COMMENT:

David Parker heads to Washington DC and Ottawa next week to advance New Zealand's interests at a time when the World Trade Organisation and global trade rules are under increasing threat.

In DC, the Trade Minister will find the atmosphere is polarised.

Not only has the threat of a trade war — emerging from the tit-for-tat tariff hikes between the United States and China — become reality this year, but the Washingtonian rhetoric increasingly focuses on just how far this trade skirmishing will escalate.

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This tense environment has enormous implications for New Zealand.

It also underlines the lack of political nous which has seen our politicians take far too long to ratify the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which expands the current FTA network of legally-enforceable rules and market access for NZ exports from 56 per cent to 65 per cent.

Just how New Zealand successfully navigates through a period where the retaliatory spiral of tariff increases is raising costs for consumers, damaging supply chains, and forcing changes in production and investment decisions, is an issue of huge importance to NZ business.

So, what practically can New Zealand to do shield itself?

The quick, and obvious, answer is to say to our politicians to hurry up and ratify the Comprehensive and Progressive Trans-Pacific Partnership agreement. ASAP.

It beggars belief that an inclination to cynical wedge politics stopped the National Government and Labour from forming a policy accommodation to resolve their differences and settle on a bipartisan approach to TPP prior to the 2017 election.

It cost New Zealand considerable credibility among the TPP nations to have to relitigate the agreement after the 2017 election.

Particularly, given NZ's signal role in launching the negotiations (alongside the US) but also its lengthy role as depositary for the agreement.

The CPTPP enters into force 60 days after at least six of the 11 signatories have completed their domestic legal procedures and notified New Zealand of this. It is possible that New Zealand's tardiness may mean the CPTPP enters into force in late 2018 or early 2019 without us.

If so, there is a cost.

If New Zealand is not among the first six, NZ's exporters will be disadvantaged. If New Zealand ratifies a month later than the first six, then it will not be able to access CPTPP's preferential tariffs or quota access for the first month after entry into force of the agreement.

There is a possibility that New Zealand exporters may miss out on a second tariff cut available on January 1, 2019 if the agreement comes into force this year without us.

If New Zealand wants to be seen in the vanguard of free trade, it needs to get its act together.

This is important given the global context.

The risk of the "Thucydides Trap" — where a rising power causes fear in an established power creating an environment which can escalate towards war — is arguably heightened by the current trade jostling between China and the United States.

Right now, the American rhetoric is centred on a new Cold War, this time between the United States and China,which will have implications worldwide if it is not de-escalated.

With China, New Zealand's largest market, and the US, our third largest, it will require Parker to exhibit careful diplomacy when he meets US Trade Representative Ambassador Robert Lighthizer to talk about how New Zealand can grow its bilateral trade relationship and work together to address shared challenges in other export markets.

Parker will be pushing for an exemption for New Zealand exporters from the US tariffs on steel and aluminium.

But there is no guarantee any such exemption will be granted without strings attached given the modus operandi of the Trump Administration.

As trade expert Rob Scollay notes, China's recently expressed interest in the possibility of joining the CPTPP, which in more normal times would be viewed as a logical and positive development in the regional trade architecture, may now fall foul of the "poison pill" injected at the last minute into the just-completed USMCA, with the stated intention of discouraging deepening of Canadian and Mexican trade relations with China.

"Extension of this 'poison pill' strategy to other proposed US free trade agreements, for example with Japan and the UK, as has apparently been foreshadowed, has the potential to further disrupt the evolution of Asia-Pacific trade relationships," Scollay told Mfat's 75th anniversary conference this week.

Apec's work programmes, in which New Zealand has also been a leader, are at risk of being increasingly paralysed by US-China disagreements.

In this context, Parker's meeting in Ottowa with the "group of 13" — like-minded nations which want to send a strong signal of support to the World Trade Organisation — is arguably just as important as his DC visit.

At the recent Otago Foreign Policy school, Ministry of Foreign Affairs and Trade (Mfat) deputy secretary Vangelis Vitalis explored the risk posed by the "Thucydides Trap" and the role small nations like New Zealand could play when faced by such major risks against a time of rising global political and economic uncertainty.

Mfat's response has been to do what it has always done well: defending the rules-based system; (as Mfat negotiating division head Clare Kelly puts it) focusing on how NZ contributes and gets results in the multilateral context; being interested, interesting, creative and constructive; doing others' work for them; fighting others' battles in order to further our own positions; building strategic issues-based alliances; embedding New Zealand into regional architecture and supporting regional and global public good.

In Ottowa, Parker will advance concrete ideas on how to improve the WTO's monitoring, dispute settlement and negotiating functions.

The countries represented are Australia, Brazil, Canada, Chile, the EU, Japan, Kenya, Korea, Mexico, New Zealand, Norway, Singapore and Switzerland.

As Kelly notes, there is also a focus on NZ's taking the lead in advancing "open plurilateralism", intensifying New Zealand's economic diplomacy which has seen the ministry step up its role as a facilitator for NZ companies in their markets and importantly developing the Government's Trade for All agenda to mitigate popular opposition to trade agreements.

This mirrors the role that New Zealand has played during other times when protectionist sentiment has been high.

But never have the stakes been so high as they are now.