Trade minister Tim Groser says the organisation in charge of world trade that he was in the running to lead until just a few weeks ago is in danger of becoming irrelevant.
In early May Groser dropped out of the race to lead the World Trade Organisation (WTO), after making it to the second round of voting.
The top job in world trade was eventually snared by Brazilian Roberto Azevedo, who replaces Frenchman Pascal Lamy as director-general of the WTO later this year.
The failed campaign cost New Zealand taxpayers hundreds of thousands of dollars, as Groser jetted around the world to drum up support for his candidacy.
However, he is unapologetic.
“We as a country probably put more into the WTO in a relative sense than any other country in the world in the last 25 years and there is a reason for that,” Groser said.
“We always saw ourselves as a country that would benefit the most from progress on agricultural trade liberalisation.”
The Geneva-based WTO is the policeman for world trade. It was through its arbitration panels that a 90-year-old export ban on NZ apples to Australia was overturned.
More darkly, it is also through the WTO that countries are lining up to challenge Australia’s introduction of plain packaging for cigarettes.
Its other main purpose is overseeing the Doha round of world trade talks.
Started in 2001, the round was celebrated as the beginning of the end for tariff barriers hampering farmers in poor countries selling their products to the rich consumers of the West.
Government payments to farmers in the West were also to be tackled after being kicked into touch by the previous Uruguay round of world trade talks, which concluded in the 1990s.
A successful end to the latest talks would be a big win for NZ, which while not a poor country, has not paid subsidies to its farmers since the 1980s and has dismantled most of its tariff barriers.
Groser estimated the benefits to NZ exporters, mainly farmers, could be as high as $1 billion annually.
Unhappily the talks have been in the deep freeze since 2008, as the rich world pushes those in the developing world to open their manufacturing and services sectors to imported competition.
The developing world has pushed back, refusing to open markets until the United States, the European Union and others agree to larger cuts to government support for their producers.
NZ diplomats spoken to by The New Zealand Farmers Weekly believed Groser’s appointment to the top job could have been the best chance of breaking the deadlock.
With the political and technical skills from his time as Trade Minister and before that as NZ’s ambassador to the WTO’s Geneva headquarters and as chairman of its agricultural negotiations committee, Groser was seen as a hustler prepared to bang heads together to get a deal done.
He admits his missing out was probably a political decision, coming as it did at the same time as a renewed push by developing countries to have more say in the world’s big three economic institutions, the International Monetary Fund, the World Bank, and the WTO.
Groser is reluctant to comment on what Azevedo’s appointment means for the future of the Doha round, but the portents are not good.
Azevedo supported Brazil’s decision last year to increase tariffs on a range of imports to just less than the level permitted by WTO rules, citing the damage to local producers’ competitiveness from the devaluation of the US dollar.
He also backed Brazil’s decision to impose controls on foreign investors in the country’s bond market in an attempt to dampen demand for its surging currency.
An early and crucial test for Azevedo as head of the world trading system will come in December in Bali, when the WTO membership meets for the first time in two years.
Groser, who will represent NZ in Bali, dismissed talk of the meeting as being make or break for the Doha round.
“The real problem is more insidious and slow-moving … as every year goes by with nothing really very important happening the foundations subside,” he said.
“It is not a make or break situation. It is more a matter of slowly becoming irrelevant to trade policy.”
Many, including Azevedo, have backed a smaller deal based on the areas where agreement can be reached in Bali between the WTO’s 159 members, to rescue the talks from death row.
US ambassador to the WTO Michael Punke also backed the idea last week. He said some countries were holding the talks hostage by making demands on agricultural protectionism “so broad as to trigger an unfinishable negotiation”.
But Groser said he was a deep sceptic of a cut-down agreement, which would in all probability leave off the table the biggest gains for NZ in agriculture and do little to advance the round’s original aims.
“I just think it doesn’t take you very far. It takes you to tiny little bits (of an agreement) that may be digestible but it would be at such a slow pace that we would all be here for another 20 years,” he said.
However, he said NZ would not give up on Doha. The Uruguay round was pronounced dead more than once but eventually led to a deal that cut global tariffs by a third.
Doha was also the best chance of eliminating trade-distorting subsidies, he said.
However, the Uruguay round did not face competition from a proliferation of free-trade deals between countries, which the US’s Punke said last week were sidelining efforts to get a multilateral agreement.
Groser agreed the boom in bilateral and regional trade negotiations that NZ was involved in through the Trans-Pacific Partnership (TPP) and other deals was in danger of sucking the oxygen out of the Doha round.
The TPP is a free-trade negotiation, due to conclude this year, which aims to eliminate tariffs among its members within 10 years.
It was started by NZ and three others in the early 2000s but now includes the US, Japan, Canada, and a handful of other Pacific Rim economies, which together account for about 40% of the world economy.
Groser said there was some room for optimism at the role to be played by such regional deals in freeing up world trade, as envisaged by Doha’s architects.
He said there were hopes a trade deal between the EU and the US would become the first bilateral trade deal to tackle subsidies.
If successful it could slash the billions in taxpayer subsidies paid on both sides of the Atlantic to keep inefficient farmers in business.
Groser believed cobbling together the EU-US deal with other large regional deals such as the TPP could lead to global free trade in agriculture within five years.
“This is so visionary and there are so many question marks in that process … but if we wanted to allow ourselves a bit of optimism then we would go down exactly (that) track of thinking,” he said.
