Fran O'Sullivan: Kiwis can help bring China to TPP

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NZ has opportunity to smooth path for Chinese involvement in trade deal, which could spur economic reforms.

While Labour leader David Cunliffe was busy negotiating a political contrivance to keep his party from splitting on the Trans Pacific Partnership, important geopolitical signals over TPP's future have been overlooked.

Strong advocacy is emerging within China for that country to engage in TPP.

There is the opportunity here for New Zealand to notch up another historic first with China by actively supporting its entry to TPP, in the way this country supported China's accession to the World Trade Organisation.

Foreign Minister Murray McCully said this year it was up to China to ask to join TPP. But the ground is shifting and - just as New Zealand did when it lobbied the US to join TPP in the first place - there is an opportunity for our minister and officials to play an honest broker role in smoothing China's path to joining TPP.

Unfortunately, after last weekend's Labour Party conference, our leading politicians on both sides of Parliament are no longer aligned on TPP.

China will not be part of the initial club of 12 nations that are working to fast-track the end of the long negotiations.

But behind the scenes it is actively considering joining TPP rather than waiting for the alternative track regional agreement (Regional Comprehensive Economic Partnership) to conclude so that both deals can be joined up into one huge Asia-Pacific free trade area.

The Government has been relatively silent on this score.

Trade Minister Tim Groser is deeply involved in supporting New Zealand's negotiators as they work through a series of meetings this month to deal with some thorny issues. The November meetings are focused on government procurement, state-owned enterprises, investment, legal and institutional issues and rules of origin to be followed by a meeting of the chief negotiators and key experts in Salt Lake City.

But it is a missed opportunity for Labour.

If Labour's key players weren't so short-sightly focused on trying to keep the internal lid on TPP tensions, the party - particularly Labour's trade spokesman, Phil Goff - would have been in a great position to leverage the farsightedness of the Helen Clark government in getting negotiations for the regional agreement under way in the first place.

I am sure that Goff would by now have been strongly advocating that New Zealand should support China's ultimate entry to this agreement to speed up the process of regional economic integration and offering to assist Groser in this endeavour.

And I am doubly sure that if he had still been trade minister he would long ago have sown the seed with China.

Instead, Goff has to go along with the Cunliffe contrivance that Labour will withhold support on TPP until it has judged the final text of the agreement.

New Zealand policy elites appear to have underestimated the scope of the changes under way since Xi Jinping took power as the Chinese Communist Party's top party chief a year ago.

On Saturday, the third plenum of the 18th central committee of the CCP gets under way in Beijing.

Xi has already made clear he believes the current suite of regional trade deals under way in the Asia-Pacific - of which TPP is by far the most robust - will help China in its endeavours to move further towards a market economy and further its economic transformation.

But as the plenum approaches some influential voices are suggesting that China and the United States do "strongly intend to engage each other" in the TPP.

Particularly China's former top trade negotiator Long Yongtu, who negotiated his country's historical accession to the WTO more than a decade ago, shepherding its full-fledged entry into the rules-based global trading system.

"The Chinese side is also taking an active interest in the TPP," said Lu in a China Daily report. "When it's ready, we are going to launch negotiations with the US."

Other senior Chinese players such as Chi Fulin, president of the China Institute for Reform and Development, are also adopting open advocacy on TPP. The same China Daily report quotes Chi as saying that as China is going to launch another round of "reform and opening up" it should take the opportunity to enter into multinational and regional trade and investment agreements to support its process of globalisation.

"We have had a very successful experience in transforming the pressures of entry into the WTO into incentives and development opportunities ... I think regional negotiations for trade investment agreements also mean opportunities, if we handle them properly."

There are mixed views over just how far-reaching the four-day plenum will be. There are big issues to tackle: food and energy security; the pressing need to move to a lower carbon economy and also tackle air pollution; inequality, corruption and balanced growth - issues which have the potential to threaten the party's own political security if they get out of hand.

And the big-ticket items that government think-tanks are urging on the party like stripping state-owned enterprises of their monopolies and giving local governments the power to set more taxes.

All this is important as the Chinese Government tries to switch to a different and more sustainable economic model driven by innovation and domestic consumption.

At the Bali Apec, Xi referred to TPP as a step towards creating the Free Trade Area of the Asia-Pacific (FTAAP) - a vast regional free trade deal linking the Apec economies.

The fundamental issue facing China is that the TPP will result in enormous economic changes within some of the more sclerotic economies in the Asia-Pacific - particularly Japan. Emerging economies such as Vietnam expect to step up their own pace of economic changes which will create new competitive pressures on the manufacturing front in China by exposing some of China's industries as trade barriers come down.

Irrespective of whether China ultimately opts to join TPP, the new global standards expected to be negotiated on areas affecting SOEs, intellectual property and regulatory coherence will have an effect on China's economy. Lu gets this.

Now that economic reform has slowed, joining TPP could spur the next round of reforms.

- NZ Herald

Fran O'Sullivan

A columnist for the NZ Herald

Fran O'Sullivan has written a weekly column for the Business Herald since its inception in April 1997. In her early journalistic career she was a political journalist in Wellington and subsequently an investigative journalist who broke many major business stories including the first articles that led to the Winebox Inquiry in both NBR and the Sydney Morning Herald. She has specific expertise in relation to China where she has been a frequent visitor since the late 1990s. She is a former Editor of the National Business Review; has twice been awarded Qantas Journalist of the Year and is a multiple winner of the Westpac Financial Journalism Supreme Award.

Read more by Fran O'Sullivan

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