Saturday, March 30, 2024

O’Connor tackles new trade role

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Signing the world’s largest trade agreement barely a fortnight into the job wasn’t too shabby a start for Damien O’Connor as new Trade Minister. He talked to Nigel Stirling about the next challenges.
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AT THE shoulder of Prime Minister Jacinda Ardern for the online signing of the Regional Comprehensive Economic Partnership (RCEP) in early November, it was not a case of Damien O’Connor grabbing the publicity without having put in the hard graft of negotiations.

He was already very familiar with the mega Asian trade deal, having deputised for predecessor David Parker as Minister of State for Trade and Export Growth over the past three years, as negotiations first started in 2012 came down to the wire.

RCEP has been criticised for not cutting enough tariffs and for losing India from the final agreement which includes the region’s other two heavyweights China and Japan among its 15 signatories.

O’Connor says that’s selling the agreement short.

To take just one example, O’Connor highlights e-commerce which has grown in importance to businesses but isn’t reflected in the so-called “noodle bowl” of existing trade agreements that criss-cross the region.

The boom in online sales of NZ meat to China since the start of the covid-19 pandemic was proof it was an area worth focusing on.

“We have to ensure e-commerce platforms are not subject to unnecessary taxation or certification systems … those are some of the things we have addressed even in RCEP,” he said.

“If our exporters are to move from frozen to higher-value fresh or chilled products, then ensuring that the technical issues around documentation and certification fit their pathway to market is going to be important.”

O’Connor is also confident of dragging India back to the negotiating table.

“Some of the agricultural issues are the most sensitive, but I feel we can build on a very healthy relationship with India and can once again convince them of the value of an FTA.”

With India included, the benefit for NZ from RCEP jumps from $2b to $3.2b by 2045.

The deal has also been a shot in the arm for global trade and its institutions which have been at a low ebb in recent years.

Soon after RCEP was signed, President-elect Joe Biden declared he did not want to see the United States continue to bypass large trade agreements like it did after President Donald Trump withdrew from the TransPacific Partnership (TPP) in 2017.

Whether that leads to the US joining either RCEP or the TPP’s successor agreement the Comprehensive and Progressive TPP (CPTPP) remains to be seen, but O’Connor is hopeful that sentiment flows through at the very least into renewed support by the US for the World Trade Organisation (WTO), which was thoroughly undermined by Trump.

Trump’s stymieing of the WTO’s appellate court was concerning for a small country like NZ which depends on a neutral referee in trade disputes.

“It would be great to see that issue progressed,” O’Connor said.

But it is not just the US that has been setting the tone for global trade.

China is currently making a diplomatic example of Australia with bullying trade tactics that even Trump would have baulked at.

Several of Australia’s primary exports have been effectively cut off from the Chinese market after Prime Minister Scott Morrison led the call for an international inquiry into the origins of the pandemic back in April. 

NZ eventually backed Australia along with 62 other countries.

NZ has also joined others to criticise China’s treatment of its Muslim minority and anti-democratic legal reforms in Hong Kong, and O’Connor says it wouldn’t shy away from doing so again.

Asked if NZ should be negotiating more market access with other countries as an insurance policy should Beijing react badly to criticism in the future, O’Connor says it was always prudent to look for new markets and the Government would continue to do so.

“Any exporter or producer would probably have some concerns when they are exposed to one customer with over 30% of their sales.

“It is normal commercial arrangement to have an ongoing assessment of the market and ensure there are alternatives,” he said.

Key to NZ lessening its reliance on China will be negotiations with the United Kingdom and the European Union.

While trade talks with the UK are at an early stage, those with the EU have been under way for several years and have been tough-going so far. 

The EU’s dairy market offers – representing less than 0.02% of the European cheese market, and a similar paltry amount for new butter access, with high tariffs to boot – were rubbished by Parker when it was leaked to the media in July.

O’Connor says he would not bend to EU demands in the talks until there was more on offer for NZ exporters.

That included the reservation of hundreds of food and beverage names linked to European places for the exclusive use of EU producers in the NZ market.

“We have said everything is up for negotiation but there has to be goodwill and good offers from both sides,” he said.

O’Connor was also keeping a wary eye on the EU’s new Green Deal, which aims for a 20% reduction in fertiliser use and 50% reduction in pesticides and anti-microbial animal treatments by 2030. It also wants 25% of European farmland used for organic food production.

The US is suspicious it is a vehicle for protectionism although the Europeans insist the targets will not be forced on competitors through trade agreements and are merely to help put its own farmers on a more sustainable footing.

The EU was also assessing border taxes based on the amount of carbon expended on products it imports.

O’Connor says the record of NZ farming in these areas was the equal of anywhere else in the world.

NZ would take a dual approach to dealing with any new trade rules based on environmental targets.

“We have to push back when we think these things are unfair, but again be at the forefront of progress in this area … we will ensure that whatever measurements are backed by science are fair,” he said.

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