TPP grinds inexorably on

It ain’t over, till it’s over, writes Stephen Jacobi

Reports of the imminent demise of the Trans Pacific Partnership (TPP) 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.

It’s in the nature of trade negotiations of teeter on the brink.  TPP has not been helped by series of missed deadlines – however aspirational they may have been – and seemingly inconclusive Ministerial gatherings.  “Just do it” is a lot easier said than done when it comes to designing a new framework for trade and investment in the Asia Pacific region.  The risk from these delays is that business will lose heart and move on to other things.  This is what we have seen with the World Trade Organisation’s Doha negotiations.  That risk is real and Ministers and negotiators are well aware of it.

On the other hand 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.  At the same time New Zealand needs to pay close attention to the other side of this negotiation – the so-called “21st century” rule-making.  These new trade rules 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.

Politics is a complicating factor.  In Japan Prime Minister Abe, whose government is more stable than any of his predecessors, faces a significant debate within his own party about the merits of agricultural reform.  That reform is critical for his plans to rebuild the economy.  In the United States President Obama also needs to convince his own party in the Congress to give him the “fast track” negotiating authority to complete the negotiations without risking they might be re-opened during the ratification phase.

All governments need to redouble their efforts to convince a skeptical public that TPP can bring benefits. Some serious questions have been asked about the impact of TPP and they need a serious answer. Those businesses in New Zealand, including key players in the export sector, which are supporting TPP, are certainly not doing so because they want to erode national sovereignty, raise the cost of medicines, make it harder to innovate or restrict the use of the Internet. Only the Government can give assurances on these matters. Business can play its part in explaining why TPP is needed, but governments need to engage more resolutely with domestic stakeholders.

Governments also need to adjust to the new negotiating realities, which have recently been set by the United States and Japan, and match these with their own national interests.   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 the United States has conceded to Japan that TPP might not be fully comprehensive, then as 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.

Meanwhile other economies presently outside TPP continue to explore membership  Korea and the Philippines are the keenest, but even China – which chairs APEC this year – is examining how trade liberalisation including through instruments like TPP might encourage its own process of structural reform.

And lastly, in case TPP at the end of the day proves impossible to conclude – and this must always be considered a remote possibility – there are other negotiating initiatives like the Regional Comprehensive Economic Partnership (RCEP) between sixteen economies in Asia, including New Zealand, which provides another pathway to the vision of a more seamless Asia Pacific.

It’s still far too early to call time on TPP. In coming months we can expect more engagement between negotiators, quite probably more seemingly inconclusive Ministerial meetings and more protests and petitions.  That’s the nature of a complex international negotiation.