Ministerial Advisory Group
Hon Todd McClay held the first meeting of his advisory group on trade on 4 May. As we reported last time Export New Zealand was well represented. The meeting allowed a good discussion of the current trade agenda with a focus on prospects for TPP without the US and also of the Government’s new trade agenda. The discussion was free and frank from both Minister McClay and his officials. This was one of the first public meetings held with the new Director of MFAT’s Trade Negotiations Division Clare Kelly. Minister McClay is open about the fact that the original TPP negotiation should have been more transparent. He is determined that future negotiations will be more open. This was welcomed by advisory committee members.
The prospects for an agreement to proceed with TPP without the US received two boosts this month. The potential agreement was the centerpiece for Prime Minister English’s talks in Japan. From these discussions it is clear that Japan and New Zealand share a similar vision. A few days later Trade Minister McClay co-chaired a meeting of the TPP 11 countries in Hanoi in the margins of the APEC Trade Ministers’ meeting. The APEC meeting itself ended in some disarray as agreement could not be reached on the final statement (the US would not agree to some of the standard language on free trade and resisting protectionism). In contrast the TPP 11 meeting was remarkably unified. The 11 will try and be in a position to reach a final decision on whether to go ahead and implement the agreement in November. Meanwhile a series of meetings of senior officials will be held to consider the technicalities of how TPP would work. Interestingly they will also consider the possibility of others joining TPP 11. The first of these meetings of senior officials will take place in Japan in July.
While the meeting in Hanoi went well there is much work to do to convince all 11 parties that implementing the TPP agreement without the US is the best way forward. For some, the lack of the US diminishes the value of the agreement. There are some who would like aspects of the agreement re-negotiated, or chapters removed. The re-negotiation of NAFTA (involving Canada and Mexico) and the possible expansion of the Pacific Alliance (involving the three Latin American TPP 11 participants and non-TPP 11 Colombia) is another factor at play.
If all goes well we should expect the new agreement (which we will call TPP 11 until such time as it has another name) will need a new ratification process including a new national interest analysis. In the meantime Minister McClay is on the record as saying that “TPP 11 represents tariff savings of NZ$222 million each year. Japan’s National Graduate Institute of Policy Studies has estimated that TPP 11 increase New Zealand’s GDP by 3.4% and is worth an additional NZ$2.5 billion to our economy after 10 years”.
As we go to print there is still no agreement on the way forward. Saudi Arabia remains the sticking point.
The trade ministers representing the Regional Comprehensive Economic Partnership also met in Hanoi following the APEC and TPP 11 meetings. The meeting did not achieve great progress. India seemed particularly discouraged. India is publicly saying that it is only prepared to remove tariffs on 74% of imports. Other members are suggesting that at least 92% of tariff lines should be liberalized (even that is very poor compared to other FTAs New Zealand has negotiated). India also seems very concerned about opening its market to Chinese imports. On services India seems to be seeking a more ambitious outcome on the temporary movement of skilled workers (Mode 4) than some of the other members (eg Australia).
The prospects for the RCEP negotiation being completed by the end of 2017 are not good.
There have been two positive developments in Europe also. The election of President Macron in France was one. A decision by the European Court of Justice on the EU’s ability to negotiate FTAs without votes in individual members state legislatures is another. The last thing New Zealand wants is to see is the outcome of the EU – New Zealand FTA subject to votes in the French legislature etc. Essentially the ECJ has decided that such votes are not needed except when it comes to investment and investor state dispute settlement (ISDS). This is probably good news but it will probably mean that either investment and ISDS is not part of the EU – New Zealand FTA or else subject to a separate agreement.
The focus has been on Brexit and the UK election.
A number of our FTAs are going to be reviewed in upgrade negotiations. Singapore, ASEAN and China are all currently on the table. Those with improvements to suggest to the existing FTAs should be making these to MFAT.