Maintaining trade rules essential

10 May 2018

Hong Kong Market

New Zealand relies on trade for its economic survival. Without trade New Zealand would be a very different and a much poorer country. Successive New Zealand Governments have successfully worked to open up trading opportunities throughout the world and this continues today, with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in the final lap before coming into force. Today, Horticulture New Zealand made its submission in support of the CPTPP to the Foreign Affairs, Defence and Trade Select Committee at Parliament. For horticulture, the CPTPP does some great things. It opens up four new markets to tariff reductions and improved entry conditions: Canada, Japan, Mexico and Peru. Tariff reduction, particularly into Japan, but also across all of the CPTPP nations, will result in a massive $48 million a year in reduced tariffs. There are also other countries looking to join the CPTPP.  What a deal!

The real importance of free trade deals and, particularly deals like the CPTPP, is that the agreements set up a system of trade rules so that the trade between multiple countries can continue on a certain basis. You know what the entry conditions for your product are and how much you will be paying in tariffs before you send the product from New Zealand. The World Trade Organisation (WTO) also has trade rules and, like the CPTPP, an appeal systems when those trade rules are not complied with.  In today’s world, there are strong indications that the WTO trade rules are under threat as trade tensions increase between the US, China, the EU and other countries. If the WTO trade rules are ignored, then it will fall to individual free trade agreements to regulate trade between the countries that are party to that trade agreement. So trade agreements like the CPTPP, with many countries in them, will take on greater importance. Thankfully, we have free trade agreements with eight of out 10 of our top trading countries and agreements are being worked on with the EU and UK. We do not however, have a free trade agreement with the US.

The Commonwealth of Nations may be another way to protect trade if the WTO trade rule system falls into abeyance. As has been noted by many commentators, the Commonwealth is a “hard sell”. It has no constitutional power and no immediate and obvious benefit to most people. But it seems that as the Brexit deadline approaches, the UK is looking to other country groupings and that includes the Commonwealth. According to an article in the New Zealand Listener, doing business with a Commonwealth country carries a 19 percent advantage in returns over trade with non-members. This is because members have dependable and well-established legal systems and functional law enforcement; enforceable property rights, backed by efficient record keeping; and modern communications and technology. There are also labour-force, human rights standards and environmental standards that are focused on by the Commonwealth grouping. 

So here is a group of countries that could be used to develop and implement trade rules for its members, if indeed that becomes necessary.  Further developing a Commonwealth free trade agreement would seem to be the next logical step. In these difficult and troubling times maintaining trade rules with our trading partners is our number one concern. To lose certainty of trade is for New Zealand, to lose our current economic prosperity.

- Mike Chapman, CEO