Re-establishing consensus on trade
For decades now the business community has supported the broad political consensus around our international trade and engagement policy. That consensus led to successive and different governments completing free trade agreements (FTAs) with China, ASEAN, Korea and others. It also led to negotiations commencing on the Regional Comprehensive Economic Partnership (RCEP) with China and India, the start of what is now the TPP as well as the beginnings of an FTA with the EU.
However, that broad consensus recently broken down with TPP being a particular flashpoint. Before the election (and during the election campaign itself) Labour, the Greens and NZ First all argued fervently against TPP, and many New Zealanders protested over their concerns about the deal.
The business community, amongst others, feared that a break down of our long established consensus on trade could have a massive impact on our capacity to do business in the world. One of our most important competitive advantages as a nation trading globally is that our policy settings are stable, consistent and well understood by our trading partners and counterparty businesses offshore.
Any change to this could result in New Zealand being immediately seen as a far less attractive place to invest and to do business.
The actions taken in the last few days by the new NZ government in Da Nang, Vietnam, therefore, are highly significant. In successfully moving closer to a newly formed TPP (now renamed the Comprehensive and Progressive Trans Pacific Partnership or CPTPP), the new government has taken an important step for business and New Zealand more generally.
What I saw in Da Nang, as an APEC Business Advisory Council (ABAC) member, was that our new government very energetically pushed forward what it saw as New Zealand’s interest, but in the context of attempting to agree an eventual settlement.
The government wasn’t walking away from this deal: it was working towards agreeing it. In doing so, I think we saw the first marks of an attempt to build a new consensus around trade. I believe this new consensus is still emerging, but it has at least some of the following elements.
- It explicitly recognises that some asset classes (e.g. existing housing stock) should not be available for foreign investment.
- It proposes changes in the way NZ gives rights to foreign investors.
- It proposes very high enforceable standards for things like trade and labour and ‘new age provisions’ such as environmental issues.
- It supports much more openness about trade negotiations themselves.
- It has at least a nod to the idea of lessening immigration which, while strictly speaking has nothing to do with a trade agreement, nevertheless plays to concerns about jobs being taken by foreigners.
Critically, from a business perspective, this new attempt to build consensus also continues to involve energetically working to conclude and make appropriate use of FTAs. This does not appear to be a government saying fine words about trade and FTAs and doing nothing about it. Indeed, the next big FTA in the pipeline for us is with the EU - we are already seeing our Prime Minister push for getting on with this.
So this new consensus does not appear to be about turning our faces away from trade and FTA negotiation, it appears to be more about building new consensus about the issues we include in FTAs - and the underlying paradigm around foreign investment, immigration and all the rest.
However, in developing this new consensus, I know that many business people will be uncomfortable about various aspects of it.
Many will oppose foreign investors being unable to invest in certain asset classes. Business will also harbour deep concerns about cuts to immigration levels. Despite this, it cannot be denied that this new government is genuinely pursuing a new consensus on trade which is trade-friendly and which still keeps New Zealand’s face very much pointing out towards the rest of the world. I think this should be welcomed by the business community, which I hope will engage in trying to achieve a new consensus around trade that will be just as long lived as the one we have enjoyed over last several decades.
The prize is substantial. If we can build a solid consensus - even if it is different from the last one - then we will continue to benefit from policy stability and broad public support for our ongoing trade agenda.
Times are changing around trade. New Zealand is lucky to still have a broad social and community consensus around trade. Some other countries are not in this fortunate position. Now is the right time to be thinking about how we forge a consensus based on maintaining broad community support in a new world which has concerns about issues like foreign direct investment, asset ownership, and the rights of foreign multi-nationals in New Zealand.
I look forward to the discussion.