Wednesday, 14 September 2016 14:04

Dairy must be at forefront of trade strategy refresh

Written by  Pam Tipa
Stephen Jacobi, executive director, NZ International Business Forum and the APEC Business Advisory Council Stephen Jacobi, executive director, NZ International Business Forum and the APEC Business Advisory Council

As NZ’s largest export, dairy needs to be front and centre of the trade strategy refresh even as the government looks to address newer issues like services, investment and the digital economy.

So says Stephen Jacobi, executive director, NZ International Business Forum and the APEC Business Advisory Council.

“So it’s good to hear that there will be a continuing focus on tariffs and increased attention to non-tariff barriers which are major issues for dairy,” Jacobi told Dairy News.

“Dairy also stands to benefit from the new issues too – as the industry works to add value to volume, e-commerce, protection for offshore investments and embedded services (especially in relation to provenance, quality and integrity) are all important.”

Jacboi says while he agrees implementation and enforcement of existing agreements is important we should not overlook new agreements eg in Latin America, Central Asia and Africa – all growing areas for dairy consumption.

“Second, as the government looks to shift resources it is important that industry is part of the conversation – this calls for new consultative and advisory structures to be put in place,” he says.

“As the minister says, more coordination with business is required but it’s not yet clear how this will be done.”

Lastly Jacobi says the increased attention the government is placing on articulating the case for trade with public stakeholders is welcomed.

“There is a new questioning of the pace and extent of globalisation around the world,” he says.

“This requires some rethink of the way trade policy is made if we are going to avoid the bitter and wholly unproductive debates we have seen around TPP.”

Four key shifts in trade policy

The government is planning a trade policy strategy refresh with four key shifts, says Trade Minister Todd McClay.

They aim to make the New Zealand economy more resilient, and in turn help to lift growth and raise living standards for New Zealanders.

McClay stressed in a recent speech that throughout these shifts, the WTO will remain important.

“It’s the only forum where we can achieve disciplines on agricultural subsidies; and with New Zealand companies trading globally, setting trade rules globally through the WTO makes sense for New Zealand companies,” he says.

The first shift was in the balance between negotiation of further agreements and making the most of those we have, or ‘implementation’, he says.

“Having invested heavily in building what you might call ‘architecture’, the fact that the majority of our exports go to markets that are now covered by FTAs means in future we are likely to spend less effort looking to negotiate new agreements and more effort on implementing and upgrading our existing agreements,” he says.

But he says before we shift the weighting of our effort, we have to complete the existing agenda of negotiations.

“And we’re not ruling out negotiating new agreements, or upgrading some of the existing ones in future. But the emphasis would shift mainly to getting the most out of the agreements that we have.”

Business has noted that more effective implementation will need more coordination, especially between business and government, he says.

“I agree. A number of elements in the Trade Policy Strategy refresh will raise new challenges for New Zealand business.”

A second shift will be to increase the focus over time on the barriers and distortions to our goods exports caused by non-tariff barriers.

This is typically long-term, resource-intensive work and Ministers are already taking steps to improve coordination and focus across agencies on non-tariff barriers.

McClay says however that government recognises that high tariffs are still critical impediments for some industries, notably dairy. It will still seek opportunities, including in future negotiations and the WTO, to address these remaining tariff peaks and the tariff escalation which affects a wider range of value-adding businesses.

A third, important shift arises from the changing nature of business. Services and investment are of increased importance. The digital economy is transforming the operating environment for New Zealand.

Services make up the majority of New Zealand’s GDP, and are a key source of employment for New Zealanders.

“A number of mainly ‘services’ exporters have told officials that they share an interest in the success of ‘goods’ exporters, because the latter are also important customers for them,” McClay says.

“I am encouraged by that. We are increasingly moving beyond rigid divisions of interest between our ‘goods’ exporters and our ‘services’ exporters. In modern business the boundaries between selling goods, services, intellectual property and making investments are blurring.”

Over time McClay says he expects that goods and services trade will increasingly have an equal weighting when it comes to trade policy in New Zealand.

“Services and increasing overseas investment – typically so that businesses can get closer to end customers - are key elements for New Zealand firms to enable them to add value to volume.

“One of the most valuable insights from business in talking about the proposed Trade Policy Strategy refresh has been the perspective that firms need to identify a place in a value chain or value network where they can see themselves able to extract significant value, and to then work backwards from there how to occupy that place – rather than the simple production-driven narrative of ‘moving up the value chain’.

E-commerce or digital trade has emerged as a vital channel to market; and with modern communications technology an increased range of ‘digital products’ can now be delivered to customers directly over the internet.

This is also of particular importance to New Zealand, as another means to reduce the enduring challenges of distance from market and small scale. There are opportunities for goods trade as well.

“The time is here where a small business in Invercargill can export to a consumer market of billions of people through online e-commerce platforms. These platforms can navigate the cultural and linguistic challenges whilst arranging secure payment, freighting and customs procedures all with the click of a button.

“We often read about NZ consumers buying online from overseas. E-commerce means those very same New Zealanders can now share in the benefits of trade directly - as exporters.”

The fourth shift as rules were improved to ensure a level playing field, will be to put more effort into appropriately assisting New Zealand businesses to compete successfully in offshore markets.

“This also raises a challenge over time to New Zealand businesses, to grow their capacity to engage with government and then to succeed overseas, and to the government to further strengthen its capability to engage meaningfully with business.”

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