Friday, February 23, 2024

Multiple trade challenges facing McClay, trade expert says

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The new minister will have plenty on his plate, not least in getting producers to capitalise on deals that are already in place, says a seasoned trade negotiator.
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Long-time trade negotiator Stephen Jacobi predicts the new trade minister can expect to have a full calendar as he revisits his role, with multiple opportunities and challenges presenting themselves in the new year.

Minister for Trade Todd McClay will be reacquainting himself with a role he held under the Key-English government from 2015 to 2017. 

Predicting that McClay represents a safe pair of hands for the role, Jacobi said despite some of the big trade deals getting over the line in recent years, there is still plenty of opportunity globally for refining the free trade agreements (FTAs) New Zealand has and brokering new ones.

“I don’t subscribe to the argument that NZ has reached ‘peak FTA’. 

“There are still multiple places we can look to for further agreements, including the likes of Sri Lanka, UAE, the Pacific Alliance.” 

He did, however, agree the large, disruptive agreements signed off in the past decade were at their end.

“It is not so much that the low-hanging fruit has been picked, more the high-hanging and ripe fruit, with the likes of China, the CPTPP [the Comprehensive & Progressive Agreement for Trans-Pacific Partnership], the UK and EU FTA agreements, they are all potentially transformational FTAs.” 

His trade consulting company would welcome the opportunity to sit down with the  government and come up with a wish list of trade agreements that could be targeted in coming years.

They could include a list of countries and regions as disparate as West Africa, Switzerland, Norway, Sri Lanka, Pakistan, and Bangladesh.

One of the incoming prime minister’s big promises just prior to the election was to have an FTA with India sorted by the end of next year, something some insiders believe may prove overly ambitious.

“The previous government took an FTA with India right off the table after they didn’t agree to dairy. To have it on again as a goal is a good thing.”

 However, he suspects it may take longer than the new PM’s timeline.

“Todd McClay is well aware of the dynamics at play here. It will require a ministerial visit by him, and then the PM at a later date. We would like to see a joint government and business community partnership to do what is necessary there.”

Earlier FTA negotiations broke down over NZ seeking access for dairy products into India, something the Indian government steadfastly rejected.

Jacobi said it would also be important for the incoming minister to champion more focus on capitalising on FTAs that are already established.

“Opening markets using FTAs is one thing, but doors like that need someone to go through them. 

“Generally, NZ does a good job in opening them up, but has not done such a great job following through with trade.”

He pointed to Malaysia, a country with which NZ has an FTA.

“They are crying out for more exporter engagement.”
A Farmers Weekly visit to South Korea in April confirmed NZ’s low level of red meat exports there.

This is a market where tariffs have been progressively declining since signing in 2015, moving to 0% in 2030. 

Despite that, and South Korea being a country enjoying a high per capita meat consumption seeking high quality, low fat red meat products, NZ is well out-competed by United States and Australian product.

Jacobi said there is a need for greater co-ordination between NZ exporters and NZ Trade and Enterprise to exploit the opportunities already out there.

Helping to fix the World Trade Organisation (WTO) will also feature on Todd McClay’s “to do” list early on, Jacobi predicted.

The organisation has been broken since the US disabled its appellate body by blocking the appointment of new judges, meaning it lacks a quorum for resolving disputes.

A conference in late February may provide a means to get the organisation back on track, a priority for NZ as a small trading nation.

There is also the first review of the CPTPP underway; it could see China coming on board, along with the likes of Taiwan, Ecuador, Uruguay and even Ukraine.

“You could say that may appear to disadvantage NZ given our FTA with them. But any agreement that has China on board anchors them to a system with trade rules, it provides more security and order to keep them in line, and has them at the table.” 

The deadline for CPTPP submissions on the review is late January 2024.

Jacobi said the US will remain a perplexing challenge for the new minister, after that country pulled out of the Transpacific Partnership, derailed the WTO, and most recently blew up the Indo-Pacific Economic Framework (IPEF). 

Due to be signed off at the San Francisco APEC meeting with 14 participant countries including NZ, the deal’s “trade pillar” was not ratified with many counties not willing to meet US demands about its impact upon US workers.

“I think we can expect to see a lot of continuity in NZ’s efforts across the CPTPP, WTO and IPEF with the new minister,” Jacobi said.

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