Damien O'Connor, Minister of Trade and Export Growth gets a chance to lay down New Zealand's position in person. Photo / Mark Mitchell
In the first of a two-part series, Fran O’Sullivan talks to Trade Minister Damien O’Connor about the big issues for New Zealand at Davos.
Damien O’Connor will join global trade heavy-hitters when he arrives in Davos on Wednesday for the World Economic Forum’s annual jamboree.
It’s the first time “Davos” has been held in person at its usual January timing in the Northern winter since the onset of the Covid-19 pandemic.
It was cancelled in 2021 and shifted to May last year and held virtually. But there’s no substitute for face-to-face meetings with the trade powerbrokers who will be present in the Swiss mountain town perched 1,560m above sea level.
Getting there should be a breeze for New Zealand’s Minister for Trade and Export Growth.
O’Connor has seen enough of the “huge piles of bags” at airports around the world in the past year not to get caught short himself. “It is a clear stipulation for everyone in my office – carry on only” he chuckles. “That can be quite a challenge if you’re travelling for two weeks.
“But it does mean that it’s a bit more secure.”
What’s not so secure is the atmosphere he will enter when he reaches Davos.
German Chancellor Olaf Scholz tops the list of global leaders heading to the World Economic Forum (WEF). The WEF reports 52 heads of state and government will show up alongside 56 finance ministers, 19 central bank governors, 30 trade ministers and 35 foreign ministers who will all be there to discuss a weighty slate of issues topped by the Ukraine war, climate change, the pandemic and the global economic outlook.
Heads of the United Nations, International Monetary Fund and World Trade Organisation (WTO) will be among them.
But it is the focus on trade that tops O’Connor’s agenda.
He wants more momentum built on a WTO waiver agreed at Geneva last year to enable a temporary global easing of intellectual property rights on Covid-19 vaccines and treatments to enable them to be produced on a far larger scale. He will also be advocating that the WTO agreement on fish subsidies is implemented and that there should be a strong focus on further reform including on agriculture subsidies.
“These are the areas we will be pushing really strongly.”
In truth, the WTO is in crisis. It has not had a functioning appellate body since the US vetoed the appointment of new appeal judges in 2019 and progress on breaking the stalemate has been slow.
New Zealand is a member of the “Ottawa group” – 14 like-minded members of the WTO including Australia, Brazil, Canada, Chile, European Union, Japan, Kenya, South Korea, Mexico, Norway, Singapore, Switzerland and the United Kingdom – which will meet in Davos to keep the reform agenda moving forward.
Behind the scenes, there is talk of a “grand bargain” being designed where the European Union and US could be persuaded to trade off elements of their agricultural system protections if China gives some way on its industrial subsidies.
But that is for the future.
An early forum panel, which includes WTO Director-General Ngozi Okonjo-Iweala and BlackRock CEO Larry Fink, will examine how tensions over trade and investment are undermining growth and trust. The big question they face is how leaders can reshape the current system to develop a new agenda for trade, growth and investment.
Both the United States and China have major roles to play here.
Feelings were grim late last year among the world’s proponents of free and fair trade, including New Zealand Ministers and officials, when United States Trade Representative Katherine Tai lobbed a grenade by stating the WTO was “getting itself on very, very thin ice” when it ruled the United States had violated trade rules with the Trump-era steel and aluminium tariffs.
Tai claimed the WTO disputes panel ruling really challenged the integrity of the system because it “gets deep into creating requirements and parameters for what is or is not a legitimate national-security decision”.
She further opined the organisation should not get into the business of second-guessing the national-security decisions that sovereign governments make.
The Government has yet to formally respond to the steel tariff ruling which affects New Zealand companies – and more significantly the US response.
Says O’Connor, “we’ve studied that decision really closely and at this point haven’t reached a formal position on where to go next but clearly it is an anomaly in what is otherwise a very positive and valuable relationship.”
In a classic understatement, he continues, “we’ll point out the oddity that is a disadvantage for a part of our economy that provides a valuable connection with the US.
“We’re not going to swamp the market, we’re not going to have an effect, but we play a part, and we’d like to think that our access to that market is fair and reasonable.
“At the moment it is not.”
Others are less polite.
The Washington DC-based “trade guys” – experts Scott Miller and Bill Reinsch – weighed in on their influential podcast saying if the WTO rulings are not respected it just becomes “the law of the jungle”.
Railing against the prevailing protectionist sentiment in the US, Kevin Rudd – who will also present at Davos – said America needs to “stop throwing some foreign allies under a bus on trade and economics if it wants to build international support to push back against China.”
The former Australian prime minister, currently president of the Asia Society, was getting his shots in before he is sworn in as his country’s next Ambassador to the US in March and is forced to take a more diplomatic approach (“become a pumpkin” in his words).
O’Connor now has the opportunity to make his concerns felt in person.
Tai confirmed at the weekend she will travel to Davos and participate in a stakeholder dialogue titled the Case for Trade, attend a meeting of WTO ministers on the margins of the forum, and conduct meetings with foreign counterparts.
O’Connor does not expect the US to shift position in the short term.
“I think we have to work with them as a trusted and like-minded partner and ensure we’re not caught and stomped on while the elephants are rumbling, and we’re not trampled on.
“And that can happen quite easily when it comes to a small trading country like ours when you have such a significant trade tension going on.”
His approach is to navigate these issues in a consistent “Kiwi way” – respectful, consistent and principled. “We’ve always been an advocate for fair trade, open trade, and transparent rules and I think that carries us a long way and enables us to have very productive discussions with both China and the US on issues where we still have some disagreement.”
O’Connor stresses that consistent stance also applies to China where New Zealand has supported Australia in its WTO case against the Chinese imposition of barley tariffs.
What worries WTO members is China’s tendency to apply trade restrictions in a coercive manner when affronted on other issues.
In Australia’s case, punitive Chinese sanctions affected some A$20 billion in exports, ranging from coal to barley, wine and lobsters.
There are signs of a rapprochement.
China’s top diplomat in Australia, Xiao Quin, has revealed that bilateral talks are underway in Geneva which may see a solution forged if the Albanese Government drops its WTO challenges on wine and barley.
O’Connor acknowledges the situation has become dicey.
“If the WTO can’t get the big players to play ball, even when the cases have gone against them, and the appellate body is not really there, how does the WTO then work for the benefit of the smaller players?” he questions.
“Just as the UN can’t always resolve all the issues, the WTO will always be under some kind of pressure. But it’s still the best game in town – not just for developed trading nations like ours but for developing countries as well.”
While at Davos, O’Connor will take part in a session on Indigenous Peoples, and Trade which New Zealand made a priority in its 2021 host year of Apec.
Asked what worries him most about trade, he points to the war in Ukraine which has had a huge influence on energy and food security, which are often at the heart of social cohesion.
“Hopefully, Europe gets through winter in a way that enables their people to be safe and secure but if not, there will be flow-on implications – that flow into global trade.
“And hopefully, China and the US continue to work on their differences. Given their dependence on one another, they acknowledge and respect that and then work on the inevitable tensions that occur between two major competitors in sport, in commerce or in trade.”
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