On Newshub Nation: Emma Jolliff interviews Trade and Export Growth Minister David Parker

• Trade and Export Growth Minister David Parker says New Zealand is trying to position itself as the bridge between the United States and China. “We have a bit of a reputation for the honest broker, and it’s times like this that we should draw upon that reputation”.

• Mr Parker says The Regional Comprehensive Economic Partnership hadn’t been signed yet because market access provisions couldn’t be agreed within the time frame. He said while places like India were very important to New Zealand, the World Trade Organisation was under threat and they could not risk signing bad deals.

• He said the CPTPP meant New Zealand now had better access to three “enormous economies” that they hadn’t had secure trading relationships with until now - Japan, Canada and Mexico.

• Mr Parker said an exemption for New Zealand from US steel tariffs hadn’t been solved yet and as time went by looked less likely to be solved but he did believe US ambassador Scott Brown was “sincere in trying to fix this for us”.

• He said if the WTO became ineffective, we’d be left with bilateral relationships and this he said made the CPTPP “the most important agreement in the world”.

Emma Jolliff: Jacinda Ardern is due to arrive in Papua New Guinea today for the final days of the APEC summit. At APEC earlier this week New Zealand, Canada and Chile reaffirmed their commitment to the Inclusive Trade Action Group — an agreement to work together to promote sustainable and equitable trade. There was some bad news for our trade ambitions, with the announcement the 16 countries negotiating the Regional Comprehensive Economic Partnership had failed to reach an agreement. Together the countries make up 32 per cent of the world’s GDP and 28 per cent of global trade. Trade and Export Growth Minister David Parker arrived back from Papua New Guinea in the wee small hours of this morning and has kindly dragged himself into our studio. Good morning to you, Minister.

David Parker: Good morning, Emma.

Let’s start with those comments by the Malaysian Prime Minister. He did say to Jacinda Adern that China’s actions in the South China Seas will eventually affect everyone. We’ve got three trillion dollars’ worth of trade going through that area. What are the implications for New Zealand if those tensions escalate?

Well, they wouldn’t be good, obviously. We try to chart these difficult waters by sticking up for our principles. We — and the prior government — have continued to say that we think that the international rule of law should apply.

Is there a risk that the trade war with the US could push China to act more aggressively?

I wouldn’t make that linkage yet. I think there is a general concern in the world that the rules-based institutions — not just the WTO but the other ones — aren’t working as cooperatively as they used to. There have always been problems with the Security Council obviously, but those problems seem to be spreading. I don’t think that’s long-term good for the world, but I wouldn’t make a particular linkage with South China Seas.

The Regional Comprehensive Economic Partnership was supposed to be signed this year between 16 countries representing 32 per cent of the world’s GDP. That’s not going to happen now. Why is that?

Because some of the market access provisions — you know, the access for New Zealand goods into other countries and between other countries not just New Zealand— couldn’t be agreed within the timeframe. They announced ‘substantial progress’ rather than ‘substantial conclusion’.

One of those countries — India — is very important to us. Was this really about a trade deal with India for us?

It’s a big part of it for us. We already have agreements with China, Japan and the rest of the ASEAN countries. So yes, the India dimension is important. It’s an enormous and growing economy. And of course although all these agreements — RCEP, APEC, CPTPP — sound a bit like alphabet soup, in reality we put a lot of work into them because they’re important to every New Zealander. We know that export firms pay higher wages, and we know that we have to sell a lot of kit to the rest of the world in order to pay for what it is that we buy from the rest of the world — the cars and our computers so having decent access, particularly at a time when the WTO — the World Trade Organisation — is under threat, those other agreements become relatively more important. Yes, we would rather that RCEP was concluded, but we’re not willing to close bad deals and so given that it wasn’t high enough quality, we’re happy that it’s been pushed into the New Year.

India has an election next year, as do some of the other countries involved in RCEP, does that mean this deal is actually dead in the water and not going to happen next year?

It’s unclear. It may be the reverse. It may be that because there is an imminent election in India it made it more difficult for them to close the deal, so maybe after the election it will be easier for them.

Does it feel like six years wasted? It’s been a long time in the making, hasn’t it?

Well, it probably would if I’d done the six years, but look we’ve had a really good year on trade in New Zealand. Both in terms of CPTPP, but also we’re trying to position ourselves as the bridge between the United States and China, to a certain extent. In the last three weeks I’ve been to Washington, Ottawa and China as well as to the recent meeting for APEC in Papua New Guinea. We’re doing that because we have a bit of a reputation for the honest broker, and it’s times like this that we should draw upon that reputation — which is born out of our fairness over many years — to try and see if we can help in any way.

That’s a big responsibility to try and bridge those two nations, isn’t it?

Well, there are lots of levels of these debates. At one level, the Goliaths go at each other but at another level there’s work that goes on behind the scenes, trying to find landing zones, if you like, that both sides to these disputes can agree with and we do agree with the United States on a lot of their complaints about the Appellate Body, how the WTO rules haven’t been updated since the Internet essentially, and how some countries don’t comply with the rules as they ought to so we take those issues forward because we believe them to be correct. On the other hand, where we see exaggerated rhetoric, criticising some other countries, we stand up for those other countries. In that way, we maintain both our reputation for honesty but also have more influence than you might expect of a little country.

That’s quite a unique position to be in, isn’t it?

It is, and we do this on the shoulders of those who’ve come before. You know, New Zealand since the UK pulled out of its trading relationship with us, we’ve had to chart our own way through troubled waters so we’re pretty good at it, and we’ve done it for a while.

Vietnam became the seventh country to ratify the CPTPP this week. During your trade talks in Papua New Guinea, did any other nations express interest in doing that too?

We had discussions with some of the other CPTPP countries as to who would be likely new entrants.

Who would you like to see?

I’m not going to name a particular country. I would say that the first entrant has to come in on a high-quality basis, so that we don’t degrade the quality of the agreement. That’s likely to be discussed at a meeting in Japan in late January, early February.

The impacts of the CPTPP are going to come in from December 30. What’s that going to mean for our exporters immediately?

Reduced tariffs — an example is kiwi fruit at the moment into Japan is uncompetitive relative to Chile, that’s equalised immediately. In recent years our beef exporters into Japan have been cleaned out by the Australians because they’ve got a lower tariff rate into Japan and therefore can under-cut New Zealand exporters. That’s fixed too. Lots of improvements into Canada — one of our biggest wine markets actually. That’s improved. Three enormous economies in CPTPP that we don’t have secure trading relationships until now — Japan, Canada and Mexico — all G20 countries. We’ve got a better access into all of them.

So despite all these trade pacts in the region, are they being undermined by this protectionism and the anti-globalisation sentiment we’re seeing from Trump, for example?

Yes, they are. Conversely, they become more important because they are your next line of defence but we really believe in the World Trade Organisation. At one level it’s just like the rule of the law on traffic laws or criminal laws, it’s just the rule of law relating to trade. If we don’t have that then more of the money that we earn in a sale goes to the government on the other side of the world in tariffs, we face non-tariff barriers and we earn less as a country and therefore our standard of living goes backwards.

So President Trump has threatened to withdraw from the WTO altogether. How much of a threat is his behaviour to that rules-based system that you speak of?

Well, one of the worries the world has, if the current trajectory continues, nothing need happen and the WTO becomes ineffective because the Appellate Body, which is the trade court if you like, stops functioning within a year. We’ve already had tariffs, counter-tariffs, counter-tariffs, counter-tariffs and then subsidies. You know, if that sort of thing becomes the norm then the WTO has ceased to function as it ought.

Asian media is reporting that business confidence in Asia is being subdued by this protectionism and anti-globalisation. That’s a concern as well, isn’t it? We’ve had some of our own issues around business confidence here.

Yes. If there was one area that it was legitimate to be some decline in confidence it would be on the international trade front. Of course, the strength of your own economy doesn’t just rely upon trade agreements. In fact, in my opinion, more important is allocating capital to productive enterprises and people follow the money and you grow the parts of the economy where you can have these new products and services — develop new points of comparative advantage but there’s been about a 40 per cent drop around the world in foreign direct investment in the last year or two. That’s an enormous drop. It’s not all caused by trade tensions. Part of it is expectations of riding interest rates, and part of it’s the splurge that went before but yes, there are concerns there, and Asia’s feeling them quite keenly.

There was some fresh hope of an exemption from the US steel and aluminium tariffs after talks at APEC. That hasn’t happened. Is it likely to?

Well, the Prime Minister raised that with Vice President Pence. I raised it when I was in Washington. It isn’t solved yet. You have to say, the longer it goes on the less likely it is that it will be solved. Japan, even Canada and Mexico, with whom the US has recently done a deal, they haven’t got an exemption from these tariffs either. It’s still wait and see, but we’re still trying.

The US Ambassador Scott Brown told us he’d pick up the phone to Trump to get the exemption if need be. Have you called in that favour yet?

Well, actually, I speak quite regularly to Scott Brown, and I believe he’s sincere in trying to fix this for us. Obviously, it’s not his decision, but I think he’s advocating for us.

Just back on the WTO — if we don’t have the WTO, then what? What are we left with?

Well, we’re left with bilateral relationships. And in those, you’d rather be a shark than a minnow, and we’re a minnow. So to bolster your protections in those trouble seas, you want other agreements with countries, so that you won’t do to each other what some countries are already doing. So CPTPP’s probably the most important agreement in the world at the moment, in that regard.

Turbulent times in the UK over Brexit. There’s still a possibility that there won’t be a deal, isn’t there? What would that mean for New Zealand?

Well, actually, if there was no deal at all, we’d probably improve our free trade agreement prospects with the United Kingdom. But I don’t think it would be good for either United Kingdom, Europe or the world. At the moment, of course, it looks like, assuming this deal goes through, and it may not, then the UK is bound by the EU tariff code because they’re within the Customs Union with the European Union until at least 2020. So, you know, we’re working through the detail of that. We don’t know what this will mean in terms of the UK ambition for their free trade agreement with New Zealand between now and 2020. We’ll have to wait and see.

All right. Trade Minister David Parker, we’ll leave it there. Thank you very much for joining us.

Thank you.

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