Trade policy developments look positive for this year Stuff – 17 January 2011

‘It’s deja vu all over again.” Those famous words of American baseball player and philosopher Yogi Berra almost came true in 2010, the year when, for the global economy, things didn’t quite turn out as planned.

Rather than an intensifying global recovery, economic growth remained anaemic in all but developing Asia and serious problems persisted in the United States and the eurozone.

New Zealand’s own recovery was also weak, largely because the exchange rate makes it difficult for exporters to capture the full returns from rising commodity prices. Improving productivity and competitiveness must remain the key national economic goals. Reducing the costs of doing business overseas by eliminating trade barriers, improving logistics and dealing with behind-the-border issues become even more important in a continuing tight financial situation.

This year holds out the promise of further progress in critical trade negotiations that will secure and enhance New Zealand’s relationships with key markets. There is a political imperative in the US to complete the Trans Pacific Partnership negotiations by the end of the year: US President Barack Obama hosts Apec in Honolulu in November and a successful outcome to the second year of TPP negotiations would be a strong deliverable for him to announce at that meeting.

TPP now includes nine participants and there is strong interest from Japan and several other countries in the region. Whether TPP can become the preferred pathway to the Free Trade Area of the Asia Pacific and live up to its promise as a new generation trade agreement will depend on two things – first, the reality of the negotiating process will have to catch up with the high rhetoric; and second, there will need to be real substance on the table.

By “substance” I mean an agreement which makes a distinctive contribution to expanding trade, investment and sustainable growth, addresses squarely stakeholders’ concerns and reflects the way business is done in the region through the development of increasingly sophisticated supply and value chains.

Two opportunities for New Zealand to discuss the negotiations with key partners will take place this year: The fourth US NZ Partnership Forum to be held in Christchurch on February 20-22 will bring together senior government, business and community leaders from both countries. The third Japan NZ Partnership Forum will take place in Tokyo on May 11-12, about the time the Japanese Government is concluding its internal consultation process about whether to seek to join TPP.

Ad Feedback Japan is the only Asian economy with which New Zealand does not have either an FTA completed or one under way. The proposals for opening up Japan under consideration by Prime Minister Kan’s government are deeply significant and deserve every encouragement from New Zealand.

Three other negotiations need to be watched carefully. New Zealand’s negotiation with Korea has entered into difficult territory and differences over agriculture need to be resolved. Now that Korea has concluded FTAs with both the European Union and the US the way ahead might be clearer. The negotiation with India made steady progress last year and could be ready for conclusion by the end of this year. The opportunities for increased trade and investment with India need further consideration by NZ Inc. India’s growing importance as a global economy has not yet been fully factored into New Zealand’s strategic considerations.

This year also sees the start of negotiations with Russia, Belarus and Kazakhstan. The implications of this negotiation are also profound, providing New Zealand with a “first- mover advantage” in these emerging markets which are largely unknown to all but the largest players.

Relations with other traditional, established partners will also be further developed this year.

The Australia New Zealand Leadership Forum, delayed on account of last year’s federal election, will be held in Auckland in April.

Australia is without doubt our most important relationship: Implementing the single market and building on the ground-breaking Australia-New Zealand-Asean FTA will be high on the agenda.

Thanks to Trade Minister Tim Groser and his predecessors and the talented team at MFAT, New Zealand’s trade diplomacy has been at full throttle in recent years. New Zealand is now in the fortunate position of having a range of existing FTAs or processes under way with most key partners. Trade agreements do not provide the whole answer to offsetting broader economic imbalances in global markets. But they can make doing business easier and level the playing field between competitors.

Trade agreements can also help manage what Colin James has called the “new globalisation”, by addressing inequalities within economies and by improving the operation of supply and value chains. The nature of global business is changing. To prove Yogi Berra wrong in 2011, leadership, investment and co- operation will be required by both the Government and business.