REMARKS TO INDIA NEW ZEALAND TRADE AND ECONOMIC ROUNDTABLE

DELHI, 28 AUGUST 2023

STEPHEN JACOBI – EXECUTIVE DIRECTOR, NZ INTERNATIONAL BUSINESS FORUM

Opening remarks

It’s a pleasure for me and the entire New Zealand delegation to be in Delhi today just days since India’s magnificent moon landing.

These days India is literally shooting for the stars and we in New Zealand offer our warmest congratulations.

Our visit comes hard on the heels of the B20 and G20 meetings during which the eyes of the world have been focused on India and its extraordinary economic development.

I’m conscious too that for our friends in CII this has been an incredidly busy time and yet you have still been able to put together a substantive programme for us today with expert speakers and participants.

Our deep appreciation goes to CII and to Rohit Sharma, Geetha Nataraj and their teams for these excellent arrangements.

We New Zealanders have come to India to learn.

To learn more about India’s economic achievements and your plans for the future, and to learn how best to engage and co-operate, discovering hopefully in the process how we can play a part in India’s ongoing story.

We represent businesses from multiple sectors, drawn from all around Aotearoa New Zealand, and comprising strong representation from the Indian diaspora community which is playing such an important role in our society and economy.

We are ably led by my colleague Michael Fox and the India NZ Business Council but five business organisations have come together to plan this visit. 

That reflects a high degree of consensus between us, shared with our Government, that the relationship with India will be important for our future.

New Zealand may be far away, but we are not strangers to each other.

We are old friends – Commonwealth and cricket have long been unifying bonds and democracy is a taonga or treasure we share.

Today we are drawing closer together.

Our political links have been boosted by Ministerial visits in both directions, most notably by Foreign Minister Jaishankar’s visit last October, Foreign Minister Mahuta’s visit last in February and Trade Minister O’Connor’s visit this week.

Prime Minister Modi and Prime Minister Hipkins met in Papua New Guinea at an Indo Pacific Summit in May.

Prime Minister Hipkins says he intends to accept your Prime Minister’s invitation to visit Delhi next year – but first there is the matter of an election in New Zealand to deal with!

Both our countries are international citizens who care about the future of the world and our two countries’ place in it.

That leads us to co-operate bilaterally, regionally and within the framework for multilateral institutions.

That was made very clear to me when at the kind invitation of CII I was invited to participate in the Partnership Summit last March and to share views on the future of multilateralism.

In some ways however we are still getting to know each other.

New Zealand enterprises certainly are looking to forge new partnerships in the rapidly expanding Indian economy.

For some time, we thought that the pathway to an expanded relationship would be provided by a comprehensive free trade agreement.

Our governments explored this thoroughly, but it became clear that the time was not right.

New Zealand will always be interested in an FTA, but this is not on our agenda for this visit.

We are at the start of a journey which hopefully lead to much better and deeper mutual understanding and to a plan for continuing engagement.

We start that journey here today with all of you.

We are grateful to all who have come to meet with us and to those who have agreed to share their valuable perspectives. 

The focus is on trade and the economy in a global context which, seen from a small, open country in the South Pacific, is decidedly worrying.

The global pandemic, which struck us both and took a particular toll here in India, was a tragedy of the second decade of the millennium.

Equally as tragic is that just as we were beginning to find our collective way out of disease and lockdown – with India leading us strongly in this direction – we are now confronted with a pandemic of geo-political conflict and inflation.

Pandemic, plus geo-politics, plus inflation are a toxic mix.

We can see the results in the outlook for global economic growth – haltering and weak at best at 3.4 percent forecast by the IMF for 2023.

The WTO estimates that global trade will grow only 1.7 percent this year.

In many respects India is bucking this gloomy trend: the momentum in your economy is certainly to be admired: it is not what we see generally around the world.

And these are not the only challenges we face.

And above all this is the risk of dangerous climate change seen so vividly in the extreme weather events in both our countries in recent months.

It’s not as if there has been any shortage of warnings to us all from the science community.

They have told us that greenhouse gas emissions must peak by 2025, and must then be nearly halved in this decade, if we are to have any chance to limit future warming to an acceptable level.

This means that we will need, both at the international and domestic level, to go far beyond the steps taken to date if we are to avert a climate catastrophe.

There is certainly a significantly heightened awareness amongst business in New Zealand with about the need to raise our climate ambitions and to bring new solutions to the table to solve the climate problem.

The point is that these global challenges are far beyond the power of any one country, or any one government to solve – something I’m sure India is acutely aware of as Chair of G20 and a leader of the global South.

Our discussions today will focus on the bigger picture of our economic and business engagement.

First we will begin with a closer look at the economic situation around the world and in our respective countries, and consider prospects for bilateral trade between us.

Second, we will consider whether multilateralism through the WTO or regionalism through the Indo Pacific Economic Framework (IPEF) can work for us both.

Our collaboration in IPEF is a relatively new feature involving the two of us and one that holds out some promise of improved conditions for business amongst its fourteen member economies.

Third, we will take a look at how India and New Zealand are negotiating with third countries and whether there might be similarities or differences between our respective approaches.

Last, we will focus on that greatest contemporary challenge of them all – climate change – and what can be done multilaterally and bilaterally to meet this challenge and create a better future for our people.

We have a lot to get through in a short time !

I hope that as time allows we will have time for discussion and input from the floor.

We have asked each of the nominated expert speakers to provide some opening comments.

We have distinguished and experienced moderators to guide our discussion.

I am excited about today’s session and excited about the promise this vision of an expanded partnership holds for us both.

The world today is a complicated place – let’s get on with the task by working together to make it better !

Multilateralism vs regionalism

Thank you Mr Chaudhuri and Dr Singh.

I’d like to focus on my comments on the WTO and IPEF.

When I was at the CII Partnership Summit earlier this year I first head the term “poly crisis” – now I seem to hear it all the time!

Confronted with this “poly crisis”, what are countries like India and New Zealand to do?

It requires nothing less than global co-operation on an unprecedented scale, engaging not just governments but business and civil society as well.

India has certainly met this challenge in its leadership of G20 and B20 with the theme of “One earth, one family, one future”.

New Zealand did something similar when we chaired APEC in 2021.

We are a nation of joiners – if there is something to join, whether multilateral or regional, you can be sure that New Zealand will want to have its hand up and to work constructively to find outcomes that address the problems needing to be solved.

That’s because smaller countries have even more of a stake in the international order than larger ones.

We depend on international rule-making to uphold our national sovereignty.

We rely on international rules – rules which we will have had a hand in making and which can be upheld on the merits of the case, rather than size or political power.

Hence our key interest in the WTO.

It is of paramount importance to us as business people because it provides the legal under-pinning against which trade is conducted.

New Zealand, like many countries, has not only benefited from successive rounds of trade liberalisation in the WTO, but we have been able to challenge some of our biggest trading partners when they have not followed the rules. 

We have taken WTO cases against trade giants including Australia, the United States, the European Union and Canada – and we have won every case.

India is of course a world away from New Zealand in terms of size – but like New Zealand, has gained a great deal from the multilateral rules-based trading system. 

WTO rules have enabled new trade opportunities across many of the sectors where India is, and aspires to be, a true global powerhouse, including services and manufacturing. 

In the agriculture sector, where India has a number of sensitivities, WTO rules have helped create new markets for important exports such as rice, sugar, pulses and wheat. 

Even so agricultural reform remains a work in progress in the WTO.

India is a key and influential member of the WTO: India played a pivotal role in concluding the Twelfth Ministerial Meeting last June. 

We are relying on India’s ongoing leadership, including of the world’s developing economies to help to shape and give impetus to the future of the WTO system at the Thirteenth Ministerial Conference next February.

As of today, it looks like our colleagues at the WTO in Geneva have a lot of work to do to match the achievement of last year.

We in New Zealand are certainly looking for outcomes in relation to e-commerce – both continuation of the moratorium and new rules for e-commerce and digital trade.

We want to move ahead with the unfinished business from the Doha Round, especially related to agriculture subsidies, an area where our views sometimes differ with India.

And we are keenly interested in the WTO negotiations on trade and the environment where the absence of rules risks propelling another round of costly and divisive trade disputes.

How much progress can be achieved across these issues is not yet clear. 

But it is certainly important that we and the global business community keep up the pressure on Ministers to find compromises. 

I’m conscious that India and New Zealand have different views on the recourse to plurilateral initiatives in the WTO.

Certainly, they are not the approach used in the large-scale multilateral negotiations of the past.

But we could not conclude the Doha round and the world trade rule book now risks being hopelessly out of date.

These are open and inclusive negotiations in which all can participate – and in fact more than 110 WTO members are taking part in the various negotiations.

Today the WTO, despite its importance, is facing something of an existential crisis.

This is revealed most starkly by the impasse in dispute settlement mechanisms which have been rendered unworkable by the inability to appoint judges to the Appellate Body.

Some WTO Members including New Zealand (but not India) have established a Multiparty Interim Appeal Arbitration Arrangement to continue the dispute resolution process in the meantime.

No-one pretends that such interim arrangements are optimal solutions, but they are preferable to allowing critical functions of the WTO to be paralysed.

We see something similar underway in the regional setting where smaller like-minded groups come together to make progress.

For some years now New Zealand has pursued an agenda of “open regionalism” whereby we have sought to negotiate plurilateral agreements which include open accession clauses to encourage membership by other economies who can meet the agreement’s standards.

The Comprehensive Progressive Trans Pacific Partnership (CPTPP) is the best example of this.

With the UK having just joined to make 12 members, a number of other economies are also seeking accession.

Today, alongside India, we are also participants in the US-led Indo Pacific Economic Framework or IPEF.

IPEF is a new type of trade instrument, not a conventional “free trade agreement” not based on reciprocal market access, but none the less encompassing a wide agenda including trade facilitation, supply chain connectivity, decarbonisation and a fair economy.

To be honest we in business have struggled to understand how this instrument might be able to create a better environment for trade and investment.

That said, the IPEF Supply Chain Pillar, which was agreed in principle earlier this year and is now close to finalisation, does contain some useful co-operative arrangements that could if implemented properly lead to improved connectivity.

Commitments in the Supply Chain Pillar are non-binding but we understand they include undertakings on labour rights, which is a most significant development, given that countries in the global South including India are normally opposed to these.

Other parts of IPEF are expected to be binding and subject to dispute settlement although it is not clear how this can work given the absence of market access commitments and therefore the inability to withdraw preferences if a dispute is upheld.

The other aspect of IPEF which disturbs us is that it is not an open plurilateral.

Our largest trading partner, China, has not been invited to join and is unlikely to be – this seems to make little sense to us given its importance in regional supply chains.

While it is true that not everyone needs to belong to everything, we still hold out hope that India might one day reconsider its membership of the Regional Comprehensive Economic Partnership (or RCEP).

In general, our view is that high quality regional undertakings should be ambitious and comprehensive, should be open to all who are willing to meet the standards, should be binding and subject to dispute settlement, if they are to have real commercial impact.

While business is always interested in pragmatic outcomes – ie what works, and how quickly – there is a balance to be struck between voluntary and binding measures and between trade facilitation and trade liberalisation.

To conclude, I would be interested in assessments from others of these matters:  how useful is the existing multilateral framework in meeting today’s challenges, how can the WTO be strengthened and what does it need to be meaningful for business, what is the role of regional undertakings and how important is it for them to be ambitious, open and binding.