A new trade agreement would improve the reliability of shipping access during another covid-type crisis but would not give New Zealand absolute assurance of security, a select committee has heard.
Parliament’s Foreign Affairs, Defence and Trade Select Committee was holding hearings into the Indo-Pacific Economic Framework for Prosperity (IPEF).
Some aspects of IPEF have been agreed on but others will not be developed further until the outcome of the presidential election in the United States is known.
IPEF covers 14 countries with 40% of global GDP, and includes major economies like India, Japan, Australia and the US.
It does not address tariffs but aims to improve the digital economy, along with promoting decarbonisation and making supply chains more resilient.
Agreement has been reached on supply chain resilience, which was an important issue for US President Joe Biden and caused New Zealand huge problems during covid. In some cases, exporters here were thwarted because of delays in imports of vital equipment that were themselves disrupted by problems several links back in the supply chain.
Speaking to the select committee, a senior Foreign Affairs official, Mark Sinclair, said everyone had had a searing experience during covid.
As a result, the IPEF negotiators agreed to set up a crisis response mechanism to deal with future crises.
Sinclair was asked how much confidence New Zealand should have in the effectiveness of this crisis mechanism during a disaster, such as another pandemic or an earthquake.
“We suffer from the tyranny of distance … tangibly what does the agreement mean, what sort of confidence should we have that New Zealand won’t be left behind at the bottom of the world?” National Party MP Tim Costley asked.
Sinclair replied the new agreement provides a mechanism for disasters that was not there before.
“You get on the phone, you send out emails, you ask to convene that [crisis] network, you spell out your situation, you spell out your needs and you can see who can give help and in what form.
“It does not spell out obligations on what the response should look like, but it does mean there is a formal commitment to take part in that process, and that is about as much as you could expect [from an agreement like this].”
Sinclair said the supply chain resilience agreement reached so far would help imports to New Zealand more than exports, because a trade pillar of IPEF, which had an emphasis on exports, is awaiting the outcome of the US election.
The IPEF issue was one of two before the select committee.
Another was the 14-year-old agreement between Australia and New Zealand on one hand, and the 12-member Association of South East Asian Nations (ASEAN) on the other.
This deal, the AANZFTA, eliminated almost all tariffs on goods and allowed two-way trade to double in that time. But all sides have agreed it could do still better, and have been talking since 2017 to achieve an upgrade.
As with IPEF, the talks have been aimed at supply chain resilience along with combating red tape, improving invoicing, speeding up processing of perishable goods and dealing with social and environmental matters.
The work is largely done, according to another senior Ministry of Foreign Affairs and Trade official, Hamza Haidon.
“When we signed AANZFTA in 2010, it was the highest quality FTA of any, but all FTAs need upgrading,” he said.
“The negotiations were concluded in 2022 and the upgrade was signed in 2023.
“The upgrade is about providing practical benefits to exporters. This includes setting the expectation that all goods should be cleared by customs within 48 hours of arrival and that express consignments should be released within six hours of arrival.”
Haidon said the agreement would assist other things, like having broader rules of origin for products. It would also require technical consultations when requested, especially on matters like the import of perishable goods.
The AANZFTA is intended to be in force by the end of the year if ratified by parliament.
The IPEF and AANZFTA hearings were part of New Zealand’s policy of mopping up all available trading opportunities, even as hopes fade for further large-scale trade liberalisation.
Serious trade disputes are continuing between China and both the European Union and US. Appointments of judges to the World Trade Organisation appeals body are still being blocked, and US presidential candidate Donald Trump is proposing 10% tariffs on all imports into the US.
In the words of New Zealand’s chief trade negotiator, Vangelis Vitalis, “the jungle is growing back”.
The only significant progress towards any new free trade agreement for New Zealand is with the United Arab Emirates, leaving IPEF and AANZFTA two of the few items left on the menu.
But both are highly rated by officials.
