Making trade work better – remarks to London JustShare event

On 30 May 2018 Stephen spoke to an event organised by JustShare at St Mary-le-Bow church in the City of London.  The theme was how trade can be made to work better for people including women, indigenous people and sectors like small business.  Here is what he had to say:

 

Thank you JustShare and Fr George Bush at St Mary-Le-Bow for the kind introduction to join this distinguished panel for our discussion this evening.

I bring greetings from the other side of the world, from Aotearoa-New Zealand, where we too experience the need for a different kind of conversation about trade, one that puts people at the centre.

There is a much-loved saying of the Maori people – “He aha te mea nui i tea o?  He tangata, he tangata, he tangata” – what is the greatest thing in the world?  It is people, it is people, it is people”.

 For the longest time trade has mostly been a conversation about business, but, at a time when globalisation is under more intense scrutiny, it’s good to be talking about how trade can be made to work better for people.

It’s a particular pleasure for me too to be in this church of St Mary-Le-Bow – my mother was born within the sound of these bells:  while she lived more than half her life in New Zealand, the spirit of the Londoner was always part of her and so I dedicate what I have to say tonight to the memory of Florence Alice Bennett.

I’d like to introduce tonight’s discussion with some initial thoughts – around New Zealand’s approach to trade, around some of the criticisms we see of globalisation today and how we might begin to address these.

New Zealand’s approach to trade

It’s sometimes said that to live in New Zealand and to be involved in trade, you have to be an optimist.

Our small nation of just 5 million people, once described as the last bus stop on the planet, is a long way away from global markets, yet we produce more food than we can eat and the small scale of our market means we can’t manufacture all the products we need.

Much of the history of our trade policy has been about trying to overcome what we call the “tyranny of distance” and trying to get closer to our trading partners.

Of course, New Zealand has some advantages – we are a developed economy, albeit with the economic profile resembling a developing country with a high proportion of primary exports; we have well-educated people, stable and for the most part reliable government, some world-class production capabilities, not just in agriculture and other natural resources, but also in niche industries and the new and “weightless” economy – the creative sector especially – and a “can-do” attitude.

As a small economy, we rely more than larger ones on the rule of trade law and especially on institutions like the World Trade Organisation, where we have never lost a dispute settlement case but have challenged successfully the EU, the United States, Canada and Australia.

The current trade friction in the WTO between the United States and China and the delay in appointing judges to the WTO Appellate Body is a particular concern.

We have also pursued high quality, ambitious and comprehensive free trade agreements with many partners especially in the Asia Pacific region.

Amongst others, we have FTAs with China, Hong Kong and Chinese Taipei and the Comprehensive and Progressive Agreement on Trans Pacific Partnership – CPTPP – a veritable mouthful of an agreement – positions us well for the future, with new accessions to the fellowship of 11 existing partners, alas without the United States.

An FTA negotiation with the European Union is about to get underway and we have strong interest in a future FTA with Britain once the complex arrangements around leaving the Union have been sorted out.

New Zealand has long been attached to the concept of comprehensiveness – by which we mean including all products, agriculture as well as industrials, services as well as goods, investment as well as trade and the raft of other measures relevant to doing business in the 21st century.

Our newly elected Government is also keenly interested in the concept of progressive trade policy by which is meant trade to benefit everyone especially those who may not have participated fully in the past – women, small business, indigenous – and where the externalities of trade are better taken into account – environment, climate change, labour.

Our Government feels it can tell the story of trade better – three cheers for that – but that we also need a better story to tell.

Criticisms of globalisation

 Having a better story to tell has become more of a necessity in recent years.

Partly this is a response to public pressure – at the time of the signing of the first TPP (the one with the United States…) in Auckland in February 2016, the city was gridlocked by protestors.

While the protestors’ specific concerns were varied, they reflected world-wide unease about the pace of globalisation and a sense that the benefits had been poorly shared.

Trade is sometimes treated a little unfairly in these criticisms – technological advancement and the digital revolution have been greater drivers of productivity change and shifting patterns of employment – but it is certainly true that greater trade openness can lead to job losses in some sectors while job gains take time to realise.

But this is only part of the story – there is also the concern that by not including all sectors of the economy, some important gains of trade have not been realised.

Take women for example[1].

Women are certainly under-represented in export activity, and their participation tends to be concentrated in traditional sectors (agriculture, textiles and clothing) and a few service sectors (tourism, education and information communication technology services).

Globally, only one in five exporting firms are led by a woman.

Yet women-owned businesses which export report substantially higher sales than their non-exporting counterparts.

Exporting firms especially in developing countries also employ more women than non-exporters.

So, this under-representation matters, because we know that trade does bring benefits in terms of better jobs, higher wages and living standards and women appear to be missing out on these benefits.

Similar arguments could be made about the lack of inclusion of small business, as well as in New Zealand’s case the Maori economy valued at around $40 billion.

The point is that the argument is not just about individuals or sectors within an economy not sharing the globalisation dividend, it’s that the dividend is that much smaller because there is not better access and inclusion.

The more we can expand participation and inclusion, the better the results will be.

And this point is valid not just within economies but between economies as well.

As the World Bank tells us, trade has helped reduce by half the proportion of the global population living in extreme poverty (1990-2010)[2].

But in many parts of the world, and especially in Africa, the participation of countries in the global economy is hindered by production and export subsidies and continuing protectionism in the developed world.

That the global community could not find a way to conclude the WTO Doha Development Agenda, once dubbed “the development round” is a shocking indictment on all WTO members.

The risk of current global trade tension is that the needs of the poorest economies will once again be shoved to the back of the queue.

So, while we think about fostering greater inclusion at home, let’s also remember that the global environment has its particular and persisting forms of exclusion.

Finding solutions

What seems clear is that finding solutions to these problems, both local and global, will require some new thinking and a whole lot of us to do it!

This is not just something just for governments – it’s far too important for that!

Business has a role to play – not just because it is the right thing to do but because it is good for business.

Other stakeholder groups – including the church – have their own useful perspectives and need to be part of this conversation.

The good news is that business increasingly gets it.

I have the honour of serving as an Alternate Member of the  APEC Business Advisory Council, a group of business leaders who advise 21 Asia Pacific governments on the APEC agenda for sustainable and inclusive economic growth.

Making trade and globalisation work better is a theme that has come up repeatedly in recent years.

Last year we tasked the MBA programme at the USC Marshall School of Business in Los Angeles to survey business opinion in the region and come up with some recommendations.

The Marshall School team report[3], based on close to 500 interviews with business and thought leaders in APEC makes for useful reading.

The team found that whereas 94 percent of those interviewed expected cross-border trade in the region would increase there were fairly high levels of uncertainty around the political environment for this growth.

Over 90 percent supported the idea of better policy approaches to manage adverse impacts of globalisation – over a third went further to suggest more radical approaches to better inclusion and fairer distribution of benefits.

Amongst the possible approaches cited include:

  • Creating “springboards” rather than just focusing on safety nets – citizens need to be assisted for the jobs of tomorrow not just for those of today
  • Promoting synergistic eco-systems – uniting governments, business, unions, education providers and other stakeholders to enhance opportunities for young workers, women and small business owners
  • Enhancing job mobility – fostering labour market reforms and adopting policies and programmes to help people to move where new opportunities open up
  • Reinventing life-long education – fostering greater resilience amongst workers to adapt to changing technologies and working conditions
  • Bringing business into this dialogue, engaging organized labour and having more conversations about income redistribution were also considered important.

Many of these recommendations focus on policies and programmes to accompany trade liberalisation.

But trade liberalisation remains important too.

We know that protectionism penalises small businesses more than larger ones because they lack the resources to address barriers head on or to find work arounds.

Reducing trade barriers and putting in place better trade rules, particularly ones that target inclusion and take account of the externalities of trade, are also building blocks for a fairer, more inclusive trading system.

Or to put it another way, protectionism and inward looking policies are a sure fire way of restricting growth and inhibiting social progress.

With a new generation of trade agreements, we can target more effectively women, small business and indigenous people.

New Zealand is a nation of SMEs with Maori and women wanting “in” more than ever before

It follows that if New Zealand wants to take a new giant leap forward into the global economy, it must do so off the back of SMEs.

 Smaller firms say they find it hard to get hold of market intelligence and the information they need about trade requirements.

They often struggle to access foreign distribution networks and customers.

There’s clearly an information deficit, and a need to build deeper and broader international connections.

Red tape and compliance costs for meeting standards or regulatory requirements in overseas markets disproportionately affect smaller firms.

So CPTPP for instance contains specific commitments designed to make it easier for SMEs to do business in the region.

CPTPP governments have agreed to set up websites containing information about all aspects of the agreement – whether SMEs are looking for tariff rates, or Customs regulations or procedures, or information about technical standards or regulatory requirements, or relevant business, tax or employment regulations. A working group will meet regularly to share experiences on best practice to support SME exporters, to identify ways to assist SMEs to take advantage of the new commercial opportunities generated by the agreement, and to develop capacity-building programmes, training and other forms of assistance, for example around trade financing.

I give this example not to praise the merits of CPTPP, but to illustrate that a new generation of FTAs, can be part of the solution to addressing inclusion and equity.

Conclusion

Kiwis are optimists when it comes to most things, trade included.

But if we are to make trade to work for people, we need both optimism and good ideas, to take us forward.

Tonight’s discussion is an excellent opportunity to engage all of you in that task and I’m delighted that a business guy from far away can share a perspective.

He aha te mea nui o te ao?  He tangata, he tangata, he tangata.



[1] Honey, Stephanie: Will CPTPP Offer Tangible Improvements for Women? – CIGI, Geneva, May 2018

 

[2] Lagarde, Christine: “Making Globalisation work for all” – address to Sylvia Ostry Lecture, Toronto, 13 September 2016

 

[3]APEC’s New Challenge – Inclusive growth througher smarter globalisation and technological progress” – a report by the USC Marshall School of Business, prepared for ABAC, November 2017

Open letter to Andrew Little, Leader, Labour Party, on TPP

 

Andrew Little MP
Leader of the Labour Party
WELLINGTON

 

Dear Andrew

Thank you for clarifying your opposition to the Trans Pacific Partnership (TPP) on your recent blog post “My thoughts on the TPP” [1].  In the interests of open and respectful debate, I would like to comment on the key points of your argument:

Labour is a party of free trade. This isn’t a product of the last couple of high profile trade ministers in Labour governments. It goes back the full 80 years since we first formed a government. We have always championed the cause of better access to markets and free trade.

There can be no argument with this.  I myself (as a public servant) worked directly for former Trade Minister Jim Sutton and can attest to the tough debates with the Alliance Coalition partner about the merits of free trade.  It is precisely this long history of bipartisanship, which makes some of us, both inside and outside the party, so disappointed with your decision.

The National government has handled the negotiations of the TPPA appallingly. Seven years of total secrecy have aroused natural suspicion about its contents. The government did nothing to inform New Zealanders about the negotiations, the issues, progress – anything in fact. The 6000 pages of agreement were dumped in November last year and academics, NGOs and citizens have been left to work their way through the document and form their own conclusions.

People are invariably afraid of what they don’t know and the long and tortuous negotiating process was hopeless in this regard.  The 6000 pages of text were released, together with plain language descriptions, some three months ago, much earlier for example than other FTAs.  Of course NGOs and citizens have to come to their own assessment and this has been assisted by the release of the National Interest Analysis, which provides further insight. The proper place to come to judgments about all this is in the course of the ratification process.  This is exactly what has happened with other FTAs.

The deal is worth less to New Zealand than the government touted. Extending copyright will add costs to libraries and universities. The cost of pharmaceuticals to New Zealand will rise.

The analysis of TPP has been undertaken by the same officials who advised the previous Labour Government and may advise the next.  I suggest, but agree it is a matter of debate, that the additional costs to libraries and universities arising from the copyright change is marginal at best when compared to the other benefits.  (Some in the industry are already claiming the Government’s estimation of the costs of copyright are too high).  It is not clear that the cost of pharmaceuticals will rise since there is little change to Pharmac or to the patent and data protection regime for medicines: at the end of the day the costs to individual New Zealanders are determined by Pharmac and the Government.  The Government is on record as saying these costs will not rise.  You should hold them to account for that.

An email from an acquaintance of mine, a strong pro-free trader and pro-TPPAer, suggested I ‘take note’ of the Canadian trade minister’s statement on the agreement.  The minister, Chrystia Freeland, set out how she is dealing with the TPPA – meeting with unions, businesses, NGOs and holding town hall meetings. She called for a non-partisan debate. All of which I thought was a fantastic idea and was happy to note. Still, I did wonder why my friend hadn’t also sent it to the National Party asking them to take note.

If this was me (!), the point I was making was that the Canadian Government, while having reservations about an agreement signed by its predecessor, was proceeding to sign TPP and allow the ratification debate to continue.  As I understand it you don’t want the Government to sign TPP, which will prevent the ratification debate.  Your contributions this week have been far from non-partisan. The Government has already committed itself to a process of outreach and hui around the country to discuss TPP as a prelude to the Parliamentary discussion.

I have read a lot of the TPPA myself. The free trade aspects are naturally attractive, even though the deal on dairy is hopeless, meat is a little better and the rest amounts to not much considering it is an agreement covering 800 million consumers and 40 per cent of the world’s GDP. The benefit of genuine free trade agreements is the potential to create new markets that previously didn’t exist.

I agree that the dairy aspects of TPP are not as good as they could have been and as we had hoped.  But they are in the view of the negotiators and the dairy industry the best that could have been achieved in the circumstances.  Dairy still benefits more than any other sector from tariff cuts in key markets and the establishment of new tariff quotas.  The meat deal – specifically beef to Japan – is a significant market opening about which the industry has welcomed. Without this we will not be able to compete with Australia which already has an FTA with Japan. To call the rest ‘not much’ is a serious under-estimation – tariff reductions and/or elimination for horticultural products including kiwifruit, wine, wood products and seafood cannot so easily be dismissed. Addressing tariff and non-tariff barriers for manufactured products like health technologies and agricultural equipment is also significant.  This will result in the creation of new markets as you suggest.

Two things that disturb me are, first: the restriction on New Zealand legislating to regulate land sales to non-resident foreigners (Labour’s policy is to require them to build a new house, not buy an existing one, and we would be unable to do this under the TPPA)

Labour’s clearly signaled ‘bottom-line’ for TPP was that it should provide for restrictions on land sales to non-resident foreigners.  This is possible under TPP: a future Government could if it wished apply a stamp duty or other tax to restrict these sales.  Opinion is divided on whether an outright ban could be introduced, but there is a ready alternative to meet Labour’s policy position.

And secondly the requirement to allow other TPPA countries, their citizens (including corporates) to have a say on changes to many New Zealand laws and regulations…

Constraints on law-making and opening up our political system to overseas interests is unheard of.

 TPP does provide for our partners to make their views known on any measure, which may be introduced that could have an impact on trade.  But these provisions are far from ‘unheard of’.  They are already enshrined in the World Trade Organisation (WTO) and other FTAs concluded by Labour including the China FTA.  They are what make it possible for New Zealand to be consulted on changes affecting our exports to other markets such as subsidies under the Farm Bill or a discriminatory labeling or levy system.  Importantly these provisions retain the right of the Government to continue to regulate: the Government may have to listen to the views of trading partners but not necessarily heed them.  Bottom line is we do this already and have been doing so for years now.

For instance we would have to let Carlos Slim, the wealthy Mexican telecom company owner, vet any regulation of our telecommunications industry.

Not quite, the Government is required to publish notice of its proposed changes as it does in the Official Gazette, but not advise everyone personally. Mr Slim may offer comment if he wishes. The Government still decides.

As a social democratic party, we have always stood for effective parliamentary democracy. That means a system that is accountable only to those who elect its representatives and which serves all citizens, not the privileged and the elite.

There is no arguing with this either. In this case it is the democratically elected Government of the day which signs and ratifies treaties.  The Parliament is invited to consider and pass the legislation, which gives effect to the Treaty’s obligations.  TPP is no different in this respect from any other treaty whether in the field of human rights, climate change or labour.  A future Government may also leave TPP after due process albeit with the loss of benefits this would entail.

I hope you will consider these points.

Yours sincerely

Stephen Jacobi

 

Under the microscope: TPP and copyright

In this article Stephen is joined by copyright expert Ken Moon of A J Park to discuss the impact of TPP’s provisions on copyright in New Zealand.

“The TPP intellectual property provisions, while a complex set of legal commitments, will not result in much change to the way things are done in New Zealand except in relation to copyright term and TPMs. This is most certainly not simply “US copyright law” has been claimed”

See the article here

NZ and Japan – an added value relationship: the implications of TPP

In a speech to the Japan NZ Business Council in Tomakomai,Japan, Stephen outlines the implications of TPP for the Japan/NZ relationship.

Read the speech here.

Ending the TPP ‘endgame’

Read Stephen’s commentary in the New Zealand Herald on the TPP negotiations and why they are good for New Zealand business – here.

Endgame is a play by the absurd dramatist Samuel Beckett. It’s also how the anticipated last hurrah for the Trans-Pacific Partnership (TPP) negotiations in Maui last week was described. And there was quite a lot of the absurd as pressure mounted on negotiators and the wildest speculation about developments circulated in the media back here.

 

 

Getting our dux in a row

Stephen was interviewed by the Herald on Sunday about his school career and advice for students today.  Read the article here

Relieved parents send their kids back to school tomorrow for a new term full of hopes and dreams for the future. Joanna Mathers tracks down five former duxes to find out the secret of their success and to see how life turned out.

Trade and resilient agri-business

Stephen spoke to the Federated Farmers’ annual conference in Wellington on 2 July.  Read his speech here.

Resilience is about equipping farmers to survive and prosper in the face of external shocks and stresses – be they climate-related, or pests and diseases, or to do with currency or some other economic factor.

Trade agreements that level the playing field have enhanced New Zealand farmers’ international competitiveness, and greatly expanded our options in terms of diversified markets.

More open trade has given New Zealand farmers strength and flexibility to withstand the shocks of drought, or events like PSA, or a high dollar, or going head to head with massively subsidised competitors.

It is trade that links food supply from New Zealand with rising demand in global markets and the changing needs of global consumers.

Emerging trade agreements

Stephen spoke to the Primary Industry Summit in Wellington on 25 May.  Read his speech here.

I’d like to start today by asking the question – why do we seek negotiate trade agreements in the first place, especially when they seem so hard to I’ll then give you a sense of where I, as business observer, think some of the more current FTA negotiations are up to.

I’d also like to venture some thoughts about what all this might mean for the primary industries.

The next generation of FTAs – what does business want?

While in Qingdao , China, for the APEC Senior Officials’ meeting Stephen spoke to a workshop focused on sharing information between free trade agreements in operation in the Asia Pacific region.  He outlined what business wants to see from FTAs and what the APEC Business Advisory Council (ABAC) wants governments to do at this point to develop the next generation of agreements:

“Next generation issues can be new approaches to old issues as much as new issues not previously thought of. Next generation issues are rather more likely to be found behind the border than at the border. And so more than ever before we need to devise robust processes to address non-tariff barriers and other “behind the border” issues. We need to develop greater coherence in rule making around the region and co-ordinate – to the greatest extent possible our approach to issues like investment, innovation and competition.We need to develop a stronger focus on services trade issues recognizing the by growing share of services trade in global commerce.We need to continue to work on the digital economy and try to incorporate new disciplines relevant to the way business is being done today, including permanent duty free access for digital products.”

Read Stephen’s full address here.

 

Trade deals and free trade on Herald Live Chat

Stephen was a guest on Herald Live Chat today answering questions about free trade and TPP.

Read the replay of Stephen’s responses on the New Zealand Herald website.