From Our Blog
Making sense of the TPP end game
There’s an old Peggy Lee song – “If that’s all there is, then let’s keep dancin’”.
That essentially was how the TPP negotiations ended up in Maui. The deal on the table was insufficient so Ministers decided to keep on talking.
How did this happen? Going into Maui there were still significant issues to be addressed. In particular, from a purely New Zealand perspective, there had been no engagement from Canada on market access for dairy and the bilateral negotiations between the United States and Japan had not been fully revealed. Other participants had their own issues (cars, sugar, rice) and no-one was ready to tackle other significant issues like intellectual property until market access was settled (so much for those who say TPP isn't really a trade deal!). It was somewhat ironic that it was Mexico which finally scuttled the chances of a conclusion at Maui – precisely (and probably quite rightly) because it felt its interests in the motor vehicle supply chain were not being adequately addressed by the US and Japan. Whether cars or dairy, it is not feasible for major exporters to conclude an agreement with totally unsatisfactory outcomes.
Where to from here? The Maui outcome does not spell the end for TPP. Far from it. Progress was reported in a number of areas including previously contentious ones like investment and the environment. The latter is a big win for TPP – the first FTA ever to have binding environmental obligations. There are now fewer outstanding issues on the table. If negotiators and Ministers can get together soon – hopefully before the end of the month – the momentum can be maintained and any backsliding from what was agreed in Maui can be prevented. The longer it takes to re-engage, the harder it becomes. The Canadian election now called for 19 October is a complicating factor. Leaving the re-engagement until APEC until November would not be a good sign.
Is there anything in it for New Zealand? Yes of course. A substantive outcome on dairy, granting significant new access to consumption in TPP economies must be part of any final deal but New Zealand stands to benefit across the range of our export industries. In just four products (beef, horticulture, seafood and wine) we pay tariffs of $130 million a year to TPP members. We can save this and there will be new trade as well. The Government continues to reassure us that the adjustment required in sensitive areas like pharmaceuticals or patents can be managed. But the big prize from TPP is being part of the new rules for trade and investment in the region that takes 70 percent of our exports – can any New Zealand Government seriously afford to turn away from this?
This post was written by Stephen Jacobi, Executive Director of the NZ International Business Forum (www.nzibf.co.nz). Further commentary on the TPP outcome from Maui can be found here.
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
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.