Barber’s Wire: Trade benefits need selling to New Zealanders

Just when we thought New Zealand was about to enjoy the trade benefits of several new agreements, not least the Trans-Pacific Partnership (TPP), the world appears to be growing more and more averse to signing up to trade deals. There is a distinct trend towards self-reliance and protectionism among countries that have up to now been champions of the benefits of free trade, most obviously sizable blocs of voters in the United States, European Union and Great Britain exercising their democratic right to protest, notes Allan Barber in this post that was published a few weeks ago.

The problem with free trade for disaffected voters is the direct connection with the theories of liberal economics and the rise of capitalism which have dominated the global economy for the last quarter of a century. When the benefits of capitalism were shared, resulting in generally higher prosperity, free trade was seen as a force for good, but in the years since the Global Financial Crisis capitalism has got a bad name, deservedly so in many cases. Economic hardship has not been shared equally – banking directors and executives were responsible for billions of dollars of shareholder losses, but most of them have got away with it and many continue to receive bonuses in spite of the losses.

The sophisticated tax avoidance structures set up by major corporations like Apple, Google and Amazon, confirm the evils of capitalism to the average person in the street. So the net result is a growing minority, even a majority, of the public who don’t trust the large corporates, merchant bankers or politicians. Therefore, capitalism, of which free trade is an important component, is increasingly seen as a force for evil instead of good. Against this backdrop of mistrust, it is hardly surprising free trade agreements between or involving first world economies are running into headwinds.

Mega agreements like TPP and the Trans-Atlantic Trade Investment Partnership (TTIP) between the US and EU appear doomed to fail in spite of years of negotiation and approval by participating countries, not so much because of the implications for removing restrictions on free trade, but because of the dispute settlement resolution mechanisms and perceived loss of control implicit in this type of agreement. A significant proportion of the public doesn’t trust the politicians and trade negotiators to protect democratic rights in their eagerness to sign ever bigger trade agreements. Other non-democratic trade partners like China attract less protest from their population quite simply because their political system does not require them to satisfy the electorate or comply with the basic principles of democracy.

New Zealand is almost entirely dependent on free trade because without it we wouldn’t be able to sell much of the country’s output and would soon get indigestion and run out of foreign currency reserves. It would be a very short drop into recession. We must inevitably attempt to conclude new free trade agreements wherever possible, while also extracting the full benefits of all trade agreements, old and new.

This is where Trade Minister Todd McClay now intends to focus the ‘trade refresh’ programme, recognising the opportunity to get more out of what we already have, as it becomes more difficult to negotiate high quality trade agreements. Trade negotiation resources are relatively scarce and it is important to target carefully where we direct and devote those resources. An obvious example of an existing FTA which hasn’t yet delivered to its full potential is the China agreement where meat plant accreditation for frozen meat products is not as comprehensive as it should be, while chilled meat exports, announced with much fanfare during John Key’s visit earlier this year, have yet to begin, pending finalising customs protocols and plant accreditation. Dairy in general and infant formula in particular are areas which will also benefit from targeted effort.

Variations to existing quota arrangements with the EU and UK may need to be negotiated, although Special Agricultural Trade Envoy Mike Petersen expressed some doubt about whether this would even remotely be a priority for them, amid all the other priorities. A greater threat may be posed by the UK negotiating a free trade deal with Australia which new British Prime Minister Theresa May has said is a priority. As part of such an agreement, Australia would gain much greater access for beef and sheepmeat than it currently has and this would directly affect the amount of New Zealand lamb imported regardless of quota. New Zealand must continue efforts to negotiate its own FTA with the UK, while also trying to keep its EU FTA’s place in the queue.

It is ironical New Zealand should have to demonstrate the benefits of free trade to ordinary New Zealanders because of its critical importance to the country’s prosperity, but at least a segment of the population seems to agree with counterparts in the USA and Europe that globalisation has led to inequity. The government must not only push on with trade negotiations, but it must also sell the trade benefits to all New Zealanders.

Allan Barber is a meat industry commentator. He has his own blog Barber’s Meaty Issues and can be contacted by emailing him at allan@barberstrategic.co.nz.

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