Trade uncertainty for New Zealand

Hort Talk
with Mike Chapman
HorticultureNZ CEO

Attention has been focused on Brexit and whether the United Kingdom Parliament will be able to do a deal with the European Union. There is also uncertainty around the so-called trade ‘war’ between the United States and China. And to top that off, support for the World Trade Organisation is declining.

New Zealand relies on WTO rules and its ‘court’ system to ensure we can export our produce, knowing the country we are sending it to will accept it. If there are problems with this, then the ‘court’ system can be invoked. If the WTO loses support from the major participants, it will lose the ability to enable smooth trading.

The result could be that countries unilaterally decide to change export rules, making it more difficult for our exports to get into the right markets. That will stifle growth and NZ’s financial vitality.

More so than most countries, NZ relies on the ability to trade for economic survival. Selling our agriculture and horticulture products accounts for about 50 per cent of our exports.

The growth of horticulture has been reported on by the Horticulture Export Authority in a report released in December, the ‘2018 New Zealand Horticulture Barriers To Our Export Trade’. Published every two years, this report is a comprehensive assessment of NZ’s horticulture trade.

The key points are: in the last two years horticulture has grown by 7.6 per cent; progress with Free Trade Agreements since 2012 has reduced tariffs by 12 per cent; the European Union, India, Japan, and South Korea are the countries we pay the highest tariffs to. However, with the Comprehensive and Progressive Trans Pacific Partnership that came into force on December 30, 2018, tariffs in Japan are eliminated. And the Government is involved in trade negotiations with the European Union, India, and South Korea.

Other key points are: The EU remains our largest trading partner, but second place is now China; and there has been an increase in non-tariff barriers, meaning negotiating access to new markets in particular is taking a long time.

The trade tensions, and our reliance on trade, increases the importance of multi-country agreements, such as the CPTPP and Regional Comprehensive Economic Partnership. These agreements put trading rules in place, but remain reliant on the WTO as the foundation of free trade. As such they are a substitute, but not the answer to the diminishing power of the WTO.

The growth highlighted in this trade report and NZ’s continued economic prosperity may not endure if we can’t ensure the WTO continues to be the prime trade organisation in the world, enabling and enforcing fair world trade. Thankfully, this is a prime focus for the Government, as it has been for successive governments, as they work to negotiate trade deals and maintain a fully functional WTO.

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