As long as the UK Government is able to support UK farmers through allowable direct supports, then we at the Legatum Institute believe that such liberalisation will actually be politically feasible.
This is one potential benefit for New Zealand.
British farmers are no great fans of the CAP, and provided there are reasonable transition periods and the example of NZ agriculture in benefiting from the market opening is explained, our preliminary soundings are that some liberalisation is indeed possible in the UK. But New Zealand is more than just lamb and dairy.
More openness can be secured in other sectors such as wine and apples.
The second benefit is in the long term more important.
When New Zealand and Singapore got together in the early 2000s to consider the possibility of a free trade agreement between their two open nations, this was not driven by short term commercial considerations.
This was a piece of trade strategy – the goal was to agree a high standards agreement that others might join given that the Doha trade round was stalling.
And this is precisely what happened.
The agreement that dealt with the new barriers to trade (competition distortions, regulatory barriers and so forth) became the P4, P4 plus One and then finally the Trans Pacific Partnership (TPP).
Now that Donald Trump has pulled the US out of the TPP, there is a vacuum of trade leadership in the Asia-Pacific region. While RCEP may bring about tariff liberalisation among countries in Asia, it does not deal with behind the border barriers and competition issues as TPP began to.
At the Legatum Institute, we believe the UK, out of the EU, is well placed to demonstrate such leadership.
It could catalyse a quadrilateral agreement consisting of New Zealand, Australia, Singapore and Britain which would be the beginnings of a Free Trade Agreement which has become known as a Prosperity Zone of like-minded countries that have a shared commitment to open trade, pro-competitive laws and regulations, and property rights protection.
The UK is ideally placed to do this because its economy is overwhelmingly based on services trade – services is about 80 per cent of its exports, and 80 per cent of its GDP. The barriers that services face are particularly domestic regulatory barriers.
The UK must therefore get good trade deals that cover services and regulatory barriers, in order for its economy to be successful on the global stage.
It will have to take the initiative or risk failure in the Brexit scenario.
We believe that if New Zealand can participate as one of the early pioneers of such a zone, other countries including Mexico, Canada, Switzerland, and the Pacific Alliance countries of Chile and Colombia will want to join.
On 9 March, for the first time, all Commonwealth trade ministers will meet in London. In 2018, all Commonwealth Heads of Government meet in London.
It is imperative that in the current global uncertainty, the UK’s newfound freedom can be harnessed by its trading partners to catalyse a new wave of global growth through deeper, more liberalising agreements.
New Zealand as it did in the foundations of the TPP can play a critical role to unlock growth opportunities for itself and the world.
Source: NZHerald
Link: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11802772