Australia signed a trade deal with Japan last week. Does that help or hinder New Zealand’s trade ambitions and prospects?
There are four parts to New Zealand’s trade strategy, broadly followed since Trade Minister Tim Groser enunciated them when an official.
The base is domestic policies that promote international competitiveness abroad and at home and prod businesses to follow through.
Next is a global rules-based trading system, as under the World Trade Organisation. Progress there has slowed to a crawl.
Then come bilateral agreements, most prominently Australia in 1983, Singapore in 2000 and China in 2008, with, John Key says, South Korea close. These typically focus at least as much on behind-the-border issues, such as subsidies, regulation, standards and investment rules, as on at-the-border issues such as tariffs and quotas.
The fourth level is regional deals. The P4 added Brunei and Chile to the Singapore bilateral. Australia and New Zealand have a joint deal with ASEAN (the Association of South-east Asian Nations). The Trans-Pacific Partnership (TPP) of the United States and 11 others, is nearing crunch point. China has proposed a Regional Comprehensive Economic Partnership (RCEP) stretching from Japan via ASEAN and Australia-New Zealand to India. The United States and Europe are negotiating a Trans-Atlantic Trade and Investment Protocol (TTIP). If they all gell, most of world trade would be in three blocs.
New Zealand’s aim in trade deals is to maximise commerce. Australia’s is to take what it can get. Its United States deal scored some wins but got far less in tariff cuts for primary products than New Zealand would settle for which is why we have no United States deal so far.
Australia’s Japan deal has some tariff cuts for beef over long timeframes and small quotas for other goods, including cheese, protein concentrates and casein and tariff cuts for sugar and tariff elimination for most horticulture exports and, over 10 years, for minerals and oil. Prime Minister Tony Abbott’s public commitment to getting a deal this year gave Japan the upper hand.
New Zealand’s official reaction was matey. The behind-scenes reaction was closer to that of the United States, where the National Milk Producers Federation called it a “bad deal” and Trade Representative Michael Froman, the chief negotiator, said through a spokesman it was “significantly less ambitious than leaders agreed to seek in the TPP”.
Froman was in Tokyo the day after Abbott but did not make progress with Japan on agriculture, now a major TPP sticking point. Some commentators argued that Abbott’s deal had made it harder to shift Japan. Others thought it would have little effect.
For New Zealand there are several dimensions.
One is that to the extent that over time Australian exporters get tariff cuts and additional quotas and our exporters don’t that will reduce New Zealand export earnings.
Another is that if Australia has made TPP more difficult to clinch or waters it down, that affects the opportunity TPP promises for additional exports.
That is quite apart from real doubt that President Obama can get Congressional approval, which would take out the TPP’s biggest participant. If Japan gets cold feet, as many expect, that would take out the second biggest participant.
For some here, most prominently but not only Jane Kelsey, a TPP failure would be a good thing.
That is in large part because of two fears — to some extent held even by some free trade supporters.
One is that the United States intellectual property regime will be imported and stymy high-tech startups here.
The other is that investment rules will allow huge United States companies to muscle into our courts and gain the same “oligarchic” influence over policy here (and in other TPP countries) as they have over their Congress, which has embedded policies favouring the richest 1-10 per cent and stripping support from the less-well-off.
Groser and Co insist these will not happen. But underneath all this is a deeper current which neither the Grosers nor the Kelseys can — yet — dam.
Economies are much more interdependent and interconnected and that is intensifying as 2010s technologies radically change the nature of production.
First, more of what is traded now is called a “service”. Second, an increasing ingredient in “manufactured” products is also a “service” such as software and design. Third, ingredients source from multiple countries. Fourth, a “good” can be exported as a piece of software which uses “additive manufacturing” to make it at the point of sale half a world away — and, yes, there are New Zealand firms doing that.
In this emerging “global” economy officials haggling through the night over a per cent or two of a tariff or a rule or standard may come to seem quixotic and their task — to defend or promote “sovereign” ambitions and needs — elusive.
The local need will be for global rules. Bilateral deals won’t get us there. Can TPP, TTIP and RCEP?