Pattrick Smellie: In trade, you can't always get what you want

Former Prime Minister John Key shakes hands with former South Korean president Park Geun-Hye after the signing of a free ...
CHUNG SUNG-JUN/GETTY

Former Prime Minister John Key shakes hands with former South Korean president Park Geun-Hye after the signing of a free trade agreement between the two countries in 2015.

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One of the new Labour Party leader Jacinda Ardern's many freshly revealed qualities is decisiveness.

Asked curly questions by journalists, she'll tend to give a "yes" or a "no" without hesitating. It's refreshing and builds trust and authority.

Pattrick Smellie: Could Labour's trade stance become "no more than an impotent gesture incapable of being implemented?"
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Pattrick Smellie: Could Labour's trade stance become "no more than an impotent gesture incapable of being implemented?"

It's also tempting to wonder how long it can last.

Most issues of government are more difficult than yes or no.

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Take, for example, Labour's expectation that South Korea will swiftly amend its free trade agreement with New Zealand to accommodate Labour's desire to ban the purchase of existing homes by foreign buyers.

Ardern believes Seoul will roll over because, after all, it asked for and got the same deal from us, while the silly National Party government didn't even ask.

"It should have. We will," she said.

Not only that, but apparently the Koreans will be happy to make that change without negotiating it first.

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A Labour-led government will legislate for the provision before Christmas, leaving for later the implementation date, which will depend on a successful renegotiation.

That looks dangerously like New Zealand handing Korea a fait accompli, accompanied by a demand, and backed by no bargaining power, while creating some offence in the capital of a fast-growing, high value Asian market.

More to the point, Korea is holding out against US President Donald Trump's attempts to renegotiate the US-Korea free trade agreement.

It is highly unlikely that Seoul would roll over to accommodate New Zealand domestic politics if it means opening a chink in its opposition to renegotiation with one of its most important trading partners.

The implication left hanging: if Korea plays hardball, could Labour's legislation become a political liability – no more than an impotent gesture incapable of being implemented?

All those factors make Ardern's confidence a gutsy call, especially as it bears directly on Labour's wider desire to renegotiate exactly this element of the Trans-Pacific Partnership Agreement.

The Asia-Pacific trade and investment pact is ailing since Donald Trump took the US out of the deal, and it's hated by the left of politics.

To shore up its vote with anti-globalists, and perhaps thinking TPP would die anyway, Labour toughened its stance last year from the "ability to restrict" foreign land ownership negotiated in the original TPP text, to an outright "ban".

The original formula would have allowed punitively high stamp duty or other revenue measures to all but kill off sales of homes to foreign buyers, but a ban is a big step further and requires renegotiation.

Yet this comes just as TPP-11 – the post-US grouping – has been making progress towards a new commitment that could emerge at the annual APEC leaders' summit in Vietnam in November.

If elected, this might be Prime Minister Jacinda Ardern's first big outing on the world stage. It also looms as the APEC meeting where New Zealand goes from TPP whip-cracker to TPP laggard.

Perhaps, if all it takes to get a Labour-led New Zealand over the line is permitting the foreign property buyer ban, why wouldn't the TPP and APEC members hold hands on a quick text change?

It may be preferable to chalking up another defeat for a deeply troubled trade pact whose significance is as much geo-political as it is economic.

But such a positive outcome requires a lot of belief and involves a lot of moving parts. It also implies a wider renegotiation of the TPP negotiations, which could add years to the process.

New Zealand and Japan have spearheaded efforts this year to prevent that happening.

If New Zealand is seen to be a weakening influence on progressing TPP, the risk must be that the pact will become TPP-10 and move on.

In time, perhaps it might go back to TPP-11, but not necessarily by adding New Zealand.

First cab off the rank of Asia-Pacific economies keen to be inside the TPP tent is, ironically, South Korea.

- BusinessDesk

 - Stuff

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