Labour's willingness to back the new CPTPP owes a lot to the US president, but also shows the rise of the political realists in its ranks. But the hard part is yet to come
It seems – perhaps, maybe – that Donald Trump has done us a favour. A new, stream-lined, more widely palatable and, well, more trade-focused pacific trade deal is about to be signed by the 11 remaining countries.
While the final wording of the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is still being etched into diplomatic stone, it looks like a deal has been agreed and is set to be signed on March 8.
The good news for New Zealand is that reports suggest that over time – and the time remains considerable – around 95 percent tarrifs will be eliminated between the participating countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, Singapore, Vietnam and New Zealand.
As a country that wants and needs to call itself 'a trading nation', that is the upside for New Zealand. While New Zealand's exporters will have to wait longer before they get to sell their wares to Americans without tarrifs, they will at last be on track to a more level playing field in larage markets such as Canada and – once a holy grail of New Zealand's trade ambitions – Japan. Yes, it looks as if it will still take years for the tarrifs to slowly reduce, but it opens the door.
All these caveats about what the deal 'may' include remain because the ridiculous secrecy of the TPP remains; we mere citizens have still not been privileged to see the details of the agreement that our leaders have negotiated without public consultation. We are relying on what the politicians of each country deign to tell us.
But what appears to be interesting in the CPTPP, as opposed to the original deal, is the wriggle room afforded each country now that the mighty US is no longer at the table. For America the deal was always less about trade and more about investment, intellectual property and influence. Those 'three Is' drove the desire of the Obama administration to the table. It wanted American firms to not so much trade with the Pacific, as move in and start buying. It wanted to be the money man of choice (both purchaser and provider), not the Chinese.
Now, each of the remaining 11 countries have been freer to indulge themselves. What the US had strong-armed them to give away, they have been able to retain. For New Zealand, that has meant more limited investor-state dispute settlements. Specfically, if a foreign company enters a contract with the New Zealand government it won't be able to turn to these ISDS clauses to challenge any dispute over that contract. It will have to rely on the New Zealand courts, like anyone else. The delays and renegotiations have also given the new Labour government time to introduce its law banning foreign buyers of New Zealand property, so that concern too has been seen off at the pass.
Contrary to America's wishes, MFAT says, we no longer have to extend our copyright from 50 to 70 years. Pharmac is afforded more protection. We don't have to allow for the extension of patents. In short, we don't have to do all the things the Americans wanted us to do, that really pissed off a lot of New Zealanders.
It seems other countries have done the same. Malaysia has more flexibility around "preferantial purchases" and exemptions for cultural industries. Canada too has won what it needed to keep its cultural businesses (movie, TV and music producers) happy, plus its automakers.
The Asia Times reports Australia's Turnbull government is happier because of the changes to ISDS rules, limits to worker movement regulations and less competition for Australian services exports. This column also claims the new deal means, "means a speedier process for reducing import barriers on key Australian products such as beef, lamb, seafood, cheese, wine and absorbent cotton."
It'll be interesting to see whether New Zealand has won the same concessions. If any of the tarrif reduction timeframes have been sped up, that would be a huge gain. The other interesting detail yet to emerge is the number of side letters New Zealand has signed with other countries, exempting it from this or that or adding a bit of the other.
Certainly, however, the Canadian dairy producers aren't happy. "Although the loss of the US represents a loss of approximately 60% of the original TPP market GDP, the original concessions to our domestic dairy market remain. How is this in the best interests of Canadians?"
Their grief is a New Zealand dairy farmers' glee. Fears of losing NAFTA means Canada can hardly risk missing out on another trade deal. To lose one may be considered unlucky, but two could be damaging to Justin Trudeau's government.
The wriggle room afforded by America's withdrawal, however, allows for some more worrying national indulgences. Alongside all the good reasons to have doubts about the TPP as it stood, one of the things I've never understood is how the New Zealand Left in its criticism of ISDS rules, copyright laws and all the rest, ignored the improved labour and environmental standards required by the deal. The TPP critics were mostly opposed on nationalist grounds, ignoring the internationalist view that the minimum labour rights and environmental standards embedded in the deal would be a boost for millions of the poorest people around our region.
Sadly, it appears the CPTPP now allows Vietnam the room to delay the requirements for it to improve its labour laws.
So, in short, the CPTPP seems to be closer to a straight trade deal than the TPP. With America's demands gone, each country has been able to achieve more of its own demands, for better or worse. From an economist nationalist point of view, that's a good thing. Hence New Zealand First's ability to support the deal.
Indeed, the politics here at home show the triumph of the political realists inside the Labour Party. Under David Cunliffe and – mostly – Andrew Little, the party's left-wing ideology was given more free reign. Those who were Opposition MPs then, but are ministers now (such as Phil Twyford, Megan Woods, Clare Curran... and even Trade Minister David Parker), marched against the TPP in 2015. Now, they are ministers signing up to 'TPP-lite'.
Parker, you may think, was towing the party line at the time. But for others, Labour's u-turn will be uncomfortable and tears them away from their base and the gut opposition they felt so strongly. Will Labour make room for Curran and others to dissent (should they want to), as they did for Phil Goff, when the party's policy was the reverse?
But more importantly, this is a clear indication that for all Ardern's talk of re-thinking capitalism and a more ideological stance on climate change, real politik will drive this government's choices. The realists are in the driving seat, most notably David Parker. The stark economic realities of government, it seems, will trump the pure ideologies of some in Labour.
Speaking of Trump, while he remains in power this deal is much easier for the government to endorse. But what about when he's gone?
What perhaps hasn't been explained as loudly and clearly as it might, is that the CPTPP only "suspends" the 22 tricky provisions. Those indulgences each country has been able to win on ISDS, patents, labour rights and all the rest are only put on hold. If and when (and it will be when) America decides it wants to join, they are all back on the table.
Will these (mostly) smaller Pacific states be willing and prepared to cling to the deal as it stands or will America be able to demand everything it wants? Because while some will back this deal in the hope that the status quo will remain and America will have to enter on the CPTPP nations' terms, other will hope the CPTPP is merely a Trojan horse for the full TPP deal to re-emerge when American is ready.
That debate– the really hard part – is yet to come and the question facing Ardern & Co down the track, is which side will they be on when that battle begins.