Overseas trade: challenges and opportunities: David Parker reviews New Zealand's trade negotiation strategy and performance and outlines the government's efforts to create a more productive, sustainable and inclusive economy.

AuthorParker, David

The context for global trade today is very different from what we saw 25 years ago or even ten years ago. The IMF recently released revised global growth forecasts--they are downwards on the back of the China slowdown, US-China trade tensions and Brexit and, perhaps related to that, a decreasing confidence in the world. Notwithstanding that, New Zealand investors have reason to feel positive with expected economic growth of around 3 per cent, while other advanced economies are expected to grow an average of 2 per cent in 2019.

Before we get into the outlook for global trade and how we are responding to that, I will set some context for where we have come from by touching on three key milestones in what has been the golden weather for New Zealand's trade policy stretching back 25 years.

With the establishment of the World Trade Organisation in 1995, agriculture was, for the first time, brought into international trade rules and an effective system for resolving disputes on trade was created.

The next watershed, 2008, was the year that New Zealand concluded a trade agreement with the ASEAN countries and our trade agreement with what is now our largest market, China, which was led by Phil Goff, came into force. Trade with both ASEAN and China has increased significantly. In China's case, exports have more than quadrupled since that deal entered into force.

The last milestone is much more recent history--the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP) coming into force and the European Union-New Zealand free trade agreement negotiations getting underway.

The CPTPP covers $10 trillion of GDP and 500 million people. It gives us preferential trading relationships with three G20 countries--Japan, Mexico, and Canada--that we did not have a secure trading relationship with and faced very high tariffs. In respect of tariff reductions, there are hundreds of millions of dollars per year once the deal is fully implemented, but in addition to that it drives volume growth so the benefits will be very significant. With the CPTPP, 65 per cent of New Zealand's trade is now covered by preferential agreements.

We are already seeing very positive tangible results from the CPTPP. In the month of January, the quantity of New Zealand's beef exports to Japan increased three-fold compared to the same period one year earlier. That will be in no small part due to the CPTPP and the immediate reduction of the tariff on beef from 38.5 per cent to 26.9 per cent. That beef tariff will continue to come down over the next sixteen years as the CPTPP is fully implemented. Australia has had a free trade agreement with Japan since 2015, so for the first time in four years we are able to compete on a level footing with Australia in the Japanese beef market. Similarly, New Zealand butter exports to Canada jumped six-fold this January compared to a year earlier and cheese exports to Mexico more than doubled. Admittedly, some of these figures will have been influenced by people delaying the delivery of product until the CPTPP came into effect, but these are very significant changes for those industries.

Active negotiations

Our other active negotiations include:

* the Regional Comprehensive Economic Partnership (RCEP), which involves ASEAN, the North Asian countries (China, Japan and Korea), Australia and, perhaps most importantly from our perspective, India;

* negotiations with the Pacific Alliance, a group of Latin American countries, including Mexico, Chile, Peru and Colombia;

* negotiations with China to upgrade and modernise our existing free trade agreement are also in play.

The promise of these trade deals and the benefits of...

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