Thursday, December 7, 2023

Deal done but delivers little

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A massive Asian trade deal has failed to deliver on its early promise.
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Prime Minister Jacinda Ardern was on hand at a regional summit in Bangkok earlier this month to back an interim agreement among 15 of the 16 countries negotiating the Regional Comprehensive Economic Partnership (RCEP) since 2012.

India was left out of the deal that includes China, Japan, South Korea, Australia and NZ and the 10 southeast Asian countries making up the ASEAN trading bloc.

While the exact details will not be known till the text of the agreement is released in the next few months, without India’s inclusion it is unlikely it will do much to improve access for NZ’s agricultural exports.

That’s because NZ already has mainly high-quality trade agreements with all the RCEP countries either through regional free-trade deals like the Comprehensive and Progressive Trans Pacific Partnership or country-to-country agreements.

It does not have a trade agreement with India and the chance to hack away at high tariffs blocking NZ exporters from meaningful access to its 1.36 billion consumers has been the singular objective for this country’s negotiators in the long-running talks.

The executive director of the Asian Trade Centre in Singapore, former trade negotiator Deborah Elms, said India baulked in the end at the prospect of increased access for dairy products from NZ and Australia.

Both had conceded ground by giving India more time to cut tariffs than they would have been comfortable with but it was still not enough.

Elms said it did not help that the Asian members of RCEP had set the bar low for eliminating barriers to trade in goods.

“From the beginning, RCEP was never going to cover all tariff lines.

“That meant members could exclude a fairly high number of sensitive items … but it also meant governments could decide what to carve out.

“For most members, agriculture is the problem.

“To make matters worse for agricultural powerhouses like NZ and Australia, dairy is typically one of the most sensitive sectors behind rice.

“Getting any opening was always a tall order.”

Nevertheless, it still makes sense for NZ to sign up to RCEP. If you get India in you can always improve the deal over time.

“In the meantime, you have set the conditions for better practices and eased the business environment. That is worth doing.”

The Government’s agricultural trade envoy Mike Petersen agreed.

“Without India the gains are modest. It is a piece of regional trade architecture that we need to be in.

“If we weren’t in and India joined further down the track then we would be out.

“It is one of those ones where the cost of being out is greater than the benefit of being in.”

At the Bangkok meeting the remaining RCEP countries left the door open for further negotiations with India in the next few months.

If those are successful it could re-join the deal before it is formally signed off in early 2020.

However, that looks unlikely, Petersen said.

Indian Prime Minister Narendra Modi has been recently re-elected with an increased majority and has still shied away from signing the contentious deal.

“If that delivers us an outcome early next year then I will be thrilled but right now the chances of India joining RCEP in the next 12 months are looking very remote.”

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