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The World Trade Organization deals with the global rules of trade. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible between its members. New Zealand joined the WTO when it was created in 1995, replacing the General Agreement on Tariffs and Trade organisation that was formed in 1947. New Zealand's Permanent Mission in Geneva works together with MFAT's Trade Negotiations and Legal Divisions and a range of New Zealand Government agencies to represent the New Zealand Government at the WTO.
The key functions of the WTO are to:
- oversee the negotiation and implementation of agreements
- settle trade disputes
- review the trade policies of individual members
- help developing country members comply with WTO rules
The WTO is based on the premise that trade should be:
- without discrimination - a member should not discriminate between its trading partners (the "most favoured nation" or MFN principle) and should not treat foreign goods and services differently from the way it treats its own (the "national treatment" principle);
- free - this means removing unnecessary barriers to trade;
- predictable and transparent - so companies, investors and governments can be confident that the rules will not be changed, or trade barriers raised, arbitrarily;
- more competitive - by discouraging unfair practices such as subsidies and dumping; and
- encouraging of development – while WTO-based trade enables development, developing country members may need help building their capacity to implement their obligations under the WTO agreements.
What does the WTO mean for New Zealand?
New Zealand is a small country with an economy that is highly dependent on trade. (Our share of world trade has held slightly above 0.2 per cent for the past decade.) Membership in the WTO means that we benefit from its trade rules and members' market access commitments, and we have a process to settle disputes if other trade partners breach these.
New Zealand also actively participates in negotiations in pursuit of new market access commitments and trade rules. Negotiating at the WTO has a number of benefits. On its own New Zealand would stand less chance of persuading a bigger country to change a trading practice which impacted negatively on us. Furthermore, the WTO operates by consensus. Every member’s opinion carries the same weight and all members must agree before a decision can be made. This means that progress can be slow, but once an agreement is reached, all members are obliged to honour it.
The WTO also provides the basis for New Zealand negotiating specific free trade agreements either bilaterally or plurilaterally (with a group of countries), through specific provisions of the WTO agreements.
At the heart of the WTO are the multilateral trade agreements. These are the legal ground rules for international trade covering goods, services and intellectual property that all WTO members must follow.
The rule book covering trade in goods is the General Agreement on Tariffs and Trade (GATT). Its aim is to reduce tariffs, non-tariff measures affecting trade, and subsidies which disadvantage competitors. The GATT is complemented by a large number of subsidiary agreements and annexes, dealing with various issues related to goods trade. These include:
- Agreement on Agriculture
- Agreement on the Application of Sanitary and Phytosanitary Measures (SPS)
- Agreement on Technical Barriers to Trade (TBT)
- Agreement on Subsidies and Countervailing Measures
- Agreement on Import Licensing
- Trade Facilitation Agreement
The General Agreement on Trade in Services (GATS) is a set of rules covering trade in services (eg education, tourism, financial services, accountancy, legal services, and management consulting). Its objective is to ensure that such trade takes place under clear and predictable rules, and to ensure that there is no discrimination amongst trading partners (subject to certain exceptions). Each WTO member chooses which sectors to open up to foreign service suppliers for market access, and where they commit to treat foreign service providers in the same way they treat their own services providers.
The Trade Related Aspects of Intellectual Property Rights (or TRIPS) agreement sets out the minimum levels of protection for different forms of intellectual property, such as copyright (music, art and design), patents, inventions, and trade marks. Members are able to decide how to implement these minimum standards in their own domestic laws.
The WTO provides a highly effective and legally binding process to settle trade disputes between members. The WTO’s dispute settlement system has been called the “jewel in the crown” of the WTO and has been used by WTO Member governments, including New Zealand, on more than 450 occasions since it was established in 1995. The dispute settlement system is of particular value to smaller countries, and their businesses, because it provides an impartial way to resolve trade disputes based on agreed rules as opposed to outcomes determined by the relative size and importance of the countries involved.
MFAT has been involved in a number of WTO trade disputes on behalf of our exporters and the Government: nine as a complainant and over 40 as a third party. We make a complaint when our direct interests are significantly affected by a trade restriction. We participate as a third party in disputes between other WTO members when we want to influence the interpretation and application of WTO agreements on matters that are also of direct interest to us.
If you encounter an obstacle exporting a product or service to a WTO member country, you can contact MFAT and we will examine whether the restriction violates WTO rules. If it does, we'll first try and resolve the issue through direct discussion with the government concerned. Many trade problems have been resolved in this way. If we can’t reach a resolution, we'll then consider whether WTO dispute settlement proceedings would be an appropriate response.
Negotiating trade agreements
MFAT works with other New Zealand government agencies to represent New Zealand’s interests during WTO negotiations, to ensure New Zealand's voice is heard, and that our economic interests are advanced and protected.
Current state of negotiations – beyond the Doha Round
The WTO Doha Round of trade talks, known as the Doha Development Round or Doha Development Agenda, covers a wide range of trade policy areas and aims to improve the existing rules around international trade. The main goal is to reach agreement on how to further reduce trade barriers, particularly for the benefit of developing country members.
The Doha Round began in 2001. Negotiations have continued at varying levels of intensity since then, but currently are effectively on hold. New Zealand has been active in Doha discussions, in particular in pursuit of elimination of agricultural export subsidies (achieved at a WTO Ministerial Conference in 2015 in Nairobi), and reducing other trade-distorting practices in agriculture. For example we are seeking strengthened disciplines on WTO members' ability to provide subsidies to protect their domestic agricultural sectors.
New Zealand has also advocated for improved non-agricultural market access (NAMA), particularly regarding the often high tariffs on fisheries and forestry products, and has been a strong advocate for an agreement on rules to limit the use of fisheries subsidies. New Zealand has also participated actively in services market access negotiations and the design of new services rules.
There has been some progress in some areas. Notably, at the 2013 meeting in Bali, Trade Ministers agreed the Bali Package - an outcome that included a new WTO agreement on Trade Facilitation designed to reduce administrative and procedural barriers to trade. The Trade Facilitation Agreement has now entered into force and is currently in the process of being implemented by the WTO membership.
At Nairobi in December 2015 WTO Trade Ministers agreed on a further package of outcomes, including elimination of the ability of WTO members to subsidise their agricultural exports. The elimination of such agricultural export subsidies has been a primary goal for successive New Zealand Governments for decades. The outcome is of direct benefit to New Zealand agricultural exporters who previously had to compete in some markets with subsidised agricultural products.
In accordance with UN Sustainable Development Goal target 14.6, WTO Members are currently engaged in negotiations on fisheries subsidies, with a view to adopting, by end 2020, an agreement on comprehensive and effectives disciplines that prohibit certain forms, of fisheries subsidies that contribute to overcapacity and overfishing, and eliminate subsidies that contribute to illegal, unreported and unregulated (IUU) fishing. Prohibiting harmful fisheries subsidies will have a significant environmental, developmental and economic benefits for New Zealand and Pacific nations.
At Buenos Aires in December 2017 Ministers agreed to continue negotiations on fisheries subsidies, with a view to adopting, by 2019, an agreement on comprehensive and effectives disciplines that prohibit certain forms of fisheries subsidies that contribute to overcapacity and overfishing, and eliminate subsidies that contribute to illegal, unreported and unregulated (IUU) fishing. Prohibiting harmful fisheries subsidies will have a significant environmental, developmental and economic benefits for New Zealand and Pacific nations.
At Buenos Aires, New Zealand also joined Ministerial Statements amongst different subsets of WTO members seeking to advance work on Electronic Commerce; Services Domestic Regulation; Investment Facilitation; Micro, Small, and Medium Sized Enterprises; Women's Economic Empowerment and Fossil Fuel Subsidy Reform. Read more about WTO negotiations on agriculture and fisheries subsidies.
The next WTO Ministerial meeting is scheduled to be held in 2021.
Plurilateral agreements and negotiations
WTO members can also participate in WTO agreements in areas currently outside the multilateral rules. Some examples include:
- The Agreement on Government Procurement (GPA) establishes open, fair and transparent conditions of competition in over 40 Government Procurement markets around the world. As a signatory to the GPA, New Zealand companies are able to compete on equal terms with their international counterparts for government procurement contracts to provide a broad range of goods and services. Parties to the GPA include the United States, Canada, Japan and the European Union. New Zealand joined the GPA on 13 August 2015.
Read more about the GPA (external link)
- the 1996 Information Technology Agreement (ITA), a plurilateral tariff agreement between a limited number of WTO members which progressively eliminated tariffs on a range of ICT products. In 2015 agreement was reached to expand the ITA in order to account for the rapidly evolving technologies in the ICT sector. The expanded ITA (known as ITA II) eliminates tariffs on 201 products estimated by the WTO to be worth NZD 1.9 trillion annually. New Zealand is a participant in both the ITA and the ITA II.
Read more about the ITA(external link)
- Some WTO members, including New Zealand, are pursuing an Environmental Goods Agreement (EGA). This seeks to remove tariff barriers for the free flow of green goods. Negotiations began in 2014 and, after eighteen rounds, failed to conclude at the Ministerial meeting in 2016 and remain stalled. New Zealand remains commited to reaching an ambitious and timely EGA, and is ready to work closely with others to explore options for renewed engagement, when the time is right.
Trade Policy Reviews
The WTO monitors members' trade policies and practices, including in the context of their WTO obligations, through a process of regular Trade Policy Reviews.
The purpose of the reviews is to promote a greater adherence to the rules and to provide a better understanding of each member’s trade and economic policies. New Zealand has undergone five reviews, with the first taking place under the GATT (the precursor to the WTO) in 1990, and subsequent reviews occurring every six years.
During the 2015 review process, the New Zealand delegation fielded over 250 questions on topics such as New Zealand’s FTA agenda, rules governing overseas investment, the agriculture sector, sanitary and phytosanitary requirements for imports, and the New Zealand Government’s Business Growth Agenda. More than 30 WTO members (including the EU on behalf of its 28 members) made statements during the review. Most were very positive, with New Zealand’s economy recognised as “one of the most robust, transparent and open in the world”. New Zealand’s open trade regime and sound economic policies were credited with contributing to robust growth in the economy despite challenges such as the Global Financial Crisis and the Canterbury Earthquakes. WTO members also commended New Zealand’s contribution to the multilateral trading system and the leadership role we have taken with respect to the Doha Round agriculture negotiations.
New Zealand’s next TPR will take place in 2022.