Redefining Trade

Our friends at TradeWindow invited Stephen to sit down with Peter Foyston to discuss the latest developments in trade – from super power rivalry, to nasty things being with P, to the future of digital. Watch what transpired here.

ADDRESS TO THE 48TH ONE STOP UPDATE FOR THE ACCOUNTANT IN BUSINESS

Thanks to Conferenz for once again inviting me to address this 48th One Stop Update event.

It’s great to be back and talking about the global economy.

If there is one thing we have learnt from this dreadful pandemic, it is that our ability to connect and trade with the rest of the world really matters.

It’s trade that has propped up our economy in this global crisis.

I’ll focus first on how the global economy has fared over the last year or so.

I’ll then turn to what should be on our mind right now.

And lastly, I’ll suggest a few things that will be more apparent in the years to come.

How have we fared?

My wife always tells me I use the same quotes in speeches.

My favourite over-used one from Yogi Berra, the famous baseball player: “The future ain’t what it used to be”.

Actually, I think for once Yogi is wrong: the future looks curiously like what it was before, at least for the immediate future!

Certainly, when it comes to the pandemic, there’s no escaping that things have been very bad and for many around the world they still are.

In some places they are getting worse.

The human toll has been incalculable, with a massive loss of human life and human potential.

The impact on the global economy and trade has been pretty dire, although the numbers are beginning to look more positive.

The economic downturn in 2020 was the worst peacetime global contraction since the Great Depression. 

In April the IMF released its World Economic Outlook, in which it projected global growth for 2021 to be 6 percent, which is 0.7 percentage points above the previous forecast in February. 

Growth is expected to moderate to 4.4 percent in 2022.

The World Trade Organisation is forecasting a growth in world merchandise trade of 8 percent this year, after a decline of  5.3% in 2020, less than the 9.2 % drop predicted earlier. 

Much of course will depend on the success with which economies are able to get on top of the pandemic and to hasten the vaccination effort.

The IMF describes this as a race between the virus and the vaccine.

In this difficult global environment New Zealand’s goods trade held up reasonably well, especially during the height of the pandemic, but has begun to fall back this year.

Exports and imports were both down in March with exports declining to most markets except China[1].

This fall-off in goods’ exports is possibly a result of the resurgence of the virus in some markets and increasing difficulties experienced with shipping and airfreight.

There are increasing bottlenecks at our ports, shipping rates are rising exponentially and airfreight is both expensive and facing capacity issues with airlines reducing flight schedules.

Of course, in services, especially the ‘people-intensive’ sectors where we are strongest, such as tourism and international education, the news continues to be bad.

The pandemic has a long tail and we may be living with an unstable environment for some time to come.

Yet what is clear is that as we work to get out of the mess that has been created by the virus, our economic recovery will continue to depend on our ability to do business with the rest of the world.

What should be on our mind right now ?

That ability is impacted by a number of factors which complicate the task before us.

Let me highlight briefly just five: growing protectionism, complex geo-politics, the rise of new trade arrangements, changing business models and risks arising from climate change. 

Growing protectionism

In a recent media interview New Zealand’s Chief Trade Negotiator, MFAT Deputy Secretary Vangelis Vitalis said that during the pandemic there had been the sharpest spike in protectionism since the establishment of the WTO.

That’s quite something!

Certainly protectionism had been growing since before the pandemic with a certain President in the White House announcing that “trade wars are good and easy to win”.

Even so – and this is really alarming – the tariffs imposed during the US/China trade war were responsible for only around one-quarter of all the trade-restrictive measures that have been deployed, including not just tariffs but also trade remedies like anti-dumping and especially, subsidies.

The US for example has resorted to large-scale subsidisation to compensate farmers’ lost incomes which penalises unsubsidised players like New Zealand.

The early onset of the pandemic saw the general climate of protectionism worsen with import and export restrictions applied to a number of goods including essential health supplies and food.

But in the course of 2020 statements from various international organisations such as the G20, APEC and the WTO all served to lower the temperature as countries sought to work more together.

Latterly however, as countries have started to move on vaccinations, new protectionist pressures have reared their ugly head once again.

Both the EU and the US, despite signing up to those numerous international statements to the contrary, introduced measures to restrict the flow of vaccines or associated goods, although they have since moderated their position in the light of the unfolding tragedy in India. 

Numerous economies also continue to maintain tariffs on goods like vaccines, soap and syringes – all of which impose costs on economies when they are trying to fight the pandemic and develop and distribute vaccines.

It’s good to see that New Zealand is leading an initiative in APEC to make trade in goods required to combat the pandemic tariff free.

Fortunately for us, New Zealand’s export markets remained largely open during the earlier period and the Government was able to negotiate a number of agreements with partners to keep supply chains open and keep trade flowing.

Unfortunately the threat of protectionism continues to overshadow the global economy.

Complex geo-politics

Behind some of this growing protectionism that we see around the world lurks a dangerous geo-political “Game of Thrones”.

It’s a story of a rapidly rising power, a slowly declining power and a whole bunch of players with limited or no power at all.

It takes place in the Asia Pacific region we call our home and involves some key friends and trade partners of New Zealand.

China’s rise as an economic power is driving growth across Asia even during this pandemic.

China’s success in lifting millions of people out of poverty cannot be denied, but their policies at home and abroad are causing deep concern on the part of the liberal democracies.

The former US Administration went out of its way to raise the temperature in the relationship, seeking overtly to contain China’s rise and citing problems in both economic and political areas.

The “trade war” between the two had little to do with trade and mostly served to penalise the United States, but had grave global consequences.

There’s little doubt that American commitments to Asia have underpinned an ‘age of peace” in the region, but the outlook is increasingly menacing.

Certain politicians in Australia are talking about a future war with China.

The Economist has gone so far as to call Taiwan, “the most dangerous place on earth”.

For what it’s worth, I think these assumptions are way off mark, but the tone is disturbing. 

New Zealand may be reluctant to be asked to choose between our largest trading partner and our “very, very, very good friend”.

As the old adage goes, when elephants fight, it gets tough on the grass.

Changing trade arrangements 

Against this background, trade policy has not stood still in recent years and we see a number of new trade arrangements come into the frame.

New Zealand like many others has been negotiating a number of bilateral and plurilateral agreements of which the NZ/China FTA, the NZ/ ASEAN FTA, CPTPP – a veritable mouthful of an agreement – and now RCEP – which most people have never heard of – are the most significant.

These agreements have been a response to the business community’s continuing push for more open and effective trade arrangements which can remove tariff and non-tariff barriers and reduce the cost of doing business.

Even so, it’s interesting to note that New Zealand still has no existing or planned preferential market access with almost 40 percent of the world’s economy and consumers.

Over half of this represented by exports to the United States where our decades-long quest for an FTA has not yet been rewarded.

That is not to say that all sectors are fully liberalised in the FTAs we do have.

The “shag on the rock” is the dairy industry – even with our coverage of FTAs, dairy only has access to around 12 percent of global dairy demand at tariffs of less than 10 percent.

Even our very high quality and recently upgraded FTA with China continues to see dairy exports affected by safeguard tariffs – these tariffs however will be completely removed within 3-4 years.

Changes in business models

One area which these new trade arrangements have all been forced to address concerns new models for international business.

The rise of digital transactions requires a different approach to the flow of data across borders, protection of privacy, systems for payment and the applications of new technologies just to name a few.

There has been a tendency to regard digital and other forms of trade as quite distinct – in fact today all trade is digital as digital systems impact on the ways exporters connect with consumers, particularly through e-commerce and the way goods move around the world.

The point here is that trade continues to evolve and trade policy needs to continue to evolve with it.

The risks of climate change

Evolution is also required in relation to trade and the environment and especially climate change.

There has long been the thought amongst more progressive trade thinkers that trade and the environment need to be mutually supportive and there has been a corresponding increase in the number of environmental provisions inserted into trade agreements, like CPTPP.

A trade and the environment chapter has also been added to the NZ/China FTA, but disappointingly RCEP has no such provisions.

The looming real-world impacts of climate change and the growing consensus amongst both governments, citizens and business alike that something, finally, needs to be done means that we need, both at the international and domestic level, to go far beyond the steps taken to date.

Working out what these steps should be and co-ordinating responses across the international community to avoid the risk of carbon leakage and new protectionism are going to be major pre-occupations.

It’s been said that the Covid disaster is but a foretaste of what could happen if the risks of climate change are not addressed.

What’s ahead ?

So where does this leave us ?

In my remarks to this conference last year I said we were in the midst of a really big storm.

I have to say, it’s still pretty stormy out there !

The challenges I have outlined are all bearing over the global economy and the multilateral trading system and in ways that are not always easy to predict.

Let me turn now to what might lie ahead.

The building blocks of trade 

It almost goes without saying, firstly, that the health response to the pandemic will continue to exercise our minds and our economies for some time to come.

We are not out of the woods yet and the economic recovery will likely be a stop-start sort of thing.

Trade will continue to underpin the performance of the NZ economy in this next period.

I have no doubt that the NZ Government will continue to look for new opportunities in global markets – Trade Minister Damien O‘Connor will shortly be travelling to Europe and spending two weeks on return in MIQ, taking one for the team of 5 million.

I mentioned earlier that despite our success in negotiating trade agreements these did not cover important areas of our trade.

The United States and India are two big gaps for us where we have no FTAs and no immediate prospect of getting them.

That means we must continue to explore ways of connecting with both.

We have a number of trade agreements to upgrade and expand.

We have completed the China FTA upgrade: the ASEAN FTA is the next cab of the rank.

We have two important trade negotiations to finish – one with the EU and one with the UK.

Both are complex because they will require our partners to open their markets in  what they regard as the “sensitive” area of agriculture. 

The NZ/EU FTA has been a long time in the making and there are other problems in the negotiation to be worked through but a successful conclusion would be a significant milestone.

The NZ/UK FTA would also be welcome and would pave the way for the UK to join CPTPP.

The UK talks a good talk on free trade these days, but it will need to demonstrate it is willing to open its market to NZ including in “sensitive” areas if this negotiation is to succeed.

We also have potential new partners to explore – in non- EU Europe, in Africa, in Asia and in Latin America.

Some of those markets are closed to us at present and will take more than a decade of work to open and develop, but these, and the other agreements I have mentioned will be the building blocks for future economic recovery.

Let’s hope Damien really enjoys MIQ!

Calls for greater inclusion

The global pandemic has laid open some significant inequalities in our societies, some close to home, others around the world.

We knew about these before of course, but we took consolation in the increasing numbers of people who have benefited from the enormous technological advances of the last thirty years.

It is now pretty clear that some groups in society have suffered more from the pandemic than others.

We will therefore most certainly hear even greater calls for inclusion of those groups who have been left on the margins, including women, youth, indigenous people, those living in rural areas, those who have not been able to acquire the skills required for the modern workforce.

Finding ways to make the economy work for everyone and to expand the benefits of trade will become an even more urgent task as we seek to “build back better” from the crisis.

A new focus on multilateralism?

The last thing I want to mention is more of a wish.

You see here the building of the World Trade Organisation in Geneva.

I hope that, as we move beyond the health crisis and turn our attention both here in New Zealand and globally to economic rebuilding and recovery, we will learn the really big lesson of the last seventeen months:  we need global co-operation to address global challenges.

At the Writers’ Festival in Auckland I heard it put this way: “we may not all be in the same boat, but we are all on the same sea”.

I admit the global climate for co-operation is not the best.

The pandemic is not defeated.

Our economies are shattered.

The world is moving increasingly inwards.

New economic policies currently being pursued in major economies – “Buy American” in the USA, “dual circulation” in China, “strategic autonomy” in Europe – do not make for a very good recipe.

When it comes to trade, we desperately need a renewed focus on the WTO.

There is some hope that the new Administration in Washington may be more enlightened than its predecessor when it comes to global engagement.

The world’s two largest economies need to learn not to let their political differences overshadow the important work they need to do together.

New Zealand is not immune from these risks.

If the world, with all its gloom and bloom, is to find a way out of the mess we need to find once again that spirit of co-operation and collaboration.

The future doesn’t need to be what it used to be: with more global co-operation, it can be a whole lot better.


[1] Annual goods exports were valued at $58.9 billion, down $1.7 billion (2.8 percent) from the previous year. Annual goods imports were valued at $57.3 billion, down $6.8 billion (11 percent) from the previous year.

Trade and the virus: united we stand

Economies need to fight the Covid-19 virus by standing together.

Desperate times call for desperate measures, but not stupid ones.  The world faces an unprecedented challenge to human health and to economic vitality.  Many economies including New Zealand are now resorting to extraordinary measures to check the spread of the virus, treat sufferers and deploy massive economic stimulus.  That is as it should be.  Borders need to close to travelers for a time. But some economies are resorting to protectionism.  That will make the fight against the virus even more complicated and is likely to delay the recovery once there is light at the end of the tunnel.

Protectionism – what’s new ?

Unfortunately, protectionism is nothing new and has been rising steadily since the Global Financial Crisis, and particularly over the last three years.  Economic openness had been fragile before the crisis struck and it seems that the virus has accelerated the trend.   Fifty governments are now limiting access to the essential tools to fight the pandemic, imposing export restrictions on medical equipment and drugs.  Many more are maintaining tariffs on even the most basic protective items such as soap and disinfectant.  The Global Trade Alert team at the University of St. Gallen  have pointed out that at least 16 export bans have been imposed since the beginning of this month alone.  Now, as Prof Simon Evenett says “beggar-thy-neighbour means sicken-thy-neighbour”.

What can be done ? 

Trade and open markets are crucial to getting through this global challenge, helping life-saving medical supplies to get to where they are needed most.  By contrast, going it alone is a recipe for disaster.  Commentators at ECIPE (European Centre for International Political Economy) have called for economies to “get rid of the restrictions and tariffs that delay the purchase of medical equipment and make them more expensive”.  They are right.  We need a lifting of export bans and a stand-still on new tariffs and elimination on these products as soon as possible – and for markets for other goods and services to stay open too, even as countries may be tempted to throw up barriers elsewhere in response to the difficult period that undoubtedly lies ahead.   We believe that economies in the Asia-Pacific should show global leadership here, staying true to our shared values of “equal partnership, shared responsibility, mutual respect, common interest and common benefit” as APEC Economic Leaders put it in their Bogor Declaration in 1994. 

Getting the engines started again

While we are in the midst of the struggle right now, thought will need to turn to how to restart the engines of trade and investment as soon as possible.  Forecasts are for a serious global recession, at least in the short term.  We will need the right tools to keep economies and communities going in the meanwhile, and ready to crank up again when the moment is right.  Protectionism is bad medicine.   First to hand instead should be openness and co-operation. Bodies such as APEC and the WTO, where countries can come together to lay the groundwork for coordinated global action, will be crucial to get things moving quickly.  New Zealand has a leadership role to play here as Chair of the WTO General Council and Chair of APEC in 2021.  We need to get back to the habit of mutually beneficial international co-operation.

For now, the world and its people are hurting. We wish all our readers the best of health and happiness wherever it can be found in these viral times.  Kia kaha ! (Be strong!) 

This post was prepared by Stephen Jacobi and Stephanie Honey.

A mainstay in international trade

It’s nearly impossible to talk about New Zealand trade issues without mentioning the name of Stephen Jacobi.

A Chartered Member of the Institute of Directors, Stephen is a mainstay in the New Zealand international trade space. After working at the Department of Trade and Industry and the Ministry of Foreign Affairs and Trade for 25 years, he shifted to consulting and took on roles as head of major business councils. The Institute of Directors spoke with Stephen and in the article below he shares his insights into the rapidly changing global trading environment and what this means for New Zealand.

Read this profile prepared by the Institute of Directors.

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.