New Zealand's dilemma at the WTO's big meeting in Abu Dhabi

Just weeks after taking office in late November, Todd McClay was also elected as vice-chair for the upcoming 13^th Ministerial Conference of the World Trade Organization (WTO).

A major gathering of trade ministers from the WTO’s 166 members, ‘MC13’ will take place from February 26-29 in the United Arab Emirates (UAE) capital of Abu Dhabi.

This is not the first time McClay has held the vice-chair role – he was also chosen for the job when he last served as trade minister in 2017.

McClay will be one of three vice-chairs at the summit, to be chaired by UAE trade minister Dr. Thani bin Ahmed Al Zeyoudi.

After accepting the role in December, the New Zealand minster said his priorities included removing fisheries subsidies, reforms to the WTO’s dispute settlement process and getting ‘a better deal for agricultural exporters’.

New Zealand, a big food producer, was a major winner in the 1990s ‘Uruguay Round’ of the WTO’s forerunner, the General Agreement on Tariffs and Trade (GATT). That deal put limits on state subsidies for agricultural products.

But as more countries joined the WTO, momentum began to dissipate. From the early 2000s, New Zealand increasingly focused on signing bilateral trade agreements instead. The first of these was signed with Singapore in 2000 and the latest, with the European Union (EU), was signed last year.

Still, the sheer size of the WTO means that the potential gains there remain immense. While bigger agreements have remained elusive, from New Zealand’s perspective there are still enough occasional small-but-significant wins to sustain a belief in the WTO’s overall mission.

For example, trade ministers agreed to eliminate export subsidies on agricultural exports entirely at the WTO’s 10^th Ministerial Conference held in Nairobi in 2015.

This kind of success perhaps explains why McClay is taking on what some might see as a thankless job for the second time.

McClay may need to hold some difficult conversations in Abu Dhabi.

This is because India and the United States – two countries with which Wellington currently wants much closer relations – are probably currently the two biggest single barriers to progress at the WTO.

Since 2017, the United States has blocked the appointment of new judges to the WTO’s Appellate Body over a belief that its rulings were overly unfair to it. The strategy has effectively rendered the WTO dispute settlement process pointless, as there is no way for appeals to be heard.

Notably, Joe Biden has continued with an approach closely associated with Donald Trump.

For its part, India’s position on ‘public stockholding’ –governments paying farmers above-market prices for grain in the name of food security – is one of the big agricultural stumbling blocks.

Essentially, India and around 80 other developing countries would like to see changes to the WTO’s 1995 ‘Agreement on Agriculture’ to legitimise the public stock holding process. This agreement, achieved in the Uruguay Round, limits farming subsidies in developing countries to no more than 10 per cent of the value of agricultural production.

By contrast, developed countries – represented in the WTO by the ‘Cairns Group’ that includes New Zealand as a member – tend to see the public stockholding programmes as distortionary and as chipping away at the letter and spirit of the 1995 agreement.

While very different in nature, both the Appellate Body and public stockholding issues threaten to undermine the drive for trade liberalisation backed by New Zealand and embodied by the WTO.

In the year to September 2023, the total value of New Zealand’s total goods exports to the world fell slightly for the first time in nearly a decade. Globally, world trade declined by around five per cent last year – while trade barriers are being imposed at an ever-increasing rate.

WTO reform could help to reverse the trend.

But so far, New Zealand officials have been reluctant to publicly call out their friends over their approach to the WTO.

A statement released by India’s Ministry of Commerce & Industry after Todd McClay met his counterpart Piyush Goyal in December said that the pair ‘assured each other of co-operation and mutual understanding for a positive approach to reach a decision’ in Abu Dhabi over the public stockholding issue.

McClay did not mention the WTO in a trade-focused speech he gave in Delhi in December, instead highlighting India’s involvement in the US-led Indo-Pacific Economic Framework (IPEF), a far more exclusive trade arrangement that Washington has developed as a part of an economic coalition to challenge China.

Meanwhile, a joint statement issued by New Zealand and the United States after then Prime Minister Jacinda Ardern visited the White House in 2022 somewhat ironically praised the ‘free and open rules-based global trade system built on high standards and long-standing principles’, before pledging a ‘commitment to reform and strengthen the World Trade Organization (WTO)’.

Following a change in New Zealand’s government from the centre-left to the centre-right, there are now even more reasons not to rock the boat.

In a speech to the US Business Summit just days after becoming foreign minister in November, Winston Peters said ‘there are few relationships that matter more to New Zealand than our relationship with the United States’.

Both countries are looking to work together more closely on defence, particularly in the Pacific and New Zealand is now seriously considering joining the ‘second pillar’ of the AUKUS defence pact.

Against this backdrop of deepening NZ-US relations, US intransigence over the Appellate Body issue is something of an inconvenient truth.

To that end, Peters similarly made no mention of the WTO issues in his speech.

Meanwhile, Christopher Luxon called for much stronger ties with India on the election campaign trail last year. He is expected to follow through on a pledge to visit the country during his first year in office.

This is partly driven by New Zealand’s desire to forge closer trade links with what is now the world’s most-populous nation, particularly after neighbouring Australia signed a limited free trade deal with India in 2022.

But it is also motivated by the current desire amongst Western countries to see India as a potential counterweight to China. The ‘Indo-Pacific’ terminology now in favour in Western capitals is one reflection of this, as is the ‘Quad’ arrangement that links Australia, India, Japan and the United States.

While attention has so far focused on New Zealand’s potential role in AUKUS, New Zealand may also become the subject of renewed interest from the Quad. Wellington joined a trial ‘Quad Plus’ meeting on Covid-19 response in 2020, when Winston Peters was last serving as foreign minister.

Trade is increasingly clashing with geopolitics, but back in Abu Dhabi, there are some reasons for optimism.

The UAE’s hosting of the summit may provide an opportunity to push for bold moves forward.

Al Zeyoudi, the chair, is framing MC13 as a ‘pivotal meeting that is set to define the future of trade’, and the UAE is unlikely to be happy with a stalemate or merely nonbinding commitments.

Moreover, WTO ministers committed at the last Ministerial Conference in 2022 to restoring a functioning dispute settlement process by 2024.

It may be a case of now or never when it comes to making progress – despite big elections being held in both India and the United States this year.

The consolation prize could be an expansion of a fisheries deal agreed upon in 2022 which tackled state subsidies for illegal fishing. The agreement is now well on the way toward entry into force, which requires ratification from two-thirds of the WTO’s membership.

A deal in Abu Dhabi could extend this ban to overfishing in general.

While another fisheries deal would not resolve the other big obstacles at the WTO, it would still be a step forward.

For Todd McClay, the WTO meeting may also bring other benefits – such as an opportunity to build closer ties with the trade-friendly UAE.

The UAE invited New Zealand to enter talks on a bilateral Closer Economic Partnership Agreement (CEPA) last year. The move was partly driven by a lack of progress on New Zealand’s free trade deal with the wider six-country Gulf Cooperation Council that has been in the works since 2006.

McClay travelled to the UAE in January to discuss both bilateral engagement and MC13 with the UAE’s Al Zeyoudi – a chance for valuable one-on-one face time.

Overall, it must be said that expectations for the WTO’s Ministerial Conference are low.

But this could be an advantage.

We could see some surprises.

Geoffrey Miller is the Democracy Project’s geopolitical analyst and writes on current New Zealand foreign policy and related geopolitical issues. He has lived in Germany and the Middle East and is a learner of Arabic and Russian. He is currently working on a PhD at the University of Otago on New Zealand’s relations with the Gulf states.

Featured image credit: By World Trade Organization from Switzerland – Tenth WTO Ministerial Conference – Day 2 – Plenary session, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=80201206