TPP: The true cost of negotiations

The Trans-Pacific Partnership could yet be sealed in the next few weeks, and if it is we need to think hard about the cost of signing up... and the cost of staying out

As I write this I am listening to a Canadian journalist being interviewed on Morning Report about the prospects of concluding the TPP. His speculation? That Canada will not let TPP be concluded until after the Canadian election, which has just been announced for October 19, just three months away. Which is another way of saying that the world's biggest ever trade deal could not be concluded until late November or December.

One wonders if the other 11 nations in the TPP negotiations will be so patient. The United States, for instance, may say if the Canadians want such a delay, it might be better if they left the negotiations altogether.

The alternative is that TPP will be concluded within the next month. We will know soon enough.

New Zealand is being held up as one of the nations that prevented the Maui negotiations from concluding the deal. If so, it's a clear demonstration that our negotiators are prepared to go to the wire on behalf of New Zealand in respect of dairy [Ed: corrected] access. It certainly makes it pretty hard, as many on the Left argue, that New Zealand is simply a pushover in the negotiations.

On the same edition of Morning report, the Prime Minister said that he fully expected that New Zealand would finalise a deal that would result in improved diary access, not at the level that New Zealand would like, but at a significant gain. Trade Minister Tim Groser said the gains for New Zealand already negotiated mean that TPP provides a net gain for the New Zealand economy, and he would be able to publicly prove that once the documents are made public.

The TPP has been particularly controversial. Of course there are the usual opponents; those activists, actors, academics, and writers who seem instinctively opposed to all free trade deals, as yet another element of the neo-liberal paradigm. They are the New Zealand’s equivalents of the Syriza Party of Greece. Voters only turn to such parties in extremis, and even then it usually proves to be a costly mistake.

But the opposition to TPP is broader than that. Labour’s left activists have been adamantly opposed, pretty much from day one. The Labour leadership has had to take on some of their concerns, and has set out a number of conditions, albeit rather flexible ones, that TPP will need to meet before Labour can support it.

Those activists also want a commitment that Labour will withdraw from TPP. But Andrew Little will never make such a commitment. Labour is not Syriza, and even Syriza was not prepared to depart the Euro and renege on Greece’s debts.

So what are the calculations for New Zealand in respect of TPP?

For the usual opponents, such calculations seemingly don’t matter. They know what they believe, and that is all that really matters. It matters not a jot to them that they were completely wrong on the China FTA or the other free trade deals New Zealand is party to. By definition they are all bad.

But for most of the rest of us, such calculations do matter. For many of those who are currently uneasy about TPP, as long as it can be demonstrated there is a net gain from TPP, they will go along with it. They mostly trust the government to negotiate as hard as possible, and that the information that will be formally released by government will have sufficient integrity.

John Key, without directly saying so, seemed to indicate that New Zealand will be part of TPP. There is no question of being left out. The goal at the moment is to negotiate the best deal possible. And New Zealand is willing to play hardball in doing so.

That is where the calculation comes in. One of the risks the government is offsetting is that they know for New Zealand to be outside TPP when our major trading partners (China excepted) are all in will almost certainly damage New Zealand’s existing trading position. And of course the other negotiating states know this as well.

In fact this is true of all the TPP negotiating parties. Well, perhaps not Canada so much. The great bulk of their trade is with their NAFTA partners so they would not be so seriously affected if they were not part of TPP.

This is not true for the United States. Better access to Japan is a big prize for them, not to speak of the broader geopolitical objectives they it's trying to achieve. A failure to complete TPP will be a major blow to the United States' position in the Asia-Pacific region. Their partners and allies will loose a significant degree of trust in its ability to lead.

Coming back to the New Zealand calculation. If for instance Australia, Japan, and the United Sates are in TPP, but New Zealand is not, it's likely New Zealand will loose existing market share, especially in Japan and the United States. Australia and the United States will have better access to the Japanese agricultural market. Similarly Australia would have better access to the United Sates market relative to New Zealand.

We could expect the pharmaceutical companies will charge more for medicines being sold in New Zealand, due to our shorter patent period than they would charge the TPP nations with the new longer period that will be in force among them. In effect we would paying the extra cost for pharmaceuticals that rises from the longer TPP patent period, but without the countervailing advantages of TPP.

These are the sorts of calculations that result in Groser being so adamant that New Zealand must be in TPP.

It is not just a question of the gains achieved by being in TPP; it is also the costs that will be incurred if we chose to stay out.