India early this morning (NZ time) decided not to join the other 15 members of the Regional Comprehensive Economic Partnership.
Their decision not to go ahead dashed the hopes of Thailand’s Prime Minister General Prayut Chan-o-cha who had hoped the completion of the agreement would be the high point of the ASEAN and East Asian summit he has just hosted in Bangkok.
The other 15 (including New Zealand) have all agreed to go ahead but they will continue talking to India over the next three months with the hope that a full agreement can be reached by February.
Emerging from the summit early this morning, of the leaders of the 16 countries, Prime Minister Jacinda Ardern, said India’s concerns over Chinese imports were a major factor in stopping them from reaching agreement in Bangkok.
India also has concerns about New Zealand’s dairy industry.
Agriculture Minister Damien O’Connor was confident those issues could be resolved but he did not resile from suggestions that part of that resolution could be New Zealand agreeing not to export big quantities of dairy products to India but instead focusing on smaller quantities of high value products.
“They have the largest dairy industry in the world,” said O’Connor.
“We can only supplement some of their demand.
“So I guess a discussion and an educational process with some of the domestic stakeholders might help us break through that barrier.”
O’Connor has already been talking in depth to the Indian dairy industry and has left Bangkok for Mumbai to continue those talks.
“We’ve had some very useful discussions,” he said.
“ We’ve been quite upfront about the fact that we would need to have dairy as part of any agreement.
“And they realise that.
“We’re not going to export all our products in a competitive way.
“ It’s a complementary way.
“And we just have to sit down and agree on the product lines that they’ll allow us into their countries. “
The Prime Minister was also optimistic.
“This is a really significant step forward,” she said.
“Twenty chapters signed by 15 nations.
“This is almost half the world’s population.
“The one country India has not been able to get to the point where it can endorse the text that has issues.
“We respect it.
“So they’ve committed to go back and to talk to their people, work on a bilateral basis through the issues that it has.
“And we hope that they can see their way to sign up to us.
“And that would be a significant step forward, not just for regional, global regional trade, but actually for global trade as well.
“And a clear signal to the rest of the world that there’s real value in trade, multilateral and through literal trade agreements.”
But it wasn’t all bad news for Ardern in Bangkok.
The announcement of the upgrade of the Free Trade Agreement with China unveiled in Bangkok yesterday would seem to confirm that political relations with China are back on track.
But the fine print in the document shows that neither side gave much away and consequently neither side got any significant gains.
It capped off a day which has seen the Prime Minister meet with some of the world’s most powerful leaders — and some of their most controversial.
She held formal meetings with Chinese Premier, Li Keqiang and a so-called “pull aside” with US National Security Advisor, Robert O’Brien.
The meeting looked no different to the formal meetings she had.
O”Brien’s greeting was more than effusive.
“You Prime Minister is a rock star here, she just gave a great talk at the summit,” he said.
O’Brien is a controversial attendee at the East Asian Summit because he is deputising for US President Trump and his absence is considered something of a snub by some Asian leaders.
But he was present at the Prime Minister’s meeting with Trump at the UN when Trump supposedly said “get it done” about a free trade agreement with New Zealand.
New Zealand’s Minister of State for Trade and Export Growth Damien O’Connor was also present at the O’Brien meeting.
Ardern also met with Viet Nam Prime Minister Nguyen Xuan Phuc who asked after baby Neve.
“She is much more popular than I am,” replied the Prime Minister.
However Ardern then found herself awkwardly positioned for the official East Asia summit photograph between two of the more controversial leaders in Bangkok; Philippines President Rodrigo Duterte and Myanmar State Counsellor Aug Sun Suu-Kyi — both of whom face serious allegations of human rights abuses in their countries.
But the big win for Ardern was being able to announce the completion of the upgrade of the Free Trade Agreement with China.
Only six months ago when Prime Minister Jacinda Ardern visited Beijing, China’s President, Xi Jinping warned her that trust was central to the relationship if it was to develop any further.
That added weight to the opening comments of Chinese Premier Li Keqiang when he met Ardern in Bangkok at the East Asian Summit and said that the negotiations over the FTA upgrade had been smooth and the breakthrough had been made.
“This attests to the stronger political trust and the broad prospect of practical cooperation between our two countries,” he said.
Some observers argued that the fact that China had agreed to anything at all was a plus which demonstrated that the relationship was still good.
But the gains announced yesterday are relatively modest.
China had sought concessions to allow more investment in New Zealand, but a Labour-led Government was not going to agree to that.
And in turn, China was not willing to bring forward any concessions on dairy exports.
The big gains are for the forestry sector.
Tariffs will be eliminated over ten years, on 12 additional wood and paper products worth NZ$36 million.
New rules make it easier to export to China.
Approved exporters will be able to self-declare that their goods are New Zealand goods under the FTA, as a further option to certification by other organization and exporters will also no longer have to apply for additional certificates when their goods transit through another country on the way to China.
The upgrade includes a new commitment to expedite customs clearance to six hours for perishable goods (such as fresh seafood, including rock lobster and salmon and will broaden customs rulings provisions; and make complying with labelling requirements, easier.
The upgraded agreement will improve New Zealand and China’s commitments on access to each other’s services markets. New Chapters on Electronic Commerce, Environment and Trade, Competition Policy and Government Procurement have been added, reflecting advances in trade rules and business practices over the past decade. These chapters provide avenues for enhanced cooperation in these areas.
The Executive Director of the New Zealand International Business Forum, Stephen Jacobi, said improved market access for wood products was a positive result, along with new rules for e-commerce and non-tariff barriers. Still, some challenges remained in the Chinese market, particularly for dairy and meat products.
Ardern defended the lack of progress on dairy by pointing out that by 2024 all tariffs on New Zealand dairy exports to China will be eliminated under the existing terms of the 2008 FTA
“ So that remains in place, and that will ensure that New Zealand has the best access of any country,” she said.
“I don’t believe that that has cost us at all.”
Standing back from the details of the agreement, there is the counterfactual argument; that China could have agreed to nothing.
New Zealand has certainly tested the political limits of the relationship with its failure to approve Huawei providing equipment for Spark’s 5G Network and only last week New Zealand joined 22 other UN nations in condemning China’s detention of Uighur Muslims.
But on the other hand, the Ardern Government has not issued any strong statement on the violence in Hong Kong nor has it deviated from the previous Government’s scrupulous neutrality over the South China Sea.
The Government’s position on China’s Belt and Road is more ambiguous though Ardern said yesterday that officials were continuing to work on details of how New Zealand might participate.