Free Trade Organisation
The New Zealand government promotes a free trade agenda at World Trade Organisation negotiations. Discuss opportunities and challenges of global free trade for New Zealand business and wider society.
One of the biggest and most talked about discussions in the past ten years is the issue of free trade. Free trade is all about opening the global trading market with few or no restrictions on trading. The dictionary definition for free trade is “trade between countries, free from governmental restrictions or duties.”(Dictionary.com, n.d.) The idea of trading is nothing new, it has been around since humankind has inhabiting this earth. Dating back to the Stone Age, people were trading things like stone carved jewellery for the exchange for foods. Free trade is gaining ever so popular for importing and exporting goods for a lot of countries, New Zealand being one of them. Until this very moment as we speak, somewhere around the world trading is taking place. In this essay, I will be covering the opportunities and challenges facing free trade, rules and polices of the World Trade Organisation, the impact of free trade in the economy and how important a Free Trade Agreement is to New Zealand.
One of the major focusing points of trade is the “free trade” agenda between countries. The World Trade Organisation (WTO) was established in 1995, it's mission is to create rules that involves all trading countries. The main function of the WTO is to “ensure that trade flows as smoothly, predictably and freely as possible.” (WTO, n.d.) The WTO is the only international organisation that has the power to deal with rules relating to trades between nations. (WTO, n.d.) There are 149 members nation in the WTO organisation, New Zealand has been part of the WTO since January 1995. A lot of countries including New Zealand faces some real risk of protectionist trade policies so it is important that an organisation like the WTO is established to enforced the rules. An example was in 1999, when New Zealand took a case against the United States for illegal protecting it own farmers against New Zealand and Australia lamb imports. (Scoop, 2006) The WTO was able to step in and rectify the issue and found in favour of New Zealand and Australia. The latest major country to join the WTO is China, where according to former trade minister Jim Sutton quoted as saying China's accession was good news for New Zealand.” (The New Zealand Labour Party, n.d.) The reasons China is such a big player for the New Zealand market is because China is worth about $100 Billion a year to the New Zealand economy.
New Zealand is a country highly depended on trade. The biggest trade sector is agriculture. In 2002 Australia is New Zealand biggest export region and accounted for $6.3 billion dollar. The European Union (EU) is the second biggest export market and accounted for $4.9 billion dollar, mostly dairy and wool products make up the bulk of the export to this region. The United States export market in 2002 was $4.9 billion, Japan at $3.9 billion, South East Asian countries at $2.9 billion and other countries accumulate the rest of New Zealand export market at $9.7 billion. (Statistics New Zealand, 2006)
The opportunity of free trade is just too important for the New Zealand economy, far outweighing any other issues. Since 1984 the government has try and still trying to change the New Zealand economy to a macroeconomic economy. A lot of state own enterprises has been sold to privately owned enterprises. During the recession in early 1990s, the unemployment rate was the highest the country has ever seen, but in 1993 the economy started to fixed itself and since on New Zealand experience a economic boom till 1995 where it slowed down. The government has then since been concentrating on free trade.
Free trade has a lot of benefits. Some example includes competition, economic growth and economic freedom. Try walking into a clothing outlet and look at the tag on the clothes, 90% of the clothing are made overseas mostly from China. It would simply cost too much, especially since New Zealanders can acquire the items from the open market with ease. Another example would be the coffee market. New Zealand being a large consumer of coffee does not produce coffee of it own and relies on imported coffee. The coffee, tea and cocoa products have surged by more than 400 per cent in the past years and its worth about 4 million, coffee accounts for 90 per cent of those sales. (Cheng, D, 2006) The director of Fair Trade Association of Australia and New Zealand quoted “People like the idea of buying something that will see the rewards go back to the producer, relieving poverty in disadvantaged communities”. (Cheng, D, 2006) New Zealanders are renounced to be caring people so it just makes sense. Free trade is simply the best deal for consumers because it offers competition between prices, choice and best opportunities.
The opportunities for economic growth in New Zealand are huge, businesses can take a lot more risk by increasing sales, hire a lot more employees and expand its businesses. According to Statistics New Zealand the unemployment rate is currently 3.6 per cent. Employment grew by 1.0 per cent, the highest level recorded and it is the second lowest on the OECD nations. South Korea remains the first out of the 27 OECD nations. The standard of living in New Zealand in ranked 27th highest in world and the economy's GDP estimated at $97.40 billion in 2005. (Statistics New Zealand, 2006) The reason New Zealand has such good figures in the world standings is because the current government objectives is to pursue free trade and the suspension of the Doha Round negotiations was a real disappointment for the government. Trade minister Phil Goff said “as an efficient and unsubsidised agricultural producer, New Zealand stood to gain considerably from completion of the Round.” (NZ Embassy.com - Germany, 2006)
In 2004 New Zealand completed free trade negotiations with Tonga worth NZ$60m. (New Zealand Labour Party, n.d.) Former trade minister Jim Sutton said “This outcome will deliver tariff saving of well over $6m a year for New Zealand exporters supplying goods to Tonga and will mean greater certainty for businesses providing services to Tonga”. (New Zealand Labour Party, n.d.) Not every country can join the WTO, they will have to prove that their trade polices are consistent with the WTO. This successful outcome will help Tonga's bid to join the WTO. Tonga was asserted into the WTO at the sixth ministerial conference in Hong Kong in December last year and soon Tonga will be the 150th member of the organisation. (WTO, n.d.)
Although free trade has many advantages and opportunities, some critics argued that Free trade agreements simply allow large Tran national corporations to freely enter cheaper labour market in developing countries like Indonesia and set up manufacturing factories and employs a labour force which are under paid and in most cases bad working conditions. The recent negotiation between New Zealand and China has critics wondering if it will be a successful. China has a bad human right history and if this deal is successful, the Council of trade Unions (CTU) are worried about Chinese imports that it will breach the International Labour Organisation guidelines on labour right and child labour. (Bilaterals.org, 2004) The late Green Party co-leader Rod Donald quoted as saying “We're talking about a country where political dissent is suppressed. Tibet is denied sovereignty and where environmental concerns and workers' right are routinely ignored” and “How can New Zealand industries compete with sweatshop where workers are paid only $1 an hour and where some nine million 10-14 years old are employed” (Bilaterals.org, 2004) New Zealand has always been proud of it's human right status so there are some challenges for the government to overcome but if a successful outcome can be reach both New Zealand and China can both benefit from a free trade agreement.
According to Trade minister Phil Goff, the WTO remains a vital tool for New Zealand and will remain fully committed to the organisation objectives of “Fair Trading” system. As long as it takes, New Zealand will be there at the conclusion of the Doha round because it advances New Zealand's trading interest. (Scoop, 2006) A lot of people may asked, do we really need the WTO? Has it really make the world a better place? It really depends on who you ask the question to, protestors would probably give a “no” answer and other will reply “it's the best thing that has happen to the world”. Country like New Zealand is highly depended on trades and Free Trade Agreements with other countries is probably the best political issue to ever evolve. Free trade is now a necessity for New Zealand and many other nations if economic prosperity is to continue and in order for businesses and its citizen to have prosperity.
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