Friday, July 8, 2022

Trade talks – all or nothing likely outcomes

TRADE officials have returned from Pacific Rim trade negotiations optimistic a deal potentially worth billions of dollars to this country’s agricultural industries can be done this year.

The 19th round of talks for the TransPacific Partnership (TPP) wrapped up in Brunei this week after trade ministers from most of the 12 countries involved had earlier met to discuss ways of resolving remaining areas of disagreement.

The negotiations aim to eliminate tariffs and other barriers to trade and investment between the participating countries.

The benefits to the New Zealand economy of such a deal have been estimated to be as high as $2.1 billion by 2025.

NZ as well as the United States, Singapore, Brunei, Chile, Peru, Australia and Vietnam kicked off negotiations in 2008.

Malaysia, Mexico, Canada and Japan have all joined since.

The latest negotiating round in Brunei was the last before the countries’ leaders assemble at the annual APEC meeting in Bali in early October.

After meeting fellow trade ministers this week NZ’s Tim Groser is optimistic leaders will be in a position by then to declare a deal is possible for this year.

“That was the purpose of by far the most intensive meeting we have had yet on TPP,” Groser said.

“Until now discussions have been overwhelmingly an officials’ process…slowly the political elements are coming into play.”

Political deal-making would be important in getting a deal done. After nearly five years of negotiations between officials only the toughest, politically-contentious issues remained unresolved.

For NZ they included access for its dairy exports to the protected American domestic market.

The Americans are yet to offer make a meaningful offer in the negotiations to NZ on dairy.

NZ’s ambassador to Washington DC, former Prime Minister Mike Moore, this week argued the US might be ready to give ground to NZ on dairy access.

He pointed out that Japan’s and Canada’s late entry into the talks offered the tantalising prospect of tariff-free access to American producers to the two countries’ consumer markets.

It would be difficult for the US to push for this lucrative opportunity for its own producers without giving the same access to its own markets for other large dairy exporters involved in the talks like NZ.

Groser said the US was edging towards an offer which included total elimination of tariffs on NZ agricultural exports.

He said he expected such an offer by the time of October’s APEC leaders meeting.

Whether the US is prepared to phase out tariffs in a timely fashion of 10 years or less will likely dictate whether it will be acceptable.

Even if NZ can get the US to roll over on dairy there are numerous remaining flashpoints between countries that could derail the entire negotiation.

These reflect the negotiations’ deep reach into the participating countries’ economies and range from Japan’s reluctance to open up its insurance and farming industries to Malaysia’s resistance to last minute attempts by the US to outlaw tobacco controls in TPP countries.

NZ even has its own bottom lines aside from elimination of agricultural tariffs which it has previously said it is not prepared to compromise.

The Government said it was continuing to resist US demands for changes to the way its drug-buying agency Pharmac cuts dealt with the big American pharmaceutical companies.

Groser said he was confident the big issues like free trade in agriculture would be included in the TPP if it was going to get over the line at all.

“I just don’t think we need another traditional little quota deal to protect everybody’s sensitivities,” Groser said.

But the former trade negotiator expected some compromises would be necessary.

“It will be brutal and there will be blood on the floor. I’ve never seen a negotiation that didn’t have that element of brutality at the end of it but we will be relying on our experience to get us through.”

The Government’s special agricultural trade envoy, Beef + Lamb NZ chairman Mike Petersen, attended the talks in Brunei.

He admitted the negotiations could still yet be derailed but remained confident a deal could be done that would benefit NZ farmers.

“It could be derailed by a single issue. But if you get weakness in any one single product like sugar or dairy that will allow others to pull back on their ambitions as well on other products.

“That is why it needs to be comprehensive. We will get either a really good deal here or we will struggle to get anything at all.”

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