The best of times and the worst of times for trade

This has been an action-packed few weeks for trade, with developments both to uplift and cast down observers of the international trade scene; while there is plenty of determination out there for pressing on with trade liberalisation, rejecting protectionism and for supporting the WTO, equally the risks arising from the US-instigated tariff war and its isolationist approach to trade more broadly continue to loom large.

Earlier this week New Zealand and the European Commission held a first round of bilateral FTA negotiations; as we argued in our 2015 paper, a high-ambition agreement offers plenty of win-win outcomes for both sides, especially in developing innovative global value chains into the Asia-Pacific as well as deepening our trade ties in agriculture, niche manufacturing and services. It is, of course, too early for progress on the substance, but in keeping with New Zealand’s new ‘Trade for All’ ethos, the New Zealand lead negotiator emphasised earlier this week that both sides expect the FTA to be a “progressive and inclusive” agreement that “works for the benefit of all members in society”.

Separately, the UK Secretary of State for International Trade on Wednesday announced the launch of public consultations on an FTA with New Zealand, putting us among the first few contenders for a new trade agreement, alongside the US and Australia, once the UK has left the EU next March.   While the process for agreeing the post-Brexit UK-EU trade relationship remains fraught (and consequently so too does the scope of any future British trade-negotiating flexibility), an ambitious FTA with the UK, which sets new benchmarks for services, digital trade and other areas, would provide another valuable plank in our global trade platform.

The UK has also signalled its interest in acceding to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Three CPTPP members – Japan, Mexico and, just this week, Singapore – have now ratified the agreement, with New Zealand, Australia and Viet Nam well along the path. It looks likely that the CPTPP will enter into force early next year. (This is particularly welcome given that the EU and Japan have this week finally signed their bilateral FTA – a “mega-agreement” that takes in one-third of global GDP – under which the EU would enjoy a significant margin of preference for beef in the Japanese market if CPTPP were not in force.) At the same time, others including Thailand, Indonesia, Colombia, Korea and Taiwan have indicated an interest in joining, and accession talks are likely to start next year. Further talks are also underway with partners in Asia (the Regional Comprehensive Economic Partnership) and Latin America (New Zealand’s associate membership of the Pacific Alliance).

This positive forward momentum casts into stark relief, however, the dismal state of other parts of the trade ecosystem.   As we noted in our last blog, the United States seems to want to move away from the rules-based global trading system it was instrumental in setting up in the aftermath of World War II. Its attitude to the NAFTA re-negotiation and its tariff actions (including recent threats of new tariffs on autos, and the launch of an investigation into uranium imports) suggest that perhaps it even wants to disestablish longstanding global value chains.   Ironically, US antipathy has generated a wave of responses from others actively seeking to reinforce the existing architecture and reject protectionism, including in the past few weeks a leaked proposal from the EU to reform the WTO’s dispute settlement system (long a bone of contention for the US), a statement from the EU and China on Monday affirming their commitment to the multilateral trading system, and perhaps most poetically, a Cabinet reshuffle in Canada which has seen the trade minister re-branded as the “Minister for International Trade Diversification”. Indeed, we are seeing the best and worst of times for trade.

This post was prepared by Stephanie Honey, Associate Director of the New Zealand International Business Forum