"A strong, viable WTO is essential for New Zealand"

A strong, viable WTO is essential for New Zealand — Azevêdo tells NZ institute

Smaller economies such as New Zealand can benefit strongly from the platform that the WTO provides for negotiating agriculture, cutting red tape at the border and other issues, and for small and medium-sized enterprises, which do not have the same capacity to overcome barriers such as complex and differing systems of rules, Director-General Roberto Azevêdo told an event organized by the New Zealand Institute of International Affairs at Victoria University, Wellington, on 18 November 2014. This is what he said:

Good afternoon ladies and gentlemen.

It’s a pleasure to be here at Victoria University — and here in New Zealand.

I want to thank Peter Kennedy and the New Zealand Institute of International Affairs for arranging this event.

This is a crucial time for the multilateral trading system — and therefore it is a particular pleasure to be here today.

New Zealand is known as a champion of free trade, and as one of the most open economies in the world.

This is a trading nation. Around 4 out of every 10 dollars that the economy produces is generated by exports.

This country was one of the original 23 parties of the General Agreement on Tariffs and Trade in 1948, and it was a founding member of the WTO in 1995.

You have always shown tremendous leadership in the multilateral trading system, and at the domestic level through major reforms to open up the economy and diversify your export base — embodied today in the “Business Growth Agenda”.

This leadership is all the more remarkable given your size and relative geographic isolation — because I think that New Zealand has offered an example in how to overcome these factors.

You have used your competitive advantages, such as in agriculture, to make the most of the trading system — and indeed you have become a world leader in a number of areas — and you have used the multilateral system to make your voice heard at the international level.

I have seen first-hand at the WTO that New Zealand takes its participation in the global trading system extremely seriously. And as a consequence, I think it’s fair to say that you are much more active and influential than one would expect judging solely on your economy or market size.

Not only do you play your full role in negotiations, but you use other parts of the system to benefit New Zealanders as well.

Smaller economies can benefit strongly from the platform that the WTO provides, and New Zealand, for example, has successfully challenged trade measures of much larger countries through the WTO’s dispute settlement mechanism over the years.

So I know that the value of trade is widely appreciated here.

But, over the next few minutes, I hope I can also give you a sense of: why the WTO is more important than ever for New Zealand and; why, one year on from our successful Bali ministerial conference, your support for the multilateral system will be absolutely crucial in the weeks and months to come.

In fact over the last week, including at the recent APEC and G-20 Summits in which New Zealand participated - there has been some good news for the multilateral trading system and the WTO - but I’ll get back to that in a moment or two.

But first, to set this in context, I want to take a broader look at the trading landscape as I see it today.

There is no doubt that the trade picture has become more complex in recent years as non-multilateral free trade agreements have proliferated.

New Zealand has 9 regional trade agreements in force — reflecting your leadership in the Asia-Pacific region. The recently concluded negotiations with Korea is yet further evidence of this.

You have also played a key role in building the trade bridges which led to many of these initiatives — including the key role New Zealand played in the commencement of the Trans Pacific Partnership negotiations.

As I see it these initiatives co-exist with the multilateral system — and they can bolster it in a significant way.

They are bricks which can help build the edifice of global trade rules and liberalization.

But there is no doubt that these agreements have grown much more rapidly in recent years. The WTO has been notified of over 250 regional agreements that are in force today.

And I think we can be honest that this is in part borne out of frustration at the pace of delivery at the WTO. There is a perception that these other agreements can deliver results more quickly.

However, while these initiatives complement the multilateral trading system, it is clear that they cannot substitute it. We need to remain engaged at all levels.

And let me explain why.

Quite simply, there are many big issues which can only be tackled in an efficient manner in the multilateral context through the WTO.

Crucially for New Zealand, farming subsidies cannot be fully tackled in bilateral deals.

I understand fully that further agricultural reform is key to the livelihoods of many New Zealanders.

As a major agricultural exporter, and as the world’s largest dairy exporter, you still face high levels of protection in many markets — both developed and developing.

Trade barriers cost your exporters about $2 billion a year - which equates to about $525 for every citizen of this country.

Therefore it is essential that we make progress on this issue — and the only place that this can happen effectively is within the WTO.

But this is not the only issue that is inherently multilateral.

Trade facilitation was negotiated successfully in the WTO because it makes no economic sense to cut red tape or simplify trade procedures at the border for one or two countries — if you do it for one country, in practical terms you do it for everyone.

Financial or telecoms regulations can’t be efficiently liberalized for just one trade partner — so it is best to negotiate services trade-offs globally in the WTO.

Disciplines on trade remedies, such as the application of anti-dumping or countervailing duties, cannot significantly go beyond WTO rules.

The simple fact is that very few of the big challenges facing world trade today can be solved outside the global system. They are global problems demanding global solutions.

Indeed, it seems self-evident to argue that global companies operating in global markets will inevitably demand global rules.

But the fact is that global companies are more ready for, and able to cope with, regulatory complexity — even if it is an increasing draw on resources.

More often it is the smaller players and the SMEs which lose out.

SMEs are increasingly trading internationally, but inevitably they don’t have the same capacity to overcome barriers, such as complex and differing systems of rules.

Lifting the burdens on businesses to help them trade is likely to benefit SMEs the most. And this is as it should be, given that they tend to be the biggest job creators.

Global rules support this effort. And they provide an important backstop, so that even if we’re not always moving things forward, we know that because of the multilateral system countries cannot fall back into bad practices and raise new barriers at their own will.

But we need to look at the bigger picture.

Low growth in many developed economies along with signs of declining growth in the emerging economies has led to suggestions that we didn’t just lose GDP growth in the years since the crisis — but that the level of potential growth has declined too.

So we need to find structural ways to respond and to boost productivity — and trade liberalization is an obvious candidate.

It is a long time since any major steps on this front — it is two decades since the completion of the Uruguay Round and the creation of the WTO.

We are living off the liberalization of the past — we are living off the reforms negotiated by the last generation.

And we all know that the big gains will come not through negotiating free trade agreements with countries that already have low tariffs — but through negotiating with those that still have big cuts to make.

So we must make progress at the multilateral level to deliver the jobs, growth and development that we all want to see.

It is almost a year now since the WTO’s successful ministerial conference in Bali.

This was a remarkable moment:

• Firstly, because members reached a series of very important agreements on trade facilitation, agriculture and development which promise to provide a real economic boost.
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• And secondly because this was the first multilateral agreement that the WTO had achieved in almost 20 years.
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I want to take this opportunity to thank the government of New Zealand for the work it did to ensure that Bali was a success.

Minister Tim Groser continues to be a champion of the multilateral trading system and there are few who understand it better than he. Your ambassador in Geneva, John Adank, has also been playing a key role just like many of his predecessors. John is now the Chairman of the Agriculture Negotiating Group of the Doha Round.

So once again your leadership at all levels is vitally important.

Bali breathed new life into the organization and in the first half of the year we were moving forward with a sense of renewed trust and momentum.

This meant that we were looking at tackling some of the bigger issues of the Doha Round, which had been stalled for some years.

But the world of trade negotiations is never easy - there are lots of ups and downs. In July, just a few months after Bali, we missed an important deadline to implement the Trade Facilitation Agreement.

Differing views on the implementation of two Bali issues — trade facilitation and the public stockholding programmes — created an impasse.

And this has effectively paralysed the negotiating arm of the WTO since then.

Of course we have been working solidly since July to try to find a way to move forward.

And this is where I come to the good news of the last seven days.

On Thursday last week I received very positive news that the US and India have reached an understanding that could help us overcome the impasse and enable the implementation of all the Bali issues including the Trade Facilitation Agreement.

I strongly welcome this development and I applaud the leadership that has been shown by India and the US to move things forward.

It represents a significant step in our efforts to get the Bali Package and the multilateral trading system back on track.

And in Brisbane on Sunday there was further good news with the strong commitment of all G-20 leaders to implement all elements of the Bali Package. They all strongly welcomed the breakthrough between India and the US as something that could now help pave the way for implementing all elements of the Bali Package, including the WTO Trade Facilitation Agreement.

This is why straight after this meeting, I will be heading to the airport to get on a plane back to Geneva.

We must now hold consultations in Geneva to build consensus among all WTO members. We have a special meeting of the General Council on 26 November when I hope we will be able to confirm that the Bali Package is back on track.

It is essential that we use this momentum to move forward in all areas of our work.

We are in a crucial moment for the future of the WTO.

First, we need to ensure support of the wider WTO membership to what has been agreed between the US and India.

Resolving the impasse will be just the beginning of our work to implement Bali.

We must start implementation of the Trade Facilitation Agreement and advance our work towards a permanent solution on public stockholding for food security purposes. We must also deliver all other aspects of Bali — including with a focus on LDC issues.

We also need to move forward on the post-Bali agenda and I was pleased that G-20 leaders also gave their strong commitment to our efforts to develop a work programme on this as quickly as possible.

In fact, at the G-20 leaders discussion on trade in Brisbane, I was delighted to hear the strong and unequivocal support of leaders for the importance of the multilateral trading system. And Prime Minister Key was amongst the strongest to speak on the importance of trade as an engine for growth.

Of course leaders also recognized we have problems, so it was even more pleasing to me that they specifically decided to have another discussion in Turkey next year on how we can make the system work better. This is an important and significant outcome.

An immediate priority that will continue building confidence and trust will be to deliver on the post-Bali work programme that was originally meant to be finalized by December. This work has been on hold since July and clearly this deadline is no longer achievable — we will need to adjust this time frame.

In my view this work programme is achievable — and, indeed, it is essential that we make progress here because this will be the first step in tackling the big agricultural issues that are so important for the future of this economy.

As I have said, while other trade agreements can be important, agriculture can only be properly tackled at the multilateral level.

It will take time and a lot of political engagement. But it is essential that we move forward. So we must work to redouble our engagement at the multilateral level.

And while there is a lot to do, there are reasons to be positive about the future.

In addition to the breakthrough regarding the Bali Package, we also heard positive news last week about a potential expansion of the Information Technology Agreement.

New Zealand is a signatory to the original Information Technology Agreement struck in 1996.

In the light of new technological developments, efforts have been underway since 2012 to extend the Agreement to cover approximately 200 additional products.

Some envisage an ITA liberalization package with trade coverage of anywhere up to US$ 1.4 trillion. This is bigger than the current trade in automotives, and three times bigger than trade in the clothing sector.

So I strongly welcome this breakthrough which brings this expanded agreement closer to reality.

This is good news for New Zealand.

Moreover, after two years of negotiations, last month New Zealand joined the WTO’s Government Procurement Agreement. Participation in this agreement means access to $1.7 trillion in procurement opportunities for New Zealand’s companies.

So I think that this shows things are happening at the WTO.

Our challenge now is to build on this momentum.

Putting the Bali Package back on track for implementation is an essential first step.

Your continued engagement and leadership will be crucial at every stage of this effort.

New Zealand’s support is essential for the WTO.

And I hope I have demonstrated today that a strong, viable WTO is also essential for New Zealand.

Thank you for listening.

ENDS

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