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Breaking down the barriers: what TPP means for exporters

The Trans Pacific Partnership has been variously described as a devil's pact allowing nasty corporations to sue or a panacea for those seeking to boost the country's trade and investment. Wherever the truth lies we should take notice of free trade agreements. David Williams reports.

In a spartan meeting room at a Zurich YMCA in 1998, the New Zealand wine industry hit a crossroads.

Six years earlier, the industry decided its future lay overseas and it was time to get serious about international trade and market access.

But it hit a brick wall in the form of the European Union.

The juggernaut was inherently protectionist and its regulations were designed to enshrine and enhance the status quo: EU domination.

In that plain Swiss meeting room in the northern hemisphere summer, a bunch of "new world" nations planned their assault.

Around the table were industry boffins and government representatives from New Zealand and its biggest competitors: Australia, Argentina, Brazil, Canada, Chile, South Africa and the United States.

Their belief was working together for consistent trade rules - under the grandiose banner "World Wine Trade Group" - would undermine the EU's stranglehold. They were right.

They jointly lobbied forums such as the World Trade Organisation, World Customs Organisation and Apec and signed two treaty-level agreements.

Now, wine can be produced here, to New Zealand rules, and sold into other participating countries under a single label.

New Zealand Winegrowers chief executive Philip Gregan says that might not sound like much, but it has been a huge advantage for an industry bedevilled by a minefield of "mind-boggling" regulatory rules.

New Zealand's wine exports in 1998 were about $100 million. Now they're almost $1.2 billion a year, making it the country's ninth-biggest export.

"We have been successful in not only boosting trade within the group, but we forced EU to change its own wine regulatory regime," Mr Gregan says.

"That meeting in the middle of nowhere has had profound implications for our industry, and it represented very much the end of one road and the beginning of another."

The wine industry's 'big game' into Asia

Speaking at this month's NZ US Council conference in Auckland, Mr Gregan uses the wine industry's example of how rules-based trade systems can help exporters.

He says free trade deals have the potential to more than double the value of exports over the next decade or so.

For wine growers, TPP is not about better access to the US -  a country which takes $250m a year in New Zealand wine exports.

It's about the "big game" of getting its products into the vast new and growing markets of Asia.

Mr Gregan says with TPP it's more important to think about the future shape of global trade - not the countries involved. After all, New Zealand's prosperity depends on exports and an intimate connection to global markets.

"A rules-based system is incredibly important for a small country with little or no power, and small industry."

That's the New Zealand picture. The US view seems more nuanced and strategic, against the background of free trade deals from which it has been excluded.

With the Doha round of multilateral trade negotiations at an impasse, the TPP is the US's only active trade negotiation.

Jeff Schott, a senior researcher for Washington's Petersen Institute for International Economics, describes TPP as "the most significant trade initiative in the 21st century" and says it is the model for prospective new talks with the EU.

His surprising conclusion is that the TPP is ultimately about China.

China isn't one of the nine countries in TPP talks and is not even one of three others - Japan, Canada and Mexico - who have formally asked to join.

But it will become involved should the deal be expanded to include the whole Asia-Pacific, one of the stated ambitions of the talks.

"China's not at the negotiating table but everyone at the negotiating table is thinking about China," Mr Schott says.

"It's important that we use the TPP effectively not to contain China but provide a means to better compete and co-operate with China."

China's interest is affirmed by cheif New Zealand TPP negotiator David Walker.

He told NBR ONLINE: "I think China's very interested to see and understand what's going on in this process and we talk to them about it, like we talk to a number of other economies around the region.

"This exercise is seen as a possible pathway towards the broader ambiition of trade area of the Asia-Pacific region, in Apec.

"China is a part of that and I'm sure all participants would want China to be participating in that at the time when it is ready to do so."

Mr Walker says there are enormous opportunities for US agriculture in Asian markets if the right trade model is agreed.

The 'two by four across the head' that woke the US up

Mr Schott says it took a "proverbial two-by-four across the head", in the form of a EU free trade deal with Korea, to "knock some sense into our politicians" over trade.

There is now broad support in Congress for TPP, in response to what he calls "widespread regionalism" and "discriminiation" against the US in Asia. 

US President Barack Obama states he wants to expand TPP, a move which puts Asia-Pacific at the forefront of its foreign policy.

The TPP has been mentioned in the same breath as the US's five-year goal of doubling exports by the end of 2014, but it is unlikely to have any effect until after then.

The US seems to be getting serious about the Asia-Pacific, something Foreign Minister Murray McCully says might be good for New Zealand.

"As the US is intent on becoming more engaged in the Asia-Pacific region and engaging with China, I believe we can play a very useful role.

"It's possibly not so well known that the US greatly values some of the skills and experiences that New Zealand has because of the particular relationship we have with China, and seeks the opportunity to talk to our people to make sure that they're well equipped for their own engagement.

"We're uniquely placed as a country that has such a strong relationship with China and which has an evolving but very strong relationship with the US on so many different fronts."

A chasm or part of the negotiating process?

The latest round of TPP negotiations kicked off in Dallas, Texas, earlier this week.

The talks have been given extra heat by an open letter from lawyers - including those in New Zealand, Australia and the US - calling for foreign investor protections under "investor-state" disputes to be dropped.

US business representative Cal Cohen told the NZ US Council conference a "chasm" had opened between political ambitions for an Asian-Pacific free trade deal and the countries' negotiators, and there is deep concern at the state of negotiations.

However, Mr Walker dismisses the divergent views as being a natural part of the negotiation.

"There's a lot of tough issues in there and there's a lot of different perspectives at the table, reflecting the range of views that exist around nine parties.

"But that is a part of a negotiating process and what you do is you work through those issues gradually reach some sort of accommodation/consensus/landing zone that is capable of being seen in the common interest."

Prime Minister John Key says agriculture must be part of any deal.

However, Mr Walker says it is highly unlikely there will be open markets in all areas from "day one" - especially with something as thorny as agriculture.

"When you're looking at the more sensitive areas for market access ... the way we have always looked to deal with that is some sort of phased market opening."

Asked what the chances are of a deal being signed by Christmas, Mr Walker dodges, and replies: "I'm not a betting man."

Will TPP dilute the benefits of New Zealand's free trade agreement with China? Mr Walker says this country has never viewed trade deals as exclusive preference walls.

"We've always looked at them as agreements which are designed to build and open to others over time because that's the whole rationale for the FTAAP [Free Trade Area of the Asia-Pacific] and, ultimately, Geneva.

Basically, these deals benefit everybody and the more people involved, the better.

That seems to fit with the ideals discussed at the Zurich wine meeting. Since 1998, Mexico has joined the group.

Mr Gregan says: "Without such a rules-bases system, New Zealand as a small, isolated country will inevitably lose its way in the world and the social, environmental and economic goals we have for this country will be far beyond our reach.

"From our experience, we know that working with like-minded parties on the big picture, with countries like the United States, we can achieve great things that we could never achieve by ourselves." 

More by David Williams

Comments and questions
16

Does NZ really get that much more from a TPP that includes the US but has all the copyright nonsense added on as compared to a deal that excludes both the US and the IP provisions?

Hi Eric - that seems like a legitimate line for debate.

Interesting. So...what are the "social, environmental, and economic goals" planned by the NZ elite? It would seem that the secrecy of the negotiations excludes the people who will be most affected by these goals from voicing their opinions on how their world will be shaped.

Like most articles dealing with the TPP, this one deals with global issues from the government/industry POV and leaves out the effects on the largest group of stakeholders, the public, who have no seat at the table.

Anonymous: for more on the negotiations read http://bit.ly/Ka50rU

Thanks for the link. The IP issue has been covered in the tech world and you guys did a fair job here. The investor-state disputes, which is like an umbrella provision covering all aspects of the TPP and which specifically gives greater protection to foreign investors and corporations than to the citizens and legislatures of nations is another issue that does not get enough media attention. This by itself should be a deal breaker.

Sorry, neither your reply nor the linked article addressed the "social, environmental, and economic goals" to which Mr Gregan alluded. Did no one think to ask Mr Gregan for some clarification on these items?

Why would anyone trust the TPP negotiators when the negotiations are kept secret and the details don't get released until 4 years after the deal is signed?
What are they trying to hide?

Anon @ 3.54pm
"Sorry, neither your reply nor the linked article addressed the "social, environmental, and economic goals" to which Mr Gregan alluded."

I think Mr Gregan's comments about "social , environmental ...." are to do with what NZ wants to achieve for ourselves as a country not goals within the TPP deal. That is, we need a deal like the TPP to achieve the required export growth so we can go after those goals.

What are those goals? And how exactly is the TPP going to allow you to achieve something that you can't do on your own? Do you really expect the economic benefits to be that great? In Japan, the government's own estimates are that it will increase the GDP by 0.05% per year. It is worth some of the non-trade provisions for that kind of return?

Anon. I don't know what the specifics are of the goals he is refering to , just that he was not refering to those goals being part of the TPP deal.
Mr Gregan obviously thinks the TPP deal is important . I'm not saying I am agreeing or disagreeing --just clarifying how I thought you may have been misinterpreting what he said.

Thanks for the explanation. I don't think I have misinterpreted Mr Gregan's words or intent. He and others like him have a plan. Most people are either unaware of that or unsure of the details. The Kiwis should find out what those plans are.

TPP is not a free trade agreement. While we call it that in NZ, the US and others don't. Notice its name?

They know that free trade agreements are about creating a level playing field, as in NZ winegrowers getting equitable access to the EU market or the NZ-China FTA.

The TPP is about creating an unequal playing field for industries, particularly in the US, that can lobby the hardest and best.

The problem with the US-proposed IP chapter is imposing their model of IP on the whole world. A model from the 20th century for a 21st century agreement.

We will be giving up our sovereignty of making laws that work for us. Hopefully, all the promised dairy access doesn't become a mirage that we chase by crippling our own economy.

As an American now residing in NZ, I encourage NZ to run, not walk, away from the US IP chapters of this agreement. If we make concessions on IP for the sake of Dairy or other primary production, NZ will be giving away the possibility of a bountiful future with a "weightless" economy (based on exporting bits and bytes) for a tiny gain in a 19th century economy in agricultural commodities.

Of course, any concessions for those land-intensive industries will be overridden by hugely powerful US-based agricultural lobbies. Ask the Aussies how well their "FTA" with the US has been going... (spoiler: it's *cost* them at least $billion/year), There's nothing "fair" about it.

The secrecy of the negotiation should've kept NZ from even joining the discussion. It's simply unacceptable for the democratically elected government of NZ to participate in a secret negotiation with such profound ramifications for NZ's future sovereignty and every single citizen's future is acceptable.

I attended the NZ US Council TPP conference on behalf of NZRise.org.nz . My notes are now online (PDF) http://nzrise.org.nz/assets/Uploads/TPP/NZUSCouncilTPPConference.pdf

The most concerning aspect of the conference was how people and organisations who don't like parts of the TPP are being painted as irresponsible or worse.

The degree of secrecy around TPP is disturbing and leads to a lack of legitimacy. See what happened in Europe when the wider public found out what has been agreed in their name with respect to ACTA.

The very same US industries who wrote our controversial #s92a internet termination law are demanding even more draconian copyright and patent measures in TPP, and our officials and politicians are not sufficiently up to speed to resist these demands.

Groser is on record believing in the inflated claims of loss from the movie industry; Key appears to have already conceded regarding IP in TPP; previously MED officials chose not to allow format shifting for video in the revised copyright law, 6 months *after* the release of the iPhone; parliament okayed the #s92a internet termination before backing down in the face of a public backlash. These are not the actions of officials who understand the internet and the nature of IP in a connected world.

Can we look forward to the US abandoning Imperial in famous of Standard measurement in the 'rules-based' system the TPP ostensibly proposes?? Doubt it. but that would make sense if they are really serious about reducing barriers to productivity and regulatory alignment, rather than simply making it easier for global corporates to operate without the distraction of nations making 'public good' decisions which might interfere with profits. The WTO may have come to the rescue of the wine industry, but how bizarre is it that the rights of companies selling harmful products are upheld above the rights of citizens to public health and protection? e.g. Philippines' right to sell clove cigarettes In US, though flavoured cigarettes encourage minors to smoke (and die!), undermining public health tobacco control programmes.