The global trade system looks shaky, and this is bad news for New Zealand

By EMA CEO Brett O’Riley.
The global rules-based trading system is under a growing threat.

Around the world, there is a growing trend towards populism and economic nationalism that potentially threatens New Zealand’s livelihood at a time when the new Government has set a goal of doubling the value of our exports by 2030.  

While I believe this is doable, it will require a different approach to developing trade, with less reliance on the free-trade agreements that have served us so well over the past 20 years.
 

Globally, politicians on both the left and right are advocating tougher tariffs and trade barriers to protect local interests, while there is also a move to weaponise trade policy to advance geopolitical interests. 

You need only look at the discourse that is ongoing in the United States, which has a history of championing a more open trading system.  

This has now changed. 

President Joe Biden has adopted a much more nationalistic tone on trade than his predecessors as he faces domestic pressure from politicians in the House of Representatives and the Senate. Meanwhile, his opponent in the upcoming election, Donald Trump, has talked about introducing a new 10% tariff on all foreign goods if he is elected. 

America is not unique in having these conversations. Other developed and developing countries are exercising their emerging economic muscle and making the multilateral trade system increasingly difficult. 

This presents a real risk to the future growth prospects of the global economy, which is already struggling to recover following the pandemic. 

Why? Because the economic growth in recent decades, which has lifted hundreds of millions out of poverty, is largely the result of the opening of markets and the adoption of a rule-based trading system overseen by the World Trade Organisation (WTO). 

Moves towards greater protectionism risk unwinding the enormous progress we have made in the past 30 years as countries make it harder to do business with each other. 

Our future economic prosperity relies on developing strong and enduring trade relationships, supported by a robust framework that ensures everyone agrees to, and plays by, the rules.  

Earlier this month, I led an APEC business delegation to the WTO in Geneva where we delivered the message about the importance of retaining this framework, while also recognising we may need to consider what are known as plurilateral approaches (some countries but not all) to deal with trade opportunities and issues. 

We met with Dr Ngozi Okonjo-Iweala, the Director-General of the WTO, where we discussed the state of world trade, business priorities, and how we can support efforts to tackle protectionism and enforce commitments while meeting the challenges of climate change. It’s no easy task, but certainly one the WTO is leaning into under Dr Ngozi’s leadership. 

The visit underscored real concerns about the direction of global trade policy, emphasising the need to vigorously defend the system built up over recent decades, while also examining new approaches. 

APEC countries, like New Zealand, have an important role to play here, with the bloc being home to 60% of the global economy, including some of the world’s fastest growing domestic economies.  

The growth that has been achieved in the region is the result of a shared commitment to trade and investment, which is why it is essential that APEC economies pull together to champion the WTO system and other free-trade opportunities. 

Despite the challenges the system faces, it’s not all bad news on the trade front. 

This month, New Zealand’s Free Trade Agreement with the European Union (EU) took effect this week. 

While this hasn’t attracted the attention it should have, it could well be the most important trade agreement New Zealand has signed since the FTA deal with China in 2008. 

The EU is the world’s second largest economy, behind only the United States, with close to 450 million high-income consumers. 

It is already New Zealand’s fourth largest trading partner, and the opportunity for future growth is enormous. 

With the trade deal with EU complete, where to next? 

The Government has signalled its intention to double exports within 10 years and is looking to advance trade agreements with the Gulf states. 

These are likely to be easier than securing a free-trade agreement with India, which is likely to be slow and challenging to negotiate with.

But while it will take time to negotiate and sign new trade agreements, that doesn’t mean we can’t grow our exports quickly by taking advantage of the deals we already have in place. 

And that means supporting smaller exporters, as well as potential exporters, to understand, make connections and take advantage of the opportunities that we know are available. That’s a challenge that the EMA and our ExportNZ and Chamber partners are ready to tackle. 

And it means investing and working with government to make our existing trade deals work harder for us.  

If we do this, there is no reason we can’t achieve the goal of doubling exports within 10 years, and in doing so continue to improve living standards to the benefit of all New Zealanders.

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