The year ahead: TPP is dead; long live global trade

Bilateral and multilateral trade deals are going to continue to be signed and implemented.

 

We know the world has been turned upside down when capitalist America is threatening trade barriers and communist China is promoting open borders. Such is the new normal state of global trade.

On January 20, Donald Trump is inaugurated as President and, in his first day in office, he is promising to withdraw from the Trans-Pacific Partnership (TPP), consigning one of the most important global trade deals in modern history to the dustbin.

I’m sure he is a man of his word in this instance (the prospects for the Mexican great wall are far less certain) but the agenda for President Trump’s second day in office?

There’s an assumption he’ll be a protectionist president. During his campaign he promised to impose tariffs of up to 45% on certain imports, to renegotiate or ditch the North American Free Trade Agreement (Nafta) and called-out China for “unfair subsidy behaviour.”

Yet such an assumption ignores some of his other campaign policy pronouncements. “We’re going to have free trade, more free trade than we have right now.” The soon-to-be president’s priority is that the deals which underpin that trade have to be better.

In this context, new Prime Minister Bill English could do worse than pursue his predecessor’s idea, floated at the Apec leaders’ summit in Peru, of negotiating a Trump-Pacific Partnership.

Cautious optimism
Mr English surely shares John Key’s cautious optimism that some kind of trade arrangement can be reached involving the US despite Trump’s election rhetoric.

The reality of our globalised and interconnected world is that bilateral and multilateral trade deals, such as the scuppered TPP, are going to continue to be signed and implemented. Particularly so if China’s President Xi Jinping has his way. 

"China will not shut the door to the outside world but will open it even wider," he told Apec leaders, adding: "Openness is vital for the prosperity of the Asia-Pacific."

It is for these reasons and the political symbolism that China and New Zealand’s leaders have announced a to-be-negotiated upgrading of New Zealand’s trade deal with China to better reflect the changed international circumstances.

The government under Mr English is adamant the TPP can be renegotiated in a new form, one that meets the new parameters being set by Washington. 

While Mr English does not yet enjoy the international standing of Mr  Key, his predecessor has given him the perfect springboard from which to forge a personal relationship and get some face-time with the 45th President of the United States to press his point.

Groser is the right man
Assisting in that process, imagine if New Zealand had a person on the ground in Washington DC with deep experience in both the ways of politics and international trade.

Ambassador Tim Groser delivers on both counts. He’s the former long-term minister for trade under Mr Key, a former ambassador to the World Trade Organisation and, in the early 1990s, was New Zealand’s chief negotiator in the GATT Uruguay Round.

As US ambassador, Mr Groser is a real asset in ensuring Kiwi interests are kept top of mind in Washington.

President-elect Trump already has form on the US-NZ relationship, contacting the Prime Minister’s office following the recent Kaikoura quake and tweeting that he will always have time for the leaders of New Zealand and Australia.

Canny negotiation, securing first mover advantage, outmanoeuvring competitors – these are hallmarks of the Kiwi modus operandi. They should resonate well with a new president who respects business acumen and negotiation skill.  

None of this is to ignore the new global paradigm that has elected Trump, engineered Brexit and raised the decibel levels on trade and currency war rhetoric.

The world is changing but New Zealand and Australia perhaps have less to worry about a Trump-led America than previously feared.

We can certainly take heart from the wise words uttered in an earlier inauguration address by another American president: “The only thing we have to fear is fear itself.”

Alex Malley is chief executive of CPA Australia

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