We still don’t know who will form the next New Zealand Government.  There are two scenarios being talked about most widely.  Both involve New Zealand First.  One would be led by National.  The other by Labour and the Greens.

What is the NZ First trade policy and how might it impact on New Zealand’s negotiating agenda?

NZ First claims that it is a pro-trade party that will support FTAs that are “demonstrably in New Zealand’s interests”.  It supports tax cuts for exporters.  It is on record as supporting FTAs with Russia and the UK.  Winston Peters has given at least one speech advocating a FTA linking the Commonwealth.  NZ First gets considerable support from companies involved in the primary sector – fishing, horse racing, meat, dairy and forestry.

In practice NZ First has not been supportive of FTAs in Parliament.  As Foreign Minister under the Clark Government he famously opposed the FTA with China. It is difficult to think of an agreement that was more demonstrably in New Zealand’s interests to support…

In opposition in recent years NZ First has consistently opposed FTAs including TPP.

NZ First’s main concern relating to TPP seems to be in regard to Investor State Dispute Settlement (ISDS).  It is clear that the level of understanding of ISDS by members of the NZ First caucus is not high.  It is therefore possible that a National led Government might be able to provide sufficient reassurance to garner NZ First support for TPP if ISDS is properly explained.  TPP 11 would be worth $2.5 billion a year to the New Zealand economy.

Labour wants to re-negotiate the TPP 11 commitment on investment in existing houses to allow a ban to be imposed on foreigners making such purchases.  NZ First would probably support this endeavor.  The Greens share NZ First suspicions on ISDS.  Such a fundamental renegotiation of important parts of TPP are unlikely to be completed quickly.  A Labour/Green/NZ First scenario would be a big complication for TPP 11.  It would either result in a delay in the outcome or New Zealand withdrawal.

The proposed FTA between NZ and the EU should survive any scenario.  ISDS is not likely to be part of the negotiation which will make it more straight forward.  This is due to EU internal factors (a court decision over negotiating competence – EU v member states) but could be claimed as a victory/concession by NZ First, NZ First/Green.

A FTA negotiation with the UK cannot happen until the UK departs the Customs Union with Europe.  Under the most optimistic scenario (Theresa May’s Florence speech) that will be three years away.

A revival of the FTA with Russia would be regarded as very negative by the EU at this point in time because of the Russian activities in Ukraine.

NZ First may well be open to a FTA negotiation with the Trump administration.  National may likewise consider this.  Labour/Green concerns about Trump would likely make such a  negotiation impossible under the Labour/Green/NZ First scenario.

NZ First is likely to regard the FTA negotiation with India, the GCC and RECP with some suspicion.  Sri Lanka will probably also be a potential concern.

FTA Negotiation updates

TPP 11

As New Zealand voted NZ’s TPP negotiators were flying back from Japan where the latest TPP 11 negotiations had been taking place.  The concept is still alive but there are obviously complications. Vietnam seems intent on seeking a re-negotiation of more of the agreement than others are comfortable.  Should New Zealand join the Vietnamese side once our new Government is formed this could delay or derail this negotiation.

Senior officials are going to meet again in October to see whether a final agreement is possible at the November APEC summit.

India

There has been no progress.

RCEP

Negotiations appear stalled.  Australia and New Zealand have refused to accept proposals for a “political agreement” by the end of the year.  The quality of offers, particularly from India, is poor.

EU

All signs remain positive.  Expect a senior visitor from Europe in November and agreement to launch negotiations at that time.  Actual negotiations could commence by the end of 2017.

FTA Upgrades

The focus is currently on China and Singapore.  Unfortunately progress could be impacted by Labour demands that some FTAs will have to be re-negotiated if they come into power to allow a ban to be imposed on foreigners purchasing existing houses.  A senior Chinese visit is due before the end of the year.

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