A trade deal for some or for all

Negotiations for a free trade agreement (FTA) with the European Union (EU) formally kick off on Thursday when EU Trade Commissioner Cecilia Malmström drops in. Who benefits?

Talks are expected to take up to two years. They come after a long wait near bottom of the EU’s list while it did a range of other deals — a low rank shared with Australia, which is simultaneously, but not jointly, negotiating with the EU.

Why is the EU bothering now, when it has to deal with grumpy Britain’s messy exit and Donald Trump’s spiteful protectionism?

One: the liberal trading order, a bulwark of the democratic-capitalist system and of the European project needs reinforcing if 1930s-type chaos is to be avoided. We are an outpost of that order.

Two: New Zealand is linked into east Asia, the star economic growth region in which Europe needs more presence. It has done deals with Japan (still to be ratified), Singapore, South Korea and Vietnam.

Three: a New Zealand FTA should be relatively straightforward, both sides think.

Even the trade-shy Greens have said they might be onside because Europe — at least its western half — projects environment- and climate-friendliness.

Jacinda Ardern made a point of this (alleged) congruence, among others, to French President Emmanuel Macron in April in a pitch insiders say tipped Macron over the line to green-light the FTA talks.

Ardern is also said to have taken a strong line in cabinet back in October to commit to a rules-based international trading order as critical to the economy and to New Zealand’s good-global-citizen standing — and for credibility as a seeker of FTAs, notably the EU one.

That required fancy footwork to finesse Labour’s opposition to the original Trans-Pacific Partnership talks: some plausible gestures from the other countries and some innovative rewording.

Partly thanks to some theatrics by Canadian Prime Minister Justin Trudeau, that is what Trade Minister David Parker and chief trade negotiator Vangelis Vitalis got in what became the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).

Among changes were reduced intellectual property restrictions, side agreements from Australia, Brunei, Malaysia, Peru and Vietnam not to use the controversial investor-state arbitration mechanism and agreement with Canada and Chile to curtail its use and all but Singapore looking the other way on Labour’s ban on foreigners buying land.

The CPTPP looks likely to be ratified by early 2019 by the six countries needed for it to come into force. Colombia wants in. Colombia, Chile, Mexico and Peru form the Pacific Alliance with which Parker is also talking up an FTA.

Investor-state arbitration is unlikely to be a bother in the EU deal. Its 2017 FTA with Canada proposed an international investment court of professional judges in place of individual country arbitration. That would suit New Zealand.

But the EU is said to want protections for copyright and patents similar to, or possibly greater than, those the United States won in the original TPP. Software copyright could constrain small high-tech companies here and longer-lasting drug patents could impose higher costs on Pharmac.

Access for lamb is knotty. The EU is the largest importer of New Zealand lamb and takes two-thirds of high-value chilled lamb. Access is tariff-free under a quota protected by World Trade Organisation rules.

But in their Brexit talks Britain and the EU have proposed dividing that quota rigidly: Britain 45% and the reduced EU 55%. Any excess could face 50% tariffs — unless Brexit results in a Britain-EU customs union. Malmström will be pushed on this.

Some context: overall exports to the EU (excluding Britain) are a third of those to China. Talks to upgrade the China FTA have recently been reactivated.

But bigger than China for Parker and Co is the need to build public support for trade deals, which Tim Groser’s high-handed TPP negotiating style eroded.

Parker has since April been touting around the country a revised trade agenda he describes as “progressive and inclusive”. It proritises multilateral FTAs, with plurilateral FTAs (such as CPTPP and the proposed China-backed Regional Comprehensive Economic Partnership) second best.

Parker is clear: trade brings benefits and more trade bigger benefits. But the benefits are unequally distributed. For many it brings cuts in jobs and incomes. This is a big factor in the disturbed politics of northern hemisphere democracies. Here it fuelled opposition to the TPP.

So Parker wants to ensure trade “works for all” through a range of economic policy and education initiatives and by involving a range of ministers and officials, not just trade specialists.

FTAs must, he says, preserve “the right of governments to regulate in the public interest, including for national land markets, inward investment, taxation of multinational businesses and public services”.

The EU agrees. So Parker might get a deal that looks like “trade for (nearly?) all”.