The international trade court system is under threat writes Federated Farmers President, Katie Milne.
As they strive for top quality products and environmental sustainability, farmers know well the hurdles in their way in the form of storms and droughts, erosion and biosecurity threats, ill-conceived regulations and price/cost fluctuations.
But perhaps they don't often think about the battles going on downstream that are crucial to our meat, dairy, wool, horticultural and arable produce getting a good return from international buyers.
Obstacles on that front include unreasonable tariffs and subsidies, nations that don't adhere to agreed trade obligations and a highly concerning uptick in protectionism.
Federated Farmers members attending our National Council meeting in Wellington recently were reminded of these emerging risks by an absorbing discussion with Vangelis Vitalis.
Read more from Federated Farmers here.
He's the deputy secretary, trade and economics, with our Ministry for Foreign Affairs and Trade (MFAT) and among his long list of credentials is that for two years he chaired the agricultural negotiations at the World Trade Organisation (WTO) and was our Chief Negotiator for the recently-secured Comprehensive and Progressive Agreement for Trans-Pacific Partnership agreement (CPTPP).
It is clear that there has been a period of "golden weather" in trade terms since the end of the Uruguay Round of the multilateral trade negotiations and the formation of the WTO in 1995.
For the first time there were enforceable rules on agricultural trade practices, with mechanisms to hear disputes.
Agricultural export subsidies that had affected prices by as much as 20-30 per cent were finally knocked on the head at the end of 2015.
We took the Australians to task at the WTO on apple import protections and won. Same with the USA over lamb, EU on dairy and, most recently, Indonesia over a range of non-tariff barriers affecting beef.
We expected the effectiveness of the WTO in enforcing agreed rules, and the continuing – albeit gradual – decline in tariffs would continue. This is now at risk.
The international trade court system is under threat.
The USA is refusing to sanction reappointment of judges that hear appeals at the WTO. If that doesn't change, by December 2019 the enforceable disputes mechanism will disappear.
Don't just blame President Trump for this; the non-sanctioning process started under the Obama administration.
Protectionism is on the rise with tit-for-tat tariff retaliation not just between the USA and China, but also the EU and others.
Some $481 billion of trade has been sucked into these retaliatory tariffs already.
Suddenly, the free trade agreements (FTAs) New Zealand has been pursuing have become even more important, not just for preferential access for our goods, but because they contain enforceable rules.
There are now more than 300 FTAs around the world but New Zealand has never used the state-to-state settlement processes they contain.
With the WTO under so much strain, from the beginning of 2020 those provisions in FTAs may be tested.
With the CPTPP coming into force on December 31, the amount of New Zealand's trade covered by FTAs will rise from 53 per cent to 64 per cent.
That will rise to more than 75 per cent if we successfully conclude negotiations with the EU. Pacific Alliance (Chile, Peru, Colombia, and Mexico) FTA negotiations continue but the two big holes that remain are India and the USA.
Compounding this is the problems we face with Brexit.
We want to protect the hard-won legal commitments we have from the EU with beef, sheep meat and dairy, but at the same time we need to defend our WTO rights, pursue our FTA with the EU and look to launch negotiations with the UK when it is ready to do so.
This will be like a three-dimensional game of chess.
A message to farmers, processors and exporters was to report to a new MFAT complaints portal any non-tariff barriers they strike in overseas markets.
These are things like licensing arrangements and non-science based or so-called phytosanitary certification issues used to block us from markets.
They cost about $6 billion every year. MFAT will reply to any queries within two working days and, in coalition with other trading partners, is stepping up to call out such practices and to try and stamp illegal non-tariff barriers out.
We also know that 40 per cent of the benefit of an FTA can be lost if it isn't implemented correctly – essentially raising its profile and making sure businesses are aware of the new opportunities and the tariff and other preferences they can enjoy.
It's a puzzle, for example, why more than 10,000 of New Zealand's small and medium enterprises export to Australia, where we no longer enjoy any particular tariff preference, yet far fewer of those firms export anywhere else.
We need to do more to encourage our small and medium exporters to take advantage of these carefully negotiated and hard won FTAs.
MFAT is working on this as well with NZTE, MPI and others.