After the TPP — a new approach to trade

The Government likes to appear almost casual in the way it reacts to yet another setback with the TPP.

First came the resistance in the US Senate, then the election campaign and now, like it or not, all of President-elect Trump’s trade negotiating team at one point or another have opposed it.

It’s looking distinctly like the Mony Python parrot, bereft of life but with its sponsors determined to prove that it could yet voom.

And though the Beehive discounts attempts to prove it dead as negative speculation, if you listen to what Trade Minister Todd McClay is saying, it is quite clear there has been a radical rethink of New Zealand’s trade negotiating policies in the wake of the failure of theTPP.

First is the appointment of McClay himself to replace the former Trade Minister and longtime trade negotiating diplomat, Tim Groser.

McClay may lack Groser’s urbane sophistication, but Groser lacked McClay’s full on retail political skills.

McClay argues that trade agreements create jobs.

“We are a small country that relies so heavily on trade, where in every single region of New Zealand jobs depend on our ability to sell our goods and services overseas,” he says.

It has become a mantra, endlessly repeated in the more than 50 meetings he held last year on the TPP; the 14 roadshow and hui on trade policy and then the six formal meetings with the Iwi Leaders’Group.

And McClay has also moved to include Labour and NZ First in trade delegations.

Labour’s David Clark, for example, went on a pre-Christmas trip to Iran.

This emphasis on selling the benefits of trade agreements – and globalisation – domestically is a clear indication that the Government now realises it left the electorate behind over the TPP.

But it’s learnt another lesson from the TPP too.

And that is the “eggs-in-one-basket, king hit approach to trade agreements where one big deal can be billed as the “next big thing” leaves the Government far too open to failure.

And the last thing it wants to offer up to its trade opponents like Jane Kelsey is another big failed trade agreement.

So now the approach is to negotiate and sign trade agreements wherever and with whoever is willing to deal.

The current negotiating list includes the Asian-wide Regional Co-operation and Economic Partnership (RCEP); the refresh of the China Free Trade Agreement; an agreement with the Gulf Co-operation Council; the “Pacer Plus” deal with the South Pacific nations; an agreement with the EU and possibly a deal with Britain.

Both McClay and the Prime Minister, Bill English, are now on their way back from Europe and Britain where the trade agreements have been the focus of their meetings with the EU, British Prime Minister, Theresa May and German Chancellor Angela Merkel.

McClay is quick to point out that there remains great uncertainty with Brexit and that anyway, New Zealand cannot do a deal with Britain until it has left the EU.

McClay is doubtful they will be able to complete their withdrawal within the two years allowed after they trigger their resignation through Article 50 of the EU Treaty.

The Government is said to be under some pressure from the beef and lamb lobby to do a deal, but New Zealand’s trade negotiators are conscious that the ostentatious courting of May by Australian PM Malcolm Turnbull at last September’s G20 summit in Beijing jarred with European leaders.

Angela Merkel is said to support New Zealand getting a deal with Europe so for the meantime it looks as though the EU agreement will be the priority.

The argument is finely balanced.

Total goods and services exports to the UK for the year ended June 30, 2016, were  $3.1 billion while exports to the rest of the EU came to $5.7 billion.

McClay – who has worked in Brussels as a trade lobbyist — has visited 20 EU member states within the last two years.

“We have a lot of supporters in the EU member states for the launch of a Free Trade Agreement,

“I think we can see that we have a lot in common.

“Our values are very, very similar, our approach to things like labour standards and the environment are quite similar.

“So at one level it is going to be quite easy to reach an agreement, at another, there are going to be some difficult issues to work through like agriculture access.

“I don’t know whether enthusiasm is the right word, but there is certainly support there.

Though agriculture will obviously be a problem, particularly with France, the reality is that New Zealand does not threaten European industrial jobs.

“I’ve said to the Commissioner and the member states that  if you can’t do a high-quality agreement with New Zealand quickly and easily, you can’t do one with anyone.”

Across Europe and the United States, the gutting of manual jobs is a huge reason for the spread of nationalistic, protectionist politics whether it be Trump in America, Farage in Britain or Marine lePen in France.

Of course, the European populist parties are also heavily motivated by their opposition to immigration.

But that too all comes back to jobs – or the lack of them.

And McClay believes Governments have to address the impact of globalisation and technology on the manual job market.

“All trade agreements do is offer opportunity.

“Whether you step through that door and make the most of the opportunities is a choice for individuals and countries.

“If you look at the concern in different parts of the world, I’m not sure that people are necessarily arguing against trade agreements.

“I think for a number of reasons, trade agreements are where the focus comes for things that are not going well in their economies.

“You don’t get to vote against technology.

“Technology replaces jobs without question.

“But you do get a chance to vote on a trade agreement and blame a trade agreement for things that it may or may not be responsible for.”

Again, he comes back to the retail politics of trade agreements.

“We need to talk a lot more about the benefits of trade and be very open about it; that sometimes it is about a compromise.

“If New Zealand wants to sell goods and services overseas we’re going to have to be open to receiving goods and services from them as well.”

But he goes further and believes that there needs to be a whole of Government response to fears about trade agreements.

“The Government needs to give the tools to be able to make the most of the opportunities the agreements open up.

“What this Government has done is to ask how can you educate  and provide skills to society so that those opportunities can be grabbed.”

But his role is not simply about negotiating trade agreements.

He is also in Cabinet as part of the economic development team and as part of the  export promotion team.

His recent trip to Iran was a classic example of this. He was accompanied by a group of business people, predominantly agri business people, all going along with the hope that what was once a thriving export trade, particularly for sheepmeat, could be revived.

In 1979, the-then Meat Board secured a four-year contract for 200,000 tonnes of lamb to Iran.

That market collapsed following the beginning of the Iran- Iraq war and never really revived.

Its legacy was the development of halal slaughtering certification at New Zealand meat works.

But McCklay believes it is ion the brink of starting up again.

“Their Foreign Minister and I agreed that it could be a one billion dollar relationship.

“And in conversations with their Trade Minister, it could be more valuable than that to us.

“But I don’t think it is going to be a quick return to the value of exports that we had previously; it’s going to take a lot of hard work.

“It’s going to take a lot of forming new relationships, but the Government is committed to working closely with the business community in New Zealand because we do see real potential there.”

So he is keeping his eye on the future … he believes there is potential for New Zealand exports to move further into South America and that it will soon be time to start looking at Africa.

This is the post-TPP world, a complex mix of trading relationships with a wider variety of countries.

It’s not quite as straightforward as negotiating one big trade agreement and then stepping back and waiting for the export dollars to roll in.

But it may be more realistic. And it may be more convincing on the campaign trail.

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