TPP can help lift incomes in New Zealand but to make a difference for people, there’s a lot more work still to do.
The TPP was never going to be the miracle that shot New Zealand to the top of the global supply chain. Neither was it ever going to be the Darth Vadar of deals where American corporations got to destroy the planet.
It was always going to be a little bit disappointing to everyone. The deal calls for Vietnam to allow free unions and Malaysia to stop people smugglers, but in most countries there aren’t enough gains for politicians to campaign on it. Stephen Harper doesn’t want the text made public until after the Canadian election and Hilary Clinton’s team just want the damn thing off the agenda by 2016.
Tim Groser’s summary of the benefits of TPP was incomprehensible: “Long after the details of this negotiation like tons of butter have been regarded as a footnote in history, the bigger picture of what we have achieved today remains.” But I give him credit because I believe a TPP negotiated by Phil Goff would not have been decisively different.
The twelve countries have an agreement only because they’re equally unhappy. Even so, we should give the deal our conditional support.
The devil’s in the detail of course, and that could change my view, but the two questions you have to ask yourself are: 'Does TPP solve the problems that are holding back the New Zealand economy?' and ‘Are there any benefits to NOT being part of the deal?’
Now that other countries are signing the deal, walking away would be unthinkable. As Helen Clark pointed out, New Zealand can’t afford to be locked out of a trade bloc involving the Asia Pacific.
Our main trading issue is that we are stuck selling ingredients to the world. We’re a global fed-ex for milk powder, the peasants at the bottom of the global value chain. Unless we want cows half way up Mt Cook, we have to sell better stuff, not just more stuff. We should aim to sell cheese to Americans, not milk powder; to own the world’s biggest food company, not just its biggest exporter of ingredients that other companies capture value from.
For years we have talked about added value, but it’s much more than that. We need to own food companies that make money when an American at breakfast pours milk from Idaho onto cornflakes from Mexico, just as Heineken clips the ticket when hops grown in Nelson are served in an Auckland bar.
Left and right agree on the need to grow our share of the global economy, but we differ on how to achieve it. The right believes removing tariffs and regulations is enough. The left has long realised that alone doesn’t guarantee increased incomes for New Zealanders unless we do much more.
We’re going to need access to more capital, develop more high value ideas and commercialise more science, better connections to TPP markets, and we will need more highly skilled migrants. (In the words of Shamubeel Eaqub, the likes of Winston Peters are going to have get $^@! real about that). Value chains require highly skilled people, and the more you have, the more value you can create.
So although TPP improves access to market for more of our products - the government claims that 93% of exports to TPP countries will now be tariff free - tariffs are less important than what we do to take advantage of the opportunity. Our percentage share of trade in the TPP region could even decline if other countries step up their activity and we sit back and assume that tariff reductions are enough.
So where is the plan to create higher value exports, own more of the value chain in TPP economies and bring those benefits home to increase the incomes of New Zealanders, and specifically the wages of working New Zealanders? Where is the transformative investment in R&D and science to make cheese and neutroceuticals instead of just bagging more milk powder. Where is the plan to develop world class skills in science, creativity, and international business? Where is the plan to create much deeper capital markets, for example by encouraging New Zealanders to save and to invest in productive enterprise, not just renovate and rent houses in Auckland?
No-one in Atlanta or Doha is going to do that job for us.