NZ trade policy 'pivots' to EU and Latin America; India, Gulf States now 'long term' goals

New Zealand's international trade policy will be refreshed with a "pivot" to Latin America and pursuit of a free-trade agreement with the European Union, while previous efforts to gain FTAs with India and the Gulf States have been relegated to 'long-term priorities.'

International Trade Minister Tim Groser and Economic Development Minister Steven Joyce released refreshed versions of the government's Business Growth Agenda (BGA) for building the country's export trade in Auckland this morning.

It describes a trade strategy refreshment initiative, which would see an upgrade to the FTA with China, encouragement for New Zealand firms to take advantage of the country's inclusion in the World Trade Organisation's government procurement system, pursuit of an FTA with the EU and "pivoting toward emerging economies such as those in South America."

Foreign Minister Murray McCully announced today that New Zealand will open an embassy in Colombia, which is seen as a major source of international students among other opportunities.

"The Pacific Alliance, involving Chile, Colombia, Mexico and Peru, is the most dynamic integration mechanism in Latin America and makes up around one third of Latin American GDP," the update document says. "New Zealand is one of the most active observer members of the Alliance" and both New Zealand Trade and Enterprise and Education New Zealand, the export education agency, have increased resources in Latin America.

On the prospects for an EU FTA, New Zealand was "now one of only six WTO members not to have a preferential market access arrangement with the EU either in force or under negotiation."

"The case for upgrading our trade and economic relationship through negotiation of a modern, high-quality FTA is compelling. Ministers and officials are stepping up work with EU counterparts to secure a decision to launch negotiations."

However, efforts to interest India and the Gulf States in FTAs are being placed on the back burner. In a statement accompanying the documents, Groser said "as well as our extensive list of immediate priorities, our trade strategy will develop a longer-term policy, bringing in other key markets like India and the Gulf States."

India was targeted for an FTA early in the Key government's life but efforts to promote the idea have fallen on deaf ears in Delhi. Efforts to secure an FTA with the Gulf States have also stalled, despite two trade missions to the region, with political tension caused by the cancellation of the live sheep trade to Saudi Arabia and subsequent criticism of the New Zealand government's payments to a disaffected Saudi businessman over that decision.

The update document also cites completion of the Trans-Pacific Partnership with "agreement as soon as possible that provides commercially meaningful access opportunities across the region for New Zealand exporters and investors."

TPP negotiations continue behind closed doors but there have been no recent indications that New Zealand's demands for improved dairy product access to the US, Canadian and Japanese markets are gaining traction.

The update also acknowledges the government's "high-level goal" of boosting exports to 40% of gross domestic product is still far from reach, in part because a revision of historical statistics pulled down the long-term track for exports, which sat just below 30% of GDP, compared with the earlier series that showed exports to GDP at about 32%. In both series, exports to GDP are shown to have been flat-lining in the last 15 years.

"We have not yet made the progress we would have liked toward our target of exports to 40% of GDP by 2025," the BGA document says, in part blaming strong domestic economic activity caused by the Canterbury rebuild, which made growth in exports to GDP more difficult. While exports to China grew strongly after the 2008 global financial crisis, growth in other major export markets slowed. Now, Chinese growth was slowing and the value of dairy exports had slipped back to 2012 levels as international dairy prices fell.

"It's increasingly clear that a significant lift in our export performance is still required if we are going to meet our goal," the document says. "We therefore need a greater focus on adding more value to volume."

The trade policy refresh will include "fine-tuning our negotiating framework to ensure we are getting the results we need from agreement," the document says.

"As part of this, we are putting increased emphasis on modernising our trade and investment frameworks with partners capable of boosting our access to innovation, skills and capital, such as through the FTA we are seeking with the EU. Our trade strategy also includes a deepening of our relationship with Asean economies, strengthening and building upon already existing trade relationships", with the 40th anniversary celebrations of Asean a major focus of activity.

(BusinessDesk)