The prime minister says she hasn't seen anything that suggests the World Trade Organisation (WTO) is concerned the government is bringing in agricultural subsidies via the back door.
Prime Minister Jacinda Ardern has responded to questions about whether the Provincial Growth Fund could violate rules against subsidised agriculture. Photo: RNZ / Rebekah Parsons-King
The ACT Party and a leading economist have raised questions about whether the Provincial Growth Fund (PGF) could violate rules against subsidised agriculture, which was phased out in New Zealand 30 years ago.
Jacinda Ardern said she had seen no advice the WTO was concerned about the way the $3 billion regional fund was being used and officials had been mindful of that when assessing each case.
"I've had advice that the PGF grants we've made do not sit counter to our trade agreements,'' she said.
But a leading economist said he was greatly concerned some of the grants could be breaching the rules.
The PGF is a $3b fund to bring development to provincial New Zealand over three years.
The risk of it proving an agricultural subsidy in drag surfaced in Parliament on Tuesday.
ACT leader David Seymour asked whether Regional Economic Development Minister Shane Jones had been advised that some of the fund expenditure might have to be reported to WTO, as a hidden subsidy.
Mr Jones replied that he had sought advice about this risk, but he laughed off any consequences.
"Naturally, advice has been sought from the Foreign Affairs Department," Mr Jones told Parliament.
"However, given that the adjudication and appeals [processes] of that international trade body are in a state of disarray, I am not bothered by that at all."
Mr Jones was referring to a looming crisis in the WTO's appeals processes, because the Trump administration is blocking new judges from being appointed to that role. This is thought likely to stymie new rulings by the WTO.
Mr Jones said he had been "counselled" by Economic Development and Trade Minister David Parker on several occasions.
"I am now much more aware of the importance of nuanced language, which will be a strange sensation for my good self. But obviously I'm one member of a broad team and international trade is our economic lifeline."
He went on to downplay his comments in the House in response to Mr Seymour's question about hidden subsidies.
"I would say though that political banter in Parliament should not be construed as a state of fact. There are some political attacks from the ACT Party that somehow we're undermining our good name with international trade rules. That's silly and that's foolish, but I accept these are matters of economic sensitivity,'' Mr Jones said.
"Just as regional New Zealand wants a champion, internationally New Zealand needs consistency and certainty about its ability to make money from trade."
The chief economist for The New Zealand Institute, Eric Crampton, said Mr Jones' initial approach suggests New Zealand could do what it liked.
"That's just terrifying, it can throw away a lot of the really good work we've had over the last decades from both National and Labour,'' he said.
When Ms Ardern was asked today whether Mr Jones' response was acceptable she reiterated her comments that she has had no advice the fund is in breach of any trade agreements.
"We do not believe that in any way that we have fallen afoul" - Regional Economic Development Minister Shane Jones
Speaking to Morning Report earlier today, Mr Jones said he had taken advice from officials the entire time through the PGF process and he had "never once been advised that the things we're doing is imperilling the good name of New Zealand''.
He said he understood it was a political talking point but he had not fallen foul of the rules.
Mr Jones said he had a "very realistic view about the role of the WTO". While it was "incredibly important to our agri-business sector", he said he had a lot to do with it when he worked with the fisheries sector and he was "continually disappointed''.