Good news, bad news for NZ in Obama win

JOHN HARTEVELT
Last updated 05:00 10/11/2012

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Before anything else, re-elected US President Barack Obama has a fiscal cliff to avoid.

But a second term for Mr Obama, assuming his country is not about to tumble from its looming precipice, presents new opportunities in foreign affairs.

From New Zealand's perspective, the possibilities are roughly equal parts exciting and worrying.

On the one hand, the Trans Pacific Partnership (TPP) will be at the centre of Mr Obama's trade agenda this term, promising continued progress towards a large free trade bloc that includes New Zealand.

On the other, the US has a long, slow transition out of Afghanistan to arrange, which will include expectations that its friends continue to contribute as far out as 2024. And New Zealand also sits, powerless, between two competing giants in the US and China.

For now, Washington DC's diplomats and think tankers are abuzz at Mr Obama's re-election.

Karl Inderfurth, a former assistant secretary of state, says Mr Obama has the chance to fulfil some of the promise implied by the awarding of his Nobel Peace Prize in December 2009.

"It [the Nobel Prize] was aspirational," Mr Inderfurth says.

"It said that he represented such a hope for a more positive approach for world problems. I am hopeful that in a second term he can reach a point that he can start to deliver on those great hopes and aspirations."

Few truly believed that Republican presidential candidate Mitt Romney would have followed through with his campaign aggression towards China if he had been elected. But there is a palpable sense of relief - tempered by caution - around Washington DC with respect to the relationship with China under a second Obama Administration.

There will be competition between the two and it will be on more than just matters of trade and "currency manipulation".

"There is inevitably an element of strategic competition and that strategic competition can become either severe or manageable," says Jeffrey Bader, who was a senior director on Mr Obama's National Security Council.

The development by China of a blue water navy and its territorial claims in the South China Sea will not inevitably lead to a 21st century Cold War.

"But one doesn't need a great imagination to picture how it could degenerate in to that," Mr Bader says.

Secretary of State Hillary Clinton, whose convictions on the importance of the Asia Pacific to the future of the US go back as far as her time as First Lady, will leave the job early next year. Obvious candidates to replace her include US ambassador to the United Nations, Susan Rice, and John Kerry, current chair of the senate foreign relations committee.

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Defence Secretary Leon Panetta, who last month visited New Zealand, is also expected to move on a little further in to next year.

Mr Bader, who is also tipping a new chief trade representative, says the choice of replacements will be significant.

"Personalities matter. The identity of those people will affect policies," he says.

But whoever fills the key roles, there is already a clear sense of posturing in Washington DC as the leadership rolls over in Beijing.

There won't be "currency manipulator" labels flying about on day one - as Mr Romney had promised - but neither will be there be any hiding from competition and potential dispute between what are New Zealand's second and third largest trading partners.

For a country this week faced with an historically high unemployment rate, New Zealand could seriously do without disruption among its top trade partners. Already, the double digit growth rates in the Chinese economy are a distant memory and the US is staggering its way through a recovery. New Zealand's exporters, as ever, would dearly love improved access to not only US markets but also the nine other member nations of the Trans-Pacific Partnership (TPP).

Notwithstanding the strong misgivings of some critics about a deal, Mr Obama's re-election is good news for the TPP. Perhaps even better than some might have imagined.

Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics, is on three private sector advisory groups to Mr Obama. He is regularly briefed by the administration on trade policy.

"It [TPP] is the centrepiece of US trade negotiating strategy," Mr Schott says. "If you look at what Obama is going to put priority on, it will be on the TPP."

The TPP was hampered during Mr Obama's first term by the sizeable distraction of the global financial crisis, among other things.

There remain many sceptics of any kind of deal because large differences between the US and New Zealand alone appear unbridgeable.

And meanwhile, Korea and Japan are possible starters to join TPP talks next year, adding yet more complexity. But Mr Schott sees this as something to celebrate, rather than fret about. The addition of Korea and Japan would boost the TPP group's proportion of global GDP from about 30 to 40 per cent.

"Sometimes in a trade negotiation, the deal is too small to reach agreement because you don't have enough incentives built in to the package to garner the political support for changing your own policies," he says.

"There is no way that the US congress is going to open up the US dairy market in a bilateral deal with New Zealand . . . But in the context of the TPP, there is a lot involved with New Zealand but with also nine other countries."

That is not to say that signatures will be inked on a TPP deal any time very soon.

While optimistic, Mr Schott warns that political leaders have recently been "off in the clouds" on the timetable.

Alongside TPP, the other perennial discussion between Prime Minister John Key and Mr Obama or Mrs Clinton has been Afghanistan.

Soon after a tragic fortnight in August which saw five Kiwi soldiers killed in Afghanistan, Mr Key announced full withdrawal of New Zealand's forces by April next year. Only a very small number of Kiwi troops would stay on for training and work at coalition headquarters while some financial aid would continue, he said.

For the US, it's a rather different story, which may force a change for Mr Key, or some other future Prime Minister.

While vice-president Joe Biden said it was withdrawal for the US by 2014 "full-stop," they have a strategic partnership agreement with Afghanistan that stretches to 2024.

US officials will soon be hammering out the precise detail of an ongoing presence past 2014.

"The United States is not going to abandon Afghanistan at the end of 2014," Mr Inderfurth, a specialist in the region, says.

"Not only is it not going to abandon it, everyone is talking about the decade of transition - supporting the continuing training for the Afghan security forces, paying for the Afghan security forces, economic assistance."

The Obama Administration does not expect to have to face this on its own. The strength of New Zealand's ongoing contributions - which at the moment include an $18.6m solar power plan amidst more than US$16b committed globally - could become an issue.

John Hartevelt is travelling on a US Government-funded programme.

- Wellington

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