Trade Tuesday: The panto politics of trade

By Richard Bicknell

Richard Bicknell is a Senior Consultant at SEC Newgate UK and a former Senior Special Advisor on Economics and Trade to the Leader of the New Zealand Labour Party and campaign consultant to the UK Conservative Party. He writes about the UK’s approach to trade negotiations with Australia and New Zealand. 

Pantomime is a true British product. So much so, that it has appeared at times in recent weeks that the UK Government is determined to export it around the world with its approach to trade negotiations. It may, however, end up being the only thing that gets exported any time soon, despite some progress last week.

Smoke and mirrors… and uncomfortable chairs

With another round of talks kicking off between the UK and Australia, many trade observers were perplexed by reports of mind games attributed to UK Trade Secretary Liz Truss in an attempt to spur progress. It appears the “glacial pace” at which trade negotiations have historically taken place is not to Ms Truss’ liking.

It was reported that Truss had planned to sit Australian Trade Minister Dan Tehan in an uncomfortable chair for their nine-hour meeting. This followed earlier reports that an ally of Ms Truss had described Mr Tehan as “inexperienced” compared to his UK counterpart.

This would of course be the same Dan Tehan whose pre-political career was in International Trade, including a decade at Australia’s Department for Foreign Affairs and Trade. Hardly a thin CV.

Unsurprisingly, an anonymous Australian Minister briefed “it’s not a very good tactic though… I would actually think it’s more likely to be counterproductive”. While New Zealand’s Shadow Trade Minister Todd Muller took to social media to opine “[I] wonder if they’re going to courier some uncomfortable chairs to NZ for the negotiators to use during the remaining zoom talks?”

These events would be comical, but for the fact that Australia and New Zealand have built some of the world’s foremost trade negotiating machines. Not only are they hardened from years of negotiations, but unlike the UK, they have been built to weather the political winds of their masters because, trade is a bipartisan issue that is viewed as simply too important to both countries for personality politics.

This antipodean approach to trade was forged from having experienced economic and political upheaval after being cut adrift when their largest historic trading partner joined the European Economic Community. But this should hardly come as news to that very former trading partner, who has repeatedly tapped senior trade personnel from both nations to try to develop its own negotiation teams. If you haven’t figured out which nation that was yet – it was the UK.

Concerningly the UK’s behaviour will not only have been noted in Canberra and Wellington but across the nine other Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) capitals. In February, the UK formally applied to join the CPTPP and has made accession a cornerstone of post-Brexit trade policy (see here and here for more). Accession, however, is no mere formality with consent required by all existing members via a very protracted process. Some might even call it glacial.

It’s Behind You

While undoubtedly churlish, the more unfortunate fact is that such behaviour simply serves to reinforce the larger problems evident in the UK’s trade negotiations.

The domestic importance for the Conservatives to get a deal with Australia has not be lost in Canberra. It is acutely aware that outside of India, there are few significant deals left available as the potential for deals with China and the United States slip away in the current climate.

While the UK may be in a hurry, political leaders on both sides of the Tasman have signalled that securing a Trade Agreement with the European Union is a higher priority for them, as demonstrated by Mr Tehan’s visit to the UK coming after a trip to Brussels.  So, while the UK/Australia deal may well be nearing completion, the onus on speed is not Australia’s own and will undoubtedly be played to its advantage.

The UK may have sensed an ability to leverage the chilling of Australia’s relationship with its largest trading partner China. Australia’s relationship with China has soured after it called for an inquiry into the origins of Covid-19. In response, China has targeted Australian barley, beef, wine, lobsters and coal exports. Unfortunately for the UK, however, outside of food and wine, it is not a feasible market for Australia’s high-value commodities, limiting its ability to fill the gap and fully leverage Australia’s pain.     

While four years of negotiations have clearly wielded results in most areas, it appears major impasses to a deal remain. For the UK, ensuring alignment on the regulation of services and investment remains a sticking point. While the UK’s continuation of protection and support for British farmers is unlikely to have their Australian counterparts waving their Akubras in joy.  

Adding to the Chorus 

The likelihood of securing an FTA with New Zealand increasingly appears on shaky ground. Beyond the usual sticking points of agriculture, as seen with Australia, two issues have recently emerged that are increasingly troublesome – climate change and the Five Eyes.  

Many in New Zealand, including Prime Minister Jacinda Ardern, are privately expressing their concern about the UK raising climate change as an obstacle to achieving an agreement, which is viewed as a zero-sum game. Climate change is a bitter pill for New Zealand, whose share of global emissions is small, but whose gross emissions per person are high due to agriculture emissions.  

In November last year, the British High Commissioner to New Zealand, Laura Clarke, told a climate change conference that she was concerned about a credibility gap between NZ’s rhetoric and action. Privately, the High Commissioner’s comments caused more ripples than Wellington’s famous Southerly wind. Such criticism of a host country, particular a close partner, is almost unheard of in diplomacy. Ms Clarke has also increasingly been seen to inject herself into New Zealand domestic politics on a number of high-profile occasions, far from helping the UK cause.   

For its part, New Zealand appears unable to decide just where and with whom it stands on the increasing fractious geopolitics of the Asia-Pacific. New Zealand has had an uneasy relationship with its status in the Five Eyes intelligence community which also includes the United States, the UK, Canada and Australia. As the partnership has evolved from its historic, purely intelligence, basis to an increasingly geopolitical one it has placed New Zealand on an uneasy trajectory with its largest trading partner in goods: China.    

New Zealand Foreign Minister Nanina Mahuta cemented this position last week when she explicitly stated that New Zealand was “uncomfortable” with letting the Five Easy dictate its position on China. The statement was quickly criticised by Conservative backbenchers, with Isle of Wight MP Bob Seely calling the move “appallingly short-sighted”. 

New Zealand, for its part, has watched closely as Australia – its largest overall trading partner – has suffered China’s economic wrath. With trade making up around 60% of New Zealand’s total economic activity, it is acutely aware that the fallout from a trade dispute with China would be disastrous.   

Oh no, it isn’t!  

While it is unlikely that the UK would go so far as to make a trade deal contingent on New Zealand’s continued involvement in the Five Eyes, any further erosion of the relationship isn’t going to help speed things up from their glacial pace anytime soon.