Speeches and Articles
Trade negotiations must keep pace with the times
Stephen Jacobi
Dominion Post, 07 September 2011
It has become fashionable in recent years to take issue with the sweeping economic reforms of the mid 1980s. To be sure there is plenty to criticize – too quick, too messy, too many examples of botched privatization. But it is important not to forget the context – New Zealand had come to the end of its economic tether and change was necessary. Compare that with the situation in the United States, Europe and Japan today where the political leadership seems incapable of acting decisively.
In times of crisis it is tempting to do nothing – why bother with local government reform, for example, why negotiate new trade agreements? Unfortunately standing still is not usually likely to lead to moving forward. When it comes to trade negotiations a dose of skepticism is probably helpful. They normally teeter on the brink until victory is snatched from the jaws of defeat (usually the other way round in relation to the WTO). Trade agreements can sometimes deliver less than was promised but that’s largely because they tend to lag behind the way business is actually being done. Trade agreements are not a once in lifetime occurrence – they are part of an ongoing process of policy reform by which governments seek to negotiate better rules for global trade and investment and to respond to changes in the business environment.
This is particularly the case for the Trans Pacific Partnership (TPP), the eighth round of negotiations for which take place in Chicago next month. TPP is still a work in progress – negotiators from the nine countries involved are focusing on ensuring the “broad outlines” of an agreement are ready by the time APEC meets in Honolulu in November. As the negotiation proceeds various stakeholders are raising concerns – that is as it should be: we need robust debate about the issues involved. Most of the concerns to date have focused on the United States and its agenda in relation to pharmaceuticals and intellectual property. Others focus on external issues like plain paper packaging for tobacco products which have very little to do with TPP. In any event at the end of the day the Government will need to make a call on whether the final agreement meets the national interest test. This judgment will be subject to political process and public scrutiny as it should be.
But TPP is about more than the United States and backdoor route to an FTA. The trade negotiating agenda has moved on in the last ten years since the NZ US Council launched the idea of an FTA at an inaugural conference in Auckland. TPP is about finding a pathway towards a more seamless and rules-based environment in the Asia Pacific region. This is required because business has changed – once again.
Today two way trade is giving way to foreign-direct investment. Services are becoming more closely integrated with the production of goods. Competitiveness is determined less by comparative advantage (although clearly that is still important for agriculture) than by the efficiency of global supply and value chains.
That’s why the TPP agenda is focused on a set of “new generation issues” and on making it easier to do business around the region and on issues of relevance to SMEs as well as larger corporates. We are not just talking about removing restrictions at the border. There is a new attention on ‘behind the border’ issues, particularly those issues that impact on business operations and affect the cost and time in which business can be done. The aim is not to do away with the laws, regulations and institutional arrangements that shape daily economic activity but to make them work better – for business, for customers and for stakeholders. As BusinessNZ CEO Phil O’Reilly said at the Japan NZ Partnership Forum in Tokyo last month, not no regulation, but better regulation.
That is not to say that there is not an agenda with the United States to be addressed. Four areas stand out from New Zealand’s point of view: high tariffs for dairy and troublesome tariffs for beef and a range of other products; easier access to Federal Government procurement; more security for existing trade and more commercial attention focused on the relationship. To be sure these areas may have become less important over the last ten years as we have opened new markets particularly in China and with ASEAN but they remain significant. They also feed in to the wider vision for trade and investment in the region and the need to make supply and value chains more efficient and competitive.
It may prove impossible to deliver on this vision. The negotiating environment is complex. Stakeholder attention is high. Political dynamics in the United States are not encouraging. Even if TPP amongst the nine can be achieved sometime in 2012 there remains the task of extending it to others including Japan, Korea and even China and then beyond the region. Moving forward is never as easy as standing still. But things change, business changes and governments need to respond. That’s what makes TPP worth a try.
