NZ threatens trade war with Britain
By Richard Harman (author)
New Zealand is ready to retaliate against a British move which threatens our dairy and lamb markets there.
And that retaliation could go as far as to use our membership of the World Trade Organisation to stop Brexit in its tracks until issues over lamb and butter quotas are resolved.
As part of its Brexit negotiations, Britain and the EU have already agreed to split agriculture import quotas among the remaining 27 members of the EU and Britain.
The split will allocate average exports over the last three years to the EU or Britain according to where they were sent.
But according to trade sources in Wellington that would prevent exporters from being able to place products like lamb in Britain or (say) Germany according to where market demand was strongest.
In New Zealand’s case, it would be largely locked into the British market which may not be as lucrative after Brexit has had its impact on that country's economy.
But it is not just New Zealand that is affected.
So are big agricultural exporters like the US and Brazil.
And though New Zealand has been suspicious of the Trump administration's "America First" policy on trade it has found itself on the same side as the US in this row.
The agricultural exporters have a number of weapons up their sleeves --- one of their key ones (ironically) is to use Investor States Dispute Settlement type provisions within the WTO which would require the WTOP to convene an independent panel to adjudicate on the dispute.
Otherwise, New Zealand could hold Britain's membership of the World Trade Organisation after Brexit until it agreed to change the quota arrangement.
New Zealand is among a group[ of agriculture exporters --- Canada, New Zealand, Argentina, Uruguay, Brazil and Thailand --- who have signed a letter to the World Trade Organisation objecting to the British – EU proposal.
They have now been supported by the US Trump administration who have also signed the letter.
Political sources in Wellington say that though New Zealand objects to Trump's decision to pull out of the Trans Pacific Partnership Agreement, relations on other trade matters with his administration have been good.
And this is an example of that.
The argument put forward for the deal by Britain and the EU is that the rest of the world will not be left “worse off” if the bloc’s quotas are reduced and Britain takes a share of them.
The letter from the signatories to the letter says they were not consulted and the deal would disrupt “the delicate balance of concessions and entitlements that is fundamental to the global trade architecture today.”
“We are aware of media reports suggesting the possibility of a bilateral agreement between the United Kingdom and the European Union 27 countries about splitting TRQs (the quotas) based on historical averages,” the letter said.
“We would like to record that such an outcome would not be consistent with the principle of leaving other WTO members no worse off, nor fully honour the existing TRQ access commitments.
“Thus, we cannot accept such an agreement.”
But behind the diplomatic language, there is a determination in Wellington to ensure New Zealand does not lose as a consequence of Brexit.
And that extends to stopping British accession to the World Trade Organisation if necessary.
That accession requires the approval of existing members -- New Zealand is one.
And POLITIK has learned both the caretaker Government and officials are prepared to use a veto to stop Britain to save the quotas.
This is unlikely to be opposed by a Labour Government if that is what emerges from this week’s talks.
There are also other tools open to New Zealand.
Britain wants to join the WTO's Government Procurement Agreement which means that it could not be discriminated against by other signatories when it came to Government purchasing.
The EU is a member of the agreement, but Britain is not.
Importantly the 43 member agreement which includes the United States covers defence purchases – a major issue for the United Kingdom.
But again, Britain’s membership of the agreement requires the approval of the other signatories of which New Zealand is one.
New Zealand’s preparedness to play tough with Britain plus the presence of the US on its side illustrates just how difficult Brexit is going to be for Britain --- and how New Zealand is going to become tangled up in it.