Friday, July 1, 2022

NZ joins regional economic framework

Trade experts remain sceptical about what, if anything, the new Indo Pacific Economic Framework (IPEF) can offer New Zealand food exporters.

The IPEF was first proposed by United States President Joe Biden in October and was formally launched in Japan on May 23.

The themes of the framework are fair and resilient trade, supply chain resilience, infrastructure, clean energy and decarbonisation, and tax and anti corruption processes.

The countries agreeing to this are the US, NZ, Australia, Brunei, India, Indonesia, Japan, South Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

The group represents 40% of world GDP.

It is being seen in some places as a best option after Biden declined to reverse Donald Trump’s withdrawal from the Comprehensive and Progresssive Trans Pacific Partnership (CPTPP). 

But former diplomat and veteran trade analyst Stephen Jacobi is very sceptical about IPEF.

He says it is an American-centric arrangement and is at odds with New Zealand’s tradition of inclusive organisations.

“Secondly, it is not a free trade agreement (FTA) so it has no market access commitments … that means it has no immediate commercial benefit for our exporters,” Jacobi says.

Jacobi concedes there were trade facilitation provisions which could be useful, but they would not be nearly as effective as an FTA.

Worse still, the US was still applying tariffs to New Zealand steel and aluminium sales on ”bogus national security grounds”.

“I find it hard to believe we are going to have a conversation with the United States about fair and resislient trade, which is the first pillar of IPEF, when they are still applying these tariffs.”

Stephen Jacobi
Trade analyst

“I find it hard to believe we are going to have a conversation with the United States about fair and resislient trade, which is the first pillar of IPEF, when they are still applying these tariffs. 

“It could be steel and aluminium today but it might be beef and dairy tomorrow.”

The Auckland academic Jane Kelsey is even more scathing, accusing New Zealand of sleepwalking into signing an agreement that was unclear.

“The low-key event was overshadowed by the elephant in the room – no one knows what the IPEF actually is”, Kelsey says.

“Rather than dive straight into these negotiations, the Government should commission an an independent white paper that sets out the opportunities and threats from such an arrangement.”  

Kelsey says the agreement appeared to be mainly about helping the US to counter China’s ascendency in the region.

Meanwhile, Professor Robert Ayson of Victoria University told RNZ some of the elements of IPEF were useful.  

“But it is not a replacement for CPTPP, it does not have market access.

“It also has the veneer of the US trying to decouple its economy from China and trying to encourage other countries to decouple their economies from China.”

But Ayson added that in terms of encouraging the US to engage with Asia and the Pacific, membership of this pact by New Zealand was a “no-brainer”.

He did not expect China to be “super pleased” about this, but the membership of the group was so broad there was a good chance of the American goals behind IPEF being diluted by the diverse interests of its members.  

As a result, any attempt by the US to use economic pressure to further its political goals wouold probably not get very far.

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