Editorial: Trade opportunity

OPINION: United States President Barack Obama's announcement that he wanted to engage with the Trans-Pacific Partnership was a surprise but welcome move.

Obama envisages expanding the current free-trade partnership, which was concluded in 2005 and comprises New Zealand, Singapore, Brunei and Chile, to include the US, Australia, Peru and Vietnam, with other nations, such as Canada, also likely to sign up.

For New Zealand Prime Minister John Key this was especially promising news. It allowed him to return from the Asia Pacific Economic Co-operation (Apec) summit in Singapore with a far larger prize than just the conclusion of free-trade talks with Hong Kong.

The greatest significance is that Obama's proposal would link this country to the economic powerhouse of the US. This would be as part of a regional deal embracing the eight nations in the Americas, Southeast Asia and Australasia, rather than the bilateral agreement which New Zealand governments have pursued. The prospects of achieving the latter were not strong.

Obama's concept might have been designed to quell criticism that the US had been dragging the chain on forging stronger trade links with Asia. This was a damaging perception for the US, especially as it will be hosting the 2011 Apec meeting in Hawaii.

It is also noteworthy that the proposal is between the US and smaller Pacific Rim nations rather than Japan, South Korea and China, although New Zealand does have a free-trade agreement with China and is negotiating one with South Korea.

Obama no doubt hopes that, if the expanded partnership succeeds, it will galvanise the East Asian economic giants into greater trade liberalisation, and perhaps to join the partnership themselves. In this way the partnership could be a catalyst to achieving the sought-after Free Trade Area of the Asia Pacific.

Obama's move reflects the reality that efforts to achieve this free-trade goal had become bogged down. It also suggests that an Apec agreement – for free trade in developed member nations by 2010 and for developing nations by 2020 – was overly optimistic.

Yet although Obama's vision is positive, the hope that a deal could be struck by 2011, which in turn is before the next presidential election, could prove too ambitious.

Obama must balance the free-trade advocates with the protectionist sentiment among US farmers and trade unions, and within his own Democratic Party. This, as well as the new administration's wish to review trade policy, led to the postponement of earlier US moves to join the partnership.

A special concern for New Zealand would be if agriculture were not included in the larger agreement due to the powerful US farming lobby.

Despite these caveats, a successful deal could be worth billions of dollars in exports and the regional approach is preferable to a plethora of individual, bilateral free-trade agreements across the Pacific.

Key and his capable trade minister, Tim Groser, must now take every opportunity, including the just announced prime ministerial visit to Washington DC next year, to ensure that the momentum created by Obama's enhanced partnership call is not lost.

- © Fairfax NZ News