Todd McClay – your trade mission, should you choose to accept it …

As published by Newsroom 19 December 2023

By Stephen Jacobi

“Twas the week before Christmas,

When all through the house

Not a creature was stirring,

Except busy trade officials …

‘Tis the season to be “BiM-ing”* and the NZ International Business Forum has sent its Christmas wish list to newly installed Trade Minister McClay.  At time of writing the Minister is already in Delhi to meet his Indian counterpart in a bid to open a new dialogue on trade.  In Singapore he will re-connect with New Zealand’s trusted partner in all things trade from CPTPP to DEPA and many other acronyms.

The Minister’s first overseas visit takes place at a difficult time.  The value of New Zealand’s exports began to fall this year after a period of continuous (and surprising) growth even during the Covid period.  It appears the global economy has caught up with us – sluggish growth and a delayed recovery in key markets are taking their toll, although forward predictions, including in China, are more optimistic.  This means we cannot afford to let up on the drive to eliminate trade barriers (especially of the non-tariff kind), open new markets and seek updated trade rules.  Minister McClay is already on record as saying trade agreements need to lead to more trade – if he can keep to that, he will be a stand out amongst his peers.  When the European Union can promote itself as the global leader on free trade, you know there must be a problem somewhere.

In this difficult context we should put aside notions of “peak FTA” and continue the work of seeking ambitious, high quality and comprehensive free trade agreements. That’s our number one wish. As the Government looks to make deep cuts to the public service, our trade agencies especially MFAT, MPI and national marketing department NZTE need to continue to be well-resourced.  There’s no doubt it has become harder to negotiate transformative FTAs, but there is plenty of work to do upgrade and expand existing agreements, especially CPTPP, and fully implement the ones we already have.  Completely new agreements can take years to initiate and conclude – our long-cherished hopes for India are a case in point – so we need to start early.   

There’s little doubt that securing better market access remains a fundamental concern for exporters.   At a time when a lot is said about diversification, we should remember that this is possible only when a market is open. It’s no accident that China has become our number one market – not only has the Chinese economy grown at extraordinary pace, but the market was also opened to us.  In January 2024 the last remaining “safeguards” on milk powder will be removed giving us tariff free access for dairy products.  Compare that with the fact that around the world 87 percent of global dairy consumption is subject to tariffs of 10 percent or more, costing dairy exporters more than $1.5 billion each year.   Non-tariff barriers add to this cost – $7.8 billion per year for dairy alone, according to recent research.  Addressing these barriers is far from straightforward but the previous Government did some good work here notching up $1.4 billion in wins from eliminating 14 NTBs, nine of which were in the food sector.  This work needs to be continued.

If the incoming Government wants big wins, it should focus more on digital and paperless trade – removing the costly and cumbersome paper documentation which accompanies goods as they move around the world.  An inadvertent loss of or error in a single paper document like a bill of lading can hold up clearance of shipments and require the couriering of a replacement.  This happens more often than might be expected.  Despite the obvious savings to be had in time and cost, little has been done to address this opportunity.  MBIE in particular has been completely missing in action. This requires working with trade partners (especially Singapore), boosting the capacity of businesses to adopt digital processes and reviewing domestic legislation. 

Public concern about trade liberalisation has calmed down in recent years.  Gone are the protests about “TPP stealing our fish”.  A renewed bipartisanship on trade has helped, which we hope might endure.  But this is not a time for taking for granted continuing public understanding and support.  There is more that can be done to make information about trade negotiations more readily accessible and understandable.  Business organisations have a role to play in this.  Maintaining outreach to te ao Māori makes sense given the continuing growth of the Māori economy and increasing opportunities arising from trade with other indigenous groups.

Lastly, key relationships need to be nurtured as the Minister is doing this week.  Each relationship has its own importance but a few stand out – Australia, our closest partner and friend; China, our largest export market requiring continuing careful management in view of differences on some sensitive issues; the United States, as a critically important partner, even in the (regrettable) absence of an FTA; India, where there is new value to be gained from enhancing our economic partnership; Asia – especially Japan and ASEAN – and the Asia Pacific more generally as the primary, although not exclusive, focus of New Zealand’s external economic policies; and the UK and EU as our newest FTA partners.

Minister McClay comes to his new portfolio with many mountains to climb, but he does so as an experienced mountaineer.  His predecessor Damien O’Connor has left a strong legacy on which to build.  The times however are less favourable than when the Minister was last in office.  After this current trip, we hope the Minister and his hard working trade officials get some rest.  If they need reading matter for the holidays, they know where to look.  

*Note: The NZIBF Brief to the Incoming Minister of Trade (BiM) can be found at https://www.tradeworks.org.nz/nzibf-releases-brief-to-the-incoming-minister-of-trade/