Small, isolated and pastoral: so turn to China?

How come farmers are so powerful? They turn rich countries’ presidents and prime ministers to jelly. Poor countries’ leaders made jelly of the WTO trade talks on behalf of farmers.

In rich Japan, where I am just now, full-time farmers are fewer than 1 per cent of the workforce. But, working through an arcane political system, they have frozen negotiators for decades.

United States, richer still, gave us an illegal sheepmeat tariff. The rich European Union coddles French peasants. Those two ganged up on agricultural subsidies on their way to Cancun.

But this time poor countries ganged up, too, behind a core group. Last-minute backroom manoeuvrings near the stroke of midnight, the time-honoured way of fixing multilateral negotiations by putting intense heat on doubters, did not budge them.

A good part of the problem is that developing countries believe past WTO rounds were run mostly for rich countries.

Yet rich-country consumers — and especially the least well off — pay a heavy cost for agricultural subsidies and protection in taxes and high prices.

Why do they put up with it? Because the cost of liberalisation is spread thickly among a few, who therefore have good reason to make a big noise and do; the cost of not liberalising is spread thinly among the many, who have less incentive to organise. Politicians respond to loud noises.

There is another cost: progress rich countries might have made at Cancun on poor-country investment rules, competition law and intellectual property protection if they had bent more on agriculture earlier. Economies rich and poor, including the developing Maori economy, have lost by the stall that has now been forced.

Stir in the fact that China is now in the WTO room and was in the developing countries’ core group. China is big and vibrant, heading to dominance in Asia.

China’s huge and rapidly expanding production capacity is gnawing at consumer markets of rich and poor countries, threatening manufacturers on their home turfs and squeezing their export opportunities.

And it is using its weight in international negotiations. That is a signpost for this century.

This weight is not just for the likes of Cancun. China is starting to do preferential deals.

This spells out both a danger and an opportunity for New Zealand.

Rules-based multilateral liberalisation is this country’s best trade option. The danger of the Cancun stall is that powerful countries will now settle for regional and bilateral preferential deals.

Even Japan is stirring — a deal with Mexico is imminent and China’s framework agreement with the ASEAN nations has triggered a hurried Japanese catchup attempt there.

There are two problems for New Zealand in such deals.

One: they are mercantilist. They are done if they suit the powerful and are largely on the powerful’s terms.

Two: New Zealand is in no region, despite an occasional gesture from east Asians, and it is below most rich countries’ bilateral radars. We are too small and we have agriculture.

The message to me in Japan has been that it is hard to get this country on any agenda in Tokyo. Relations are fine. But we aren’t big enough to force attention.

A United States embassy briefing in Wellington last year spelt out our predicament in Washington: we are not an ally, like Australia; negotiators’ time is more fruitfully put to bargaining with bigger countries; we are not a threat nor in a turbulent region, such as the Middle East; we are not a friendly country in a hostile region, as is Morocco; we are not deserving poor, like southern Africa — in fact, not even poor. And we threaten American farmers.

We threaten Europe’s farmers, too — and we are no longer European. We are not Asian.

So we get small pickings: Singapore, Chile coming, Thailand possibly. Union insistence on tight rules of origin ruled out Hong Kong, even though we already are one of the highest per-capita importers of China-made goods.

Ah, China.

There are the student problems — a regulatory failure that is perhaps the blackest blot on the Clark government’s record, likely to be costly for the economy and possibly its poll ratings.

Nevertheless, China thinks well of us. That is not Wellington officials’ propaganda. I have heard it from Asian diplomats, with no axe to grind. We have played the game with China’s thugs these past 30 years over Taiwan, Tiananmen Square and Hong Kong. We are a disinterested voice in Asia, one China likes to have onside.

President Hu Jintao’s visit next month is his first state visit since taking office. Yes, it is part of an Australasian visit but we are not a tack-on. We rate.

That gives us some inside running. If mercantilism is in the air and China is well-disposed, a trade agreement conceivably could partly compensate for American, European and Japanese cynicism. The flipside of China’s productive power is its huge and rapidly enriching population.

Any other options? Well, we could be a state of slightly-less-little Australia. Ouch!