Commonwealth free trade: Negotiating the art of the possible

8:15 am on 25 April 2018

By Stephen Jacobi *

Opinion - Kiwis are eternal optimists when it comes to trade. We have to be, given the distances that separate us from overseas markets and the small size of our economy. It's an approach that has served us well as we have concluded a suite of high quality and comprehensive free trade agreements - some might say against the odds - with much larger partners around the world.

24/01/13. Photo Diego Opatowski / RNZ. New Zealand First leader Winston Peters at Ratana celebrations.

Foreign Affairs Minister Winston Peters is talking up the prospect of a free trade agreement between all 53 commonwealth nations after discussions in London. Photo: RNZ / Diego Opatowski

Something of that optimism was showing when Deputy Prime Minister Winston Peters commented from London that there was "excitement" in the Commonwealth about a future trade deal. Several commentators have taken issue with the idea, noting the Commonwealth's lack of a trade mandate and the resources that might be used up in something that could prove fruitless. But maybe the idea is not as surprising as it might seem.

First, let's be clear that a Commonwealth-wide free trade agreement (FTA) could not be concluded by the Commonwealth per se. That's because the Commonwealth is a voluntary and non-binding arrangement between 53 sovereign nations, which operates by consensus.

As David Henig, who worked on the EU-US trade agreement and is now focused on developing British trade policy, has pointed out, two of those nations - Cyprus and Malta - are members of the European Union and cannot negotiate outside that arrangement. Other nations in Africa and the Caribbean may face similar strictures.

But in the same way that the Trans Pacific Partnership (TPP) was negotiated outside APEC - similarly voluntary and non-binding - so too could the Commonwealth provide an incubator of the idea of freer trade amongst its members. Any resulting deal-making could conceivably be carried out by a subset of the membership willing and able to do so - a new coalition of the willing, much the same as with TPP.

There's no doubt that this kōrero is going to take time. Then again, let's remember that trade policy is a long-term game. TPP took a decade or so to negotiate and its antecedents stretch back to the concluding days of the GATT Uruguay Round when it seemed that the round might collapse. At that time, five economies (NZ, Australia, Chile, Singapore and the United States) started an open-ended dialogue that led first to the NZ/Singapore FTA, to the P4 agreement (NZ, Brunei, Chile and Singapore) and ultimately to TPP (and then CPTPP).

Good ideas take time to gain hold and other events have a habit of intervening. Few people back in the day thought a NZ/China FTA might be possible, much less a NZ/ASEAN FTA. And who ever had Brexit on their radar? The point is that broadly-based discussions about trade are intrinsically a good thing because trade negotiations are the art of the possible. Such discussions need not take a lot of resources before they reach the negotiating phase, but can be a good investment for the future.

From a New Zealand perspective, there are also reasons for us to be interested in such a concept. As trade expert

Charles Finny has noted, a Commonwealth trade discussion might enable us to re-engage with India with whom - not for want of trying - we have been unable to complete an FTA. The Commonwealth also provides a means for discussions with African nations who themselves are beginning to integrate through some early trade arrangements.

Who knows where such discussions in the Commonwealth might lead - the important thing is to not close off options before they have been properly explored.

The sexy part of trade is the conclusion of the deal and the signing on the dotted line. But to get to that point can require decades of effort and a lot of nudging and pushing to get to the starting line.

We should not hold our breath for free trade to break out in the Commonwealth, but the deputy prime minister is not being unrealistic to signal that New Zealand, as the world's most optimistic trading nation, is willing to play a facilitating role to get a trade discussion off the ground.

* Stephen Jacobi, who is old enough to remember the Christchurch Commonwealth Games, is executive director of the [ New Zealand International Business Forum]

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