Free trade deal dreams proving elusive

17:00, Jun 16 2014

Around the world we're known as free trade fundies - pious, hectoring even, in our search for the holy grail, a free trade deal that opens the world's borders to our dairy and agriculture exports.

The Trans Pacific Partnership deal is just the latest all-consuming "big thing" - before that there was Doha, the dream being that global trade barriers would melt away by international consensus.

Years later Doha is still stalled.

For years there was the mirage of a Free Trade Agreement with the US. That debate got so fraught, insiders say New Zealand was forced to strategically withdraw before the US turned it into a quid pro quo debate about New Zealand's nuclear-free legislation.

Five years on, the TPP is proving just as elusive, despite the original dream of keeping negotiations focused and tight between a handful of like-minded countries.

A flying visit to Tokyo by US President Barack Obama recently appears to have kickstarted talks - but at a big cost. Desperate to have Japan in the deal, the US has signalled its willingness to make compromises in areas, including agriculture. Trade Minister Tim Groser is now publicly flirting with the idea of walking away from the TPP. That will barely raise a ripple in the US.


It might be all smiles and backslaps when Key and Obama meet up on the world conference circuit. But in a bald economic equation, Japan means more to Obama than New Zealand, White House visit or not.

Frankly, suggests former US Secretary of Agriculture Clayton Yeutter, TPP was never a goer without Japan on board.

"Had Japan not come into these negotiations, my view is that TPP would never have been concluded or at least would never be approved in the US. Japan coming in generates excitement in this country, it generates enthusiasm in the business community and, in particular, it generates enthusiasm in the agriculture community which had very little to gain in TPP prior to the entry of Japan. So Japan's entry was critical to the success of this agreement."

The downside is that to get Japan on board, compromises in agricultural market access are likely to figure large in the equation. Yeutter, who served under George H Bush, says our Government understands that, though it is useful having the likes of New Zealand and Australia take a more "purist" view of the negotiations.

"It's good for the US to be able to point out to Japan, ‘look, we're being practical and pragmatic. If you think we're being tough on you look at how the Kiwis feel about this. Or the Aussies'."

If New Zealand walks away, it will be hailed as a victory by the anti-free trade lobby, which believes that the Government will have to make concessions benefiting big business, undermining our sovereignty and threatening things like our drug-buying system, which guarantees Kiwis cheaper medicine than in the US.

But the chances of New Zealand choosing to remain on the outside of one of the world's biggest regional trading blocs are slim. The Government has touted benefits in the billions of dollars from being inside the tent.

Yeutter says it is too soon to gauge the shape of any compromises, but admits the pressure is on.

"If a deal cannot be done by, say, mid 2015, it seems to me that all 12 countries are then in a position where it could well drift till after our presidential election, that is all the way to 2017. That could be unfortunate in my view, because people will begin to view it like Doha."

And if it fails? It may be a case of resurrecting Plan B - the push for a bilateral trade deal with the US. We would not be at the top of the US list of potential trade deals - TPP and the equivalent European Union deal rank higher. But Yeutter says it is not out of the question.

"If we were to return to negotiating bilaterals with individual countries I'd say New Zealand would move to a relatively high-priority position immediately."

In other words, the search for the holy grail will still have legs.