It is an increasingly uncertain world…
The announcement overnight that the UK is going to have an early election adds further uncertainty to an already very uncertain environment for trade policy. No doubt future FTAs and the treatment of agriculture will form part of the election campaign in the UK. The New Zealand media is not reporting on this but trade links with New Zealand are an election issue also in France with National Front Leader Marine Le Pen actively campaigning on a platform to oppose a FTA between the EU and New Zealand.
Then there has been the marked deterioration in relations between the Trump team and Russia sparked by the US retaliation over Syria’s use of chemical weapons on civilians. Does this mean the MFAT dream of a FTA between New Zealand and Russia gets pushed further back in the freezer?
Meanwhile on the otherside of the world there is political instability of another kind. South Korea and Japan are desperate to maintain the US security umbrella in the face of a mounting threat from North Korea. The US is happy to oblige but is talking trade in the same breath. Vice President Pence has been talking about re-negotiating the Korea US FTA. What will this mean for the new market access New Zealand negotiated with South Korea in the Korea-New Zealand FTA? And in Japan it seems the Government there is trying to resist pressure from the US to negotiate a bilateral deal. There are increasing signs that Japan is wanting to keep TPP alive (without the US at this point). This seems to align with New Zealand interests. The US needs Chinese help to try and rein in the North Korean regime. It is therefore no surprise that the Trump Administration has toned down the rhetoric about trade with China. This is a good thing.
Tensions between Turkey and the EU are on the increase. Why is this an issue for New Zealand? If we begin a FTA negotiation with the EU we have to begin a similar negotiation with Turkey. Turkey is part of the EU Customs Union for manufactured goods. This means that Turkey will have to apply the import regime for manufactured goods from New Zealand that the EU negotiates with New Zealand. But will Turkey stay part of the EU Customs Union. It is part of the Customs Union because it wanted to eventually join the EU. But is this still the case? President Erdogan seems to have won new powers in the weekend referendum. He is talking about re-introducing the death penalty. This would mean that turkey cannot join the EU. What would this mean for the Customs Union? And might this mean that Turkey is more or less interested in negotiating bilateral FTAs with countries such as New Zealand?
We have commented before that while Ministers seem confident that this negotiation has been unblocked we would like to see some real evidence of this. Ministers remain adamant that a political deal has been done and that all that needs to happen before the FTA between New Zealand and the GCC members is signed is work on legal verification. We understand that the test of this position will be a meeting of GCC Foreign Ministers around 10 May where this position will hopefully be formally adopted. If it is not our new Foreign Minister will have an immediate challenge on his or her hands. Murry McCully has put huge effort into getting this negotiation back on the tracks.
NZ EU FTA
One of the most interesting elements of the potential negotiation between New Zealand and the EU is the way in which negotiations will take place. Both sides claim that they want to be more open with their publics over what is being negotiated. This is EU policy and is part of the new New Zealand trade strategy. An early test of this commitment is the treatment of the scoping study that has been completed by both sides. Why has this not been made public? What does it say about agriculture, about Geographic Indications, about investor state dispute settlement? And how does the study completed with New Zealand compare with that negotiated with Australia? Is the language on agriculture the same? And what about trade in services? Has New Zealand been as aggressive in that space as Australia?
Meanwhile both sides are seeking mandate to actually begin negotiations. This is not much of an issue here in New Zealand but in the EU it is complicated by the French, German and now UK elections. The UK is still part of the EU even though it is trying to leave.
Support for TPP minus one seems to be growing in Japan. There are some important meetings coming up including, we understand, high level discussions between New Zealand and Japan that might advance this idea. Will Malaysia, Vietnam and Mexico support this idea? Meanwhile the idea of the Pacific Alliance (Mexico, Peru, Chile and Colombia) negotiating FTA links with our part of the world seems to be gaining traction.
The formal US position is that it will not be part of TPP but it is open to negotiating “good deals” with the individual TPP members. The US already has agreements with several TPP members but there is talk about some of these being re-negotiated. Where does this leave New Zealand? How should New Zealand respond to any advances from the US? Or should New Zealand be actively seeking such a negotiation? New Zealand has a more liberal trade regime than the US and there aren’t any trade balance issues to worry about between the US and New Zealand.
China FTA Upgrade
The FTA upgrade received a strong boost by the visit of China’s Premier in late March. Negotiations are due to begin in April. If you have not been consulted on improvements you would like to see in the FTA now is the time to approach MFAT.
Ministerial advisory Group on Trade
The first meeting of the new Ministerial Advisory Group on Trade is due in early May. This was an initiative announced as part of the new Trade Strategy. Export New Zealand is well represented.