Opinion: NZ must defend
‘Rules-based trading system’

New Zealand and Vietnam, as champions of the rules-based trading system, have to be more active and united in their efforts to defend it at a time when its survival is increasingly called into question, writes Sarah Paterson.

OPINION: The “international rules-based order” is probably not a term most New Zealanders use very often, if at all. In my time working on trade issues over the last decade and more, I haven’t heard more than a passing reference to its importance.

What it refers to is the set of globally agreed rules governing relations between states. It includes, with respect to trade for instance, World Trade Organisation (WTO) rules that have created a relatively stable and predictable basis for international trade for nearly three decades.

My take on why New Zealanders haven’t talked about it more deeply is that we haven’t really had to.

We have assumed our current framework of rules to be an unquestionable part of the global “furniture”. It has mostly served the international community well and enabled international trade to flourish. That includes contributing to lifting a billion people out of poverty over the last 25 years.

“New Zealand and Vietnam both have a lot to lose if the global rules-based system is eroded.”

When we do talk about the rules-based trading system, it has been in the context of trying to progressively expand and develop the rules to tackle persisting obstacles and deal with new challenges that arise. We’ve mostly focussed on opportunities to move forward, rather than defending the system from going backwards.

However, the discussion now is a very different one. Rather than talking about progressively developing the international framework of trade rules, the sad reality is that we are now more likely to be talking about how we ensure its survival.

That was certainly the case in the Track Two dialogue with Vietnam earlier this month. I was surprised at the extent to which the health of the international rules-based order was a major theme of the discussions, and even concerned it may be damaged irreparably by developments linked to the rising competitive tension between the major powers in the region.

One particular area of focus was the impending “trade war” that is now upon us. The US has proceeded to impose the promised higher tariffs on a range of imports, including targeting China with tariffs to address what the US says is theft of intellectual property. China and other affected trading partners are retaliating with higher tariffs of their own.

For Vietnam, trade is a key enabler for growing the domestic economy and building the resilience of their local businesses and communities. They have increasingly opened their economy and been an active participant in the Trans-Pacific Partnership Agreement (TPP) and now the Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP).

Closer trade ties are a critical pathway for Vietnam to strengthen its integration with the global economy. Trade agreements also help Vietnam develop policies that support its domestic industries to be more competitive and better able to participate in the global market place.

New Zealand and Vietnam both have a lot to lose if the global rules-based system is eroded. We are both heavily reliant on the current system of trade rules to protect our respective interests. Alone we have relatively little political or economic weight to throw around.

“We cannot be complacent when it comes to playing our part in defending and supporting the rules-based trading system.”

What I took away from the Track Two dialogue, and serious concerns shared there, is the necessity for champions of the rules-based trading system, like New Zealand and Vietnam, to be more active and strongly united in their efforts to defend it.

Another concrete action we can take is to ratify the CPTPP and continue to work on progressive development of trade rules regionally and globally. This is an area where New Zealand and Vietnam could show leadership together in demonstrating our ability to constructively work through challenges and demonstrate the importance and benefits of rules-based trade.

Legitimate criticisms have been leveled at the current global trade rules and dispute settlement system. Undoubtedly there is a need for the current rules and systems to be improved. But the solution is to come back to the negotiating table, not throw the whole system under the bus.

As an optimist, I hope that the current threats and challenges will eventually drive states back to multilateral solutions. And we shouldn’t waste a good crisis. While the risks are significant, there may also emerge opportunities to break some long-standing deadlocks on key issues in trade.

In New Zealand we also need to be discussing these issues with greater urgency beyond the Wellington beltway, including with business and the public. Everyone needs to better understand what is at stake and why we cannot be complacent when it comes to playing our part in defending and supporting the rules-based trading system.

Otherwise, as Joni says, we won’t know what we’ve got till it’s gone.

Sarah Paterson, Director at Blue Circle Consulting, travelled to Vietnam with a Track II delegation in June. Views expressed are personal to the author.

This article was first published on the Foundation's Asia Media Centre

Author: Sarah Paterson
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