The fight for multilateral trade

US President Donald Trump was not mincing words when talking down multilateral trade agreements during his Apec address. Photo: Getty Images.

After a few fraught days, the TPP was given new life. However, the struggles to get the deal across the line and other issues raise questions about obstacles to multilateral trade and what that means for New Zealand, as Sam Sachdeva reports.

The ideological battle for the future of Asia-Pacific trade played out on the big screen at Da Nang.

Of course, there was the stuttering, stumbling, but ultimately successful (or near enough) negotiations to reach agreement on the TPP (now known as the CPTPP - the Comprehensive and Progressive agreement for the Trans-Pacific Partnership).

While the New Zealand team was cautiously hailing the outcome, other events at the Apec summit may have given them cause for concern when it comes to multilateralism.

In his speech to the Apec CEO’s Summit, US President Donald Trump railed against what he saw as unfair trading arrangements, saying the US had “not been treated fairly” by the WTO and other countries had not reciprocated the favours extended by his country.

While the US was open to bilateral agreements with any Asia-Pacific country, he made no bones about its approach to multilateralism.

“What we will no longer do is enter into large agreements that tie our hands, surrender our sovereignty, and make meaningful enforcement practically impossible.”

Worryingly, there are some concerns about whether Trump wants to kill the WTO: an article in the New York Times suggested American negotiators had warned their Mexican and Canadian counterparts that they could not expect their trade to “simply snap back to WTO rules” if the US leaves NAFTA.

The US has also been blocking appointments to the WTO’s appeal body for trade disputes, leaving them short on members.

Some found reassurance in the words of Chinese President Xi Jinping, who pushed for a conclusion to the rival RCEP trade deal and spruiked the benefits of globalisation.

“Opening up will bring progress and those who close down will inevitably lag behind.”

Yet there is a sense that the Asian superpower is yet to put its money where its mouth is: there has been little progress to date in terms of opening up, and its Belt and Road Initiative has to date functioned more as a bilateral project, with a hub-and-spoke model.

In addition, RCEP talks at the ASEAN Summit reached a less than promising conclusion: according to the Nikkei Asian Review, ministers agreed no decision would be reached in 2017, despite China and others pushing for a swift end to talks.

Given these threats to the multilateral system, Trade and Export Growth Minister David Parker said a successful outcome to the TPP was more important than in the past.

“We as a small country are very reliant on the international rule of law, and rules-based institutions that are fair to everyone on the basis of rules rather than size.

“Given that there are some uncertainties on that front and a bit of a rise in protectionist sentiment, and the suggestion that the alternative might be bilateral relationships, we know that in some of those bilateral relationships we don’t have much power and that we’re better off to have rules inside multilateral agreements and if not that, plurilateral agreements.”

Speaking to Newsroom on the sidelines of Apec, Parker said the CPTPP was good for New Zealand not just in terms of market access, but by providing enforcement mechanisms to hold countries to account if they didn’t meet labour and environmental standards.

“There are mechanisms that require participating countries to have their laws updated to international norms - you know, freedom of association, no forced labour, prohibitions against discrimination - and if countries breach that, there are ways in which that can be elevated through the system, which in the end if countries were recalcitrant about it could end in trade penalties and loss of access.

“Now we haven't got that in prior agreements - to have that in a grouping of 11 countries as it currently sits, with the potential for other countries to join that regime, you can see it's a countervailing force among quite a large group of countries to perhaps act as a buffer if there is further degradation of the international rule of law relating to trade.”

WTO wins for NZ vital

As for the headwinds that multilateralism is struggling against, Parker said smaller countries around the world could speak up to protect the benefits they gained from systems such as the WTO.

He pointed to New Zealand’s recent success against Indonesia through the WTO dispute settlement process, striking out barriers which had seen Kiwi beef exports to the country drop by 85 per cent.

“There’s unpopularity with multinationals being able to sue the government, but I think there’s general recognition that you need governments to be able to take on governments if they’re breaching their agreements or acting unfairly…

“I think people can readily see that those sorts of things are disadvantageous to New Zealand and to people who work in New Zealand and earn their living in New Zealand and want to buy computers and cars.”

The key to protecting multilateral trade, he said, was better explaining the benefits of those global rules to the public, while addressing their concerns about others which are more problematic – seen in the Government’s moves to restrict foreign house buyers and water down the ISDS provisions.

“We’re a trading nation: computers, cars, medicines, whatever it is, we're going to buy, we’ve got to pay for it from what we sell to the rest of the world, so maintaining public support for those trading settings is really important and quite hard, because some people feel excluded by the effects of globalisation or technological change.

“One of the ways that we want to maintain that public support and understanding is through protecting the interests of New Zealand when it comes to things like some of the investment protocols, and that’s why we’ve moved so quickly in terms of land sales, because that’s a touchstone for many New Zealanders.”

Communique reflects Trump's sway

At Apec, there seemed to be a recognition of both the value of free trade and the need to address its negatives - while also reflecting Trump's concerns.

Prime Minister Jacinda Ardern told media in Da Nang the Apec communique, a written statement following the summit which must be agreed to by all countries, included a commitment to free trade.

However, the communique also includes a reference to the need to reform the WTO, as well as noting the importance of "bilateral, regional and plurilateral agreements" - no such reference to bilateral deals was made last year, in a sign the US made itself heard.

Given Trump’s rhetoric and the ongoing struggles with the CPTPP, New Zealand and other countries will need to heed Parker’s words and speak up as one if the multilateral system is to be protected.