Life after TPP
By Richard Harman (author)
As Donald Trump advances towards the White House, the whole question of free trade agreements has been thrown up in the air.
Trump is opposed to the Trans Pacific Partnership, and even if it is ratified in the lame duck session of Congress, he would want it renegotiated at the very least.
Just what would be renegotiated is a moot point, but there would almost certainly be pressure on New Zealand from Republican senators to change sections related to biologics which New Zealand negotiators say will not require any legislative changes to implement.
There would be concern among other TPP countries about a failure to ratify or to re-negotiate.
Japan, for example, regards the agreement as a way of locking America into East Asia at a time when China is flexing its economic, trade and military muscles in the region.
Trade Minister Todd McClay is still optimistic that Republican congressmen will vote to ratify the agreement during the lame duck session of Congress at the end of the year.
“I think there is a pathway to ratification in the United States after the US election depending on who is the President,” he told POLITIK.
(In other words, if Trump wins, the likelihood of ratification is much lower.)
"It looks quite challenging there, but there are very good reasons for the USD to be involved in the TPP.
“It’s not just about trade; it’s about showing leadership in the world and showing leadership in the Asia Pacific region and setting the trade rules for today and into the future.”
That’s an endorsement of japan’s argument that the TPP can be a counterweight to China.
But McClay is ready to offset that with a new push he is putting behind New Zealand’s negotiations for the Regional Comprehensive Economic Partnership (RCEP), the Chinese led 16-nation proposal for a free trade agreement which includes China, Japan and India.
For New Zealand, it is an alternative way of getting a deal with Japan with the bonus of India.
The Prime Minister has been touting the prospect of a bilateral free trade agreement with India but trade watchers noted that the Trade Minister was not with him on his recent trip to India; a hint that the bilateral deal is still a long way off.
The RCEP negotiations are tricky; there are more countries involved than in the TPP, and the proposal is not as comprehensive as the TPP.
It is still unclear how committed Japan is to the proposal.
McClay is enthusiastic about RCEP because it involves all the ASEAN nations which he says that though they are not developing economies as such, they are all developing and growing very quickly.
"We need a high-quality outcome that has to bring tangible benefits for New Zealand for us to be part of RCEP,” he said.
“We are continuing to push that around the negotiating table.
“The other countries don’t necessarily want to liberalise their trade with New Zealand.
"It is that they don't have strong trading links with each other and few of them have trade agreements with each other, and I think that's the reason that RCEP is so important because it bolsters and strengthens a regional supply chain but for New Zealand it has to be a high-quality outcome.
“That doesn’t mean full liberalisation.
“We need better access and a better deal with a number of those countries than we have at the moment.”
RCEP will face a tricky path from now on as there is growing opposition to the agreement in some of the participating countries and there are moves to organise region-wide opposition to it by unions and non-government organisations.
Meanwhile, New Zealand's negotiations with the European Union have been thrown into uncertainty by first Brexit and more recently by the refusal of the Walloon legislature in Belgium to agree to the EU's free trade agreement with Canada.
The situation is complex, and trade negotiators are currently awaiting the outcome of a European Court decision to clarify on the EU competence to sign and ratify the Free Trade Agreement.
The decision is expected to clarify which of the agreement’s provision are within the EU’s exclusive competence and which must be approved by member states.
Even so, the Singapore agreement is an example of the glacial speed with which trade agreements move.
Negotiations were completed in 2014; signing is expected to take place in 2017 or 2018, and it is expected to come into force a year after signing.
"The reason the court case is so important for them to work out is that they need to send a signal to the world that when they negotiate a deal, they are able to honour those commitments,” said McClay.
But he is optimistic that New Zealand can get a deal.
“I think there is quite a bit in common that we have with the EU.
“We’re going through a scoping exercise with them at the moment where there is a lot of common ground.
"There are going to be some challenges and contentious issues that we will expect outcomes on, but if they can't do a high-quality free trade agreement with New Zealand quickly and easily, they can't do one quickly and easily with anybody.
“Quickly and easily would be three or four years, not seven or eight."
And that leaves Brexit and an agreement with the UK.
The problem here is that no one knows where the UK is going to end up. There are some New Zealand sources who wonder whether that ultimately the UK will not move far from the status quo regarding its relationship with Europe.
And the Minister reflects some of the uncertainty.
“There is going to be quite some time of reflection and negotiation between Britain and Europe going forward<” he said.
But he says it is not a matter of choice for New Zealand which does $20 billion of trade with the existing EU --- $5 billion of which is with Britain.
So even though negotiations with Britain can’t begin until there is some certainty about its future relationship with Europe, McClay says New Zealand has to protect its interests.
“Over the coming months and years you’ll continue to see me and other Ministers involved with the UK to remind them of the importance of our relationship,” he said.
It is clearly a new era in New Zealand’s trade negotiations with a much wider range of agreements on the table and some lessons learned from the TPP negotiations which are seeing McClay actively run a campaign to get people to understand what he is doing – and why.