Vangelis Vitalis: Inside NZ’s trade strategy | EP 93

Vangelis Vitalis is New Zealand's top trade negotiator. He's our man in the room securing better access for our exports, defending our interests overseas, and managing relationships with some of the world's biggest economies.

In this episode, Vangelis explains how New Zealand navigates an increasingly complex and unpredictable global trading environment. How does a small exporting nation compete for access to international markets? What happens behind closed doors during trade negotiations? And what does it all mean for farmers?

Find out from Vangelis.

Transcript

SPEAKER_02 0:07

Vangelis Vitalis is New Zealand's top trade negotiator. That means he's the man in the room when we're trying to secure better access for our exports, defend our interests overseas, and navigate increasingly complex relationships with some of the world's biggest economies. He's been doing this stuff for decades, but it's fair to say that the world's becoming much less predictable. Tariffs are back, trade disputes are escalating, and economic relationships are increasingly tied to geopolitical tensions and national security concerns. So, what does all that mean for a small exporting nation like New Zealand that relies on selling food and fibre to the world? How do trade negotiations actually work behind closed doors? What does that look like? And how can Kiwi farmers position themselves for success in a more uncertain global environment? We're going to find out from Van Gallus in a second, and I hope you enjoy this conversation. He's a fascinating, highly intelligent man. Just quickly before we do, if you haven't subscribed to the podcast already, please hit follow or subscribe on Spotify or Apple Podcasts or wherever you get your podcasts to make sure that you get notified when our new episodes go live. Let's get into it. Van Gallis, thank you so much for giving up your time to speak with us on the Federated Farmers Podcast. Now, for people who aren't familiar with your role, what exactly does a deputy secretary for trade and economic actually do day to day?

SPEAKER_00 1:34

Yeah, no, fair question. So a big part of my job is actually negotiating trade agreements, but I also am responsible for implementing them as well. By that I mean I lead the negotiations, but of course the negotiating team is made up of a whole range of NZ Inc. agencies, MPI, MB, Customs, New Zealand Trade and Enterprise. We all come together. So while I'm the chief negotiator, I've got a very good team that kind of supports all that. But I'm the nominal, I'm the nominal head. So I'm the one responsible both for the good and the bad. And often with these trade agreements, there is definitely good, uh, but there are often things that people uh feel very strongly about. And part of my role is also to kind of um kind of present a bit of a public kind of explanation of the good and the bits that people perceive as not so good. So that's a big part of the role. Then there's the implementation of those um agreements, not so much led by me or my group, um, but we work together with our colleagues from NPI, from MB, from customs, but particularly NZTE and the trade promotion piece to leverage the benefits of the agreement. And the other part of my job is um to try to be a little bit innovative, take a few risks, and try some new things in the trade space, particularly in this world that's so uncertain. So those are the kind of the functional elements. My group's about 120, 130 people. A chunk of that is rotational staff who rotate within the Ministry of Foreign Affairs and Trade. So they then their next role might be working on issues with Tonga or working on issues with the United States. And then within the group, I've got um a sort of a group of specialists that are here sort of permanently with real highly technical skills that are absolutely pure goal for us uh as a group. Um and then we've got functional embassies offshore. Um many of them have trade roles in them, as you'd hope. Um, and then some of the core trade roles, of course, are in Washington, in Beijing, in Canberra, in Brussels. Uh, then on top of that, we've got the Geneva, the WTO Embassy, if you like, the team that works on the World Trade Organization, uh, the team that works in Paris at the OECD, the Organization for Economic Cooperation and Development, which by the way has a very, very strong agriculture, trade and agriculture component to it, which is a big area of work that we we focus on. So that's kind of that gives you a sense of it. Um, well, I hope it does. A big part of it is that domestic focus piece. We try to get out there a bit more to explain what we do, try to demystify what these trade agreements are about, and also very importantly, what they're not about. That's a really important part of kind of helping New Zealanders understand. So I'm an economist by training. I do believe that trade is a good thing for New Zealanders. I do believe it generates employment, that it's um, that you get a better income if you're in an export-focused industry, and that your productivity is higher. But I also accept there are things that people are concerned about in trade agreements. They wonder about why that's in a trade agreement. Is it really related? Those kinds of things. I see that as my job and the job of my team to help explain, as I said, to demystify and, you know, come to grips with what is a very large and growing architecture that we have to, I like to think, protect and advance New Zealand's national interest.

SPEAKER_02 4:54

To give people an idea of how demanding your role is, you're doing this podcast with us, but you you landed back from Europe within 24 hours ago, right?

SPEAKER_00 5:04

That's right. Yeah. So one of the wonderful things about the job is you've got lots of international colleagues that you meet, but there is a lot of travel. And I know many of your listeners will think, wow, that's a fantastic job. And yep, it is. It is great to do the travel. But I must say, um, it can get pretty tough if you if you're doing it time over and time again. And um, as we were discussing at the start, Ben, there's also an age function here. I think I used to enjoy it much more when I was in my 20s and 30s, a little bit less now that I'm a little bit older than 20 or 30.

unknown 5:36

Yeah.

SPEAKER_02 5:37

And you picked a tough country to be a trade negotiator for, about as far far from anywhere as you could be.

SPEAKER_00 5:43

Or as I prefer to think everyone else is a long way away from me.

SPEAKER_02 5:46

That's all right. Hey, you've spent decades working in trade policy and negotiations. Looking back, how much has the trade environment changed since you first started?

SPEAKER_00 5:59

Look, it's hard to overstate how much it has changed. So I really had the the huge advantage when I started my career. Um, and I've I've been in and out of the ministry. So I worked as my first job was actually as an economist at the OECD, and then I joined the ministry, but then I resigned from the ministry. Anyway, at various points I returned. I think I and my generation, if you like, we really, and I like to call it the golden weather, we've had this fantastic time where the rules worked. Small country like ours could, you know, enforce our rights against the big guys, and they would actually observe the rules. They bring their regimes into compliance. United States, EU, Canada, we took them all to court. We won. They brought the systems into compliance. It was magical, period. Second big thing, protectionism was declining. You could, you know, 10 years ago, you could reasonably sit here and say, look, protectionism is out. It's the, you know, within the next three or four years, if we had kept the pace that we'd been doing from 995, we'd be on zero tariffs now. It just if people had continued to wind back their protection, wind back their subsidies. And this is, as I said, that was the golden weather. And the other feature of the golden weather that I always talk about that I was hugely beneficial in my career, basically, New Zealanders on balance thought that trade was a good thing, that you know, it brought benefits back to the economy, that it created jobs, that it was essentially a positive. That is not the world we're in anymore. The golden weather really is over. And, you know, to use a phrase, um, the jungle is definitely growing back. We we are not no longer in that world, and that's a non-trivial change. One of the big things in my career has been to benefit from US leadership. So the US really led the construction of this system. It had its own reasons for that, but we were a huge beneficiary, and I would argue the agriculture sector in New Zealand in particular. One of our really big wins since 1995. So, 995, WTO was established, World Trade Organization, and crucially for the agriculture sector, something called the Agreement on Agriculture was concluded and brought into force. That meant agricultural tariffs were cut. They weren't eliminated, but they were cut. And subsidies, there were finally some disciplines on agricultural subsidies. In 2015, and again, I want to pay a tribute to the United States here. Thanks to their leadership, we got the elimination of one huge thing that matters to New Zealand: the elimination of agricultural export subsidies by everybody, by the EU, by the US, uh, who were the major global export subsidizers. You know, these things really matter to us as an economy. And the system worked, and we had U.S. leadership. And I can honestly say I was there when we eliminated agricultural export subsidies in Nairobi. U.S. leadership was crucial. Without it, it would not have happened. Fast forward to today, that was 2015, we're in 2026, nearly 11 years later. I'm really sad. Um, that is not the world we're in anymore. In fact, unfortunately, U.S. actions are clearly breaches of the rules. They are um acting outside. I I had I understand why they're doing it, but um I'm really saddened uh by the change. And unfortunately, I do believe that we've moved into a new paradigm. We are not going to go back to those days. You know, hope is not a strategy for New Zealand. We've got to accept the world is fundamentally changed. We're gonna have to adjust to that new reality. So to answer your question for a huge part of my career, it was a tremendously exciting and positive time to be representing a small country like ours. We made progress, new rules were being built, protectionism was reduced, the agriculture export industry in New Zealand was really taking advantage of not just the WTO, but the free trade agreements we were negotiating. It was a it was a great time to be in this game. Unfortunately, things are a lot harder. In a way, it's a really interesting time to be doing this job because it's, you know, you're creating essentially what's going to be, I think, the new system that we're gonna have to operate in. And it's not gonna be as tidy and as convenient and as comfortable as we've been used to, but it is still gonna be a system, and I I do believe we're gonna be okay in it, but we're not gonna be able to rely on US leadership anymore. In fact, in many ways, we just hope that the US isn't gonna be an obstacle to the kinds of things that we really want to do. There's a lot of unfinished business in agriculture, uh, Ben, a lot of unfinished business. Subsidies are just growing. Um, unfortunately, the US, the EU, China, and India, they're the four major subsidizers, and their subsidization programs continue to increase. That's distorting prices, it's distorting the returns to our unsubsidized sector. We have to find a way to address that.

SPEAKER_02 10:44

Yeah, I guess that the next obvious question is what is that way? How do you form a strategy when it's so unpredictable?

SPEAKER_00 10:51

So, what we've got to do, I think, is we've first of all we've got to accept the world is not as it was. It's it's not the way we would like it to be. And we've just got to say, okay, take a deep breath and look at the world as it is, not the way we wish it would be. Um, and I think that's the that's the life of a small country trade negotiator. You've just got to accept it ain't the way I want it to be, but I'm gonna have to now make the best of it. Now, for me, I think the future is gonna be very much, we're still gonna want to sustain the World Trade Organization. We don't want to give up on the agreement on agriculture. We we do need to remember that, okay, the United States is behaving badly, but other countries are still observing those rules within the agreement on agriculture. So we need as a country to continue believing in it, supporting it, and sustaining it. But where are we gonna do the new rules? So since 2015, when we eliminated agricultural export subsidies, we've done literally nothing on agriculture. On the biggest distortions in the trading system, which are in agriculture, we've done nothing. Not we New Zealand, we the 166 WTO members. So clearly we need to keep trying in the World Trade Organization, because that's the way we get 166 countries to sign up to the rules. But I think we're gonna need to think about some other places to do this. And for my money, it's running ideas and reform of subsidies in a number of different tracks. One of those is still going to be the World Trade Organization. We'll be the last country to give up on that. But I think we're gonna also think, need to say, okay, what about the CPTPP group of countries, the 12 of us, Japan, United Kingdom, Malaysia, Singapore, New Zealand, Mexico, and so on, all 12 of us, plus the EU. There's a dialogue going on between those two blocks. And I'd like to think that at some point there'll be the right moment to be saying to the EU, we understand that one of your big concerns is industrial subsidies. And by that, you know, the OCD just put out a report last week which showed that China is a major industrial subsidizer. Now, we don't think that you're going to be able to just force China to make change on its own. The only way this is going to work is if we have a package where everyone contributes, where everyone feels a certain amount of pain. And for that, I would argue to the EU, and I would argue also to the US, and I would indeed also argue to China, we need to put agriculture and industrial subsidies together and say, look, there's a reform package here. We're all wasting our money spending this colossal sums. We need some discipline on this. You big guys can keep spending, but at some point you are going to come to some fiscal limits. I think when that time comes, we need to be ready with some rules and some disciplines around that. So working in the CPTP EU dialogue, trying to run an argument in there, running it in the World Trade Organization, and then running it also, I think, in another grouping, which Minister McClay is hosting in July. It's called the Future of Investment Trade Partnership. 16 trade ministers are going to come together in Auckland. And uh, one of the things Minister McClay has asked us to do is to say, okay, can we get a group of these 16 to 20 ministers together to say, what kind of rules could we accept on subsidies, agriculture and industrial, that we can then take as a group of us to the big guys and say, tell us why these don't work for you. So what I'm saying is we need a strategy that has multiple tracks. Yeah. And there'll be a variable geometry of speed. Some of them will move quickly, some of them will move more slowly. That's okay. We just need to have them all turning. And I do think that because agriculture is such an important sector for us, we need to be leaders in this space and we really need to be investing in the expertise that we need. And to see this, and you know, I urge your listeners, um, this isn't going to be the India FTA done in nine months or the UAE agreement done in three months. We're going to need some strategic patience here. We haven't done anything in 11 years since 2015. We now have got to do a plan that involves different groupings, and some patience is going to be required. And I think we're just going to have to keep the faith while we run those for as long as we can and make sure that when we're ready, when the big guys are ready to do this, we've got we've got the answers for them. Look, and in the meantime, Ben, we will absolutely be still negotiating other trade agreements, other free trade agreements. Um, and we won't just be doing one thing. The good thing about um our group and MPI and MB is we can do lots of things. We're good multi- multitaskers, and we absolutely have to be in this environment.

SPEAKER_02 15:32

It's interesting that you said that this is the new normal, really, this um environment that we're in. That's interesting because I I don't know about other people listening to this, but I think in my head I I thought that our maybe with some different leadership in future, um, you know, a different US president at some point, that we might go back to a more rules-based structure. But are you saying you don't think that's likely?

SPEAKER_00 15:56

I'd like it to be that way, but I don't believe that is the case. So I think we need to remember a couple of things. The first is that there's pretty much bipartisanship in the United States at the moment on the challenge that China presents to the United States in trade. So both the Democrats and the Republicans broadly agree. I think the second thing to say is, you know, one of the features of the Golden Weather I talked about was this enforceable trade regime, where, you know, a country could take a case against a big country and there'd be judges to hear the cases. It's really important to remember that those nine judges that you have hearing these cases, three at three per case, those nine judges have to be reappointed. And it was not the Trump administration that started this, it was the Obama administration that vetoed the first judge and said, we don't think this court should hold us to account anymore. So that was Obama. President Trump continued it. And President Biden continued it and finished it. So the last of the nine judges that was vetoed was vetoed by President Biden. I think we also need to remember and be honest with each other that the Democrats traditionally have not been friends of New Zealand on trade. And, you know, we're we're finding it hard with the Republicans, but the Democrats were pretty hard work as well. So I think we just need to be realistic about what the world looks like. I think it's going to be very difficult for the United States to take away these tariffs. I think there's an important revenue component for them. I do remember that President Biden continued to apply steel and aluminium tariffs against New Zealand despite our requests. The fact that we were a small exporter, that we were exporting the kind of steel that their defense industry needed. It meant nothing. So I'm I'm afraid we're in this world to stay. I don't think it's the end of globalization or international trade, but I just think we're just going to have to get used to the fact that the United States is going to have a very different view of the way in which this system works and it isn't going to be the one that we're going to find comfortable or easy.

SPEAKER_02 17:58

Van Gellis, in the past week, you mentioned US tariffs. In the past week, we've seen the US announce that 60 countries, including New Zealand, could soon face a new 12.5% tariff for failing to stop the importation of goods made by forced labor. From what I've read, this isn't really a surprise. And it's not really about forced labor, but it's about the US finding a way to get back closer to those Liberation Day tariffs, that tariff of 15%. Is that how you see it?

SPEAKER_00 18:26

Yes, unfortunately, that is my assessment as well. And it's hard not to draw that conclusion. Um, you know, New Zealand, we participated in good faith in the process that the United States ran. Sort of a series of questions that we answered. We provided um material in writing as well to show them what we were doing. Uh, we talked about our forthcoming modern slavery legislation, but it was really hard not to have the feeling that this actually isn't about whether or not we are using forced labor in our supply chains, or rather, whether anyone else is using forced labor that finds its way into our supply chains. It is actually much more about reinstalling uh the tariffs. So putting the bricks back on that wall that we face. So um, I mean, it it was uh yeah, very difficult to hear that news that we were going to be subject to a 12.5% tariff. Um, and very disappointing and very frustrating, I must say. I know uh Minister McLay last week uh met with uh his US counterpart and it was very clear that we don't accept the findings, uh, that we don't accept that this is a justifiable tariff. Uh we understand what the United States is trying to do, but we don't agree with it. Uh, and we think it's really problematic and disappointing, especially as I said at the start. You know, all my career, US leadership has been the way we got things done. And uh this this feels like a real, you know, that a really non-trivial change to the way we've thought about the world and and just, you know, the events on on this tariff have just reaffirmed for me that that that is the world we're in.

SPEAKER_02 20:03

There have been some real positives though. I so let's talk about the India uh FTA. Why is that agreement such a significant breakthrough, Bengalis?

SPEAKER_00 20:13

Well, I would say that, wouldn't I? Um I do think it's a really important agreement for us. I think it's important in in a whole range of ways. I mean, the first thing to say is India is a colossal market, and I don't mean just in population, I mean in terms of its middle class. So that middle class by 2030, which is not far away, is over 700 million people. That's bigger than the EU market, it's bigger than the 10 ASEAN markets, and we're talking about the middle class. That's number one. Number two, our competitors are negotiating or have negotiated free trade agreements with India. Australia's already had one, it's had one for three years. The Chileans have got a partial agreement, which gave them an advantage over us in Kiwifruit. The British concluded an agreement, the EU has just concluded an agreement. Um, and this is a market, uh, you know, so the second reason is to catch up uh and make sure we've got a level playing field with some of our key competitors. Look at the third reason is to get a bit of an advantage. So some of the things we negotiated in the agreement are better than what the Indians gave the EU, or better than what they gave um our Australian colleagues or the British. So we also got an advantage. So it's about access to that middle class, it's about leveling the playing field with our competitors, and it's also about getting an advantage. And the Indian market is really tough. And the tariffs are between 33%, for example, on sheep meat. Uh, there's 66% on manuka honey, for example. Uh one of the big things of the agreement. There are 150% for wine. So you can see that. I mean, let me give you an example of what happens when you don't when you don't have that situation. So before uh Before Australia finished its free trade agreement with um with India, New Zealand accounted for 85% of India's sheepmeat imports. 85%. Today we account for 9%. The Aussies are 91%. Why? Because they got the tariff, 33% tariff eliminated on day one of their agreement. I'll never allow anyone to say that Australian sheep meat's better than ours. But if you're an Indian consumer and Australian sheepmeat is 33% cheaper than the New Zealand product, I'm sorry. What I think is amazing is that we've still got a foothold in the market. So, you know, you're seeing the real impact of that. So another another effect of the agreement is that Australian exports of wood increased by 119%. Ours fell by 20%. Again, the tariff, 11% tariff, we're just not competitive in those kinds of circumstances. Fish and seafood, 33% tariff again. Australia went up 269% when they got their FDA. Us, we fell by 67%. This is one of the big markets in the world for seafood. It's this middle class that wants to have healthy food. Seafood's a big one. We are not going to be in that market if we have to pay that size, that kind of tariff. Now, where did we do better than others? So a big focus for us was kiwifruit and apples, getting an advantage for our exporters there. And so what we're able to do is we've got a quota, which means that we can send a certain amount of um kiwi fruit, a certain amount of tons of kiwi fruit into the Indian market at a zero tariff. So our competitors are at 33%, we're at zero for that volume. And then outside the quota, we're at 16.5%. Everyone else is still 33, we're at 16.5% for everything outside that first. Now, the first quota that we've got is actually greater. Uh, it's nearly um three times the average uh exports that we were sending uh the three years before we negotiated the agreement. So it's it gives us a real advantage in that market. Same for Apples. The Apple tariff is 50%. So we've cut it to 25% for our guys. So all of New Zealand's competitors in Apples, they're paying 50% tariff. We'll be in at 25%. And that, you know, that advantage is going to be huge. And no one else has got that access, not the Australians, not the Swiss, not the British. And so we've got an opportunity here to really get into that market. Now, India's never given anyone, including the European Union, they didn't give them honey. We got honey for manuka honey access for a certain volume. So our the amount we send is about 100, sorry, is one ton, one to two tons a year. We've got a volume of 200 plus tons. And the tariff of 66% has been cut by 75%. So again, we're going to have a significant advantage in that market for Manuka honey. Uh, wine's another great example, 150% tariff. We've cut it, we've got a level playing field with the Australians and the British. And the best thing about the deal is that we've got what's known as an MFN provision in there, which means that if India does something better for anyone else, and it has, it's just given the EU a better deal than it gave us in Australia. But because we've got this most favored nation provision, this insurance, as soon as, as long as we ratify our deal before the EU does, we will get the immediate benefit that the EU gets. We'll immediately be on a level playing field with the Europeans in wine. That is crucial in this new market that's emerging. Again, it's that Indian middle class. We want to be in there. We want to be selling the product. And I mean, look, let me be open. You know, so we did really well in um meat products, sheep meat, and so on. But let me be open about the fact that it was a big disappointment on dairy, really big disappointment. Not gonna guild that one in any way. Um it's only a slight comfort that they haven't given anyone else any dairy. So, okay. But we uh look, I can tell you that the minister fought right until the end. This was the last thing that got resolved, or rather not resolved from our perspective. Um, and it was a really, a really difficult and tense negotiation with um with India, with um them threatening at various points to uh to walk out on us because they were so frustrated that we continued to push on on dairy. Now, we didn't get nothing, uh, but I'm not going to pretend we got what we wanted. Uh so we did get the 33% tariff eliminated on infant formula. Uh we got a special quota on albumins, which is sort of this whey protein, a sort of a protein concentrate. Um, so we got some small things. We got an import for re-export program, which means that we can send dairy ingredients to an Indian processor. And as long as that processor then exports it, we don't pay the tariff, the 33%, 42% tariff on it. Um, and we've also got a commitment from India that if they give anyone else access on dairy, they will come and talk to us uh about that. But look, um, again, I'm not gonna pretend we any of us were pleased with where we landed on dairy. Very, very disappointing. Um, it is the reason why we're gonna continue to review the agreement. So there's a commitment to review the agreement one year after entry into force, and then every two to three years thereafter. So very important to keep in front of the Indians and say, at some point, you guys are gonna have to accept that you don't produce enough dairy for your population. We can help you. Um, and we want to be, we want to have the kind of relationship uh with them that I think the FTA will provide us um to help build that partnership with them. And therefore, when they decide to open up, that we'll be well positioned to be a genuine partner of theirs on that.

SPEAKER_02 27:54

I don't know anything about the Indian uh dairy sector. Is it in fast growth? Are they trying to basically build that up so that they've got their own supply?

SPEAKER_00 28:04

Yeah, so they're very, they're super, super sensitive on it. They they regard it as one of their you know strategic industries that they want to protect. They see it as part of their food security program. Um, and it is the largest, you know, dairy producer in the world. It is colossal. Um, but the method of farming is is just totally different to ours. You know, the average farmer there's got one to two cows. It is a very different system, and it is not able to produce enough for its own population. So, you know, we we do expect at some point that they're going to need to open up or at least provide some limited access for people. And again, that's where I see the opportunity. And I do see the role of the free trade agreement is helping us build a partnership with them as a good, credible partner that actually wants to help, you know, build their industry, build ours, and find a way into that. But but right now it is very, very sensitive. Look, everywhere we went, people were warning us that on dairy uh there'd be protests and riots in the streets. I mean, only a few years ago, the government made um some very modest, the Indian government made some very modest changes to some of the assistance programs they have for dairy, which would have affected less than 1% of the farmers. There were riots uh in the streets um and people died, and you know, and the government had to change course. It is a super sensitive area. And so while we respected the sensitivity, uh we also pushed very, very hard, or Minister McLay pushed very, very hard to try to find a way to find something, which we found some things, but you know, again, certainly not what we would have uh wanted.

SPEAKER_02 29:41

I think a lot of people would be curious, I know I am, to just understand how these negotiations happen. Um is it that you go and you've got things on the table, you've both got things on the table that you're, you know, holding on to or giving up, and that's what the negotiation is like. For example, from our side, what what are we giving up to India um to get that agreement across the line?

SPEAKER_00 30:05

So, I mean, maybe to start with a sort of a functional observation. So what happens is you have a team, 20 plus people, um, and this team negotiates the rules of the agreement, and the rules are contained in the chapters of the free trade agreement, you know, 19 or 21, up to 25, 26 chapters that you might negotiate, depending on who the partner is. And you have a chapter lead and a and a support person, if you're lucky, for each of those. It's technical barriers to trade, it's sanitary and phytosanitary standard, that's another chapter. There's a chapter on rules of origin, there's a chapter on trade facilitation, there's a chapter on investment, chapter on services, et cetera, et cetera. So huge amount of those are what is known as the rules of the agreement. So, what rules will apply for a New Zealand exporter to export into India? So, for example, our customs colleagues did a fantastic job. And, you know, to clear your product, if you're an exporter, you need to clear your product at Indian customs. And it can take between three and six days to clear customs there. There is an obligation, a legal obligation in our agreement, where um India and New Zealand must clear each other's products within 48 hours. So that's a huge shift on their side to facilitate our access into their market. And if it's a perishable product, you think about our seafood, um has to be done within 24 hours. So these are the rules you see that apply to trade. And we're looking to give New Zealand exporters an advantage. And by the way, very pleased with that. And I want to thank my customs colleagues for this because um that's not something the Australians have. So it's a it's a real advantage for a new practical advantage for New Zealand exporters. That's the rules. Then you've got a separate team that negotiates the market access in services, in goods, and sometimes with some partners, we negotiate investment market access as well. And that's um a colossal tariff schedule that you negotiate. So to give you a sense of it, these agreements run to thousands of pages. And if you include the tariff and in services schedules, you're talking about tens of thousands of pages. So it's a it's a big thing. And we then negotiate, hopefully not line by line, but often we do end up line by line, grinding through, you know, chapter four, which was dairy, uh, and you you negotiate all of those. Now, to come, that's sort of a functional process. And as you conclude the chapters, your team becomes smaller and smaller as you get near the end of the end of the negotiation. Now, that's the sort of the official level piece. A really critical piece is your ministers and your leaders. At what point do they engage and at what point do you have ministers? Now, we've got a very activist minister, and so do the Indians. And so they had this terrific relationship, and that certainly helped us unlock at crucial moments where my counterpart and I, uh, she was a very formidable uh Indian negotiator. When we got stuck, we'd surface those issues sometimes uh to our ministers to see if they could help us find a solution. Sometimes they'd kick it back to us, sometimes they'd resolve it, and then we'd, you know, we'd try to continue the negotiations. So there's this element of from officials to the ministers and then back. Um, of course, the prime minister launched the process during his visit there. Um, so very important that his relationship with Prime Minister Modi. So all of those pieces now to come to your actual question. So, how does New Zealand then present itself in those negotiations? Well, I'll tell you what, it is hard work. So you put yourself in India's shoes, you've got the EU coming to you for negotiations, you've got the UK, you've got um the Australians, and you can see with all of those, oh yeah, EU's a big market. The Australians have got critical minerals that I need, uh, they've got coal, things, things that I really need. Um, the British, long-standing relationship, G7 economy, you know, I do want to have access to that market, especially if I'm going to negotiate with the European Union as well. Here comes New Zealand. What is New Zealand gonna give me that's really worth it? So I'm India, I look at New Zealand and I see a small country, uh, five point, whatever we are, 5.3, 5.4 million people. It's already an open market. So, you know, as my Indian counterpart used to very vividly point out to me that um they done their consultations with business, there were no problems with New Zealand, we didn't have a problem with the tariff, we don't care. Okay, thanks very much. That's good to know. Um, so what was it that India was going to get out of this free trade? That was our challenge. And for India, what were we bringing to the table? Well, we brought an expectation in dairy. We expected them to, for the first time ever, give access on apples, on kiwifruit, on honey. We wanted the same as Australia on wine, but Australia was offering all of these additional things. What are you offering New Zealand? That was really tough. And so then what you do as New Zealand, you try to construct a package that you think will be attractive. So you put yourself in your Indian counterpart's shoes and you know that she's got to sell the deal to her colleagues, to her minister. How is she gonna sell the deal? And that's that's the art of the negotiation. Now, New Zealand has this problem with everybody. When we were negotiating with China, same problem. When we negotiated with the 10 ASEAN countries, New Zealand demands all these things, meat access, dairy access, super sensitive for them. And I think often New Zealanders forget how sensitive other countries' agriculture sectors are. They are behind the highest tariffs with the greatest subsidies for a reason. Because they're sensitive, they're politically very uh powerful lobbies. You know, if you think about where they are in the EU, certainly in India, certainly in the United States. So, you know, what is it New Zealand brings to the table? And that's where we look at things like, and I know this is controversial, and I understand that some of your listeners will disagree, some of the things on visas, some of the things on cooperation programs, to build a partnership with the Indian sector to try to help them grow their sector. But let's be honest, that's actually good for us. So it is a good thing if the Indian consumer can buy kiwifruit all year round. At the moment, they can only buy it in their season. So you don't have that for a large chunk of the year, they can't buy kiwifruit, they can't buy apples. By having this partnership, we're able to fill the other part. We can grow the market together. Let's face it, 700 million middle class consumers, there's plenty of space for everyone in the market. Let's work together. How do we? And so we we did this. And I've got a you know, huge tribute to the kiwifruit industry, which had already been doing this work, and the apple and pear industry, which had already been doing this work, already had relationships with Indian growers, Indian producers, Indian packaging houses, developing real partnerships, you know, genuine relationships. I'll tell you what, what's really important here is our reputation. So lots of people talk a good game about, well, we'll help you, India, we'll do this, we'll do that. But the Indians could see that we had a track record of doing this already. So they knew that we would be as good as our word. And that is really important. If you're a small country, you've got to be as good as your word. And we are a serious country, so we made these commitments and we'll live up to them and we'll deliver the support, but they are actually to our benefit as well. So if you think about we're gonna review this agreement, let's say in four years' time, we'll want more apples access and more kiwifruit access. The key decision makers are gonna be the Indian growers, the Indian Ministry of Agriculture, and they are gonna ask themselves: has New Zealand been a good partner? Have they helped us when we needed them? Have they helped grow the market for both of us? What are the returns for our growers and how is that going? And I back our apple and pear industry and our um kiwifruit guys to have these great relationships, genuine, you know, win-wins often chucked around, but it'll be a genuine win-win here so that when we come back to that and ask for more access, the Indians will see this will be a benefit. So a real that's part of the piece. The visa piece was important, but I don't want to overstate it. I mean, my counterpart said to me, well, so I'm a population of 1.4 billion, and you're offering me 1,667 visas a year. Long awkward pause. And then you're also saying that you're gonna have all these safeguards in there. No pathway to citizenship, gotta be a job that's from an occupational category where there's a shortage, got to have uh English language requirements and so on. Okay. Um, but you can see that from the Indian perspective, that was it was it was not an easy sell. But it is a really important thing you put yourself, especially if you're the small country. Look, India's not gonna be, my Indian counterpart did not lose sleep thinking, how is poor Vangelis going to sell this deal at home? I, on the other hand, lost many, many nights worrying about okay, how how does this package work for India? Because Ben, I do believe we need this deal. Um, I do believe that we would be wiped out of that market uh by Australia already. And I gave you some examples where that's happening in real time. Now that the EU's got a deal and the British have got a deal, those are key competitors of ours in agriculture. Uh they didn't get anything in dairy, but they also got commitments in other product, horticulture products and so on. We need to have a level playing field. Actually, the the dirty secret here is actually we've got a better deal. So we are actually going to have a small advantage in a whole range of areas as well. And look, in a world of uncertainty and a world where um some of those markets are getting harder and harder for us, you know, where the United States, a good friend and partner, is whacking a 12.5% tariff on us, we need some options out there. And I do believe India is a key part of our optionality out there. It'll be up to exporters to make that decision about where they want to put it. But I hope that they'll be looking in a different way at the Indian market because for the first time we'll have a level playing field. We will not be constrained by these 33%, 75%, 8%, 150% tariffs. We will actually have an opportunity to build a market there. And I do, and I'm a real believer in those partnership pieces. I do believe both sides will will come out of this well.

SPEAKER_02 40:30

That's fascinating. Thanks, Miguel. It's really interesting to hear how those negotiations play out. It sounds complex to say the least.

SPEAKER_00 40:38

I mean, let me give you the one of the best quotes I heard was from um uh, you know, when when Minister McLay was negotiating with his counterpart. And um, you know, at one point the the Indian ministers leaned over and said to him, So tell me again what your population is. Oh, five point, okay. So that's a little bit bigger than a medium-sized street in Mumbai. He was joking, but um, you know, it was a good reminder of our place in their in their system. And look, when we were negotiating with them, they had the Americans in town, they had the EU in town, they had the Chileans, they had the Peruvians, they had the 10 ASEAN countries. Everyone was negotiating with them. If we if we did not find a way into that negotiation, um, I shudder to think where we would be in the next couple of years.

SPEAKER_02 41:20

What's the next big focus for New Zealand trade? And um, I guess I'm bearing in mind you talked about this at the beginning, about the sort of multi-pronged strategy, but are there any big opportunities still to be unlocked? You know, South America, Africa, anywhere like that?

SPEAKER_00 41:34

So just take South America. I think one of the really exciting things that happened last week was that Argentina applied to join CPTPP. So one of the jewels in our trade architecture crown um is CPTPP. Of course, the original was TPPP, and I want to pay tribute to my former boss, David Walker, who negotiated TPP. I picked up CPTPP, but he he did TPP. Uh, we owe him an enormous debt of gratitude because that is the jewel in our crown, because other countries are now wanting to join it. So there's a queue now of I think 11 countries wanting to join economies wanting to join. Um, Argentina is the latest. So there's a big, you know, powerhouse from uh South America wanting to join the agreement. So I think that's a it's a big opportunity, is the expansion of the CPTPP membership to include these countries. We're hoping that we've started a process with Uruguay. Uh, we're hoping to start one soon with the United Arab Emirates. Um, you know, I think those are going to be really important ways of showing how important this piece of architecture is for us. Look, the other area where there's two other areas we need to be thinking about. I think the first is, you know, the United States is negotiating its own bilateral trade agreements with a whole range of countries out there. Um, and those agreements leave us at a disadvantage. So to give you one that's very much on uh, I know the dairy industry's mind is Bangladesh, where the United States has just finished a negotiation with Bangladesh. They've eliminated the tariff on dairy in there. And once that agreement comes into force, we will be at a huge disadvantage in the Bangladesh market, which has been a really important market for milk powders for the dairy industry. So we are going to have to think about, okay, how do we, how do we work with, how do we find a way into agreements like that? Now, you know, we're a long way from starting that process, but it's it's one area where we're tracking where the United States is going and we're seeing that where it negotiates that access, it's leaving us at a disadvantage. And we're having to think about how we equalize, how we catch them up. Then the other area is um we have nothing in Africa. We have we have very low trade, it's basically dairy trade, but it's this colossal new opportunity where, you know, I talked about optionality. We've got agreements with China, with India. We have nothing in Africa. And I think at some point we're going to need to think about how we get into that. I think that will be tough. I think that will. Tough for us domestically as well, because we're going to be coming up very quickly to the problem that we face with India and with China. What's in it for our African counterparts? That will be a difficult uh discussion to be having. But for my money, that's another area we're going to have to be thinking about where we literally have no architecture at all.

SPEAKER_02 44:21

So I'm very mindful of the time. I know you've got to go in a minute, so I'll I'll just cut I'll skip a few questions. There's one I wanted to ask you here about this debate that's been going on uh lately about whether we should be blocking the imports of meat, uh, mainly pork from countries with lower animal welfare standards than New Zealand. You know, you're someone who knows better than anyone how our trade partners would respond to that. What's your view on how that would go down?

SPEAKER_00 44:49

Look, my first observation is um I I can I do understand the animal welfare concern and I do understand the frustration as well around this. And it is a really difficult thing. And I know that we had very difficult negotiations with our British counterparts who were very big on animal welfare. And so the UK Free Trade Agreement, uh, the one we have with the UK, has a specific set of commitments in that uh agreement around animal welfare. And I think one of the important things that that did, and we then that was carried over because for the EU was a big priority as well, um, was this understanding that we all have different ways of reaching the same outcomes, you know, good outcomes in terms of animal welfare, but we operate in different conditions and we need to acknowledge that one size doesn't fit all. So that was an important strand, I think, of the uh of the negotiations. Now, and I do know the debate you're referring to domestically, um, and as I said, I have a lot of sympathy with it, but I'm also very anxious about that we don't um we don't make an error. So I think the first thing to say is under our trade agreements, and in particular the World Trade Organization, uh we are not able to discriminate um on a different um basis on a on the way in which a product is produced. So for and this is extremely frustrating, and I do understand it. So to give you an example, we cannot at the border have a lower tariff for paper that has been sustainably produced compared to product that has come straight out of an unsustainable forest, wherever that might be. If the tariff is 5% on paper, then it's 5% on all paper. Not you can't distinguish between uh between that. That's a fundamental principle of the of the trade rules. And that's where I would go to here is we really have to be scrupulous in obeying the rules. I'm aware that some countries uh don't. Uh they tend to be bigger uh economies. Um, some of them we've already talked about, who clearly do not obey the rules. Um, but I don't think that's a position that New Zealand would want to be in for a whole range of reasons. Uh so some of the actions, for example, raising the tariff on a product that was um perhaps didn't meet our animal welfare standard, that would that would create enormous risk. And the risk is not just that that would be challenged and we'd have to then defend it. I think the the damage then becomes much more reputational as well. It is, okay, so you are knowingly breaking the rules, New Zealand. So what does that mean for the next time we want to challenge Canada for its what we see as its rule breaking in dairy subsidies? What does it mean for the next time you we look at the EU, which has already just broken the rules on steel, where they've imposed a or they're saying they're going to impose a quota on New Zealand when in our free trade agreement we've got duty-free, quota-free access. You know, if we are bending or breaking the rules, other countries are going to find it much easier to say, well, you're you're no longer observing the rules, so you know, we are not going to stand by uh and do that. So I think that is another real risk that we that we face there. Look, there is a there is a way to address this. And for me, it's about labeling. Uh, it's about making sure that um the New Zealand consumer has good information about the product that he or she is consuming, including if that is animal welfare standards. So I'm much more sympathetic to sort of voluntary labeling programs that would be put in place. And that's what happened. I used the example of paper. That's what happens on paper. The Forest Stewardship Council, for example, has a label on it. So you know, as a consumer, you're buying a product that's sustainably produced. And here's a product that doesn't have the label on it. So I know that that's not sustainably produced. So I can make an informed choice as a consumer. And I'd argue that's a much better way to do it rather than imposing a ban or indeed an increased tariff, because those are clearly breaches of the rules. Um, and once you start going down that track, your reputation starts to erode, and it makes it very hard indeed for you then to credibly take on other countries for doing that. And by the way, um other countries do take a dim view of New Zealand's animal welfare standards. So there is certainly a view that I ran across in the European Parliament. Uh, actually, sorry, no, it was in the British Parliament. Um, in the British Parliament, um, I had to respond to questions in the select committee hearings um about why we allowed our sheep and cows to be outside and in the winter, in the mud. And this this was an unacceptable situation in animal welfare. So, you know, there are different views about this, and and we really need to be very careful. So, again, you know, it became an explanation of yes, um, you guys keep it all in the barn, but ours are, of course, free range. They're able to move freely and so on. And that kind of adjusted a little bit the question is um perspective. Um, but it is, I think, really important to be aware that um we often do get criticized for, and I do know during the UK FTA negotiations and during the ratification, we were heavily criticized for a whole series of alleged abuses and so on. Uh, I think we just need to be super, super careful here um and tread with care uh while also acknowledging that those are legitimate concerns for consumers to have. The question I have is how do you get that consumer the best possible information and transparency? As I say, there's good experience in the timber, in the paper production area. There's pretty good and increasingly uh improved evidence in the seafood space as well, marine stewardship council and so on. So I think, you know, there are ways to do this that are less damaging to our future kind of prospects.

SPEAKER_02 50:44

Van Gelis, thank you so much. I'm aware you've got to go to another meeting. So I will uh skip any final questions I've got. It's been such a pleasure to have you on, and I hope we can get you back on the podcast again because I think you've got up um so much to share. You've always made a point of speaking directly with farmers and rural groups, um, even though trade policy can seem really distant from everyday farming. So I'm really grateful to you for that. And thank you for giving up your time to do this podcast.

SPEAKER_00 51:12

My pleasure, Ben, and thank you very much. And um, I must say, I mean, I I do genuinely enjoy the interactions I do have with farmers. Farmers leave you in no doubt uh when they think you've you've you've come up short or um or you're talking um, you know, nonsense. That's a very polite way. It's certainly not the way farmers put it when they uh when they speak with me. But I'm I'm really grateful for it. And um uh it is a really important uh area of work. We've got to work together uh out there. It is a lonely world out there in a way that sometimes I think we might forget. And I think we forget how tremendously powerful and efficient and effective our sector is and how frightened our partners are internationally. They're wrong about that. I think there's plenty of opportunities to build trust and confidence amongst us, but I think we sometimes forget at home how people perceive us offshore. And um, it's always good to have that kind of reality check at both ends. Hearing my Indian colleague uh stressed about the tidal wave of milk that was coming her way was a good reminder. But then also hearing very vividly from uh dairy farmers in New Zealand how disappointed they were with the outcome. Yeah, both sides are uh very free with uh free and frank advice, which is always good. Uh, but I am very grateful and thanks very much for giving me the opportunity to talk. And I apologize, I know my answers tend to be very, very long.

SPEAKER_02 52:37

No, they're incredibly interesting, Vengellus. Yeah, thank you for your time.

SPEAKER_01 52:47

Thanks for tuning in to today's episode. If you've enjoyed it and you'd like to hear more, subscribe to the Federated Farmers Podcast on Spotify, Apple, or wherever you listen to podcasts so that you get notified when our new episodes drop. And if you have any feedback or podcast suggestions, we'd love to hear from you. Please drop us a line, podcast at fedfarm.org.nz. That's podcast at fedfarm.org.nz. Catch you next time.