KEY POINTS:
Trade Minister Tim Groser sees himself and his international peers as in the front line, defending the world economy against the onslaught of protectionism.
"In trench warfare terms people like me and the ministers from much more important countries are in the front trenches, trying to defend a position until reinforcements who can do a final deal [in the Doha World Trade Organisation round] arrive," he said in an interview with the Herald.
And their ammunition is starting to run low, he says, as unemployment rises and country after country adopts measures designed to protect their jobs and limit their output losses.
"This is a very dangerous situation. Right now the collective view is that the situation is not out of control, but there are some really worrying signs."
One is the Buy American language in the US$800 billion ($1.5 billion) stimulus package legislation being thrashed out on Capitol Hill.
"You can understand that it looks to Americans like a perfectly reasonable proposition. They are the ones paying taxes to pay for stimulation of their economy. They want the benefit to go to their jobs," he said. "But then you have to ask why American companies like Caterpillar and General Electric are fighting this like hell. It's because they know there will be a second round - when other countries do more and more of the same - and then you start to lose high quality export jobs."
Another menacing sign of the times is the European Union's reinstatement of export subsidies on dairy products.
"Dairy farmers in France and Germany are now in quite difficult circumstances, the German state secretary of agriculture told me. I have no reason to doubt him."
But the response had been to haul the "most reviled trade instrument" back out of the toolkit, export subsidies. They want to pass the burden on to those in the international marketplace, and that's mainly us.
The issue is not just an EU-New Zealand one. It has led to calls from the US dairy lobby for the United States to reinstate its export subsidies, and the Cairns Group of agricultural exporting nations has joined the condemnation.
The Europeans contend that what they are doing is perfectly legal. And the US Senate has added to the Buy American clause language about consistency with WTO obligations on government procurement.
But this misses the point, Groser argues. There is often a big difference between what governments have been doing on the trade liberalisation front and the minimum they have committed to under WTO agreements.
WTO Director-General Pascal Lamy says that if countries increased their tariffs to the levels legally permitted, worldwide they would nearly double.
Bringing bound tariffs in line with actual ones is, like the banning of agricultural export tariffs, one of the expected gains from the Doha round.
"The Doha round remains absolutely doable," Groser, who when he was New Zealand's WTO ambassador chaired its agricultural negotiations, said. "As Pascal Lamy says, 80 per cent of it is done. [But] we are waiting for America and we have to hold the line on protectionist measures in the meantime."
Waiting for America includes waiting for political appointees of the new Administration to be confirmed by the Senate and start work. And that is not just Ron Kirk, US Trade Representative-designate, but several members of his staff.
"Until they are [confirmed] you can make informed guesses about what their policy will be, but you can't negotiate with them."
The people being put in place are good internationalists, Groser believes, but they are struggling with a domestic problem - that over recent years the American people have lost their erstwhile confidence that the US will always come out on top in any international economic fight.
While the Doha round remains the No 1 priority, the eggs of New Zealand's trade policy are not all in the WTO basket, Groser says. On February 27 he will be in Thailand for the signing of a free trade agreement linking new Zealand and Australia with the Asean (Association of Southeast Asian Nations) bloc.
The preliminary study phase of a potential free trade agreement with an even bigger slice of the global population, India, is well advanced.
India is at an earlier stage of economic development than China or any other country New Zealand has tried to negotiate a fully reciprocal trade agreement with, Groser said.
But while it has hundreds of millions of impoverished peasant farmers, it is also a first world economy in some technological areas, which has widened its economic reach.
In its dealings with India, New Zealand has long relied on the goodwill surrounding Sir Edmund Hillary and cricket.
"All very friendly, but it is not going to cut the mustard in the 21st century."
