Although we have tried to use plain English content on the site, you may come across specialist terms and acronyms. Find out what they mean in our glossary of terms.
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The ongoing global financial crisis will have important implications over the next 18 months to two years. The Ministry has two significant roles: monitoring developments as they unfold through its overseas posts and analysing the implications for New Zealand, working closely with other Government agencies. New Zealand’s diplomats are able to use their contacts to access senior overseas officials, private sector leaders and other experts to obtain first-hand perspectives on global economic developments that would not otherwise be available to Wellington policy-makers. Work being led by Treasury with input from the Ministry, Reserve Bank and Ministry of Economic Development is underway to identify New Zealand’s core interests in the debate on international financial reform. A report will be produced shortly for Ministers’ consideration.
The Ministry also works to ensure that New Zealand’s interests are protected in the context of international and regional responses to the global financial crisis and responses of key partners such as Australia. It is necessary to develop and promote New Zealand’s position with respect to international and regional economic diplomacy, as the institutional frameworks within which governments will address these issues become clearer. The issues will be discussed in a range of international forums, such as the Organisation for Economic Cooperation and Development (OECD).
Aside from the obvious intensification of competition for market share amongst exporters as import demand slackens, there is also a particular concern about the potential rise of trade protectionism as a new pressure affecting our interests. This will require attention both bilaterally and in relevant forums, particularly the WTO.
The Ministry has an ongoing important role in coordination of the Government’s external efforts to take forward New Zealand’s economic development objectives, especially in support of innovation and growing globally competitive firms. New Zealand Trade and Enterprise (NZTE) has a new support and facilitation programme aimed specifically at such firms. It takes on added significance because of recessionary influences in key markets. The Ministry’s role overlaps with the work of the Ministry of Research, Science and Technology (MORST), the Ministry of Education, the Tertiary Education Commission (TEC) and Immigration New Zealand (INZ), in jointly building international linkages around science and technology, education and migration. The Ministry needs to be responsive to both domestic and international developments, including international obligations which constrain Government intervention.
For economic development objectives to be achieved, New Zealand will need to:
Through its posts the Ministry identifies opportunities to enhance New Zealand’s international connectedness in relation to economic development priorities. It supports the efforts of other agencies to develop their off-shore linkages (eg in the area of innovation), including where they have no off-shore presence. Another key aspect is drawing lessons from comparator countries. Ministry posts contribute to market intelligence, and assist with research and/or policy dialogue on specific issues to feed into the New Zealand policy debate.
The Ministry plays a lead role in coordinating and managing the Government’s engagement with the OECD to draw on research to inform policy thinking.
In close coordination with other economic agencies, the Ministry is actively engaged in work to position New Zealand business to take advantage of opportunities, and minimise risks, from the increasing global focus on sustainability issues such as climate change. Activities include regular market intelligence reporting to businesses on sustainability trends and developments in key export markets (working closely with NZTE); engaging in development of international standards around sustainability issues (eg greenhouse gas footprinting); and coordinating the Sustainable Food Exporters Group, a model Government/industry partnership originally set up to address market access issues for food produce that had arisen as a consequence of greater awareness of climate change, and which has now refocused on broader sustainability issues facing the food and beverage sector.
The Ministry works with NZTE to ensure that New Zealand firms are well-placed to take advantage of opportunities in overseas markets. In addition to continued strong emphasis on its ‘core business’ of maintaining and enhancing market access, the Ministry is increasing its focus on supporting NZTE, including by providing support in those markets that NZTE has identified as being of lower priority, and through providing diplomatic support and access to key overseas decision-makers.
In collaboration with other economic agencies, the Ministry works to help realise the opportunities secured through negotiation of FTAs, by ensuring that business is fully informed and has effective implementation plans.
The Ministry manages Growth and Innovation Framework (GIF) funds totalling $4.4 million which allow Government agencies engaged in trade negotiation and implementation to undertake research, outreach and constituency-building, capacity-building and participation in negotiations. top of page
A key Ministry focus and contribution to the Government’s Economic Transformation Agenda (ETA) is to secure increased market access for New Zealand through successful outcomes to trade negotiations. Our objectives are to improve access to international markets, ensure fairness for New Zealand business (protecting against unfair competition) and provide certainty to business through transparent, stable trading rules.
New Zealand’s trade negotiating agenda is pursued on three fronts:
Particularly in respect of the latter two, the Ministry emphasises that the totality of New Zealand’s relationships with potential partners is crucial, and successful trade diplomacy will need to be constantly underpinned by wider relationship management and development strategies using the Ministry’s core expertise, as well as “NZ Inc” assets, coherently deployed.
Notwithstanding their slow progress, the Doha Round of World Trade Organisation (WTO) negotiations remain a key priority for New Zealand. The current Round offers the prospect of substantial reductions in subsidies which distort international trade, particularly in agricultural products. The WTO is an essential mechanism, as the largest subsidisers (the EU, US and Japan) are unwilling to negotiate on subsidies in a bilateral or regional trade context. The WTO also provides an efficient mechanism for New Zealand to achieve tariff reductions across 153 member states in one negotiation. As a small international player, New Zealand has a strong interest in maintaining the rules-based trading system that the WTO offers.
Limited progress in the WTO has led to increased interest in negotiating bilateral and regional arrangements, particularly in the Asia-Pacific region. These negotiations seek to improve New Zealand’s access in goods, services, investment and intellectual property, as well as to secure commitments from our trading partners on labour and environment. We also need to be mindful of our position relative to our competitors: negotiating our own bilateral or regional agreements is a way of ensuring that New Zealand firms are not operating at a competitive disadvantage in key markets.
The US-Trans-Pacific Economic Partnership Agreement negotiation is likely to be New Zealand’s most significant outside the WTO process – both in terms of potential benefits, and in terms of resource intensity.
The international trading framework is also being affected by increasing concerns about the environment and food security – the latter flowing from steep increases in international food prices. There is growing consumer interest in how goods are produced, particularly the impact of their production on the environment, leading to popularisation of the simplistic concept of “food miles” and, more importantly, carbon footprinting. Governments are likely to follow this trend with regulation and labelling, which will require new New Zealand thinking about the nexus between trade rules and environmental outcomes.
Since its launch in December 2001, the current Round of WTO negotiations (the "Doha Development Agenda") has been characterised by a number of highly publicised breakdowns and walk-outs from WTO summits. At Davos in January 2008, Ministers expressed a commitment to concluding an overall deal by the end of this year. After a number of setbacks, that objective was revised to one of reaching agreement on final "modalities" for agriculture and non-agricultural market access (these determine the content of the schedules that detail tariff and subsidy cuts to be made by each member.) Even that now seems to be in doubt after the breakdown of the most recent Ministerial talks in Geneva in July.
New Zealand’s key interest in the negotiations is in achieving a good market access result for our exports, particularly agriculture, which remains the most distorted sector in international trade. Export subsidy elimination alone could be worth around $300m annually to New Zealand (based on a medium world price scenario), with further substantial gains to be derived from the expansion of tariff rate quotas and tariff reductions. Reform of agricultural trade is unlikely through bilateral free trade agreement negotiations: the US and EU have been unwilling to negotiate on subsidies outside the WTO. New Zealand also has a strong interest in preserving the integrity of the WTO rules-based trading system and its mandatory dispute settlement. Failure of the Doha Round could place that system at risk.
The immediate future remains unclear. Publicly, members continue to declare their commitment to reaching a deal on modalities in the key areas in the near future, emphasising the progress that was achieved in the lead-up to and at the July Ministerial. The Chair of the agricultural negotiations (Crawford Falconer) has resumed consultations in Geneva, as has his industrial goods counterpart. top of page
P4-US: The Trans-Pacific Strategic Economic Partnership between New Zealand, Chile, Singapore and Brunei (formerly known as P4) entered into force in 2006. The Agreement was designed as a high-quality undertaking with the potential to lead to greater economic integration in the Asia-Pacific region. On 22 September 2008, negotiations were launched for the United States to join the Trans-Pacific Agreement. US involvement has increased the interest of others (eg Australia, Peru, Viet Nam) in joining and discussions are underway on the Agreement’s further expansion. The US had previously been participating in negotiations between the Trans-Pacific Partners on investment and financial services, underway since early 2008.
The US decision to negotiate has significant strategic and commercial implications, particularly for New Zealand: commercially, through the elimination of trade barriers to the US; and strategically, through the fillip that the initiative will give to broader regional trade and economic integration. As it proceeds, the Trans-Pacific initiative will enhance New Zealand’s profile in Asia and strengthen relations with key countries in the region.
Comprehensive negotiations involving the US and potentially others in the Asia-Pacific region are planned to begin in March 2009. Before the negotiations get underway, officials will begin a process of public consultation and will seek guidance from Cabinet on the New Zealand mandate.
ASEAN-Australia-New Zealand FTA (AANZFTA): On 28 August 2008 in Singapore, Ministers from ASEAN, Australia and New Zealand announced substantive conclusion of the ASEAN-Australia-New Zealand FTA (AANZFTA) negotiations. The Agreement is expected to be signed at the East Asia Summit (EAS) in the third week of December 2008. AANZFTA represents a significant milestone in New Zealand’s ongoing integration into one of the world’s most economically dynamic regions. It is also the first time that ASEAN as a group has negotiated a comprehensive agreement as part of a ‘single undertaking’. The outcome simultaneously spans goods, services and investment, as well as the other areas such as intellectual property and competition policy. New Zealand’s priority countries for these negotiations were Indonesia, Viet Nam and the Philippines, the larger members of ASEAN with which New Zealand does not have an existing FTA or an FTA under negotiation.
New Zealand’s priority objectives for securing new FTA negotiations are Korea, Japan, India, and, the medium term, the EU. Meanwhile ongoing FTA negotiations with the GCC, Malaysia and Hong Kong are at varying stages. A targeted Trade Ministers’ travel programme, as part of a wide whole-of-Government approach, is important.
For Korea, following officials’ FTA preparatory talks in November, a Minister’s introductory letter and a visit in the first quarter of 2009 could set the scene for a subsequent Prime Ministerial visit. (New Zealand cultural events are planned for April.)
For Japan, an early Ministerial visit would allow us to inject momentum into the process of agreement on Terms of Reference for a Joint Study of an FTA.
With India, completion of the current Joint Study on an FTA should hopefully lead to agreement to launch an FTA negotiation.
For the EU, the first six-monthly Foreign Ministers’ consultations in April 2009 will keep contacts moving, but an early Trade Minister visit is important both in terms of the EU’s leading role multilaterally, as well as to reinforce bilateral links, and EU awareness of our FTA interest.
With the US, there may be merit in a visit by the Minister of Trade to Washington in February or March 2009 to meet key counterparts.
Republic of Korea (ROK): Leaders agreed in May 2008 to two rounds of preparatory talks on an FTA during 2008. The objective is to discuss the scope, content and level of ambition of a Korea-NZ FTA and to clear the way for negotiations. The first round was held in Seoul on 29-30 September, with a second round expected in November. Based on the results of an earlier private-level joint study, an FTA would offer proportionately less economic benefit to Korea than to New Zealand. Korea also has a heavy negotiating agenda, with other larger partners vying for its attention. These factors complicate progress and New Zealand does not yet have a commitment from Korea to enter into negotiations. The timing of a decision to negotiate may be influenced by the timing of the Korean ratification of the Korea/US FTA. The objective is to achieve, over a relatively short timeframe, a high-quality, comprehensive FTA with New Zealand’s sixth-largest trading partner.
Cabinet has agreed to a general mandate for the preparatory talks based on established New Zealand principles and positions and reflecting New Zealand’s previous FTA outcomes. If FTA negotiations are launched in early 2009, a detailed negotiating mandate will be sought from Cabinet once more information is available on Korea’s interests and objectives.
Japan: Prime Ministers Clark and Fukuda agreed in May 2008 to undertake an authoritative joint study of the potential benefits of an Economic Partnership Agreement (EPA). Terms of reference for the study are to be agreed at Joint Economic Consultations in December 2008.
Japan is New Zealand’s third-largest export market and fourth-largest trading partner (exports of $3.4 billion and imports of $3.9 billion in the year to December 2007). The agreement to undertake an authoritative joint study on an EPA is a welcome step in the process to significantly lift the relationship.
Sustained diplomatic effort, including at the Ministerial level, will be important, as will ongoing wider contact with Japanese business constituencies and opinion.
India: Ministers agreed in 2007 to undertake a joint study into the implications of a free trade agreement (FTA). The study is being undertaken by a Joint Study Group (JSG) consisting of officials from both countries. Four JSG meetings have been held so far in 2008, and officials expect that the study will be completed before December, although early Ministerial guidance may be needed on some points.top of page
The New Zealand/India trade and economic relationship is growing strongly but is well below potential, not least because of tariff and other barriers that keep most New Zealand agricultural products out of the Indian market.
Subject to the successful conclusion of the study, officials will prepare a Cabinet paper for Ministers’ consideration, which is likely to recommend proceeding to a negotiation.
Gulf Cooperation Council (GCC): New Zealand and the GCC have held three FTA negotiating rounds. The fourth was to be held in October 2008, but in September the GCC announced suspension of all of its 13 FTA negotiations for up to six months, to allow for a stock-take of its negotiating agenda. It is unlikely that negotiations with New Zealand will resume before March 2009.
The GCC is a valuable market for New Zealand dairy and meat products, in particular. Exports to the GCC averaged NZ$680 million per year between 2004 and 2006, attracting an average of $32 million of duties per annum. Only 7 percent of our goods enter the GCC duty free, while 87 percent of our exports face the GCC’s ‘common external tariff’ of 5 percent. Exporters have urged officials to pursue the FTA to ensure that the competitiveness of New Zealand exports to the GCC is not eroded via more preferential access extended to major competitors (eg the EU and Australia) through bilateral FTAs.
Malaysia: After suspension of negotiations on the Malaysia-New Zealand FTA in April 2006 (due to Malaysian sensitivities on some key New Zealand objectives), Ministers agreed that they should be put on to a slower track until re-engagement might enable a conclusion. Following Ministerial agreement to resume negotiations in 2008, the seventh round was held in Kuala Lumpur in September. This round provided a shared sense of the basis for ongoing negotiations. New Zealand will host another round of negotiations in November 2008.
New Zealand has a commercial interest in securing a high-quality and comprehensive FTA with Malaysia that goes further than our and Malaysia’s commitments in the ASEAN-Australia-New Zealand FTA. An agreement with Malaysia would also be another step in broadening and deepening New Zealand’s integration into the ASEAN region.
Hong Kong: FTA negotiations between Hong Kong and New Zealand were suspended in 2002 pending the conclusion of New Zealand’s FTA negotiations with China. Now that the New Zealand-China FTA has been completed, both sides have expressed an interest in the possible resumption of talks.
Hong Kong is essentially a services economy. The treatment of services is therefore a key element in determining the benefits for New Zealand of an FTA with Hong Kong.