New Zealand is once again in a tizz about a free trade deal with America. The reality state-side, however, is a long way from the rhetoric as a glance at the US media will tell you
There's been quite a flurry of excitement at the start of this week with reports that US has re-opened the door to a Pacific free trade deal and New Zealand stands to, in the Prime Minister's words, make "billions and billions" out of it. An almost giddy John Key said we're closer to the "holy grail" of an FTA with the world's superpower.
The fuss stemmed from a speech President Obama gave in Japan before heading to APEC in Singapore and in a notable comment, the president said the US would "be engaging with the Trans Pacific partnership countries with the goal of shaping a regional agreement that will have broad-based membership and the high standards worthy of a 21st century trade agreement".
It was a trade statement as promised on Q+A by US diplomat Kurt Campbell and discussed here on Pundit. On Obama's first visit to Asia, amidst his rhetoric that he is America's first Pacific President, it was a clear nod to trade allies that America wants to step up its economic role in the region. You can find 160 free trade pacts around Asia-Pacific, but only two of them involve the US. That must trouble American leaders.
The Obama administration put all trade deals on hold when it came into office while US trade representative Ron Kirk completed a "stocktake". The results of that are yet to be released, but Obama's words were an indication that the US was not going to try to put the free trade genie back in its box.
It's interesting to note that last month influential Republican senator Richard Lugar introduced a bill encouraging US officials to negtotiate a deal with the ASEAN bloc. Lugar said:
"...China, India, Australia, New Zealand and South Korea have already finalized FTAs with ASEAN and are sharpening a competitive edge over the US in Southeast Asia..."
Having said that, it's fair to say Obama's comments are the merest of nudges towards the supposed nirvana of a deal with the US and the Prime Minister is optimistic beyond even his normal levels in expecting a deal to be in place in 2011.
Obama spent exactly 38 words on the Trans Pacific Partnership (TPP) in a 4,303 word speech. He promised nothing; offering merely vague words about engagement. It was, literally, the least he could say.
Most of the coverage of this speech around the world focused on his warm words towards China (and digs at their currency) and his hints at growing a savings culture in the US; and even those were soon over-shadowed by later comments that the Copenhagen climate conference was not going to meet expectations.
The US, based on years of profitable experience, enjoys protectionism and any trade negotiations with the Pacific will involve a political battle across both houses of Congress. Already this year Congress has been stymied by healthcare reform and US politicians won't discuss anything of import until that historic argument is won or lost. Next on the president's agenda are Afghanistan and an emissions trading scheme, both of which will dominate US politics almost as completely as healthcare.
If anything happens on the trade front in the forseeable future – and that's a big if – America's representatives have three FTAs all negotiated and ready to be passed before they begin work on any new ones. South Korea, Panama and Colombia are all ahead of us in the queue, and have been waiting more than two years for Congress to sign them off. And still they wait.
Toss in the fact that next year sees mid-term elections with the Republicans eager to make Obama seem ineffective by stomping on the toes of any reform he proposes, and you begin to get a picture of how hard it's going to be to make any progress on trade in the next year or two.
What does the US media have to say? Well, if you doubt my skepticism, check out the New York Times', which reported Obama's mention of the TTP this way:
There are also high hopes among American companies and some Asian countries that the United States will commit to joining a regional trading group called the Trans-Pacific Partnership. Although Mr. Obama did open the door during his speech in Tokyo on Asia policy, he did not explicitly say that the United States would join the pact. A formal announcement that the United States is beginning negotiations would undoubtedly kick off criticism from free-trade opponents in the United States and pushback from Congress.
Mr. Obama spoke, instead, of “engaging the Trans-Pacific Partnership countries with the goal of shaping a regional agreement that will have broad-based membership and the high standards worthy of a 21st-century trade agreement.”
That line left many trade envoys already in Singapore scratching their heads: did Mr. Obama mean that the United States would begin formal talks to join the regional trade pact, which presently includes Singapore, Brunei and New Zealand, and could later include Vietnam — an addition that could lead to more Congressional pressure at home?
Many regional officials have been waiting for the United States to join the initiative as a demonstration that Washington will play a more active role in the region. But the Obama administration has yet to establish a firm trade policy, as it is still reviewing its options.
White House officials were not much clearer on what Mr. Obama meant when they were pressed on this after the speech. Mr. Froman, the deputy national security adviser, said that what Mr. Obama meant was that he would engage with the initiative “to see if this is something that could prove to be an important platform going further.”
The Washington Post took a similar view:
...with other, far more significant trade accords – including one with South Korea – formally negotiated but stalled in Congress, there is skepticism that Obama's gesture will lead to much. Indeed, one of the main themes at this year's APEC conference is this: The United States talks a good game on free trade but too often lets politics interfere.
Is the Christian Science Monitor any more optimistic? Er, no:
Analysts say governments in Southeast Asia don't expect Obama to take up this call [for more Pacific free trade], as the US Congress is likely to resist during tough economic times. Free-trade deals are unpopular in key Democrat constituencies such as labor unions, where cheap imports and outsourcing are blamed for job losses. Obama wants to use his political capital on health care and Afghanistan.
The Wall St Journal reported Obama as saying his administration would start talks about "joining a little-known trade pact" and read it as a sign Washington was responding to criticism in the region that the US had been slow to foster trade ties. It went on:
But it was unclear whether U.S. interest in the Trans-Pacific Partnership bloc – which currently comprises Singapore, Chile, New Zealand and Brunei – represents a significant change in policy for the Obama administration, which put new trade deals on hold earlier this year as it reviews its trade policies amid rising protectionist rhetoric at home.
It's also far from certain the Obama administration will be willing to expend the political capital at home needed to carry the talks to fruition.
Although touted by free trade advocates, the combined size of the four economies in the pact is smaller than Belgium's economy. Moreover, Washington has a number of much-larger trade deals, including with South Korea and Colombia, that have been negotiated but are blocked by opposition from the US Congress and are potentially much more significant for the US economy.
The announcement by President Barack Obama during a speech in Tokyo, though, was welcomed by Asian leaders and US business groups who were looking for at least some concrete sign his administration embraces free trade. Some Asia-Pacific leaders have expressed hope the Trans Pacific Partnership could someday [my emphasis] form a stepping stone to a wider free trade agreement in the Asia-Pacific region, which accounts for half of the global economy.
It went on to point out the politics of trade in the US:
Mr. Obama's announcement effectively meant the US planned to restart talks that were put on hold in March amid the trade policy review. US Trade Representative Ron Kirk, in Singapore for the APEC meetings, said any deal would be done "in close consultation with US Congress."
Some House members noted the inclusion of Vietnam - which along with Australia and Peru are also interested in joining the Trans Pacific Partnership – might complicate talks.
Two key Democrats on trade issues, House Ways and Means Chairman Charles B. Rangel of New York and Michigan Rep. Sander Levin, chairman of the Ways and Means trade subcommittee, issued a statement welcoming the discussions but warning that Vietnam, a Communist-run country with minimal worker rights, "presents a challenge" to the US.
Other leaders were more optimistic. "President Obama's decision to participate in the TPP negotiations is right for American jobs, right for American exporters and right for the American economy," said Senate Finance Committee Chairman Max Baucus. "By opening these key markets for American exporters, the United States shows it has a new blueprint on trade focusing first and foremost on the needs of America's businesses and America's workers."
Hopefully that gives you a sense of America's mood and priorities, because, by and large, I don't think local media and politicians are doing the job particularly well. Free trade with America, for good or ill, remains a long way down the road.