Crawford Falconer: How to fix trade in the age of Trump

President-elect Donald Trump. Photo / AP
President-elect Donald Trump. Photo / AP

Our trade relationship with the US just got harder. No point simply wringing our hands. We have to work harder and smarter. Some thoughts on how to adapt our approach.

Hit volume control on TPP in DC

Trump can't say he is going to raise tariffs on Mexico and China, ditch TPP, tear up NAFTA and walk out of the WTO, but just do nothing in office. It is unlikely he will actually achieve all of those, but he will need a scalp or two. And TPP is the easy one.

So, a quick back flip is unlikely. Okay, make the case for it once if you have to. If it doesn't work, pointless to just go banging on about it.

That doesn't necessarily mean that some other model won't evolve, but that will be a longer game.

The ball is in Japan's court

Assuming that doesn't work, the rest of the TPP membership should get together and rename it TPPMINUSUS.

Japan would be nervous. The rest have to convince them that the US would, over time, come around. Of course they would, once they saw the rest of the Members getting commercial advantages. Japan would be a big winner displacing the US in TPP.

Certainly worth creative thinking. Not least because there is a real threat that, in time, The US will make a play for a straight bilateral deal with Japan. New Zealand would be the biggest loser. Anyway you look at it, we have to up our game with Japan.

Push the envelope

It's time to scope out radical scenarios. If a new US Administration doesn't want to play for now, that's fine. But the best way to promote their engagement is to create attractive working deals. With the UK coming out of the EU, they should be a prime target. They will want quick runs on the board. Why not a model CER-UK-Singapore-Chile-Japan-deal? That'll get US attention.

If TTIP proves to be as dead as TPP in Washington, why not get those Members together with the remnant of TPP and do a collective deal-with a lower toxicity agenda. It could be just the time for a coalition of the jilted.

Hold onto our cards-we'll need them

We should bail out of the Trade in Services Agreement in Geneva double quick.

It was never clear why New Zealand would agree to bind two thirds of its domestic economy (services) when the rest of the world was doing precisely nothing on our agricultural market access and anti-subsidy interests in return. When TPP was in the offing perhaps we felt obliged. But we aren't obliged now.

Crawford Falconer.
Crawford Falconer.

The last thing we should do is give this incoming US Administration a freebie.

They take TPP off the table and we give away the shop? Why would we send a message to an incoming Administration which says it doesn't give a hoot about trade that we will offer up our sovereign rights for nothing in return?

They won't respect that, and it hardly reminds them that trade is about negotiating mutually beneficial outcomes.

The Indians and Chinese have been smart enough to stay out of this boondoggle from day one. We should join them.

Dial back on trade agreement overreach

Trade agreements used to be about just that: trade.

They have become increasingly intrusive. Unsurprisingly, that has provoked serious electoral backlash. Time to learn the lesson. Central to TPP being toxic in the US (and TTIP being toxic in Europe) is investor state dispute settlement. These fears are absurdly exaggerated. But governments have failed to convince. Time to cut your losses. A Trump Administration will have to show it is responding to popular fears about control. Dumping this stuff would be a sea change.

Corporate America would grizzle, but isn't that what Trump was campaigning against?

Working quietly with an incoming administration on constructing a much less toxic trade agenda is surely a priority. It might even help reconstruct bipartisanship here in NZ.

Crank up RCEP and China

This is the slow burn mega-Asia deal which involves China and India but not the US. Time to turn up the gas-if India will let us. It will be low ambition compared to TPP. But it's better than nothing. And it sends a clear message that the economies in Asia will move on. That demonstration effect is going to be far more effective with the US, over time, than wittering on endlessly about how sad it is that TPP hasn't happened.

Obviously we keep up efforts to improve the existing China FTA. But that won't be a free "upgrade". You only get what you are prepared to pay for. Taking China's One Belt One Road initiative more seriously would be a start.

Salvage what we can in Europe/UK

WTO renegotiations stemming from UK BREXIT come first, and will effectively pre-empt most of an FTA in any case: we would be dreaming if we thought the euros will negotiate twice with us.

Which is probably just as well. The intrusive FTA model doesn't sell any better in Brussels Berlin or Paris than it did in Washington. Frankly, we may be running out of time as the full backlash there has yet to hit, with French and German elections coming up next year. All the more reason to be realistic about what we can expect.

But we should be working hard on the UK and drawing it in to wider agreements with us.

Get lawyered up

A Trump administration will up the ante on trade disputes. It will also push the limits on trade law remedies against US imports (particularly from China). Its big trading partners will take countermeasures. This (probably) won't be aimed at us, but we can't rule out getting caught in the cross fire.

Any remnant of good faith negotiations in the WTO will be on hold until this frenzy runs its course. We need to steel ourselves to litigate, not least because any progress in WTO will only come out of a grand bargain to settle a whole raft of trade disputes some years down the track.

- NZ Herald

Crawford Falconer was formerly the Deputy Secretary of the trade and economic group of MFAT and Ambassador to the WTO from 2005-2008.

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