Trade Update by Catherine Beard

  • Date Added: 29 Apr 2013 from BusinessNZ

  • Japan TPP Entry - once in a lifetime opportunity for exporters to have barriers negotiated away

    Some of the questions asked in our last trade update have been answered.  As a result of the discussions at the APEC Trade Ministerial last weekend in Surabaya Japan has now been formally accepted as a participant in the TPP negotiations.  The US Administration has notified Congress that it seeks to have negotiations with Japan.  In 90 days, the Japanese can join the negotiating table.  This will happen at the July negotiating Round.  Up until then, they will be observers.

    While the questions over whether and when Japan will enter the TPP negotiations have been answered, the questions about the Japanese impact on negotiations remain unanswered.

    Our view remains that Japanese entry into the TPP is very positive long term.  It increases the critical mass of the TPP grouping and it therefore increases the appeal of TPP membership for other players not already part of the TPP process.

    But Japanese entry is a major complication to the negotiation.  It may mean that some parts of the text that were believed to be final will have to be re-opened.  And it may mean that there is a very long negotiation pending over market access for agriculture and some aspects of services.  Also, while Japanese entry will increase the value of the TPP outcome for US exporters it will heighten some US protectionist sensitivities – eg automobiles.  This might lengthen the amount of time that the US will need to negotiate agriculture and industrial tariff reductions.

    For New Zealand we have a tough negotiation ahead.  We need to keep the TPP membership to keep adhering to a high quality outcome (without exceptions) at a time when Japan (and maybe some others) will be arguing for exceptions, long tariff phase outs and the continuation of tariff quota arrangements.   But we, at long last, are negotiating a free trade agreement with Japan (as well as the other TPP participants with whom we do not yet have agreements – US, Canada and Mexico). This is a great opportunity.

    The degree of difficulty involved in integrating Japan into this negotiation is going to mean that concluding the negotiation in October is going to be very difficult.

    Exporters should be welcoming Japanese entry into the negotiation.  We recommend that you make submissions to MFAT welcoming this development and highlighting those barriers that Japan maintains against your products or services.  This is a once in a lifetime opportunity to have these barriers negotiated away.

    WTO Director-General

    Trade Minister Tim Groser did well to get as far as he did in the WTO Director-Generalship race.  Because of a view circulated by some developing countries that it was the developing countries’ turn to have the slot (even though Thailand had the slot before the incumbent) he was fighting an uphill battle.  The entry of two unexpected candidacies from Asia also ended up splitting preferences in a way that was unhelpful to Groser.  If the Indonesian and Korean candidates had not entered the race, Groser would probably have the support of all 10 ASEANs and all the North Asians.  Because they were in the race, he only had support at the most recent ballot of two of the ASEANs and the North Asians were split also.

    The killer blow was apparently the big differences within the EU.  Even though the majority supported Groser, it seems that some members were implacably opposed to him.  This made a consensus involving Groser impossible for the 27 member grouping.  Without all of Asia and without the EU, Groser just did not have enough votes to get there.

    Of the two remaining candidates, the position now looks most likely to go to Blanco from Mexico.  Mexico’s trade liberalisation credentials are hugely superior to Brazil’s.  Blanco is a former Minister.  Brazil’s candidate is a career diplomat without political credentials.

    Blanco was the negotiator of Mexico’s entry into NAFTA and has taken other tough decisions in his career.  His appointment to the role will not be the end of the world but Blanco is no Groser.  This raises serious issues about the chances of the WTO re-launching global negotiations anytime soon.

    Some of the aspects of this WTO race were concerning.  Indonesia’s attempt to foist an underperforming Minister on the world to solve a domestic problem (without regard for potential consequences for the wider race should she not make it) is one.  The adoption of UN type attitudes is another.  One of the WTO’s strengths has been its difference from the UN.  Unless the membership is careful, the organisation risks further marginalisation, and could become as irrelevant as are most of the UN agencies.

    Perversely, Groser’s campaign seems likely to boost Minister McCully’s chances of achieving his goal of a seat at the Security Council table.  Groser generated substantial support and sympathy during his campaign.  Now that he has missed out, many of those who failed to give him their support in the second round of WTO voting are likely to ensure that New Zealand is compensated through support for the Security Council position.  A number of the Latins for example wanted Groser to win, but felt obliged for reasons of regional solidarity to support the two Latin American candidates. Pretty much all of those who did not support Groser because of regional solidarity for the Latins, have sent messages through that they will support New Zealand for the Security Council.