From Our Blog
APEC in Beijing - let a thousand flowers bloom
When the 21 Leaders of the Asia Pacific region and the thousands of Ministers, officials and business leaders descend on Beijing in early November, they will arrive in a country very conscious of its economic muscle and confident in its ability to assert itself as an economic superpower. The (still relatively) new leadership of China under President Xi Jinping will look to APEC to demonstrate its leadership credentials and to translate into the regional sphere a number of key concerns from its own economic reform programme – business growth, urbanization, innovation, infrastructure, sustainable development. In doing so China will also seek to show it is no laggard when it comes to big ideas for trade and investment – while not (yet) a member of the Trans Pacific Partnership (TPP) China is pushing strongly for more rapid progress on the Free Trade Area of the Asia Pacific (FTAAP) and in ways which are likely to discomfort even the free-trade loving Americans. FTAAP is an idea that has been around for 10 years or more. First mooted by the APEC Business Advisory Council (ABAC), and formally adopted as a broad vision by APEC in 2006 very little has been achieved since, despite numerous reports and discussions. In 2010 APEC decided that FTAAP would be achieved through various negotiating “pathways” of which TPP is one and the most advanced, with the 16 member, ASEAN centered Regional Comprehensive Economic Partnership (RCEP) being another. But how to ensure TPP + RCEP = FTAAP? The Chinese want a deadline, a feasibility study and a work programme. The United States see this merely as muddying in the waters for TPP especially back home with a Congress that, pending the outcome of the mid-term election on 2 November, is decidedly ambivalent about trade. For its part New Zealand is cautious about deadlines but keen to maintain momentum for freer trade within APEC as a whole. Behind all this is a growing concern that TPP might not be able to be achieved, at least as the high quality, ambitious and comprehensive agreement it was set up to be. TPP negotiators and Ministers are meeting in Australia in advance of APEC to nut out a possible deliverable for their Leaders when they meet in Beijing. In their advocacy of FTAAP the Chinese are effectively raising the stakes and reminding all parties that there is a bigger picture which needs to be worked on. The 23 New Zealand business leaders attending the APEC event might well say “let a thousand flowers bloom” – with a foot in TPP and RCEP and a strong relationship with China and our trade-thumping FTA New Zealand is well placed to benefit from whatever emerges in Beijing. This post was written by Stephen Jacobi who will attend the meeting of APEC Business Advisory Council (ABAC) and APEC CEO Summit in Beijing 5-10 November 2014.
Time for more bipartisanship on trade
With the election over it’s time for more bipartisanship on trade.
Successive New Zealand governments have chosen, with the support of the electorate, to embrace globalisation. With some discordant voices to left and right, public and bipartisan political support for trade has been a hallmark of New Zealand’s economic strategy for forty years or more.
Trade Ministers from both major parties - Lockwood Smith, Jim Sutton, Phil Goff and now Tim Groser - have advanced this policy. New Zealand is fortunate with the range of trade and economic agreements which underpin and support our international business.
Improved trade rules can translate into huge benefits for New Zealand. We saw this with the Uruguay Round in the 1990s, which laid the foundation for the significant expansion of agricultural exports and rising international commodity prices in the last decade. We see the same with China today where exports have surged since the FTA was signed.
Each trade agreement needs to be weighed on its merits. The devil is always in the detail. There are opportunities to be exploited and risks to be mitigated.
TPP is an example of a highly complex negotiation which would benefit from greater bipartisanship in the same way that Labour and National are standing side by side in New Zealand’s quest for a seat on the UN Security Council.
Economic opportunities are enhanced when politicians work together. That applies regardless of the strength of a government in office because trade is beyond the three-year election cycle.
This post was written by Sir Graeme Harrison, Chairman of the NZ International Business Forum (www.nzibf.co.nz).
Of mountains and molehills
I’ve said it before and I’ll say it again – especially in the current political climate in New Zealand – public debate about trade policy is important. This website was established to provide a means of explaining the importance of trade from a business perspective. We try to be as clear as we can about the benefits of trade without minimising any downside risks. We respect the right of others to make their views known but we do not refrain from robust debate or from taking issue with others’ views when we believe they are lacking in substance.
The latest in the war of words about the Trans Pacific Partnership (TPP) concerns “certification”. The claim is that draft US Trade Promotion Authority (TPA) provides a means to undermine the negotiating process by requiring partners to agree in advance to US negotiating objectives. This is because TPA would require the Administration, before TPP commitments enter into force, to “certify” to Congress that the other party has done everything necessary to bring its laws and regulations into conformity with the agreement. A website has been established (www.tppnocertification.org) which reveals all. (Incidentally, unlike TradeWorks, the ownership of this website is not fully disclosed). The website, and accompanying media commentary, claim that the US Trade Representative’s office worked in this way to amend laws in Peru which were contrary to Peru’s national interest and took further what had been agreed in the negotiation. There are the usual leaks of emails, which purport to back up this allegation.
It’s hard to accept these claims. The shared responsibility for trade policy in the US requires the Administration to negotiate treaties and the Congress to regulate commerce. Hence the need for TPA, which seeks to ensure that negotiated treaties cannot be undone in the ratification process. It is the absence of TPA, which overhangs the negotiation at present and, some would argue, hinders the US in securing an ambitious outcome. As Congress maintains oversight of trade policy it is necessary to provide a formal mechanism whereby the Administration, through USTR, confirms to Congress that the matters requiring action arising from the concluded treaty have been concluded so the treaty can enter into effect in the US. That’s in effect what “certification” is. It comes after the negotiation and ratification process, not before. It is about ensuring that undertakings given in the negotiation are in fact being met.
Each negotiating party in TPP has their own legislative processes to follow. The MFAT website confirms that the Government has the power to ratify treaties after they have been signed and after consultation with Parliament. Ratification can occur only once any laws requiring amendment by Parliament are duly voted. “The Government then completes the treaty making process by depositing the appropriate formal instrument with the treaty depositary”. The treaty does not come into force until other parties have completed the ratification process. TPP will specify how many parties (some or all) will need to ratify before the agreement enters into force.
As regards the “help” the US might give to other parties during the ratification process, this probably has to do with the lack of capacity in some economies to attend to the required legal processes. We can’t imagine New Zealand accepting such help from the US or any other economy.
It is interesting to reflect on why those opposed to TPP have chosen to focus on such an innocuous aspect of TPA, apart from the fact that it speaks to the theory that TPP is an underhand conspiracy to undermine economic sovereignty. We’ve heard that argument before. In a climate where TPP is grinding on without conclusion, it’s out of such molehills that mountains can be made, and frequently are.
This post was written by Stephen Jacobi. Henceforth it will be the practice on TradeWorks to identify the author of our blog. Information on the New Zealand treating making process can be found at http://mfat.govt.nz/Treaties-and-International-Law/03-Treaty-making-process/index.php
Are the times changing ?
It's sometimes assumed that nothing much changes with trade but a powerful new animation from NZTE and MFAT illustrates the changes in New Zealand’s export profile in the period since 1983 when we signed CER with Australia. Check it out here. The rise of China and developing economies is made clear as their growth picked up and we secured new bridgeheads through the FTAs we successfully negotiated. The rise of ASEAN, the comparative decline of the United States and Japan, the continuing significance of Australia and the prospective importance of India are pretty plain to see. Congratulations to all those at NZTE and MFAT who made this presentation available – we need more of this to build public understanding and support for change.
These changes are very much behind the moves to establish the Trans Pacific Partnership (TPP). At stake is the degree to which New Zealand is able to integrate in the wider Asia Pacific region and the rules, which are going to govern trade and investment in the future. TPP is making agonisingly slow progress. In recent weeks another meeting of Chief Negotiators has come and gone. Negotiators continue to chip away at differences on a range of issues. President Obama has even suggested a deal could be done by November. We’ve heard that before. It’s hard to see much progress can be made before the Congressional mid-term election on 2 November or before a new Congress has granted the President a Trade Promotion Authority (TPA). In New Zealand some are now suggesting that New Zealand should quit TPP if, as may well prove likely, the United States and Japan find they cannot commit to eliminate all tariffs including on products of most interest to us.
That would be a big call. The NZTE animation shows that our future lies clearly in the Asia Pacific and the role that can be played by FTAs in building business growth. TPP has never been a blank cheque. It can work in New Zealand’s interest only if it leads to new business opportunities. An agreement, which offered little in the way of new market access and new business, would be of little advantage. On the other hand an agreement, which offered commercially meaningful market access would need to be considered seriously. The substance of the agreement needs to guide our negotiating strategy. TPP is taking too long but even as negotiations drag on, possibly into 2015, other nations including even China are showing renewed interest. That’s because integration and inter-dependence, fuelled by the development of regional and global value chains, are the drivers of future trade and investment. In such a dynamic environment New Zealand needs to way up very carefully the strategic choices it has to make.
- Stephen Jacobi, Executive Director, NZ International Business Forum (www.nzibf.co.nz).
TPP High On Agenda for PM's Visit to Washington
Prime Minister Key leaves for Washington this week. He needs to take with him a strong message on TPP – the deal can be finished only if there is an ambitious outcome on the table and only if all share equally in the benefits. There is no room for dodgy bilateral deals on the side of TPP.
The Prime Minister’s visit takes place as reports abound of the imminent demise of TPP. Such reports are greatly exaggerated. While some momentum has certainly been lost in recent months, TPP is still very much a “live” negotiation and economies are re-engaging in a flurry of bilateral consultations in advance of another Lead Negotiators’ gathering in July.
A quick and dirty end to the negotiation serves no-one’s interest, especially not New Zealand’s as we push for a high quality, ambitious and comprehensive outcome, one that advances our market access needs in Japan, the United States, Canada and Mexico. The recent Australia-Japan FTA has set a low benchmark for tariff elimination in products of interest to New Zealand like beef and dairy products – this cannot be accepted as a basis for TPP. If, as some are suggesting, the United States has conceded to Japan that TPP might not be fully comprehensive, then as Trade Minister Groser has suggested, these two need to demonstrate how the goal of a high quality agreement can be reached. The US and Japan also need to be unequivocal that benefits of tariff elimination in TPP will apply to all parties. It is only on this basis that others can reasonably be expected to participate in the wider rule-making process.
At the same time New Zealand needs to pay close attention to those new trade rules – they need to be made in a way which meets the needs of our economy in terms of encouraging investment, promoting innovation, fostering competition, reducing costs and improving the ease and speed of doing business. New Zealand has interests beyond market access even if tariffs on agricultural products are the most visible benefits from a successful TPP. Getting this right – and in a way that avoids unintended consequences - takes time.
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.