17 October 2017

New Zealand parties don’t grasp gravity of TPP withdrawal

by Matthew Hooton

For 20 years, New Zealand has nagged other countries to join the Trans-Pacific Partnership (TPP).

The idea emerged from talks between New Zealand and Singapore in the mid 1990s about how to accelerate Apec’s objectives and, in particular, how to convince the US to open its market.

In the following 20 years, New Zealand’s TPP campaign was always bipartisan, with successive trade ministers careful to keep their opposition counterparts informed at every step.

The first move towards the TPP was in 1999 when National launched negotiations with Singapore for a new generation free-trade agreement (FTA). With trade in goods almost entirely free anyway, the deal was important because of what it promised behind each countries’ border.

Helen Clark carried forward the project, recognising that the future of international business was not primarily about shipping commodities across borders like Fonterra, but establishing offshore supply networks like A2 and Zespri, or marketing services online like Xero.

As an internationalist, Ms Clark fully understood that just as environmental or human rights treaties must intrude on domestic policy, economic agreements needed to move in the same direction to reflect changing sources of commercial value. Protecting intellectual property and other investments in-market is now as important as eliminating tariffs.

Leading the region

Ms Clark continued to lead regional developments through the 2000s. Her government concluded the Singapore FTA in 2000, and then she and her Singaporean counterparts launched and concluded the Trans-Pacific Strategic Economic Partnership with Chile and Brunei, intended as a blueprint for a TPP with the US and others.

New Zealand’s record of initiating innovative ideas and seeing them through was also critical to Ms Clark launching and completing the historic FTA with China, Beijing’s first with a developed economy.

That crowning achievement of Ms Clark’s foreign policy was rivalled only by her securing the agreement of the US to finally enter negotiations for a TPP in 2008, followed later by Australia, Vietnam, Peru, Malaysia and Mexico, countries New Zealand had been lobbying to get involved for a decade.

Most astonishing was 2012 when trade policy recalcitrants Japan and Canada joined the negotiations for exactly the type of behind-borders deal New Zealand and Singapore had dared imagine back in the 1990s.

The final TPP – signed last year in Auckland in recognition of New Zealand’s role as instigator – was overwhelmingly in this country’s interests. That it included the US was one thing. That it included two other G8 economies, Japan and Canada, with historically tightly protected agricultural markets, massively exceeded the imaginations of the even the most wild-eyed optimists when the project began.

The TPP vastly improved New Zealand’s access to the US, Japan and Canada for beef, lamb, dairy, kiwifruit, apples, wine, seafood, wood products and wool.

As important, it allows New Zealand service providers to compete on an equal footing with locals on government procurement, and New Zealand businesses operating offshore to protect their intellectual property and other investments against unfair policy changes by other governments.

Domestically, Pharmac was shielded and New Zealand is able to ban foreign purchases of housing and other land with punitive stamp duties.

That Donald Trump pulled the US out of the TPP in January only underlines that it benefits small countries like New Zealand more than larger powers.

Following Trump

Despite this extraordinary triumph for New Zealand’s bipartisan foreign policy, a new coalition government risks following Mr Trump’s lead in withdrawing from the TPP, perhaps as soon as next month when TPP leaders meet in Hanoi.

The issues are Winston Peters opposing the TPP’s dispute settlement procedures for investors and Jacinda Ardern wanting to use means other than stamp duties to limit foreign investment in property. Bill English may feel he needs to match these pledges to retain power.

This means a prime minister may go to Hanoi in November demanding amendments to the TPP but there is no reason other countries will agree, putting New Zealand on course to follow the isolationist Trump regime in withdrawing.

Among others things, this would severely embarrass Justin Trudeau who has weathered vicious criticism from his left to keep Canada in the TPP and would likely lead to the whole deal collapsing. TPP critics here and abroad would celebrate but the implications for New Zealand would be enormous.

It is one thing for a superpower like the US to behave unpredictably under the likes of Mr Trump, but another for a minnow like New Zealand.

Having urged other governments for 20 years to be part of TPP – in some cases at considerable domestic cost – New Zealand would be conducting the most extraordinary diplomatic u-turn. No foreign government would deal seriously with us for a generation. This would hamper our ability to complete trade deals such as those with the EU, UK, India and Russia. Less obviously, we would no longer be taken seriously when negotiating agreements on everything from human rights to deep-sea fishing to climate change.

More broadly, a unilateral TPP withdrawal would signal a weakening in our support for the rules-based systems we argue should be the norm for all international relations.

Incredibly, such a grave step would be taken against the will of a majority of parliament, which supports remaining in the agreement. That includes all National MPs given their farming, manufacturing and service-sector stakeholders. But it also includes most Labour MPs, including its leadership.

Having worked closely with Ms Clark, Ms Ardern knows full well why the rules-based system generally and the TPP specifically are so important to New Zealand. So too do deputy leader Kelvin Davis, finance spokesman and former diplomat Grant Robertson, foreign affairs and trade spokesman David Parker, primary industries spokesman Damien O’Connor, fisheries spokesman Rino Tirikatene, and forestry and economic development spokesman Stuart Nash.

The very idea of New Zealand withdrawing unilaterally from a deal both National and Labour governments have badgered other countries to join for 20 years and which the majority of parliament continues to support should be unthinkable. For it to nevertheless be on the table represents an abrogation of leadership by Ms Ardern and Mr English who, even on a matter of such magnitude, risk being played by the leader of a 7 per cent party.

Matthew Hooton

Matthew Hooton is a political commentator and columnist, and managing director of Exceltium, a New Zealand corporate and public affairs consultancy.