Stephen Jacobi previews the forthcoming annual meeting of CER Trade Ministers, noting they can show that openness, practical cooperation and rules still matter

By Stephen Jacobi*

"We lived in a world of palaces and trade, blind to its beauty, until we broke it." 

This surprising line from Christopher Nolan's Odyssey captures today's trading environment rather well. 

After decades of lowering barriers and integrating markets, we are now in a time of raising tariffs, disrupting supply chains and treating trade as an instrument of strategic competition. When New Zealand's Todd McClay and Australia's Don Farrell meet here this week, they will be discussing how they can push back against that trend. 

This is their annual get together, a long established practice, which often slips under the radar. This year a meeting between such close allies takes on a new significance. Lamenting the state of the global trading system only gets you so far. Small and middle-sized economies need practical ways to defend and strengthen it. 

Much has happened since Ministers last met. New Zealand has concluded a free trade agreement (FTA) with India, which Australia did earlier. And Australia has concluded an FTA with the European Union, which New Zealand did earlier. Both economies have had to weather the topsy turvy nature of US trade policy: both now face the egregious imposition of a 12.5 percent additional tariff. 

For Australia, which concluded an FTA with the United States back in 2004, this is all the more galling, since they now face the same additional tariff as a range of other economies including New Zealand which do not have FTAs. The two Ministers will rightly be aghast at these tariffs – not illegal like the earlier ones, but a mockery of due process and a disappointing departure from the robust, rules-based discipline that the Office of the US Trade Representative once championed. 

If both countries face similar challenges and are already close partners, why don’t we just negotiate together? This is a fair question often asked by business participants in the Australia New Zealand Leadership Forum. Despite our close integration under CER, Australia and New Zealand continue to pursue separate trade policies reflecting national priorities. Those priorities overlap substantially—but not completely. 

On the agenda for the Ministers’ meeting will likely be the initiatives to strengthen CER which have been endorsed by Prime Ministers Luxon and Albanese. Ministers are expected to review progress on aligning standards, recognising professional qualifications, digitising trade documentation and involving business more directly in regulatory reform. None of these initiatives will make front-page news, but together they move CER closer to its ambition of a genuine Single Economic Market. 

The next question should be whether the Single Market model itself can now be exported. Could it be extended to like-minded partners, beginning, say, with Singapore? Both countries have strong economic relationships with Singapore now going beyond trade agreements into trade in essential supplies and digital economy arrangements. The success of CER has been driven by deepening regulatory co-operation with the aim of making it as easy to do business across the border as it is at home. Why not extend this concept beyond the Tasman? 

Such a move cannot be completed overnight: extending the Trans-Tasman Mutual Recognition Agreement in the area of professional qualifications would be the obvious place to start. It’s the sort of big new idea which is needed in the current trade environment. 

At the global level the outlook remains grim. Geo-political risks abound. Protectionism is rising. Supply chains are under pressure. Uncertainty reigns. But, somewhat against the odds, trade is still happening and new trade agreements are still being concluded. Ministers will want to exchange notes on these multilateral and regional developments, starting from the (parlous) state of the World Trade Organisation (WTO) through to next generation agreements. 

Top of mind will be the progress in deepening and expanding the Comprehensive and Progressive Trans Pacific Partnership (CPTPP): momentum here could be faster with a number of economies including Indonesia now presenting their case for membership. New Zealand will also want to debrief on next steps following the meeting of Trade Ministers from the meeting of small and medium sized economies held in Auckland recently: these were the 19 members of the “Future of Investment and Trade Partnership” plus invited guests. 

Ministers in Auckland discussed ways to reduce non-tariff barriers, make supply chains more resilient, advance digital and paperless trade, and address trade-distorting subsidies. Importantly, the Partnership provides for parties willing and able to move ahead not to wait for a full consensus to develop. In a more fragmented world countries need more flexible ways of working together in this way. 

Every economy is now looking for ways to give exporters more options, lower costs and fewer points of vulnerability. Business is less concerned with the theory of trade agreements than whether they make it easier to do business. What is needed are practical solutions that actually work. That is why new thinking as well as structured engagement between governments and business really matters. The Australia New Zealand Leadership Forum, working alongside other business organisations, provides an important channel for identifying practical reforms which benefit firms on both sides of the Tasman. 

The state of the world might suggest that the task before Ministers in Auckland is heroic at best. Australia and New Zealand cannot rescue the trading system on their own. But together they can demonstrate that openness, practical cooperation and rules still matter. Right now, that kind of trade leadership is worth showing.

*Stephen Jacobi is a former diplomat, trade official and business advocate. He currently serves as an Honorary Senior Fellow at the Helen Clark Foundation. He previously led both NZ US and NZ China Councils and, until last year, the NZ International Business Forum.