Trade Update August 2023
As often happens during the European and North American summer breaks the intensity of trade policy negotiations have eased up a bit. While there has been intensive lobbying on CPTPP with the Chinese Ambassador even going public in support of Beijing’s application. So, in New Zealand there has been time for current and potential future trade policymakers to reflect on the future – this month we take a look at the recent comments from the National Party’s trade spokesperson, Hon Todd McClay, and how they may stake up.
There was something of a contrast between comments by New Zealand’s senior trade policy official Vangelis Vitalis from MFAT in his “end of the golden weather” speeches that he is delivering around the country and the views of his potential future Minister Hon Todd McClay who recently penned an op-ed which gives some hints at National’s future trade policy direction should National be back on the Treasury benches.
Vitalis is suggesting that the scope for new FTAs is more limited now that the UK and EU FTAs have been concluded, the WTO is not delivering, and the evil forces of protectionism are on the rise. He notes that the US leadership in the trade policy space was now absent and many were challenging the belief that trade was a good thing. “We are having to reorient the way we think about international trade policy in the absence of that [US] firm and clear leadership that constructed the system on which we depend on significantly today.” Vitalis is suggesting that New Zealand would have to be more creative and start thinking about how the country could work with a coalition of economies to break down barriers. It is hard to disagree with this view from the wide Mr. Vitalis but it is a bit sobering.
Vitalis’ comments of course come on the back of a very successful period for New Zealand trade policy from the current government. Aside from the UK and EU outcomes, CPTPP was saved and expanded to include the UK. Several others have applied for membership. The China FTA and AANZFTA upgrades have been completed and the Digital Economic Partnership Agreement finalised.
The Opposition Trade and Agriculture spokesperson Hon Todd McClay gave his perspective in a recent op-ed. McClay noted the importance of trade for economic prosperity and celebrates the achievement of the current FTA network. He notes that the world is not standing still and that there are major dramatic shifts. “Chinese consumers will become more wealthy and will remain important for New Zealand. But [China] will not be growing as quickly as in recent years and its population is about to undergo a dramatic shift.” McClay suggests “India, Pakistan, Bangladesh, Sri Lanka and a number of countries in the Middle East and Africa are going to become more important.” He also states that “Latin America is going to be even more interesting as an opportunity than it is today”.
Like Vitalis, McClay sees the need to reposition New Zealand trade and foreign policy “to do better in this new world”. On the negotiation front, McClay wants a reset of the negotiations with the Gulf Cooperation Council (by beginning negotiations with GCC Member, the UAE) and the Pacific Alliance in Latin America. McClay wants to promote formal liberalisation discussions with the US and India and notes that “we need to be smarter in our strategy and patient with our expectations”.
McClay sets out an immediate goal of looking at how New Zealand can partner with Ukraine to help build the Ukrainian economy that has been so damaged by the war with Russia. “We are very complimentary as economies and have much opportunity for agricultural collaboration.” McClay thinks that New Zealand should support and champion Ukraine’s fuller participation in the world’s trade architecture “and look to welcome them for strategic reasons to existing trade deals”. That would seem to be reference to Ukraine’s interest in CPTPP membership.
This is all exciting stuff and it suggests that MFAT should not be downsizing its trade policy operation any time soon.