TPP – Let’s keep dancin’ folks By Stephen Jacobi [1] Dominion Post, August 2015

Stephen Jacobi keeps calm after the Maui TPP negotiations.

There’s an old Peggy Lee song – “If that’s all there is, then let’s keep dancin'”.

That essentially was how the Trans Pacific Partnership (TPP) negotiations ended up in Maui.   The deal on the table proved insufficient in three areas in particular – dairy, motor vehicles and intellectual property – so Ministers decided to keep on dancin’.

How did this happen?  Going into Maui there were still significant issues to be resolved.  There had been no engagement from Canada on market access for dairy and the outcome of bilateral negotiations between the United States and Japan had not been fully revealed.  Other participants had their own concerns (motor vehicles, sugar, rice) and no-one was ready to tackle other complex issues like intellectual property until market access was settled (so much for those who say TPP isn’t really a trade deal!).   Whether cars or dairy, it is simply not feasible for major exporters to conclude an agreement with totally unsatisfactory outcomes on products of key interest.  Dairy is not just a concern for New Zealand.  The US dairy industry is bigger than ours and its share of world trade has tripled since 2003.  New Zealand, Australia and the US have a common interest in prizing open highly protected markets and the US stands to win if it leads by example in opening up its own market to competition.

Where to from here?  The Maui outcome does not spell the end for TPP.  Far from it.  Progress was reported in a number of areas and there are now fewer outstanding issues on the table.  If negotiators and Ministers can get together soon, the momentum can be maintained and any backsliding from what was agreed in Maui can be prevented.  The longer it takes to re-engage, the harder it becomes.  The meeting of APEC Leaders in Manila in November is an obvious target for concluding TPP but the re-engagement needs to start much sooner.

Is there anything in this deal for New Zealand?  Yes of course. Dairy, as our largest export, has potentially the most to gain.   Increasing access and reducing costs in TPP economies would be a huge boost to a sector currently in real difficulty.  In the light of Maui, the question is not whether dairy will be excluded from TPP, but rather the extent of its inclusion:  even if tariff elimination is not on the cards, TPP economies could still allow significant access into the dairy consumption in their markets under transparent rules.

The value of our other exports should not be overlooked.  In just four major exports – meat, horticulture, seafood and wine – there are annual tariffs paid in TPP economies of at least $130 million. If other products are added (forestry, manufactured goods), and combined with some even partial gains on dairy, the benefits would be major.  This is just money saved, not new business, which, as our other FTAs have shown, would occur under lower tariffs.

We should not overlook either the impact of commitments on services exports – especially professional services (engineering, ICT, software) and financial services – and provisions which make investing in New Zealand or New Zealand companies investing offshore more attractive.  Maui would have appear to have settled differences amongst the parties including the need to balance protections for investors with the right to continue to regulate to promote public health (including in respect to tobacco) and the environment, and in New Zealand’s case to uphold the Treaty of Waitangi and to make decisions under the Overseas Investment Act.

On intellectual property New Zealand has interests to promote (our creative industries and some IT exports could benefit from better IP protection internationally) as well as some clearly identified risks to avoid.  Generally the Government will want to hold, to the greatest extent possible, to existing policy in respect to medicine pricing, the role of Pharmac, patent terms and extensions including in respect to biologic drugs and to software, copyright, geographical indications, parallel importing and internet file downloading.   New Zealand negotiators are well aware of the potential costs of moving away from current policy: while some change to current policies cannot be excluded, the Government continues to reassure the public that this can be managed.

Amongst the range of other issues in the final TPP there could be some other important advances.   TPP could well be the first FTA to include binding environmental provisions which protect endangered species – a major win.

The biggest prize from TPP is being part of the framework of new rules for trade and investment in the wider region that takes 70 percent of our exports.  We know from past experience how difficult it is when we are locked out from overseas markets. Trade is what makes possible the lifestyles we enjoy.  That’s why the TPP dance needs to go on – could any responsible New Zealand  Government seriously afford to turn away from doing the utmost to achieve an acceptable outcome?

[1] Stephen Jacobi is Executive Director of the NZ International Business Forum www.nzibf.co.nz