President Obama says the NZ-US relationship is growing stronger by the day. Why? What's in it for both countries? And do we have to be careful about not getting too carried away?

It was an impressive meeting list that Prime Minister John Key took to Washington DC... Panetta, Kerry, Geithner, Bernanke, McConnell, Reid, Kirk, Napolitano, and of course, Obama. Absolutely top drawer, even if a few fell over because of the debt ceiling debate. If last year's Wellington Declaration was the wedding, this trip was the consummation.

And didn't Key look like a giddy bride, sitting there in the Oval Office with Obama. flush with the heat of summer and re-requited love? America's wedding night performance may not have been the romantic dream he'd hoped for – with the White House meeting cut from one hour to 30 minutes – but the fact it went ahead at all in the midst of a debt crisis is a sign of affection.

Undoubtedly the "rock in the road" - our nuclear-free legislation - is now in the rear-view mirror. We are useful to the US; arguably even more so for our years out in the independent wilderness. We are listened to around the Pacific, do 'sfot power' well, and are on the right side of trade debates. Toss in our new-found willingness to put boots on the ground in any US military (mis)adventures and, well, we're back to where we were 26-odd years ago.

So what's our 'national interest' in all this visiting, handshaking and rapprochementing?

For New Zealand, it's all about the money. John Key was at his innocent best when he didn't bother with fluff about shared values, historic ties or the bonds of democratic brotherhood. No, no, as he simply said on Q+A, the "critical part" of the NZ-US relationship is "trade and the TPP".

Some bemoan our years spent out of favour, as they most likely cost us a free-trade agreement. Me, I think our years spent out of favour were well spent, especially in our relationships in Asia, and the lack of an FTA is not much of a price to pay, especially if Australia's experience is anything to go by.

Since its deal in 2004, Australia's trade deficit with the US has actually grown, while a survey by the Australian Industry Group found 80% of exporters saying it had been little or no help in creating new exporting opportunities. America has slipped in those years from Australia's third largest export market, to its fifth. Hardly a great advertisement for these things.

We're likely to get a better deal as part of the TTP, because, as one diplomat once put it to me, it's not just us and them going at it hammer and tongs, but nine countries all negotiating together. We're more likely to be on America's side than not, and our wee issues will be after-thoughts compared to what's hammered out between the likes of the US and Japan.

In terms of cost-benefit analysis, it's clear that the biggest benefit from any such deal would be a reduction of dairy tariffs, and I think both left and right in New Zealand realise there's no point signing a deal unless dairy is included.

Our biggest risk remains Pharmac. Big pharmaceutical companies in the US don't like us buying generic drugs, so want to push their branded products on countries such as us via intellectual property rules. National says it values Pharmac, won't compromise our health system in any deal, but then repeatedly refuses to take Pharmac off the table.

Why? Is it weak? You could argue that a strong starting position puts other parties on the back foot. Are we genuinely under the gun from the many millions Big Pharma is spending to lobby on this? Is it a timid unwillingness to rock the boat? Or do our negotiators simply not want to draw unnecessary attention to the issue by being hard and fast so early in negotiations? And of course, if we put one issue out of bounds, then de facto that gives other countries permission to do the same.

The point is, Pharmac is a foundation stone of our health system, a New Zealand success story. It must not be compromised. Not even for the sake of greater dairy access to the US.

I can only hope that when John Key says "everything is on the table", that's a negotiating tactic, not a sign of true priorities.

Of course all of this debate rests on one rather heroic assumption. That a trans-Pacific deal is do-able. Hey, Europe came together, so anything's possible.

But for this to work, US dairy has to be won over, either we or those pharamceutical companies - which are heavy donors to US politicians - have to roll over and Democrat lawmakers have to accept free-trade doesn't kill US jobs. What's more, the three other already negotiated free-trade deals sitting in Congress' in-tray have to be passed. And they've been there since the Bush Jr years.

And that covers only a few of our issues. Nine countries are involved. Imagine, for example, how US manufacturers feel about the Philippines getting into their domestic market. And then there's Japan, which is proposing to join the talks. As academic Jane Kelsey wrote this week, after a recent visit:

‘‘Japan is in no state politically, economically or psychologically to join the Trans-Pacific Partnership negotiations...The triple catastrophes of the earthquake, tsunami and nuclear power plant meltdown have focused people’s minds on recovery. The prospect of a TPP-driven economic experiment is terrifying, especially when it would be dominated by the interests of US corporations."

So, I'm not holding my breath for a TPP deal. For all the buzz about relationships reborn, the deliverables, as trade negotiators might say, are few. This is a tiny step in a long game and any one of the nine players could toss all the pieces on the floor and walk away at any time.

So while we can enjoy the open doors once more in Washington DC, let's not be so naive to fling our door open too wide and too quickly in our desire for what could be a fraught, possibly impossible, deal.

Comments (6)

by HIlary Stace on July 25, 2011
HIlary Stace

The drug companies have already won Direct to Consumer advertising in NZ  (those are the TV ads for named drugs such as Viagra and Sudafed - the only country that allows that is the US). This was the result of some hefty lobbying by professional lobbyists. So there will be some major lobbying going on to get rid of Pharmac as US drug companies hate it.

by Bruce Carruthers on July 25, 2011
Bruce Carruthers

Actually US dairy gains access to foreign dairy markets under free trade and is able to increase production substantially over time. We have little spare capacity to grow our production much further and are obtaining world prices in other markets already.

So there is more to lose than gain by including free trade in dairy in a deal including the USA - the USA could depress the world price if they expanded production to export to the world market.

That could ruin the books of some of our local banks etc.

And they will want investor access to our dairy companies including Fonterra and also our farmland.

 

by Tim Watkin on July 25, 2011
Tim Watkin

Hilary, you're going back a fair way, aren't you? Yes, we're one of only two countries to allow drugs advertising direct to consumers, but that's been the case as long as I can remember.

Bruce, interesting point. But population growth and increasing numbers of middle class folk in the developing world seeking better diets is outstripping production growth at the moment. My understanding of the situation is that no amount of expanded production could keep up with demand, without another 'green revolution' or similar. You think otherwise?

As for farmland, given the buying up by the Harvard fund and others, it seems like there's little to stop a US buy-up even now, is there?

by Bruce Carruthers on July 25, 2011
Bruce Carruthers

Tim, the TPP may include terms that prevent us blocking foreign ownership of our farmland - this is not required of us yet, we have just chosen not to restrict foreign owner access. And Fonterra is something that they have cited in the past as an unfair trade practice - they oppose farmer co-ops in general as they prevent investor buy-in.

On the issue of world market dairy prices, they will be higher if the Americans don't expand production for export - so I see no positive from including them in world dairy market free trade. They produce a lot more than we do just for their local market, they are capable of producing enough extra supply to become a larger exporter than us. Their current intransigence is to our advantage - why should other nations give them free trade in dairy if they won't allow dairy exporters such as ourselves into their own market. On this point, when the Australians can export into the USA market (from 2020) they will leave more room for us in the rest of the world market.

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