the Export Helpdesk, seeking to resolve individual NTBs at the bilateral level where required and providing transparency of this work including through regular reporting of progress, plus an annual published inventory of both resolved and unresolved NTBs
• Taking opportunities (eg through IPEF or through the consultative mechanisms in existing FTAs) to build further on APEC’s (non-binding) disciplines to ensure non-tariff measures (NTMs) do not become trade-distorting NTBs.

An increasing focus on sustainability is also impacting the trade agenda. New Zealand’s exporters are well placed to meet increasing customer and consumer demands around sustainability, but NZIBF Members are concerned that the inter-section between trade, climate and sustainability policy could become a new form of protectionism, if not advanced according to WTO disciplines. Actions the incoming Government could take include:

• Developing greater public-private interaction and joint engagement on trade and climate and other trade-related responses to advancing environmental protection, including trade in environmental goods and services, supporting a principles-based approach to the development of appropriate standards and requirements and promoting New Zealand’s reputation and credentials abroad. 

NZIBF Members also see the value of more concerted and decisive action to encourage end to end paperless/data-driven trade, removing the need for paper documentation to accompany goods trade. The current framework for paperless trade is fragmented and disjointed. Actions the incoming Government could take include:

• Providing stronger leadership and multi-sector governance of a national initiative to develop secure and trusted end to end paperless/data-driven trading to and from New Zealand, encompassing the current regulatory, commercial and financial documentation.  This includes removing any domestic regulatory obstacles to paperless trade and reviewing the case for the adoption of provisions of the UNCITRAL Modern Law on Electronic Transferable Records (MLETR).

Public understanding and support for trade is vital for the Government to make the necessary resources available to conduct an effective trade policy.  There is scope for greater co-ordination of this effort to promote the benefits of trade to local communities.  Actions the incoming Government could take include:

• Co-investing together with business in greater public communication about the benefits of trade in terms of job creation and sustainable and inclusive growth as well as the importance of addressing transaction costs within the supply chain to reduce the cost of living burden on households
• Reviewing the role and governance of the Trade for All initiative to promote transparency and accountability
• Maintaining traditional protections for the Treaty of Waitangi along with the right of governments to regulate in the national interest
• Maintaining funding for outreach to te ao Māori and ensuring timely, regular and culturally appropriate consultation with Māori interests on trade policy, while reviewing the Government’s digital trade policy positions in the light of the findings of the Treaty of Waitangi Commission.

NZIBF Members are concerned about the future level of resourcing for trade policy and value the work of government agencies, including MFAT and MPI, on key trade issues. Providing private sector representatives with greater understanding of resource allocation decisions and relative prioritisation of specific issues could help focus attention where actions are likely to deliver a greater return.  Actions the incoming Government could take include:

• Engaging with NZIBF and other business organisations on strategic trade policy choices where resource allocation and prioritisation are critical and seeking support for adjustments to strategy where required.

Key bilateral and trade relationships

Relations with Australia

• NZIBF acknowledges that Australia is New Zealand’s closest partner and friend, sharing similar outlooks and approaches to trade policy.  NZIBF supports the ongoing development of the closest possiblerelationship building on CER and the Single Economic Market and recommends the incorporation of a new digital economy pillar in CER as proposed by the Australia NZ Leadership Forum.

Relations with China

• NZIBF Members appreciate the careful way in which successive governments have managed the relationship with China, our largest export market. NZIBF understands the incoming Government will need from time to time to express views on some sensitive issues which reflect New Zealand values.  This need not deter from the goal of a strong and vibrant economic relationship which has considerable room for further expansion.  NZIBF has been concerned that calls for “diversification” away from China might be mis-interpreted: for many sectors the level of market demand available in China does not exist in other available and open markets.  NZIBF recommends continuing funding for the work of the NZ China Council.

Relations with the US

• The United States is a critically important partner for New Zealand, even in the absence of an FTA.  IPEF provides a potentially useful opportunity to encourage US economic engagement in the Asia Pacific region in the absence of US willingness to rejoin CPTPP.  The failure to conclude the IPEF Trade Pillar at APEC in San Francisco is disappointing. Whether the other IPEF pillars can deliver binding, commercially meaningful outcomes, consistent with other agreements, is as yet unclear, but NZIBF supports continuing New Zealand engagement in IPEF to that end. NZIBF also recommends continuing funding for the work of the NZ US Council

Relations with India

• NZIBF welcomes the ambition the incoming Government brings to the enhancing trade and economic partnership with India.  NZIBF agrees that a binding and comprehensive FTA is the ultimate goal.  NZIBF sees value in a range of medium term engagements aimed at enhancing the economic relationship, creating a platform for further discussions and identifying the future contribution New Zealand can make to India’s ongoing development.  Along with the India NZ Business Council (INZBC), NZIBF recommends the establishment of a Strategic Advisory Panel, comprised of government and private sector representatives, to help guide this work and the allocation of specific funding to this end.

Relations with the Asia Pacific

• NZIBF is convinced that the Asia Pacific region[5] should be the primary, although not exclusive, focus of New Zealand’s external economic policies. New ideas are needed to boost New Zealand’s engagement in the region. Improving “Asia literacy” amongst exporters and the public large is critical as is promoting people to people links. In this context NZIBF recommends continuing funding for the Asia New Zealand Foundation.  NZIBF also recommends the incoming Government evaluate the case for building a new trade route, the “Southern Link”[6], across New Zealand from Asia to Latin America.

Relations with the UK and EU

• NZIBF welcomes the entry into force of the NZ/UK FTA as a high quality and comprehensive agreement.  While the NZ/EU FTA delivered differing market access outcomes for different sectors, NZIBF supports New Zealand’s prompt ratification of the FTA.  NZIBF further urges the Government to press for improvements in the FTA’s market access outcomes as the Agreement is progressively implemented and reviewed.

• NZIBF Members would welcome the opportunity to meet with the Minister as his schedule allows to discuss these matters.

NZIBF

December 2023

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[1] “Comprehensive” is defined as including all sectors of export interest to New Zealand, including agricultural products, without a priori exclusions.

[2] See “Wanted! New FTA Partners”, prepared for NZIBF by Sense Partners (June 2021): https://www.tradeworks.org.nz/wanted-new-free-trade-agreement-partners/

[3] CPTPP = Comprehensive and Progressive Agreement on Trans Pacific Partnership; RCEP = Regional Comprehensive Economic Partnership; DEPA = Digital Economy Partnership Agreement (DEPA).

[4] This concerns the diminution in the quality of existing access as CPTPP Tariff Rate Quotas have not been expanded to include the UK.

[5] NZIBF prefers the use of the more familiar and inclusive term “Asia Pacific” rather than ill-defined “Indo Pacific”.

[6] The Southern Link is an initiative proposed originally by the NZ China Council.