In Asia, there is the Regional Comprehensive Economic Partnership (RCEP), a complex trade negotiation involving 16 economies, including Australia and New Zealand. RCEP also includes China but is not led by China, (as some commentators insist on believing) but by ASEAN (Association of South East Asian Nations). RCEP has been underway for a number of years and is grinding on at a slow place. Whether that quickens as a result of TPP’s demise remains to be seen. India is a reluctant participant and the current level ambition in the negotiations is not high. RCEP at present is not an alternative to TPP, but is a useful initiative nonetheless – and could be particularly so for New Zealand if it delivers better access to Japan and India which we currently lack.
RCEP is useful but the benefits will be less than TPP.
Then there is the TPP(11) option. As of today Japan, a key player, has said TPP is “meaningless” without the United States, while other players including Australia, New Zealand and Singapore have expressed interest in exploring the options. Japanese reticence needs to be seen in the context of their critical security relationship with the United States. On the other hand, Japan, like New Zealand, has already ratified TPP. We need to let some quiet diplomacy proceed to see if the remaining 11 parties, or a sub-set of them, see merit in amending TPP to take account of US withdrawal. This should include deciding whether or not to strip out of the agreement those things that were essentially US demands. It’s too early to jump to conclusions; the TPP ratification process has in any case another year to run.
A lot of what is in there is due to the US so stripping out their demands would not be a quick process. And will Japan and Canada concede much on tariffs without incraesed access to the US to match? I see little chance or value in TPP less the US – but again better than nothing.
New Zealand has been seeking to obtain a bilateral FTA with the United States since the turn of the century. Two problems have bedevilled that effort: first, a poor political and security relationship, which has now been fixed, thanks to efforts over years by certain politicians and diplomats on both sides, supported by leaders from business and the wider community. And second, on the economic front, the small size of the New Zealand economy and the perceived – if highly exaggerated – risk which our agricultural sector poses to American farmers.
This will make it difficult for New Zealand to get ahead in the queue and may make a purely bilateral agreement ultimately no easier to negotiate than TPP. While we simply do not know the detail of the new President’s trade policy, he is not likely to do us favours on agriculture and may seek to go beyond the TPP outcomes on issues like investment and intellectual property. Nor is likely to be any more flexible on allowing professionals to work temporarily in the US as many services exporters especially in the tech sector would wish.
There is much irony here – TPP’s lengthy negotiation was in part because the other 11 partners were seeking to counter the full extent of American ambition across a range of issues as well as a wider framework of trade rules for the region. This was largely achieved: the final TPP text was a carefully structured consensus, which represented a balance of interests of all parties. For New Zealand TPP delivered substantial benefits with little change to existing policies, even if we did not achieve all we hoped.
This is key. TPP allowed us to resist most of the US demands and the final agreement meant relatively minor changes to our existing laws and policies. In a bilateral we would have very little ability to do this, and I doubt a bilateral would be of net benefit to NZ.