Those questioning the value of free-trade agreements should look carefully at the results achieved by a few of New Zealand’s agreements.
Trade with China has grown spectacularly since the free-trade deal came into force, outperforming all expectations, and in its first month of entry into force of the NZ-Taiwan free- trade deal, trade with Taiwan grew 37% when compared with December 2012.
The bottom line is that there is no country that stands to benefit more from free-trade deals than New Zealand.
That is because whichever way you look at it, our major export categories and our businesses of scale are from the agricultural sector and that is where the biggest tariffs and barriers to trade around the world have historically been.
If free-trade deals can give us competitive access to these markets where we have previously been blocked by high tariffs or quotas, then the rewards can be large and the results tend to come quickly, as we have seen with China and Taiwan.
Another positive spin-off that we have observed at ExportNZ, is an increased focus on the countries where we are getting better access and increased trade from a broader range of businesses.
Companies are prepared to invest in new markets and developing relationships for the long term if they have regulatory barriers removed and can compete fairly with the rest of the world.
Modern trade is a two-way street, with our exporters being part of global supply chains on the supply side, but also on the import side, often requiring components or inputs from other countries to add to the production or manufacturing mix.
Those who raise doubts over the net benefits of free-trade agreements in New Zealand tend to take a “Chicken Little” view of the world and think of all the potential worst-case scenarios. Sure, our negotiators have to hold firm to ensure the best outcomes for our economy overall in areas like intellectual property, investor state disputes mechanisms, environment and health and safety. But they have proven competent at getting good results in the past, and can do so for the TPP as well or why would we sign the deal? We should not forget that TPP has as its starting point an existing free-trade deal (P4) New Zealand has already signed up to.
Those most strident about the risks to New Zealand like the Sustainability Council are the same small cohort of academics that were also advocating we adopt the highest cost response to climate change in the world. Their body of research and reports are pretty consistently distrustful of markets and trading (they would also have us renationalise the energy sector, for example) and they have quite a fortress approach to the world.
New Zealand cannot afford to have that approach or we will get left behind as countries free up their trade with each other. If we get a high-quality free- trade deal in the TPP that includes tariff phase-outs for agriculture, the net benefits to New Zealand will be significant – not just in avoided tariffs, but in new opportunities to trade where before we were effectively blocked.
The world has moved on, business is internationally connected and increasingly borderless and New Zealand needs to be involved. If and when disputes arise with our trading partners they will need to be managed and all our FTAs include mechanisms for managing them. This is what businesses around the world do every day of every week of every year and governments can help us by removing barriers to trade.
Catherine Beard is the Executive Director of ExportNZ
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