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It is one thing for our trade negotiators to win benefits and concessions. But the value is lost if exporters and traders apply to use them

Rural News / opinion
It is one thing for our trade negotiators to win benefits and concessions. But the value is lost if exporters and traders apply to use them
arguing at negotiations

Very recently I wrote about the value New Zealand’s trade negotiators have extracted from concluding free trade agreements with several countries and trading blocs, including China, Malaysia, United Kingdom, and European Union, as well as the broader CPTPP and ASEAN-Australia-New Zealand FTA with our Pacific neighbours.

So it was a timely reminder of how much work goes into bringing these deals to a successful conclusion, when Vangelis Vitalis, the Chief Negotiator who led these negotiations, addressed the delegates at the Red Meat Sector Conference on the topic of trade in a time of turbulence.

He began by telling us the period of golden weather that started with the World Trade Organisation’s formation in 1995 as a result of the Uruguay round of trade negotiations has now come to an end, firstly because there are insufficient judges appointed to hear cases brought before the Disputes Body and secondly because of a rise in protectionism. The first is as a direct consequence of the Trump administration’s refusal to make the necessary appointments.

For the last quarter of a century it has been possible to request consultations with other countries under the Disputes Settlement Understanding and, if no agreement can be reached, take the case to the WTO’s Appellate Body to overturn illegal obstacles or subsidies put in place to prevent trade access. In recent years New Zealand has won decisions against Australia for blocking imports of apples and Canada for the provision of subsidies on its domestic dairy production. But the WTO’s rules have become harder to implement with the rise in global protectionism and the lack of judges.

Arguments against the WTO have strengthened recently on the grounds it favours stronger countries and multinational corporations which places smaller, less developed economies at risk of their domestic industries being overwhelmed. Critics maintain the WTO favours richer countries which tend to get what they want and, although the United States is clearly one such economy, a Republican victory in the next election would almost certainly make a successful conclusion of the Doha round of WTO negotiations even more unlikely.

Vitalis warned trade is no longer seen as unequivocally positive and its social licence is very fragile, because the world has depended on US leadership which it no longer provides. It is very important not to get caught in the crossfire of geopolitical tensions between powerful economies, for instance China and the USA. The world has changed substantially in the last 15 years with the emergence of India and the unstoppable rise of China which is the main trading partner of 134 countries, including New Zealand. Another change has been the increase in public expectations of trade agreements which are now subjected to much more public scrutiny.

He outlined the challenges facing our trade negotiators, both old and new. The former come predominantly under the headings of tariffs and subsidies which affect export prices on average by between 6% and 14%; 30 years ago the EU and USA were responsible for the bulk of the world’s subsidies, but now China and India are also subsidising their farmers. New challenges involve the inclusion of environmental provisions in trade agreements and ratification by multiple national governments in the case of the EU.

The number of environmental regulations to be complied with has risen to 3,500 and these must be answered with factual science-based answers, not only when signing the original FTA, but also at the regular annual reviews. FTAs are not set in stone and negotiators must update the validity of claims with scientific justification each year. As an example, before it was prepared to ratify the NZ/EU FTA, the Dutch government required justification of the level of food miles content of our exports to ensure their decision to force their farmers to reduce livestock numbers did not cause leakage i.e. a net increase in global emissions. This was answered satisfactorily, while in contrast the South American MERCOSUR trade partnership cannot gain EU ratification because of its inability to answer the Amazon deforestation issue adequately. In an entirely different product area, the EU has prepared a carbon assessment system to apply to imports of steel.

Vitalis gave some examples of non-tariff barrier work which has directly benefited the meat industry: achieving an extension of expiry dates which saved $7 million, changing regulations on sealing cartons of liver worth $30 million and gaining pre-approval for entry at the border with a saving of $20 million. Notwithstanding the hard work invested in concluding the various trade agreements, it is estimated 40% of the benefits are lost through poor implementation, mostly by exporters who may be unaware of the more favourable terms and conditions available to them.

Reasons for poor implementation include low awareness of FTAs, lack of information about how to obtain preferential tariffs, assumptions deals are only for goods exporters, especially dairy and meat, and do not cover services like licensing procedures for engineers, inability to fill in the various application forms in spite of tools available on the MFAT website, and also possibly a need for more trade promotion missions to FTA partners to increase awareness.

This list confirms the need for our exporters to work harder at understanding the detail of FTAs and tariffs applying to different product categories, using the assistance from government departments and industry organisations available to them if they cannot work it out for themselves. In particular the red meat and other agriculture sectors can consult the government hit squad of MFAT, MBIE and MPI as well as Federated Farmers, B+LNZ or other sector representative bodies.

Current schedule and saleyard prices are available in the right-hand menu of the Rural section of this website.

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