From Our Blog
TPP - game on !
Now that the US Congress has finally given President Obama his much longed for fast track trade promotion authority, negotiators can get back to the complex task of completing the Trans Pacific Partnership (TPP).
New Zealand can claim a share of TPP’s parentage. A founder member along with Singapore, Chile and Brunei of the original “P4” agreement, New Zealand was also at the forefront of even earlier efforts to link up the more liberal minded trading nations in the Asia Pacific region. In the mid to late 90s the United States was part of those emerging discussions. How long it has taken to get to where we are today!
As well as being eternal trade optimists, New Zealanders are also mindful of the need to integrate more closely in the Asia Pacific region. Our high-quality FTAs with China, ASEAN, Taiwan, Korea are the result of a well thought-through and well executed internationalization strategy. The United States and Japan are missing pieces. Our economy is small and distant from world markets. Trade – exports and imports - are our lifeblood – it’s what makes possible the successful, smart and developed economy that we enjoy. Yet we are an oddity amongst other developed economies because our largest export earners are natural resource based products – dairy, meat, horticulture, wood, seafood. So clearly the most important issue for us is ensuring that these products benefit from the comprehensive removal of trade barriers in TPP.
New Zealand’s economy is also changing – services, ICT, the creative sector, the ‘weightless economy’ - are all important and growing sectors. So we need also to ensure TPP promotes the market-based innovation and commercial expansion necessary to fuel these sectors’ continuing development. We know too that business models are changing so we share with others the need to optimize supply chains and to ensure we can participate effectively in regional value chains and networks.
When it comes to ratifying the completed agreement – and when we finally get to see the treaty text - we like others will be looking to ensure that our key interests are addressed and any risks minimized. We subscribe fully to the founding vision of TPP as an ‘ambitious, high-quality and comprehensive’ agreement. Not all sectors require the same treatment, but none should be left out. That means especially agriculture. We will want to pay careful attention to the detail of the rules. If there is provision for investor-state dispute settlement, we will want to see the detail of safeguards around the right to regulate, especially on environment and public health. If intellectual property provisions go beyond what is currently the international norm, we will want to see that innovation is not penalised. If there are requirements about medicines purchasing policies, we will want to see that these apply equally to all economies (including the United States) and that citizens continue to have affordable access to the medicines they need.
New Zealand is already an open economy. We have high standards of regulation and a sound judicial system. We are not expecting the adjustment from TPP to pose significant challenges. We pursue agreements like TPP to provide the best possible environment for trade and investment and sound rules for the operation of markets which also reflect our country’s values and interests. If TPP can deliver on its founding vision, we hope to be a proud parent of a new economic instrument which will deliver value for citizens and businesses alike.
This post was prepared by Stephen Jacobi, Executive Director of the NZ International Business Forum and uses material prepared for the Asia Society Policy Institute (see http://asiasociety.org/policy-institute/reaching-trans-pacific-partnership-agreement-perspectives-asia
Of leaks and TPP conspiracy
The leak of Trans Pacific Partnership (TPP) text on transparency for pharmaceutical purchasing agencies shows many things, but one thing above all – the United States and the US pharmaceutical industry is not getting its own way in this negotiation. Previous leaks have been similar. The environment leak showed that TPP was exploring legally binding provisions for environmental protection (the first time in any FTA). The intellectual property leak showed that economies were resisting demands for higher IP protection. The investment leak showed that there are likely to be clear exceptions from investor state dispute settlement for regulation to promote public health and the environment. And this latest pharma leak shows the US has backed down on some of its earlier demands about pricing for medicines paid by agencies like Pharmac. Importantly too the leak shows that the US has accepted that its own Pharmac-like systems including Medicaid and Medicare need to be captured by TPP disciplines (again a first for any FTA). It was particularly interesting that the leak was released in association with commentary by prominent anti-TPP activists. This shows a disturbing alignment of those activists with Wikileaks. Furthermore the leaked documents have curious deletions – the references to specific economies’ positions on individual items within the text are redacted (they are referred simply to “xx”). Why is that? Who did this and why? Because Wikileaks is unaccountable to anyone except themselves, no-one can possibly know. That seems strange for an organisation, which purports to be concerned about transparency and accountability.
This post was written by Stephen Jacobi, Executive Director, NZ International Business Forum (www.nzibf.co.nz). Like other business organisations in NZ, NZIBF has no access to TPP negotiating text.
Trade Promotion Authority - so far so good
After weeks of political and procedural wrangling the United States Senate has finally approved (22 May) a bipartisan bill authorising the President to conduct trade negotiations and complete the Trans Pacific Partnership (TPP) as well as the Trans Atlantic Trade and Investment Partnership (TTIP). This is welcome news as far as it goes. The bill now proceeds to the House of Representatives where the political debate mostly within the Democratic Party will continue. President Obama faces an uphill battle to convince his own party of the merit of these initiatives. He can count on the support of the larger part of the Republican Party but some protectionist-minded Republicans will also oppose the legislation. In the Senate the TPA largely survived the mark up process and most attempts to add extraneous provisions or “killer amendments” that would have ensured the bill would be dead on arrival either in the House or on the President’s desk. Some complicated provisions remain however – some language on currency manipulation and a potentially poisonous pill aimed at Malaysia’s human rights record. Both elements present challenges for TPP and can hopefully be worked out as the House considers the bill and any differences are ironed out.
TPA matters because it is an essential pre-requisite to completing TPP. The other twelve participants will not be prepared to make their final offers on market access (or in Canada’s case any offer at all on dairy products) without knowing whether the US can commit fully to the negotiation. Resolution of the market access issues is also necessary for the participants to show flexibility in the remaining trade rules issues including intellectual property and investment. However you look at it no TPA means no TPP, at least not for now. The Senate TPA vote probably comes too late for this week’s proposed TPP Ministerial in Guam. Even if Ministers decide to make the trip, there remains too much uncertainty to bring TPP to conclusion.
The clock is ticking on this complex and controversial process. The US risks ceding its traditional leadership on trade to others, especially as APEC meets this week in Boracay and considers next steps towards the Free Trade Area of the Asia Pacific (FTAAP).
This post was prepared by Stephen Jacobi, Executive Director of the NZ International Business Forum (www.nzibf.co.nz)
Trade debate takes off in US - and NZ!
On a rare day in Washington recently it looked as though the Congress and Administration could finally agree on something. Congressional leaders from both sides released for discussion a draft ‘fast track’ trade bill to authorise the President to conduct and complete trade negotiations including TPP. Subsequent wrangling revealed the limits of bipartisanship as the President fought hard to convince fellow Democrats and the Republican leadership sought to placate Tea Party protectionists. The debate was as much about the roles and responsibilities of legislative and executive branches as trade itself. It revealed however an extraordinary scepticism, if not downright hostility, about the effects of trade on the US economy. Offshoring and job losses are routinely raised while little attention is paid to increasing productivity at a time of economic downturn – this essentially means American workers are producing more with less but there is less demand. What to do if not trade more, ie grow demand for American goods worldwide by reducing costs and increasing efficiency in supply consumers’ needs. That debate continues as the renamed ‘Trade Promotion Accountability” bill makes its way through Congress as an essential pre-requisite for concluding TPP.
Trade is also increasingly under scrutiny in NZ as TPP gathers momentum and the NZ Korea FTA is debated by the Parliamentary Select Committee (so much for the accusation that these things are done in secret!). The Korea FTA is not a perfect agreement (some tariffs will remain even after a lengthy implementation period) but it was important to be concluded to ensure NZ was not discriminated against in the Korean market where a number of competitors already have FTAs. The public debate is more about the investment provisions of the FTA, which are seen as a stalking horse for TPP. In fact the Korea FTA goes further than previous FTAs in maintaining a balance between investor protection and the right to regulate. There is little risk to NZ from this agreement.
This post was prepared by Stephen Jacobi, Executive Director of the NZ International Business Forum www.nzibf.co.nz
TPP - Fact and Fiction
The wildest speculation and misinformation is being spread about by those opposed to the Trans Pacific Partnership (TPP).
It is claimed TPP is not a trade agreement. TPP is about trade - and investment and jobs and everything else that impacts on the way business is done. The final agreement will have a market access schedule setting out reductions in tariffs for all members and a set of negotiated rules to govern a range of other issues.
It is claimed TPP will allow multinational companies to sue governments for loss of profits. The recently leaked text includes a process for investor state dispute settlement but shows that governments will retain the right to regulate by placing their reservations in an annex to the investment chapter. Other exceptions in the final agreement may (or may not) apply to the investment chapter. The leaked text shows that compensation will be required not when profits are threatened but when property rights are confiscated. Proving the latter is a higher threshold than simple policy change. Such provisions already exist in New Zealand’s FTAs with China, ASEAN and Korea – and for good reason. They protect New Zealand investors abroad. Governments can act against investors as Portugal has done recently to the NZ Super Fund.
It is claimed TPP will prevent the Government from regulating in the national interest. The Government has already said there will be safeguards to enable it to promote public health, the environment and the Treaty of Waitangi. TPP seeks to promote best practice when it comes to setting regulations. New Zealand has a strong record in this regard.
It is claimed TPP will undermine environmental and labour standards. Unlike most FTAs TPP is likely to contain specific undertakings on these issues. The United States is pushing hard to make these binding and enforceable. WWF and Oceana have come out this week in support of TPP leading to new commitments to end fishing subsidies and to protect threatened wildlife and natural resources.
It is claimed TPP will result in higher prices for medicine. The Government is already on record as ruling out major changes to Pharmac. The Government has a strong fiscal incentive to be very wary about costs. In the United States there are some federal and state programmes (although not Medicare) that operate in similar ways to Pharmac.
It is claimed TPP will undermine New Zealand’s intellectual property legislation. There are some risks to New Zealand policy settings but earlier leaks of text show our negotiators are leading the charge against any massive increase in rights for IP holders. Any change to New Zealand’s legislation in respect of patents or internet file downloading has to be done by Act of Parliament.
It would be beneficial if there was more background information made available by the Government about TPP - if only to end this wild speculation.
This post has been prepared by Stephen Jacobi, Executive Director of the NZ International Business Forum (www.nzibf.co.nz). It is based on an article published by NBR On Line.
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.