Brian Fallow 's Opinion

The Economics Editor of the NZ Herald

Brian Fallow: Mystery surrounds trade deal talks

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Claims of potential 'landing zones' on most of the key outstanding issues leaves observers none the wiser

Trade Minister Tim Groser. Photo / APN
Trade Minister Tim Groser. Photo / APN

As they emerged from their latest conclave in Singapore, groggy no doubt with fatigue, the trade ministers of the 12 Trans Pacific Partnership countries had no deal to brandish but claimed at least to have identified potential "landing zones" on most of the key outstanding issues.

Whatever that means.

Diplomats are past masters at finding a form of words to paper over chasms of disagreement. In this case "landing zones", with its peculiar echoes of paratroopers and combat, probably means no more than that the key issues are all still up in the air.

All the same, substantial progress has been made, we are told, and the ministers will meet again in the new year. The process has momentum. The big Mo.

So should we look on it with hope or dread? Impossible to say until we know what "it" is.

It doesn't help that these meetings are conducted with all the secrecy of a papal election.

We have to rely on leaks - the provenance of which is inevitably uncertain - for any idea of what might be going on behind those closed doors.

A summary chart leaked to the Huffington Post and apparently prepared by one of the participating governments (it does not know which) of the 12 countries' positions on 89 issues (itself an indication of the breadth and complexity of the negotiations) sheds some light on the state of play immediately before the Singapore ministerial.

On the particularly contentious chapter dealing with intellectual property it shows the US positions surrounded by a sea of rejection from most of the other countries.

It is the chapter which includes provisions that would strengthen the market power of drug companies and curb the countervailing power of a monopsony like Pharmac.

But is that still the position?

Professor Jane Kelsey, an indefatigable opponent of TPP, cites a report in the Washington Trade Daily that ministers from all the TPP nations, apart from one developing country, have dropped their objections to the US-driven intellectual property chapter, with some modifications.

Kelsey accuses Trade Minister Tim Groser of selling out. "But we also hear that the US has not tabled any significant proposals for agricultural market access. So he has played Judas with our health system, without even 30 pieces of silver in return," she said.

But Groser, talking to Radio New Zealand's Morning Report yesterday, was unequivocal that TPP would not mean higher prices for pharmaceutical products, or an end to parallel importing.

"That was never the issue. The issue was to preserve the underlying Pharmac model which has been an outstanding success. I am confident it will not be put at risk," Groser said.

"I can give you a categorical assurance New Zealanders will not be paying higher prices for pharmaceuticals as a consequence of TPP."

The stakes could hardly be higher. The 12 TPP countries include two of the three largest national economies and account for more than a third of global trade.

Its scope is wide, stretching beyond traditional trade issues like market access to intellectual property, government procurement, state-owned enterprises, the ability to use capital controls, and the rights of foreign investors - including the ability for corporations to sue governments in unaccountable international tribunals if they adopt policies the corporations believe breach their rights under the agreement.

Groser's line has consistently been that New Zealand is already so open to trade and foreign investment that it has little to lose or fear from a high-quality agreement.

"It will require some adjustments but nothing that will cost New Zealand very much at all," he said yesterday.

Well, we shall see.

In the meantime, the process of reaching an agreement is clearly complicated by the number of countries and the range of issues involved.

But not only that. Further uncertainty arises from the fact that the US negotiators do not have a negotiating mandate - Fast Track or Trade Promotion Authority in the jargon - from Congress, which has to approve a trade agreement before it can go into effect.

In the past that has involved Congress in effect setting some bottom lines for the negotiations in exchange for an undertaking to vote the eventual deal up or down and not take it apart and demand further concessions from the other parties.

The inability to secure Fast Track attests to the breadth of the TPP agreement and US legislators' unwillingness to enact as part of the package, for example, widely opposed extensions to intellectual property protections they rejected only last year.

In the absence of Fast Track, a trade agreement with the US Administration would be somewhat like shaking hands on a deal with someone who then said, "Of course you understand that I will have to check with the missus when I get home and she can be difficult about these things. I may have to come back for more concessions."

Bilateral agreements with Korea and Peru suffered that treatment.

It is hardly an incentive for other TPP parties to put their best offers on the table.

The absence of Fast Track would mean congressional committees, not the Administration, would write the implementing legislation. That would be only the first of several points at which local interests, opposed for example to concessions on dairy products or sugar, could move to water down the deal.

Even with Fast Track the US International Trade Commission has to conduct a comprehensive study of the agreement's effects on the US economy before legislation can be submitted, a process which takes many months.

For all that, the US process looks a lot more democratic than the ability a New Zealand Government has to trundle a trade deal through Parliament.

Kelsey, a professor of law at Auckland University, says that claims Parliament would have the final say over TPP are disingenuous. When the Cabinet approves the signing of the agreed text by the minister, that is the definitive step that binds the Government to act in good faith towards its negotiating partners, she says.

"The text is not tabled in Parliament until it is signed ... It is then referred to the foreign affairs, defence and trade select committee, which is required to report back within 15 sitting days, unless the Government extends the time."

The TPP agreement would be the size of two telephone books. Few people could provide a comprehensive and informed submission within the available time.

The accompanying national interest analysis is prepared by the same Ministry of Foreign Affairs and Trade that negotiated the agreement.

"Parliament might be invited to vote on the TPP agreement ... but the vote would be symbolic," Kelsey says.

Where implementing legislation is required, Parliament could refuse to pass it but if the treaty were already ratified New Zealand would then be in breach of its new obligations.

- NZ Herald

Brian Fallow

The Economics Editor of the NZ Herald

Brian Fallow is the New Zealand Herald's economics editor. A Southlander happily transplanted to Wellington, he has been a journalist since 1984 and has covered the economy and related areas of public policy for the Herald since 1995. Why the economy? Because it is where we all live and because the forces at work in it can really mess up people's lives if we are not careful.

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