It amounted to a billion-dollar Christmas present for the country’s beef farmers.
On December 22 the World Trade Organisation (WTO) upheld a challenge to rules used by Indonesia to restrict beef imports and which NZ claimed cost exporters up to a billion dollars in lost sales since 2011.
It was NZ’s first time before the WTO’s dispute settlement body in Geneva since its successful challenge to Australia’s apples ban in the mid-2000s and its ninth straight win since the body was established two decades ago.
Lawyer Tracey Epps, who was an adviser to the Ministry of Foreign Affairs and Trade during the Australian apples case, says the Government shouldn’t just take cases it is certain it will win.
“If we have a very credible legal case and a strong interest commercially or some more systematic point of view where we want to ensure that things are interpreted a certain way and a message is sent then I think we should bring those cases.”
Epps speaks from a position of authority as one of the country’s top trade lawyers. She was lead legal counsel for NZ during the Trans Pacific Partnership (TPP) trade negotiations.
Late last year she joined top-end law firm Chapman Tripp as it bolstered its ranks in response to what it sees as backlash against free trade around the world and the likelihood of more trade litigation.
While United States president-elect Donald Trump’s has been grabbing headlines with his threat to use a 35% tariff to restore American jobs lost overseas Epps says that is merely the latest example of rising protectionism.
A report last month by the NZ Institute of Economic Research on trade protectionism in the Asia-Pacific region showed non-tariff measures annually cost the dairy industry nearly $4b and the meat industry $1b.
While tariffs imposed a 15% cost to the dairy trade that rose to a whopping 58% once non-tariff barriers were added.
Epps says the WTO’s Uruguay round of global trade talks in the mid-1990s secured for the first time upper limits on tariffs but the positive effect that had on freeing up trade was undermined as new barriers sprung up in their place.
Just because a country’s government signed a tariff-busting trade deal doesn’t mean its domestic industries suddenly give up lobbying to keep competition from imports out.
“Countries have turned to non-tariff barriers as a way of protecting their domestic sectors.”
In 2009 NZ and Australia signed what is regarded as one of its better trade deals with the ASEAN bloc of countries including Indonesia.
The agreement provided for tariff elimination on 99% of products to key ASEAN markets by 2020.
But, mindful of election promises by successive Indonesian presidents to make the country self-sufficient in beef, officials in Jakarta devised regulations to shut out imports and boost its own farmers.
Arguing its case before the WTO panel last year lawyers for the Indonesian government claimed the measures were justified on food safety grounds and to protect public morals.
Citing problems with the sale of thawed and refrozen meat in the past the Indonesians said continuing to allow the sale of imported frozen beef at the country’s traditional wet markets represented an unacceptable risk to public health though NZ produced evidence that Indonesian state-owned companies continued to sell frozen beef at the same markets.
Epps said it was not unusual for food safety concerns to be used as a front for protectionism.
“A lot of the time measures may serve two purposes. They may serve a legitimate health and safety purpose but they also have the effect of protecting a domestic industry.”
While such measures were defendable under international trade law they had to be based on science.
“In terms of the WTO, they have tried to reach a balance … countries are allowed to make regulations to protect health and safety. There is no question about that.
“But at the same time these agreements are there to provide trade liberalisation and ensure that countries are not discriminating against products from other countries and putting in place trade barriers that are unnecessary.”
Epps said the beauty of the WTO dispute system was that it was in a judicial setting which elevated trade disputes above the push-and-shove of global politics.
“If we bring a case against the US – which we have done before – and the US gets a ruling from the WTO it is in its own interests to comply because it wants other countries to comply when it brings its own cases against them.
“So, it is a positive for a small country like NZ but we need to use it as well.”
Epps’s message likely has a supporter in the dairy industry which in late 2015 wrote to Trade Minister Todd McClay reminding him of the potential contained in the enforcement provisions of NZ’s free-trade agreements as well as the WTO dispute processes as a means to tackle barriers to trade.
Soon after that, McClay announced a “once in a generation” update of NZ’s trade policy.
Announcing the overhaul McClay said having trade deals either completed or under negotiation with 90% of NZ’s export markets the Government was ready to shift its emphasis to ensuring those agreements were working for exporters and achieving their aim of facilitating trade in the markets concerned.
Reacting to the December 22 ruling by the WTO panel against Indonesia McClay said the Government was working on a range of measures to tackle trade barriers but litigation would remain a last resort.
Epps said with it proving increasingly difficult to get new trade deals over the line governments internationally were turning to stronger enforcement of existing ones.
That was prove to sceptical voters that free trade was not a one-way transaction benefiting multinationals exploiting cheap foreign labour but instead could create jobs and raise incomes for local workers if trading partners were made to play by the rules.
But she believes it will be up to exporters if they want a similar hard-line approach from the NZ government.
The first step would be to ensure officials were made aware where and how exports were being blocked.
“It is something that industry may have to work a bit harder on putting their case to Government.
“NZ has in the past has had a high threshold when deciding whether or not to bring a case.
“One is how strong is the commercial interest and the other is there a systematic interest … if countries are interpreting agreements in a way that is just not right or we can see they are putting in place measures not based on science even if we are not sure of the commercial outcome we should be bringing cases because actually we need to make the point that countries cannot be allowed to get away with this.
“If you let one get away with it then you let everyone gets away with it.”
