New Zealand Institute of Economic Research (Inc)
Media Release, Thursday 5 December 2024
For immediate release
Doing nothing is not an option
The election of Trump has signalled heavy weather for trade reform over the next four years. "However, dark clouds can have silver linings,” commented Chris Nixon, Principal Economist at NZIER. Trump 2.0 may provide New Zealand with the opportunity to convince others that it is a good time to look at how they can get more out of their existing trade agreements and augment existing trade agreements with additional commitments.
"In this environment, New Zealand needs to act; doing nothing is likely to be the riskiest option. The NZIER thinks this is a good time to be proactive, and developing coalitions of the willing is our best option – it has worked for us in the past (e.g. the development of CPTTP), and it can work for us in the future. In fact, we have little choice but to be out there “making trade policy play,” Mr Nixon explained.
This paper is the third in a series of four papers that look at trade policy and what we can do about the challenges New Zealand faces.
The first paper looked at the US elections and its likely negative impact on world trade. The second looked at CER. This paper looks at how we can project parts of CER into third markets (ASIAN and beyond), and the fourth paper examines how we might get “more bang for our buck” from existing trade agreements by adopting paperless trade.
New Zealand and Australia have agency
Both New Zealand and Australia have been part of a number of trade policy success stories: CER, the Cairns Group in the Uruguay Round, Agreements that include ASEAN (AANZFTA and RCEP) and the CP TPP are all notable successes. These agreements have been path-breaking, with 70% of New Zealand’s exports now covered by rules-based trade agreements. New Zealand also has a number of agreements that cover digital trade (DEPA), climate change and sustainability (ACCTS), indigenous trade issues (IPECTA), inclusive trade (ITAG), and supportive gender policies (GTAGA).
"These agreements are designed to bring together coalitions of the willing and interest major trading nations in joining. This is a slow process, but we need to engage in these approaches to demonstrate New Zealand’s willingness to engage with like-minded countries”, said Mr Nixon.
Trade policy innovation and practice will be needed
With the pace of reform slowing, we need to redouble our efforts and think innovatively about how we might drive further reform. In addition to undertaking the initiatives already underway, two areas that could be examined are mutual recognition agreements that enable standards (product standards and recognition of professional and trade qualifications) and paperless trade. “Both of these issues are important since they have the ability to boost international trade and make it more efficient,” said Mr Nixon.
Standards contribute a substantial amount to new trade development (possibly up to 13% of new trade), and paperless trade can cut logistics costs between 15% and 45%.
Despite New Zealand’s trade policy challenges, New Zealand needs to be proactive on the trade policy front.
“We have done it before, and we can do it again,” commented Mr Nixon.
For further information, please contact:
Chris Nixon
Principal Economist
021 633 127
Chris.nixon@nzier.org.nz
