A golden era of free trade is over as countries take more nationalistic approach while setting up greater regulatory hurdles, according to a London based trade expert.
David Henig, a director for the United Kingdom Trade Policy Project, European Centre for International Political Economy, said since Chinese economic growth has slowed, no country has come forward to replace it.
India had been seen as an obvious candidate, but Henig said access is complex and the regulatory hurdles high.
“Every country is trying to get in there but the trouble is there are multiple reasons why it is a difficult nut to crack.”
As the growth of international trade has slowed, Henig said, the regulatory requirements imposed by countries have expanded and much of that is being driven by the European Union.
“There is a sense the EU is the dominant regulatory player, it sets the pace and everyone falls in behind it because that is the standard that has to be met.”
Henig has been involved in the EU-United States Trans-Atlantic Trade and Investment partnership and helped formulate UK trade policy following the 2016 Brexit referendum.
He said the “low-hanging fruit” of free trade agreements have mostly been plucked, which coincides with countries becoming more nationalistic.
“The countries that are doing them are at an end but populations are more suspicious as they haven’t necessarily lived up to what they [FTAs] promise.”
Future trade agreements are likely to be small trade deals or deals that cover multiple issues other than trade access.
Few of these deals are being negotiated.
Politically, announcing free trade agreements is much more popular than announcing the lowering of trade-disrupting regulations, which would be of significant benefit to exporting companies.
The increased volume of regulations around food production is despite little apparent thought about wider implications and how they squeeze out smaller exporters and producers.
Henig said large food-producing companies rather than small players have the scale and ability to meet those regulations while also satisfying retailer requirement for year-round supply.
Food-exporting countries like New Zealand, Henig said, need to stay ahead of the regulatory environment.
“It’s not about quality of product but the way its produced, such as the impact of climate change and adhering to the sustainability agenda.”
He said there is plenty of pressure from groups seeking government regulations on food production to address concerns about sustainability, environment and animal health.
“The net result is that regulations are expanding and we end up with a huge burden to meet.”
The widely questioned EU deforestation policy – a blanket requirement for producers of products such as beef to prove production did not result in deforestation – is an example of policy advocated by interest groups but for which there are significant unintended and wide-ranging consequences.
Henig said this regulatory growth is an untold story but could start to level off due to the complexity it has created.
“They may be able to justify it individually, but cumulatively it makes it virtually impossible for the smaller guys.”
He would not be surprised if food producers were one day be required to provide consumers with guidance on packaging about the degree of sustainability of the production system, such as traffic lights.
Henig also thinks producers will have to provide verification about claims such as “pasture raised”.
The increasing regulatory process means countries are focused on protecting access to markets for their premier products by ensuring they adhere to those regulations, in the UK’s case exports of Scotch whisky, which are worth NZ$15 billion a year.
More: Wallace is visiting seven countries in six weeks to report on market sentiment, a trip made possible with grants from Fonterra, Silver Fern Farms, Alliance, Beef + Lamb NZ, NZ Meat Industry Association and Rabobank. Read more about his findings here.
