The end of the two-sided policy
New Zealand’s reduced dependence on Britain, the removal of preferential treatment given to British imports, and the signing of the Closer Economic Relations trade deal with Australia in 1983, showed a trend towards removing trade barriers – including its own.
The Labour government elected in 1984 took further steps. It ended government assistance to farmers, and set a timetable for ending import licensing and reducing tariffs. It aimed to encourage free trade and remove protection from uneconomic industries.
New Zealand could now take a consistent stand in its international negotiations, particularly the General Agreement on Tariffs and Trade (GATT).
The Uruguay round
The role of GATT had been to reduce (manufacturing) tariffs to the point where they averaged roughly 4–5%. By comparison, tariffs on agricultural products had been neglected. An agricultural trade war between the US and the European Economic Community (EEC) culminated in overproduction with ‘mountains’ of butter and ‘lakes’ of milk that had no market. The trade war created the right conditions for sensible rules to be applied to agriculture. The Uruguay round of trade talks (1986–94) was the longest, most comprehensive and ambitious round ever undertaken. There were 14 issues to resolve; the most difficult negotiation was about agricultural trade.
The Cairns Group
A pivotal preparation for the Uruguay round was the forming of the Cairns Group of nations (New Zealand, Argentina, Australia, Brazil, Canada, Chile, Colombia, Hungary, Indonesia, Malaysia, Philippines, Thailand, and Uruguay). This group of relatively unsubsidised agricultural exporters wanted agriculture to be the core issue. Collectively, they hoped to carry enough weight in the negotiations to affect outcomes on agriculture.
Negotiating was difficult – even getting agriculture onto the agenda was contentious. The Cairns Group paid a key role in keeping negotiations going. While the outcome was relatively modest, the real success of the round was to subject the largest countries – who were ambivalent about freer trade in agriculture – to relatively equitable rules governing agricultural trade.
A new organisation
An agreement, signed in 1995, established a new organisation, the World Trade Organization (WTO), to oversee GATT and other agreements. The WTO had greater powers to enforce free-trade rules and a clearer mandate to promote free trade. The scope of what trade rounds covered also expanded. By the early 2000s it included intellectual property, investment, trade in services and agriculture, as well as trade in manufactured goods.