Jousting on the frontiers of trade

In garages and community halls across Auckland, activists opposed to the Trans-Pacific Partnership will be breaking out the paint tins, nailing placards to poles and planning how best to make their presence felt when its bandwagon comes to town early next month.

From December 3 to 12, New Zealand will host the latest round of negotiations for an Asia-Pacific free-trade deal which began under a Labour-led government in 2007, and now has Prime Minister John Key predicting a possible conclusion by the end of next year.

Success has a thousand parents, so the partnership is characterised these days as a United States-led initiative, when in fact the US came on board slowly after the initial push from New Zealand, Singapore and Chile.

Some 12 countries are involved now, if we count Thailand's announcements this week. Japan continues to circle on the edges.

Meanwhile, an alternative trade pact, the Regional Co-operation Economic Partnership, also got a big leg-up this week. Leaders at the East Asia Summit in Cambodia confirmed the 16 countries in RCEP - including China, but not the US - will begin formal negotiations.

That sparked media reports suggesting RCEP is "China-led" and will compete with TPP as part of the geopolitical jousting now happening more widely between China and the US.

Yes, the US-China dynamic is undeniably present in the interplay between these two initiatives, and that dynamic is about geopolitical influence as much as trade. After all, it is no accident that US President Barack Obama made Burma, still a client state of China's despite recent political loosening, his first trip since his re-election.

So there is a smidgen of credence for the claim by Auckland University law professor and leading TPP critic Jane Kelsey that other countries "risk becoming collateral damage in a new version of the Cold War" as China and the US make trade policy a new area of competition.

However, that claim would carry more weight if it were not for the fact that competition in trade policy is common to almost every country bar North Korea, and that the ability to act nimbly in the miasma of competing trade initiatives is one of New Zealand's few competitive strengths.

It also underplays the fact that RCEP talks were started by the 10 members of the Association of Southeast Asian Nations (Asean), which includes powerhouse economies such as Indonesia and serious competitors to China's previous dominance of low-cost labour such as Vietnam and Cambodia.

In fact, while most observers think a successful RCEP negotiation will produce a weaker, more limited trade pact than TPP, it's a bigger deal than TPP, representing nearly half the world's population, about a quarter of its trade, and combined annual economic output of some US$23 billion (NZ$28.2b).

New Zealand's decision to have a foot in both the TPP and RCEP camps, makes absolute sense.

That point was made forcefully in a paper from the New Zealand Institute of Economic Research for the export arm of Business New Zealand, which argues the country must maintain its position "on the frontier of international and bilateral trade agreements".

That means "being prepared to take opportunities as and where they present themselves", widening the scope of potential trade pacts, and staying the course rather than walking away once a deal is inked.

"Pursuit of trade agreements is not so much about increasing market access any more as it is about managing risks of losing market access," it argues, and should foster establishment of businesses in the countries concerned, as well as exports.

For all the fears - some justified, some overblown - about threats to sovereignty, intellectual property rights and the hollowing out of local industry, New Zealand not only needs such access to other markets, but also knows that no-one else will care if we do not make the effort.

It is this last point that worries the institute the most. International trade policy in New Zealand has traditionally seen a high level of bi-partisan political support. But what if that changes, the institute asks.

"The beneficiaries of trade policies and the bearers of costs from barriers are becoming more diffuse.

"A key risk is that New Zealand loses its invaluable bi-partisan position on trade policy, especially in light of shifts already having taken place within the New Zealand Parliament."

Risks inherent in trade pacts are real, but so are the risks of disengagement. It's a pity no-one will wave a placard for that view when the TPP negotiators come to town. BusinessDesk