'WTO an agent of evolution, not revolution’

It is a measure of the importance New Zealand attaches to its ties with India that the first overseas trip undertaken by Tim Groser, the country’s
minister for trade in the new government that took over in November 2008 was to India. At a time when many countries are turning protectionist, Mr Groser, until recently New Zealand’s Ambassador to the World Trade Organization (WTO), and Chair of Agricultural Negotiations, comes across as a breath of fresh air. Excerpts of an interview with ET:

New Zealand was one of the first countries to officially enter a recession. How is your government coping with it?

We are trying to tackle the short-term problems while keeping the long-term picture in play. The long-term policy is to shift more and more of our economy into the export sector and that process has to go on regardless of what happens in the short-term. In the short-term, we are following the classic Keynesian of fiscal stimulus to increase demand that, though small by Indian standards, is still about the seventh or eighth largest in the world. We are also shoring up trade financing. In any case, we are not in a severe recession.

It is more like a mild slowdown. The impact on our exports has been quite limited. We’ve been helped by the fact that the biggest banks in New Zealand are all Australian-owned; they (Australia) control 95% of our bank assets relatively in good health. We’ve integrated our economy completely with Australia and that has come to our aid.

What is your outlook for the global economy?

To be honest I just don’t know! There are two broad issues—one about financial architecture and the real economy. We have to hope and pray that as far as the first is concerned the worst is over. In terms of real economy the critical question is what’s going to happen to the giant developing economies and the inter-linkages with the rest of the world. China and India both have massive domestic markets to fall back upon. The developed world is now counting on developing economies especially those of China and India to shore up demand and act as a stabilising force.

What about global imbalances since these have a close relationship to trade?

I just read a fascinating article, I think it was by Paul Krugman to say 20 international economists of repute were invited to give their opinion on whether the Chinese exchange rate was under-valued and they could not come to any agreement. So, if some of the greatest economists in the world can’t agree on the direction, let alone the quantum of the undervaluation, it would be foolish for me to hazard a guess.

Are you worried about the growing signs of protectionism?

It makes perfect political sense to look after your own domestic interests in a recession. The problem is collectively such action could be disastrous for the world. I am enormously frustrated by the wide gap between rhetoric and reality. Take the Novemebr 20 meeting of the G20.

The leaders gathered there instruct their trade ministers to go to Geneva and finish the negotiations and they decide not to even turn up. Another decision taken at that meeting was that the world should not move towards protectionism but there again we‘ve seen the opposite happen. We have a particular gripe with the EU for re-introducing export subsidies. There is a huge scope for increasing trade restrictions that are perfectly legal but could do much harm to the world economy. The Buy American clause in the US fiscal package is also distressing.

What, in your view, does this mean for the future of the WTO, in particular the Doha round?

All the elements for a settlement are there. I believe these deal quite well with India’s legitimate concerns whether on special safeguard measures or special products. I believe it is possible to complete the negotiations by the year end. The larger problem could be Nama. We have to look at the larger picture. There is a range of options available and that was the case even at the time of the Uruguay round. It is not that all issues were sorted out at one go. It is important to have a strategic long-term view. Progress is always incremental. All it requires is a minimum level of political commitment and courage and we can be done.

What about services?

We are keen on expanding services trade. I know many think of Mode 4—movement of natural persons—to be some kind of Trojan horse for mass migration, but professional negotiators know that is nonsense so I think we can find a way through this. Gatts and WTO are agents of evolution not of revolution.

Has the joint study group that is examining the possibility of a Comprehensive Economic Cooperation Agreement between India and New Zealand identified any specific areas of potential interest?

There are issues with respect to trade negotiations in agriculture. After all there is one India that is very advanced and on par with the developed world, there is another India that is yet to benefit from the fruits of progress. But we can contribute to the Indian development process in the area of agricultural technology. You will not get commercially oriented technology from New Zealand companies if they don’t have a commercial stake here and presently they don’t for a variety of reasons including trade barriers. If we can find a politically sensitive pathway to change in a few areas that are of interest to us I believe technology will follow. It is not difficult because many of the products we produce do not compete with what India produces.

Even where we do, as in the case of milk, the reality is India is the largest milk producer but does not export much of milk products. We have only 2% or world production but we have 40% of world trade in milk products because the world trade is so small. India has a large middle class that is in a position to consume many of the milk products that NZ has an advantage in. So it could be win-win for both countries.