Speech to Wellington public meeting on the refresh of New Zealand’s Trade Policy Strategy
Thank you for taking the time to be here today.
I said earlier this year that I view one of the most important roles that I have is to better make the case with the New Zealand public about why trade openness and trade agreements are vital for the success of New Zealand businesses and the prosperity of New Zealanders.
Why trade is important to NZ
Whilst we are too small to produce everything we need, in some areas we also produce far more than we need.
We have to import medicines and medical technology, vehicles and agricultural machinery. We also like enjoy seasonal and tropical foods, the latest smart phones or Netflix episodes.
To pay for those imports we need to export.
Some of our biggest export sectors produce far more than we can consume – dairy exports 95 per cent of its production; sheep meat about 90 per cent. Wine will earn a record $1.5 billion this year. The people who work in these sectors need secure access to much larger markets than just New Zealand. Tourism depends on foreign visitors. Tourism earns more than $12 billion in export receipts each year and many New Zealand jobs depend on these visitors to our shores.
We say it a lot - and it deserves repeating; we will not prosper selling to ourselves. We cannot shut ourselves off from the rest of the world.
I have been discussing our Trade Policy Strategy with a wide range of stakeholders and other interested New Zealanders, including from civil society. Other Ministers are also having such discussions.
This provides a valuable stream of input.
It is important that all New Zealanders are given the opportunity to share in the benefits of trade.
Trade agreements are not about big companies. They are about levelling the playing field so that the men and women who work for those companies, and who work for their own companies, have greater job security and greater opportunity.
I announced at the beginning of August that, as part of the process for the refresh of New Zealand’s Trade Policy Strategy, we would hold public meetings in the main centres, open to all New Zealanders, to provide an opportunity to hear their views.
To enable New Zealanders that do not live in those centres to participate, these meetings are being webcast and there is an opportunity for people to send in questions during the meeting.
This meeting is the first in a series of open public meetings that deliver on that undertaking.
I have also continued dialogue with Iwi around the significant benefits to all New Zealanders and in particular Maori businesses that high quality trade agreements can deliver.
Taken as a whole, I hope this even greater engagement with New Zealanders will ensure that there is much wider understanding of, and comfort with, our trade policy strategy and the overall direction of New Zealand’s trade policy.
The Trade Policy Strategy refresh
Turning to the refresh of New Zealand’s Trade Policy Strategy.
We need a broad strategy that will help us to deliver on some basic objectives.
We need to create opportunity and increase international connections, especially for New Zealand businesses – large and small. We need to use strategy to reduce the enduring challenges that New Zealand faces: we’re a long way from some of our key markets, we have a small domestic market, and our major comparative advantage is in products that some of our trading partners want to protect from competition.
If our trade policy strategy can address those objectives it will help to make the New Zealand economy more resilient, and in turn help to lift growth and raise living standards for New Zealanders. Ultimately, New Zealand’s Trade Policy Strategy contributes to meeting the government’s goal to lift the share of exports to 40% of GDP by 2025.
At the same time, we will negotiate trade agreements that protect the government’s right to pass law and regulate for legitimate public policy purposes.
I outlined in a speech at the beginning of August four broad shifts that I expected we might see over time in a refreshed Trade Policy Strategy. I am pleased that feedback to date from business has been broadly supportive of these shifts.
I also want to stress that throughout these shifts, the WTO will remain important. It’s the only forum where we can achieve disciplines on agricultural subsidies; and with New Zealand companies trading globally, setting trade rules globally through the WTO makes sense for New Zealand companies.
New Zealand has had and must retain an important and influential role in shaping these developments at a multilateral level. Our capacity at the WTO must be maintained and, where it makes sense, enhanced.
While it has had some well-documented difficulties, the WTO can still surprise us.
The achievement of the 10th Ministerial Conference in Nairobi in eliminating agriculture export subsidies was truly historic.
I hope that success breathes new life into the negotiating function at the WTO and we do not slip back to the situation where negotiations drift for years. There is too much at stake. Key objectives for New Zealand, such as disciplining agricultural domestic support, can only be achieved in the WTO.
An important medium term goal as part of a refreshed New Zealand Trade Policy Strategy should be to seek to reinvigorate multilateral trade negotiations centred on the WTO.
The first shift was in the balance between negotiation of further agreements and making the most of those we have, or ‘implementation’.
We have achieved a lot already.
Having invested heavily in building what you might call ‘architecture’, the fact that the majority of our exports go to markets that are now covered by FTAs means in future we are likely to spend less effort looking to negotiate new agreements and more effort on implementing and upgrading our existing agreements.
I want to underline a couple of things about the nature of this shift, in response to points that business has raised with officials. First, this is a process that will take a number of years; it’s not a light switch. It’s about shifting the emphases, or weightings, in our Trade Policy Strategy over time.
Before we shift the weighting of our effort, we have to complete the existing agenda of negotiations.
And we’re not ruling out negotiating new agreements, or upgrading some of the existing ones in future. But the emphasis would shift mainly to getting the most out of the agreements that we have.
Business has noted that more effective implementation will need more coordination, especially between business and government. I agree. A number of elements in the Trade Policy Strategy refresh will raise new challenges for New Zealand business.
Business has also pointed out that greater emphasis on implementation of existing agreements will also highlight the importance of alignment of New Zealand’s domestic policy settings with those agreements. New Zealand’s trade policy strategy and New Zealand’s overall economic strategy need to be mutually supportive.
A second shift in our trade policy strategy arises from a combination of what we have achieved to date, and the new challenges faced by business.
Our bilateral FTAs have delivered significant benefits for exporters.
At the same time, non-tariff barriers have been repeatedly identified as a concern by a wide range of businesses. Government has heard this concern.
With the progress on tariffs, we should be able to increase our focus over time on the barriers and distortions to our goods exports caused by non-tariff barriers.
Addressing NTBs is typically long-term, resource-intensive work. There are very few quick fixes.
The breadth, complexity, technical character and timeframes needed to address many NTBs will require both government agencies and business to further strengthen our existing means of engagement on this.
Ministers are already taking steps to improve coordination and focus across agencies on NTBs. But as with other aspects of the Trade Policy Strategy, effective progress by New Zealand to address NTBs will also require business to strengthen its capability to engage government on these very technical issues in a meaningful way, and to sustain that engagement and technical support over the medium and long-term.
There has been some debate among business about the speed of this shift towards more emphasis on NTBs and what it may imply for the focus on tariffs.
I want to emphasise that government recognises that high tariffs are still critical impediments for some industries, notably dairy. As I said in a speech at the start of August, we will still seek opportunities, including in future negotiations and the WTO, to address these remaining tariff peaks and the tariff escalation which affects a wider range of value-adding businesses.
A third, important shift arises from the changing nature of business. Services and investment are of increased importance. The digital economy is transforming the operating environment for New Zealand.
Services make up the majority of New Zealand’s GDP, and are a key source of employment for New Zealanders.
A number of mainly ‘services’ exporters have told officials that they share an interest in the success of ‘goods’ exporters, because the latter are also important customers for them. I am encouraged by that. We are increasingly moving beyond rigid divisions of interest between our ‘goods’ exporters and our ‘services’ exporters. In modern business the boundaries between selling goods, services, intellectual property and making investments are blurring.
Over time I expect that goods and services trade will increasingly have an equal weighting when it comes to trade policy in New Zealand.
Services and increasing overseas investment – typically so that businesses can get closer to end customers - are key elements for New Zealand firms to enable them to add value to volume.
One of the most valuable insights from business in talking about the proposed Trade Policy Strategy refresh has been the perspective that firms need to identify a place in a value chain or value network where they can see themselves able to extract significant value, and to then work backwards from there how to occupy that place – rather than the simple production-driven narrative of ‘moving up the value chain’.
E-commerce or digital trade has emerged as a vital channel to market; and with modern communications technology an increased range of ‘digital products’ can now be delivered to customers directly over the internet.
This is also of particular importance to New Zealand, as another means to reduce the enduring challenges of distance from market and small scale. There are opportunities for goods trade as well.
The time is here where a small business in Invercargill can export to a consumer market of billions of people through online e-commerce platforms. These platforms can navigate the cultural and linguistic challenges whilst arranging secure payment, freighting and customs procedures all with the click of a button.
We often read about NZ consumers buying online from overseas. E-commerce means those very same New Zealanders can now share in the benefits of trade directly - as exporters.
The fourth shift that I see is that, over time, as we improve the rules to ensure a level playing field, we will want to put more effort into appropriately assisting New Zealand businesses to compete successfully in offshore markets.
This also raises a challenge over time to New Zealand businesses, to grow their capacity to engage with government and then to succeed overseas, and to the government to further strengthen its capability to engage meaningfully with business.
So there are four broad shifts in our Trade Policy Strategy that I believe make sense for New Zealand and will provide a useful guide to the future.