MIL-OSI New Zealand: Speech to the New Zealand Institute of International Affairs – Whare Tawāhi-a-mahi i Aotearoa

16

Source: New Zealand Government

It is a pleasure to be here tonight addressing you all and continuing to showcase New Zealand’s reconnection to the world. It was fantastic to be travelling again and promoting New Zealand with the Prime Minister a couple of weeks ago to Singapore and Japan.

However these are challenging times for trade. The impact of the largest war in Europe since World War Two is reverberating around the globe. International commodity prices are rising, inflation is increasing, supply chains are struggling and there remains uncertainty around what the major powers will do.

All this on the back of Covid-19, a pandemic that triggered a major global shock and continues to effect economies around the world. It persists in causing significant supply and demand disruptions, and has made many of the countries that we trade with more inward-looking.

However we continue as always to look outward and when it comes to COVID restrictions, we are turning a corner. Our borders are opening up. Tourists are coming back and businesses are able to travel offshore. Aotearoa New Zealand is reconnecting to the world, and we are open and ready to trade.

This is a significant step towards restoring vital international social, economic and trade connections.

Nevertheless international connections are taking a knock at the moment. Russia’s actions are threatening not just the lives and way of life of the people of Ukraine, but also challenging and violating international rules and order.

We understand our responsibility as a productive and dependable member of the global community to help.

We worked around the clock to set up a legal framework to enact sanctions against Russia.  And so far, New Zealand has committed $30 million toward humanitarian, military, legal, and logistical support. This includes a contribution to weapons and ammunition.

We continue to stand by the people of Ukraine at this difficult time.

The impacts of this conflict on trade cannot be understated, because we live in an interdependent world.

Internationally it is having a profound effect and we are not immune. New Zealand imports from Russia, which are mostly crude oil, have dropped to close to zero in recent months. The most significant impacts on New Zealand of the invasion will be indirect, primarily through higher fuel and commodity prices, financial market volatility, and the potential drag on global economic activity.

For many of our key trading partners, particularly in Europe, the impact will be far more significant. To the extent that an extended invasion weighs on global economic growth, this could potentially affect the medium term prospects for New Zealand trade.

I have talked in recent months about New Zealand’s Trade Recovery Strategy, a critical part of our national response to the COVID-19 pandemic and essential to our recovery from the impacts of COVID 19.

Today I want to talk about the bigger enduring picture; what we are doing to confront the major global challenges through our Trade Strategy? What is the future like for New Zealand’s trade policy? And some thoughts on my recent trip with the Prime Minister to Singapore and Japan.

NZ Trade during Covid-19

Throughout this pandemic, New Zealand’s trade has held up remarkably well. At a headline level, merchandise goods exports have continued to grow over the last two years, which is incredible during one of the biggest recessions the global economy has seen. This emphasises the high regard for New Zealand goods internationally.

At home, our approach has been to treat our pandemic response as a health one first, with the belief that this would buffer our economy from the expected disruption to the global economy.

We’ve been fortunate that as an island nation we were able to close our borders and pursue an elimination strategy until such point, as we are now, where we have very high vaccination levels. We are now re-opening and are well-positioned to continue our recovery.

We recognise, however, that the impacts have been uneven across exporting sectors and businesses. Service exports that rely on people’s ability to travel internationally have of course suffered, our tourist industry in particular has struggled without international visitors; as have manufacturing and other businesses that depend upon efficient, well-functioning international supply chains and workers.

The need to protect and strengthen the resilience of those supply chains is clearer now than ever. Throughout the pandemic, New Zealand advocated – and will continue to advocate – for international cooperation on transparent, open, secure and diverse supply chains, which we believe generate the greatest resilience to shocks.

Our exports have led the New Zealand economy through the worst of this crisis, and it’s my intention that exports will lead our recovery out of it. 

For example exports from New Zealand increased 15.6% from a year earlier to NZ$4.8 billion in January of 2022, led by sales of milk powder (8.5%), butter (35%), beef (51%), and sheep meat (11%).

Trade will be a key driver of the overall economic recovery for New Zealand. New Zealand’s Trade Recovery Strategy has put us in the best possible position to recover from the impacts of the global pandemic and to seize new opportunities for exports and investment.

The Strategy was designed to position New Zealand to recover from the economic impacts of the pandemic by providing the tools, resources, and support – including a NZ$216 million package from the COVID Response and Recovery Fund to support New Zealand’s exporters and international businesses. This allowed those businesses that were thriving through the pandemic to build on this success, whilst giving those that have endured harsh market shocks the information and tools to rebuild and find new opportunities.

With borders re-opening and international travel recommencing, we are now tweaking the Trade Recovery Strategy to focus on supporting businesses as they reconnect with partners, customers and key markets overseas.

The Government is committed to supporting a trade recovery that promotes sustainable and inclusive trade, lifts our exporters’ capability and performance in markets, strengthens international and regional trade architecture, and builds resilience.

We also want to support and encourage New Zealand exporters to seek to diversify their export markets to guard against future economic shocks and protect themselves from undue influences.

Our successful response to COVID-19 provides New Zealand with a unique opportunity to position ourselves globally as a safe and secure place to trade with, to invest in, and to visit again.

The World Bank, since 2012, has consistently ranked New Zealand in the top three nations for ease of doing business, including holding the number one ranking every year since this government took office.  As we continue to implement the Government’s ‘Reconnecting New Zealand’ framework announced in February, we are determined to remain at the top.

APEC 2021

APEC was a great success on New Zealand’s international agenda last year: a once in a generation opportunity for us to lead a grouping that embraces the world’s three biggest economies and 60% of global GDP.  Certainly, I wish our APEC year had not been disrupted by COVID19, and that we were able to shower the region’s leaders with manaaki (or hospitality).  But the fact we could not bring people to our shores did not diminish the scale of what we achieved last year.

We can all feel a sense of pride in the way the Prime Minister pulled together Asia-Pacific Leaders in July and united them around the shared challenge of confronting the economic consequences of the pandemic. 

We were able to use our year in the chair to make a uniquely New Zealand contribution to APEC’s forward work programme.

  • Prior to 2021, the region’s 270 million indigenous peoples were invisible in the Asia-Pacific conversation. No longer. Indigenous economic empowerment is firmly on the agenda for the next twenty years.
  • And while institutions like APEC used to dismiss climate change as an environmental problem for others, the economic transformation challenge of decarbonising our economies became a critical part of APEC’s finance, structural reform and trade agenda in 2021.

APEC Leaders also issued a joint declaration which recognised New Zealand’s host year had rejected vaccine nationalism, with APEC members lowering tariffs on vaccines and related products to combat COVID-19, speeding them through customs, and shunning export bands.

To me the phrase “None of us is safe from COVID unless we’re all safe” characterises the spirit of cooperation experienced at APEC 2021 under New Zealand’s hosting.

As a small country that cannot flex its muscles to get its way, New Zealand depends on the effective functioning of processes like APEC to shape the region in ways that support security and prosperity for all.  At a time when multilateral institutions generally and APEC specifically had been beaten down, I am incredibly proud of the work we did in 2021 to restore APEC’s credibility as a responsive and relevant organisation. The proof is in the pudding of course, and for the first time in years we are seeing other APEC member economies stepping up to invest, with the United States stepping up to host in 2023 and Peru in 2024 – something we warmly welcome.

NZ Trade Policy: Looking Ahead

New Zealand’s Economic Plan is designed to improve the well-being of our citizens by supporting our economy to become more productive, resilient and sustainable. No country in the world can deliver on the aspirations of its people without a solid economic base. 

Trade supports one in four jobs in New Zealand, and is responsible for around one third of our GDP. That is revenue that goes directly into our economy and provides the means for New Zealand to maintain a high standard of living. A higher standard of living means access to healthcare and education for all New Zealanders. It means we are able to care for our environment and support our communities. It means we can reach for higher sustainability goals than countries that are dealing with high debt and poverty. 

The point I’m trying to make is that trade isn’t just about big companies making lots of money, it’s about providing the means for a better future and about how we want to live and be in the world. It is also a vital enabler in helping the economy rebuild and recover from the COVID-19 pandemic – therefore it is important that the future of New Zealand trade continues to grow, develop and progress, because we believe trade is the solution.

I have mentioned creating export market options for New Zealand companies, something officials refer to as ‘Trade Diversification’. In addition to the recently concluded FTA with the UK and our massive negotiation with Europe, we are also working to expand markets for New Zealand products in other regions: for example with Latin America we are negotiating an FTA with the Pacific Alliance Agreement with Chile, Peru, Colombia and Mexico; we are exploring what more we can do with Africa; and revisiting our concluded but not signed FTA with our Middle East partners through the Gulf Cooperation Council.

A successful future for New Zealand trade also depends on its benefits reaching all New Zealanders, not just large companies. The Trade for All strategy is a fundamental component of ensuring an economy that is growing and working for all New Zealanders. 

Our partnership with Māori on trade is a vital component of how Trade for All can reach deep into future potential markets. Optimising international trade opportunities for Māori exporters and playing a leadership role in expanding participation of indigenous peoples in global trade are some of the areas we are progressing.

Recently the Indigenous Peoples Economic and Trade Cooperation Arrangement (IPETCA) came into effect. The Arrangement (IPETCA) is a new, first of its kind open plurilateral arrangement across economies, which creates a framework for economies and Indigenous Peoples to work together to increase trade and economic cooperation. I look forward to seeing this develop and grow with the support of our Māori partners.

Alongside New Zealand’s COVID-19 Trade Recovery Strategy, implementation of Trade for All continues to contribute to an economy that produces and exports higher value goods and services, protects the environment, supports our regions to grow, underpins productive, high-quality investment and makes sure all New Zealanders can share in the rewards of economic growth generated by trade.

With a focus on engagement and identification of opportunities for Māori-led businesses, women, and Micro, Small, and Medium Sized Enterprises (MSMEs) to engage in trade and grow exports, the Trade for All Strategy has been instrumental in gaining the support of the public for trade through the Covid-19 pandemic. 

Over the past two years, this government has worked hard to ensure we maintain and enhance our trade relationships. We’ve commenced steps toward expanding the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTTP) with the UK accession negotiations, brought the Regional Comprehensive Economic Partnership into force, upgraded our FTA with China, and of course signed our historic free trade agreement with the United Kingdom.

International Trade Trends

Let me return for a moment to the international context.  Make no mistake, the world is dealing with geopolitical and trade issues not seen in a generation. New Zealand faces a challenging global trade landscape that continues to change.

The WTO, and its systems of trade rules, which allows small countries like New Zealand even footing, is coming under growing pressure. Protectionism and strategic competition, most notably between China and the US, has threatened the stability of international trade.

As a small, export-oriented economy, it is hard to overstate the importance to New Zealand of a trading system underpinned by rules rather than economic influence – or an economic ‘might is right’ attitude.  

New Zealand is a firm believer in the multilateral system and the benefits it provides. Being a small economy with big ambition, strong exporters, quality products and world-leading innovation – we understand the vital aspects multilateral institutions and agreement such as the WTO, APEC and CPPTP bring.

New Zealand will therefore continue to advocate for the restoration of a fully functional multilateral system.

We are also developing what are termed ‘open plurilateral agreements’, such as the Digital Economy Partnership Agreement between New Zealand Chile and Singapore; and the Agreement on Climate Change, Trade and Sustainability, or ACCTS.  The ACCTS, launched last year by our Prime Minister, is a trade agreement with Costa Rica, Fiji, Iceland, Norway and Switzerland, that will drive the reform of fossil fuels subsidies and lower the cost of environmental goods and services.

The need to engage in greener, more sustainable trade is an important issue for New Zealand. In all of New Zealand’s FTAs we now include an Environment chapter that has legally binding commitments to avoid weakening or failing to enforce environmental laws to secure a trade advantage; to avoid using environmental regulations as a disguised restriction on trade; and to implement obligations in multilateral environmental agreements.

As I indicated earlier, we believe trade policy should contribute to solutions to global environment problems. Trade isn’t the silver bullet, but it can be part of an effective solution. Trade agreements can:

  • remove barriers to trade in environmental goods and services to promote the development of international carbon markets;
  • combat trade in illegally harvested fish and illegally taken wild flora and fauna;
  • and help us eliminate environmentally harmful subsidies such as those for fossil fuels and fisheries and even agriculture that contribute to overproduction, distort trade, disadvantage sustainable products and practices, and cause environmental damage.

New Zealand’s policy is to promote mutual supportiveness between trade policies and environmental policies, including climate change, to achieve the objectives for sustainable growth and development. We don’t see trade and sustainability policies as mutually exclusive but as mutually beneficial with one supporting the other.

Update on the WTO and free trade agreements

I have discussed our strong desire to pursue multilateral, plurilateral and bilateral agreements, and our belief in the rules-based system. These free trade agreements are a corner stone of advancing New Zealand’s trade interests.

The WTO is in many ways the original “mega-FTA”. The WTO is crucial for New Zealand’s long term trade and economic interests, and its continued effective functioning therefore remains our number one trade policy priority.

We welcome the announcement that the 12th Ministerial Conference (MC12) will be reconvened in June. At MC12, New Zealand will continue to bring this ‘Trade for All’ approach to the WTO. This includes a focus on sustainable trade to reduce environmentally harmful subsidies on agriculture, fossil fuels, and fisheries.

UK FTA – The signing the UK-NZ FTA was a major highlight of my trip to Europe in March. This is one of the highest quality and most ambitious free trade agreements that New Zealand has ever signed, and completed remarkably swiftly. We shall continue our work to bring its significant benefits into force by the end of this year.

The NZ-UK FTA marks the first FTA begun and concluded under New Zealand’s Trade for All policy.  Responding to Trade for All objectives and interests was one of the overarching principles throughout the negotiations. This provided for the most far reaching commitments New Zealand has ever negotiated on trade and the environment, including:

  • Commitments to prohibit subsidies which increase fishing capacity, and to take steps to eliminate harmful fossil fuel subsidies, and a specific article on climate change. 
  • And a dedicated chapters on Trade and Gender Equality, Consumer Protection and Trade and Development.

Also included in the agreement was a substantial chapter on trade and indigenous issues. This is a significant achievement and recognises the relationship between the United Kingdom and Māori. We now see this as a standard in supporting Māori that we will look to find ways to advance in future FTAs.

EU FTA – Negotiations on the EU FTA are making good overall progress. We have recently concluded our 12th round of negotiations and more chapters were closed or moved closer to conclusion. I have directed our negotiating team to continue their work to close out remaining chapters with a view to wrapping up negotiations as soon as possible.

The EU is already our fourth largest trading partner, and this FTA will generate new and exciting opportunities in a market of close to 450 million consumers.

I am expecting good outcomes for New Zealand in the FTA, including with respect to full tariff elimination for fish and seafood products, horticulture and other sectors. Areas such as dairy and beef remain serious sticking points, but I am confident we will work these out.

GCC FTA – As you may have heard, New Zealand has agreed to re-engage in FTA negotiations with the Gulf Cooperation Council. This is in line with New Zealand’s efforts to access a diversified range of international markets.

Negotiations with the GCC originally commenced in 2007, and were substantively concluded in 2009. The process was stalled in 2009 as a result of the GCC pressing pause on all of their FTA negotiations while they embarked on a trade policy review. And more recently, regional dynamics have prevented the GCC from advancing their FTA agenda.  

Negotiators are re-engaging with a focus on goods market access. Discussions will also be held to explore what adjustments may be required to update and modernise the agreement in line with New Zealand’s expectations, including in terms of the Trade for All agenda, particularly on labour and the environment.

I only need to look as far as New Zealand’s FTA with Korea signed in 2015 to see the benefit these agreements bring to New Zealand. Practically, it has delivered – and continues to deliver – solid commercial outcomes for our exporters.

In the six years since entry into force, two way-trade in goods and services with Korea has grown by more than 30% (an increase of more than NZ$1 billion) to reach NZ$5.38 billion.

We now have duty free access for products such as wine, chilled salmon, cherries, squash and kiwifruit. Korea has become one of New Zealand’s top ten markets for food and beverage. And there has been growth in newer areas as well, with pet food and skincare products among those that now enter Korea duty free under the FTA.

It is exactly these types of benefits I envision coming to New Zealand businesses from the current and future FTAs we are working on.

Mission to Singapore and Japan

It was my pleasure to accompany the Prime Minister on her recent visit to Japan and Singapore – her first official overseas travel since the start of the pandemic. Travelling with us were business leaders from a range of important sectors of the economy with close links to Singapore and Japan.

The pandemic has underlined the importance of working with partners like Singapore and Japan on global issues, including building resilience into our supply chains.

In line with this, during our recent trip to Singapore our respective Prime Ministers agreed to establish a Supply Chains Working Group between Singapore and New Zealand. The Working Group aims to make our supply chains more resilient, sustainable, and work for businesses of all sizes.

The Prime Ministers also announced a new fifth pillar to the Enhanced Partnership on climate change and sustainability, which will see New Zealand and Singapore collaborating on a range of areas – from low carbon technology to sustainable aviation.

While in Japan we took part in a number of events focusing on specific aspects of our relationship. These ranged from our food and beverage offerings to renewable energy through to our Working Holiday Scheme with Japan.

The Prime Minister witnessed the signing of agreements between Hokkaido and the New Zealand Embassy, and between Education NZ and Japan Women’s University. And I’m sure many of you saw our launch of the kiwifruit season in Japan, complete with dancing kiwifruit mascots.

I met with the Japanese Ministers of Foreign Affairs; Economy Trade and Industry; Agriculture, Forestry and Fisheries; and the Minister in Charge of Economic Revitalization (including CPTPP). Our discussions highlighted our shared work in CPTPP, Regional Comprehensive Economic Partnership and other trade agreements, as well as covering broader geopolitical developments. 

But the New Zealand Government feels that we can do even more. Singapore and Japan are large economies with wealthy and discerning consumers – a perfect fit for our strengths in sustainable and innovative productions. We also have much to work together on innovation in renewable energy production – particularly in green hydrogen and geothermal energy – and Japan could be an important source of the electric vehicles that we will need in the New Zealand market in the coming years.  To that end it was great to see the Prime Minister with Toyota New Zealand announce the introduction to New Zealand of a hydrogen car sharing scheme using the Toyota Mirai. Eight New Zealand companies will share a fleet of four hydrogen-powered cars in a trial that is the first commercial application of hydrogen fuel cell vehicles in New Zealand. This is an exciting development that I will be watching closely.

We continued to reinforce the message that New Zealand is open for business, and we drew particular attention to the reopening of our borders soon to tourists from Singapore and Japan along with welcoming back international students and working holiday-makers.

We travelled with a delegation of New Zealand business leaders, all committed to innovation and reconnecting with the world. I believe there is also considerable scope for our companies to work together on sustainability initiatives – and in other areas such as digital technologies, agri-food research, healthcare and tourism.

It was fantastic to be back travelling and showcasing New Zealand to the world.

Conclusion

I want to conclude by reiterating that while New Zealand faces a challenging and turbulent time in our trade policy, COVID-19 remains this Government’s top priority and trade will be at the forefront of our economic recovery.

APEC was a shining light on New Zealand’s trade agenda last year. The successful hosting, although virtual, highlighted the New Zealand ‘can do attitude’ and showed that even in a pandemic that we value our trade relationships and how trade could help us address issues like COVID by eliminating barriers and facilitating faster access to COVID protective equipment. Under our chairing, the 21 APEC members delivered a world first commitment to standstill – in other words stop at current levels – subsidies for fossil fuels. That will have a real impact on climate change.

And this year is not a quiet one. Already this year we have completed the UK FTA, updated our FTA with China, and the EU FTA is nearing a conclusion.

We have shown that we will not sit idly by. Our Trade Recovery Strategy is showing the benefits of forward thinking and allowing New Zealand businesses to plan for a future post-Covid. Our borders are opening and we are reconnecting with the world.

New Zealand is coming out of the last two years in a position of strength and I am determined that our trade sector will continue to benefit from this.

Finally, may I say that although the world may seem to be moving from one crisis to the next we have come through similar events in our past stronger and able to stand tall. Our trade relationships are strong and built on solid foundations, and I am certain these will remain so as we move forward in this changing landscape.

Thank you.

MIL OSI New Zealand News