She said further trade liberalisation via the World Trade Organisation was not likely to happen any time soon “and to be honest I think a lot of us have known this for the last 20 years.”
She also said New Zealand had reached or was rapidly approaching the natural limit of what bilateral and regional trade agreements could do for New Zealand business.
The trade statistics spoke for themselves.
Right now, 65 per cent of New Zealand’s two-way trade already occurred under a free trade agreement.
When the EU-NZ free trade agreement came into force – likely to be next year - and assuming New Zealand got a deal with the Gulf Co-operation Council, then 78 per cent of New Zealand’s trade would be under a trade agreement.
Of the remaining 22 per cent of trade that was not conducted under an FTA, half was with the United States and the US Administration and Congress had made it clear New Zealand was not a high priority for them.
The other 11 per cent of trade that didn’t currently occur under an FTA was among a long list of countries, none of whom looked like obvious potential FTA partners for New Zealand, with the exception of India.
And the Government of India had also made it clear that New Zealand was not a high priority.
So aside from the Gulf Co-operation Council, the Us and India, she doubted that furth FTAs would deliver economy-wide benefits that would justify the very significant costs associated with negotiating those deals.
“So if trade agreements are not the panacea going forward, it does beg the question ‘What is?’”
She had several suggestions.
First, she said the Government needed to conduct a fundamental review of New Zealand’s trade policy to get a comprehensive understanding of non-tariff-related restrictions and regulations that hamper New Zealand’s access to foreign markets.
It was important that a broad range of stakeholders were consulted, not just traditional trade policy experts but including professionals working in logistics, finance, marketing, and IT in order to get a broad commercial picture.
“I hope with this review the Government will be able to identify specific areas where cost savings could usefully and realistically be made and also to help us develop a new national strategy to help businesses to realise these cost savings.”
Secondly, the Government could usefully address restrictions and regulatory divergence identified in the review, primarily by pursuing mutual recognition agreements.
“I am not convinced there is a lot of mileage in trying to address regulatory divergence via plurilateral non-tariff barrier agreements or by regulatory harmonisation,” said Salmond.
“I think history has taught us quite clearly that most Governments do not want to bargain away their food safety standards, their technical products standards, so let’s take a different approach.”
New Zealand’s regulatory system is generally well regarded. Its products were considered to be high quality and safe so it should identify markets with complementary regulatory systems and negotiate deals whereby its products could be lawfully sold in their market and vice-versa.
“This is not pie-in-the-sky stuff. We have actually done this successfully with Australia already via the Trans-Tasman Mutual Recognition Agreement. We have a template here. We should try and roll it out for others.”
She also said the Government and New Zealand business representatives should collaborate to help make the United States Government Indo-Pacific Economic Framework (IPEF) initiative a commercially meaningful success.
It was no secret that the New Zealand business community was disappointed when the IPEF was launched, without tariff reductions in a traditional FTA. But officials in the US and New Zealand were calling for suggestions on how else it could be made commercially meaningful across the region comprising 40 per cent of the world’s gdp.
“This agreement will be what we make of it,” said Salmond.
On India, she said New Zealand should carefully and creatively look at how it could improve market access to India in the absence of a traditional free trade agreement.
“While a traditional free trade agreement is unlikely in the near term, we should be ready to move and seize an FTA window if the political, economic and geo-strategic circumstances change.
“In the meantime, we should remember that tariff reductions can be secured outside of a traditional FTA.
“At any time point, a WTO country is entitled to unilaterally reduce or eliminate a tariff should it choose to do so, so long as the benefits of that market access are made available to all WTO members.”
New Zealand exporters and officials should think carefully about what it could offer India as an incentive to reduce some of the country’s more restrictive tariffs from a New Zealand perspective.
“And let’s not be modest. There’s actually a lot we can offer India. For example on agriculture and food security, we could offer technical co-operation in areas such as sustainable farming, crop diversification, post-harvest management, and food safety standards. All of this could be very beneficial to India in return for a reduction in an agricultural tariff.”
Renewable energy was also an area in which New Zealand had a lot of experience.
“We could collaborate on research, technology exchange, and capacity building to enhance India’s renewable energy sector. There is a lot that we can do together. We just need to approach this relationship in a creative way.
“We have some meaningful work to do, and overcoming the status quo bias is always going to be difficult but there is reason to be optimistic because New Zealand has been a trade policy innovator in the past.”
NZ’s Free Trade Agreements in force:
- Australia (1983)
- Singapore (2001)
- Thailand (2005)
- China (2008)
- Asean (2009) with 10 Asean countries and Australia
- Malaysia (2009)
- Hong Kong (2011)
- Taiwan (2013)
- South Korea (2015)
- CPTPP (2018) among 11 countries
- Pacer Plus (2020) with 10 Pacific countries
- DEPA (2021) Digital agreement with Singapore and Chile
- RCEP (2022) among 15 countries, including 10 Asean.
- Britain (2023)
- EU (concluded but not yet signed)
Audrey Young covers politics as the New Zealand Herald’s senior political correspondent. She was named Political Journalist of the Year at the Voyager Media Awards in 2023, 2020 and 2018. She was previously political editor, leading the Herald’s Press Gallery team.
