The TPP may not deliver an immediate big bang for our dairy industry. But there's an awful lot to like in it - and New Zealand really has to be a part of it.

Helen Clark had the most succinct and best explanation of why New Zealand had to be part of the TPP. I know for a fact that her late intervention caused some people who were sceptical about the TPP to revise their opinion about the necessity for New Zealand being in TPP.

It would have been unthinkable for New Zealand to be outside a deal encompassing 40% of the world economy. More particularly TPP includes three of New Zealand’s top five trade partners, Australia, United States and Japan. Was it ever really conceivable that New Zealand would choose not to be in a trade deal that encompassed these nations?

Well, if the New Zealand government was dominated by the Green Party and New Zealand First the answer would be yes. But there is a reason why these parties only gain 20% of the vote. Most New Zealanders know that the country depends on trade and investment for its living.

Many of the defenders of the TPP deal, including Tim Groser, have been rather apologetic about it on the basis that it did not deliver the hoped for gains in the diary trade. Essentially this reaction is a result of disappointed expectations. Perhaps the government raised New Zealand hopes too high. Once Canada joined there was never much prospect of major removal of restrictions on the diary trade. Not that Canada was ever much of a target for New Zealand diary exports. But Canada’s intransigence also meant that the United States also did not have to do too much either. 

The public focus on the dairy trade has obscured the broader gains for the New Zealand economy. It also ignores how trade and investment agreements evolve. Once markets start to open there is inevitably pressure to further open the market. Agreements like TPP typically have follow-up negotiations. Within the next ten years there will be a new round of negotiations to expand the TPP concessions, especially on investment, services and agriculture. In addition other nations are likely to want to join TPP. South Korea, the Philippines and Indonesia are probable candidates. 

And China will be carefully evaluating whether it is better to be in rather than out.

So rather than bemoaning what a perfect deal might have looked like, why not focus on what has been achieved now?

The ANZ has done a rather nice analysis of the percentage gains on current earning as a result of the tariff reductions in each trade sector (hat tip to David Farrar). Notably for meat it is 3.1%, for dairy it is 2.2%, for fruit and vegetables it is 2.2%, of fish it is 1.4% and for wine it is 1.2%. Some gains are immediate, such as the tariff reduction of kiwifruit to Japan, beef and sheep meat to most markets. Others occur over time as the tariff reductions are phased in. Overall the gains amount to hundreds of millions of dollars for the New Zealand economy. The officials estimate $260 million, but this is on the basis of a static picture. Invariably reduced barriers led to greater volumes. For disbelievers, have a look at the impact of the China FTA.

Some reductions will also force some necessary changes in the New Zealand dairy industry. There are minimal reductions in barriers to exports of milk powder, but respectable gains for cheese and baby formula. Surely a real incentive for Fonterra to move up the value chain.

The biggest advantage of TPP is not to be measured by an enumerating of financial gains in individual sectors; it is the progressive transformation of the Asia-Pacific economy. The 12 TPP nations will become more tightly woven together. Other Asia-Pacific nations will want to participate. From trade in goods, to deeper integration of services, to freer flows of investment and of people, the Asia-Pacific will be enriched and become more cohesive.

The focus of the world economy will continue to shift toward the Asia-Pacific. The fact that twelve nations within the region could do this when Doha has so signally failed is indicative of the importance that the 12 placed on their future in the Asia-Pacific.

There are still hurdles to cross. TPP has to get through the US Congress. In my view it will do so.

There will be enough legislators on both sides of Congress who will appreciate what a strategic opportunity that TPPA represents. They will know that it will not be possible to negotiate better deal. None of the other eleven nations would be willing to go through such a process again to be hostages to congressional whim.

The legislators will also know that TPP is about US leadership in the Asia-Pacific. Failure to ratify would be tantamount to abandonment of any such ambitions. And any presidential contender worth his or her salt will know this.

Comments (13)

by Murray Grimwood on October 07, 2015
Murray Grimwood

'Most New Zealanders know that the country depends on trade and investment for its living".

Actually, most New Zealanders, like most commentators, don't have a blind clue as to what supplies 'its living'..

It's actually energy, but 99.99% don't grasp this, even though if they stopped eating or stopped filling their tank, they'd stop.

As would dairying. As would all other agri-bisuness, all forestry, all harvesting, all tourism.

Living? There wouldn't be any.

Trading and the proxy we invented - money - are just mechanisms whereby we use the energy - usually inefficiently and always for short-term gain - which actually underwrites our 'living'.

The supply is beginning to be volumetrivcally limited, quanlitively limited, and has been reducing per-head for decades.

And it's about the attempt to continue an Empire. There isn't the energy left for a pretender to rise to challenging-level.

by Shaun on October 07, 2015
Shaun

"The legislators will also know that TPP is about US leadership in the Asia Pacific. Failure to ratify would be tantamount to abandonment of any such ambitions. And any presidential contender worth his or her salt will know this".

One observation about pro-TPP arguments is that they downplay human rights issues, (this article is one example) whereas opposition to it is frequently on the same basis.

When less than 20% of the agreement has trade as an emphasis, it's a misnomer to call TPP a trade agreement.  The Trade Promotion Authority fast-tracked in June had intense lobbying in Congress as a catalyst - many of these interests pose a threat via TPP to New Zealand's ability to determine policy (eg., the requirement for Pharmac to disclose planning schedules is one 'trade'-off.  This is extremely abhorrent).

Note where Mr Obama outlines his TPP rationale.  It's hardly the epitome of a domestic worker-friendly operation.  Then relate what the presenter says in relation to your final paragraph especially, and overall message.  Most of what he says can be applied in a New Zealand context:

https://www.youtube.com/watch?v=x3WNw0xIWM4 (Thom Hartmann)

Your final paragraph says this Presidential candidate is wrong in his stance, yet he's got a sound argument, and appeals to a great deal of US voters.  New Zealanders can trust him more than your pro-TPP article.

https://www.youtube.com/watch?v=kNm1WL89JSc (Bernie Sanders)

As I write, a separate reflection is that the process of gaining information about TPP in this manner (online searches) would be under threat, and potentially illegal.  Also, a pro-TPP argument does not explain how likely 'non-discrimination' clauses in the TPP will protect New Zealand businesses that have stable existing markets, or the threat posed to innovative new procedures (eg., in medicine).  The extension on copyright is already raising concerns amongst schools & libraries (RNZ, today).

As someone else has said, there are likely significant fishhooks that our negotiators have not accounted for, but creative litigious interests now have greater opportunity to exploit.  Returning to injustice & human rights issues,  what is the negotiators stance on the existing ISDS cases that have multiplied over three-four decades, especially those that relate to environmental policies as the Paris meeting approaches?  Who do you want to see win the plain packaging case across the Tasman? (remembering their established High Court already ruled on this measure).

You don't hear Mr Groser discuss this in relation to TPP.  He might discuss New Zealand's paltry INTD only, but with globalisation NZ is a stakeholder in these policies, and the procedures against them.  I suggest the interests behind the fast-tracking of Trade promotion authority include significant numbers of climate deniers, including one particularly unusual Senator who heads a committee with this brief.

by Andrew Geddis on October 08, 2015
Andrew Geddis

On a somewhat lighter note - there's this.

by Wayne Mapp on October 08, 2015
Wayne Mapp

Shaun,

My final sentence was obviously about Senator Bernie Sanders and also Donald Trump. Naturally I hope that US voters don't go for either of them. On the other hand it would not surprise me if they ended up as their respective parties candidates. As the selection of Corbyn showed, a lot of voters are grumpy with the "establishment". But one of the great things about democracy is that you get to re-evaluate your choice in 3, 4 or 5 years depending on the electoral cycle. But maybe these new style candidates are miracle workers and could get re-elected (assuming they get elected in the first place).

It is true that trade and investment deals do not focus on human rights. And in general terms neither should they, it is hard enough to negotiate the trade issues. There are other forums for human rights issues.

Imagine for instance if NZ had made the acceptance of democracy, fully independent courts, and a free press conditions of the China FTA? Or if you made these things conditions of WTO agreements.

The most you can do is to have some controls on working conditions, such as anti-slavery, prison work, and child labour. Though apparently there are some provisions in the TPP around labour unions in Vietnam, presumably about their independence.

 

by Shaun on October 08, 2015
Shaun

If one of the redeeming features of democracy is you can re-evaluate your choice according to election cycles, this can be applied to policies as well as candidates.

Sanders has evaluated the effects of previous trade agreements, and gives a sound argument on TPP, that builds upon Thom Hartmann's stance.  If the rationale for TPP is about US leadership in the Asia-Pacific, the problem is one of representation, as the conduct of many US businesses appear to contradict US values by having a commercial focus at the expense of countries they offshore to.  Many of these interests were behind the TPA fast-track in June.  

You mention Vietnam, where Nike operate (..listen to Sanders again) and also where Mr Obama outlined his pro-TPP rationale, demonstrating Sanders & Hartmann are right about TPP.  It's unfair to lump Sanders with Trump.  The China FTA is cited frequently, yet the the scope of TPP makes it a different animal.

It's not enough to say there are human rights forums separate from trade matters. These matters should be reflected in trade policy.  The reason is that in a globalised world (even without TPP) all parties are stakeholders to events in other nations.

Opponents to TPP are not anti trade.  However,  the 'trade-offs' have to be accounted for in proportion to the gains for domestic industries.  People should be wary of the '5 out of 29' characteristic.  The implications for Pharmac are a legitimate example of this.  It is reasonable to account for the effects on domestic businesses also. 

I suggest that the reason why figures like Sanders & Corbyn resonate with voters is because their supporters have evaluated previous policies, and see that an expanded 'business as usual' approach expressed in the TPP doesn't meet their aspirations. 

 

by Katharine Moody on October 08, 2015
Katharine Moody

Other Asia Pacific nations will want to participate.

And we've been told the agreement is structured such that others can join in the future. So, what's our hurry? Why not just sit back and see how it goes for everyone else? Given Clinton now also came out today against it - it is looking more and more like the US won't go there. We'd be mad to take on all the associated costs up front and lock in future NZ governments for this 'anything-but' free trade agreement.

by Ross on October 09, 2015
Ross

You've obviously seen the text of the agreement, Wayne. Would you mind sharing it with the rest of us...

by Wayne Mapp on October 09, 2015
Wayne Mapp

Ross,

No I have not. I have just read the commentaries and the material publicly released by the Minister's office.

I must say I did not anticipate Hillary Clinton coming out against TPP. She is obviously quite fearful about the impact that Bernie Sanders is having.

She really needs Congress to act early so she does not have to deal with it in upcoming debates. That will also probably suit a number of the contenders for both parties.

We shall see.

by Katharine Moody on October 09, 2015
Katharine Moody

She is obviously quite fearful about the impact that Bernie Sanders is having.

Or, she might actually just be concerned for the same reasons he is! The press release I read from her expressed concern about the impact it might have on pharmaceuticals - the same issue of course being raised here;

TPP: Generic drug applications under greater threat of injunctions

http://www.stuff.co.nz/national/politics/72842167/tpp-generic-drug-appli...

Your attempt to infer (i.e., spin it) that she is actually pro-TPP but for electoral expediency has simply  'joined the crowd' might be a classic tactic in your playbook but it doesn't necessarily hold true for all politicians. There may actually be some politicians who act with a public good conscience. Elizabeth Warren being one of my favourites in the US at the moment and she and Hillary appear to get on quite well. If Hillary wins, I'd say Elizabeth will get a top job in the administration.

by Voice_of_Reason on October 09, 2015
Voice_of_Reason

It would have been unthinkable for New Zealand to be outside a deal encompassing 40% of the world economy. " We were already trading with all of these countries so this isnt exactly a startling new development brought about by TPP.

Nice puff piece but some balance would be nice. Reading your article it seems it is all upsides and no detrimental fall out from signing this so called "Trade Deal". Adding 1% growth to any economy by 2030 in my eyes isnt worthy of celebrating much at all. Groser had nothing to bargain with and as such he come back with little gains. Why are we not surprised1

by Ross on October 09, 2015
Ross

Adding 1% growth to any economy by 2030 in my eyes isnt worthy of celebrating much at all

Indeed, with gradual improvements to trade access wouldn't we expect to see growth of at least 1% without the need for such a formal trade agreement?

by Henry Barnard on October 09, 2015
Henry Barnard

And if (and it is not an unreasonable `if' given the news about Clinton and possible flow on effects) the US does not sign up to the TPPA, then that `40% of the world economy' shrinks considerably - to something like 16%?  Would the cost/benefit analysis remain the same?  I'd be very interested in an answer to that question, especially as we already have CER with one of the big remaining trading partners that Wayne mentions i.e.I assume (possibly incorrectly) that the TPPA adds very little for us with regard to our trading relations with Australia. 

I'd hate for us to find out, as Hillary Clinton says the US did with regard to the trade deal with Korea, that something might "look great on paper...doesn't have the results we thought it would have"  - and that too after they (the US) secured "improvements".

 

by KJT on October 16, 2015
KJT

Hi Wayne.

Still waiting for the cost benefit analysis of the China FTA , I have asked for, from Wayne Mapp on several fora.

Note that Australia had similar increases in export trade to China, without an FTA.

I am sure we will not get one for the TPPA until it is too late.

Of course, as Grosser liar says, we will likely not be sued under the TPPA as National will not do anything to reduce corporate profits. With any future Government looking after New Zealanders interests will just be too costly to even consider.,

We are still waiting for the wage rises and better future promised since the unilateral,  removal of most of our industry protection in the 80's and 90's, hoping the world would be daft enough to do the same.

I am equally sure that wages and incomes for most in New Zealand will drop even faster to "meet the market", after TPPA while we wait in vain for Nationals "brighter future". And more local business will lose local contract and sales to big box internationals and multinational construction firms. More income earning assets will be sold off, especially those who compete with private monopolies and keep them honest.

SOE and Government operations to resist monopoly power and fix market failures will be the the first casualties.

And the main course of opposition. TPPA is not about "free trade" at all. It is about the rights of corporates to manage trade for their own interest. No way is allowing longer rentier terms on copyright, patents and drugs about "free trade". It is simply protectionism for rentiers and large firms, who can bankrupt Governments with ISDS cases if they do not toe the line. Note the x case against a South American country when they were trying to protect the last of their unpolluted water supplies from mining.

A Magna Carta for corporates and a removal of our rights to determine our own fates through democracy.

 

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