From Our Blog
TPP and Japan - hopefully not back to the future
From Stephen Jacobi in Japan
President Obama’s visit to Tokyo 23-25 April should tell us whether there is a way forward with the Trans Pacific Partnership (TPP) negotiation. It is in the nature of trade negotiations to teeter on the brink of collapse but there is concern that momentum risks being lost as the United States and Japan go head to head on the perennial issue of market access for agriculture.
A visit to Tokyo last week suggests there may be readiness on the Japanese side to offer new concessions but these are unlikely to satisfy the Americans who remain, like New Zealand, wedded to the idea of a high quality, ambitious and comprehensive agreement. The Japanese Government continues to want to protect “sacred” sectors - five in all including rice, dairy products and beef. Japan may be close to concluding a negotiation with Australia with rather limited liberalisation for some of these same sectors, which will nonetheless give Australia a (hopefully) short term advantage in the Japanese market. For its part the United States has yet to reveal fully its own hand on market access given the stand off with Congress on the President’s trade promotion authority also known as “fast track”.
It is disappointing that things have come to this. A 21st century agreement is being held up by last century issues. A plurilateral negotiation between 12 partners is dissolving to a series of unedifying bilateral deals. It has been clear from the beginning that TPP was to be comprehensive and Japan knew this when they joined the negotiation. So it may well prove to be “back to the future” for TPP.
Can this blockage be overcome? President Obama’s leadership could be decisive – as the largest economy the United States needs to set the tone. Prime Minister Abe also needs TPP to bolster “Abenomics” and get the third arrow of structural reform loosed from its quiver. The Australians could help by hanging tough on the need for genuine market openings or better still waiting for TPP to deliver this. There is much more at stake than some additional tonnages of beef. It is nothing less than the future liberalisation of Japanese economy and the future of TPP as a pathway to wider liberalisation in the wider Asia Pacific.
TPP is a high stakes game. Those stakes are playing out in Tokyo these coming weeks.
Responding to Sustainability Council TPP Criticism
It always good to see others enter the discussion about the merits of the Trans Pacific Partnership negotiations. In this vein we were pleased to the Sustainability Council contribute. It was however disappointing that their report contained no new data or information.
The Honolulu based East West Center study, led by Professor Peter Petri drew its conclusions from hard data and peer reviewed modeling. We acknowledge that economic models will always be debated and they should be. The Sustainability Council’s report offers little more than a detailed critique of the Petri study modelling though and no alternative modelling is offered to gauge the impact of TPP.
It is not just empirical literature that suggests there are gains from reducing non-tariff barriers and easing impediments to investment, modern businesses are also saying the same thing.
The non-tariff dimensions to trade agreements are difficult to measure but that is no reason for ignoring them. Trade policy today is mostly NOT about tariffs. The vast bulk of the modern world’s wealth is generated by trade in services, not goods.
TradeWorks challenges the Council to produce evidence to illustrate that TPP would be a negative for the New Zealand economy.
The statements in the Sustainability Council report, as they stand about the potential costs, have no empirical basis. So claims that net gains seem “doubtful” appear to based on opinion rather than analysis.
Big Year Ahead for Trade
News broke recently that China may have become the world’s largest trading nation, but it should be remembered that a significant percentage of Chinese exports are generated by foreign companies established in China. Chinese and Asian export growth is itself dependent on recovering economies in North America and Europe. This highlights the increasingly integrated and inter-dependent nature of the global economy. Trade negotiations seek to build economic growth and employment by promoting integration and making it easier, faster and cheaper to do business across borders.
As China continues its seemingly inexorable rise, the twelve parties in the Trans Pacific Partnership (TPP) continue work to find a way to bring the negotiation to a successful conclusion. At this stage the key issue is whether the United States is serious about making changes to its import regimes for agricultural products, textiles and other products. Without this it’s hard to see the other parties addressing issues the US considers important. A positive step has been the introduction of a bill in the Congress which would give the Administration the authority to conclude deals like TPP without them being unraveled in the ratification process. It will be a major test of President Obama’s political skill to get this bill through a fractious Congress.
Recent leaks about the TPP environment chapter show how difficult it is to negotiate environment issues in an FTA. TPP isn’t about lowering environmental standards. The place for environmental negotiations is in multilateral environmental agreements but FTAs like TPP need to ensure they do not undermine agreements made elsewhere. Hence the need for an environment chapter in TPP that encourages parties to observe their own laws and encourages them to expand their environmental protections.
While TPP is close to conclusion success is not a foregone conclusion. New Zealand needs to work hard in 2014 on other key negotiations including the Regional Comprehensive Economic Partnership (RCEP) and bilateral deals with Korea, India and the Customs Union of Russia, Belarus and Kazakhstan.
TPP - Pluses and Pitfalls
Touted as a 21st century trade agreement, the Pacific-wide Trans Pacific Partnership agreement has its pluses and pitfalls according to a Radio New Zealand National Insight documentary aired recently.
NZUS Council Executive Director, Stephen Jacobi, said our future depends on our ability to connect. Not only do we need freer movement of goods he said, but also services, capital and people.
Professor Jane Kelsey, a well known opponent of TPP, warned that the agreement is an attack on national sovereignty and that nations signing up risk financial instability and privacy intrusions.
New Zealand has been involved in trans-pacific trade pacts since 2005 when it signed the P4 agreement with Brunei, Chile and Singapore. This was the launch pad for TPP which now involves 12 countries including some of New Zealand's biggest trading partners - the United States and Japan. Collectively the TPP economies account for $US27 trillion in GDP.
Calman Cohen of the Emergency Coalition for American Trade noted the TPP supports job creation. His organisation therefore advocates strongly for the agreement. President Obama has put TPP at the centre of his trade policy.
Responding to the observation that New Zealand's prosperity is increasingly tied to the Asia Pacific region, Stephen Jacobi said our free trade credentials are second to none. As a champion of free trade we have a strong incentive to "get things right". We also need to recognise the changing way of doing business in a globalised world. Our exporters are supplying into global value chains where our wood is made into furniture in China which is sold into the US, where our food is imported by Japan and used in products sold elsewhere in Asia.
Hayden Green, a writer for Consumer NZ, takes issue with the fact the public have been kept in the dark. Calman Cohen points out that a degree of secrecy is essential to get the deal done. Stephen Jacobi noted that recent leaks show NZ negotiators are defending our interests and that no one country can call all the shots.
There is little doubt the agreement will be concluded. Calman Cohen hopes it will be agreed by the end of the year. Stephen Jacobi said could be early in the new year. Interest being expressed in joining the agreement by China and Korea indicate it is a deal worth having.
Asia Pacific Integration - trade and economic dimensions
EXTRACTS FROM NZUS EXECUTIVE DIRECTOR'S SPEECH TO NEW ZEALAND INSTITUTE OF INTERNATIONAL AFFAIRS - Wednesday 13 November 2013
Trade negotiators tend to take a rather disparaging view of APEC which operates as a voluntary and non-binding arrangement. However unsatisfactory APEC's processes are, the organisation exists and has a history of achievement. It is the glue which holds the framework of regional cooperation together.
China, as the incoming APEC Chair for 2014, has already spoken about ensuring that APEC provides a forum where economies can share information about negotiating processes.
India is not part of APEC but is a participant in the Regional Comprehensive Economic Partnership (RCEP).
It seems to me inevitable therefore that a way will have to be found to include India, along with other aspirant economies like Colombia in APEC at some point soon - if only to ensure that the wider region moves ahead cohesively in the future.
Despite the continuing reluctance of the APEC economies to contemplate anything that might resemble an actual decision to do something by date certain, the Free Trade Area of the Asia Pacific (FTAAP) concept continues to inform the direction in which much of APEC's work is said to be headed.
Japan's participation in the Trans Pacific Partnership negotiations, along with Canada and Mexico, has changed the game not just for New Zealand but for all the participants in TPP by increasing significantly the economic gains from the expansion beyond the initial nine.
I think there can be little doubt that TPP, as the more advanced process, will deliver an outcome before RCEP.
When that might be is uncertain at best, but my guess is the negotiation will be concluded if not by the end of this year, then in the first half of next year.
Welcome to the TPP negotiators.
New Zealand has been a key player in the Trans Pacific Partnership agreement. Given the potential benefits of TPP for New Zealand in terms of economic growth and job creation, it is good to see that negotiations are being held in Auckland between 3 to 12 December. As such, the representatives of some major New Zealand businesses and business organisations have written to Government endorsing its current approach to TPP negotiations. They note that there are complicated public policy issues involved in negotiating such an agreement, and that solutions need to be sought that are in New Zealand's overall interests. They also welcome the hard working negotiators.