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Business analysis and comment from Herald columnist Fran O'Sullivan

Fran O'Sullivan: TPP - a good idea facing a rocky road

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Domestic difficulties for Obama and reluctance from other nations are adding to trade deal stumbling blocks.

John Key and Barack Obama are facing different TPP problems. Photo / AP
John Key and Barack Obama are facing different TPP problems. Photo / AP

It's an even bet that Barack Obama will finally lift the lid on the details of the highly secret text of the Trans Pacific Partnership (TPP) agreement and put it in front of the American public in November.

Obama's indication that he is preparing to take Americans into his confidence that month came during his informal remarks at the White House after meeting John Key in Washington on Friday, and is a sign that he is finally prepared to step up and make the case to Congress and the US public at large that the TPP is a deal worth signing.

"Our hope is that by the time we see each other again in November, when I travel to Asia, we should have something we have consulted with Congress about, that the public can take a look at, and we can make a forceful argument to go ahead and close the deal," Obama said.

The extreme secrecy over the negotiating text has been contentious, and plenty of objections have been made to revelations contained in leaked versions.

But these disclosures do not present a view, "in the round", of the many tradeoffs under discussion between the 12 nations negotiating the TPP deal.

Right now Obama doesn't even have Trade Promotion Authority - agreement from the US Congress that his Administration can negotiate a deal which will then be accepted or rejected by the House of Representatives without amendments.

This is a precarious position for Obama with the mid-term elections approaching.

The problem is that he has yet to step up his own domestic salesmanship for this 21st century deal to ensure Americans do understand the tradeoffs between the additional export jobs that will be created to serve new markets and the domestic pressures which will result as some industries are exposed to more competitive imports.

TPP is a regional agreement which is also as much about setting the road rules for the economic integration now linking Asia-Pacific nations at a much deeper level as it is about 20th century-style tradeoffs for market access for goods and services.

Selling basic equations such as, "I'll lower my tariffs for dairy products if you lower your tariffs for manufactured goods", can easily be factored into studies projecting the benefits from a deal.

But it is very difficult to sell tradeoffs when "I'll lower my tariffs for dairy products if you agree to accept my intellectual property regime" is the new game.

Which is why New Zealand finds itself having to consider quite difficult tradeoffs because our decision to lower virtually all tariffs more than two decades ago means a very different value equation is now on offer.

It's also why New Zealand is finding it difficult to finalise negotiations on South Korean and Indian free trade deals.

The problem is that while our agricultural sector (and some service sectors) are aggressively pursuing trade liberalisation, there has not been nearly enough discussion on whether accepting the new rules of the road, particularly for intellectual property, will enhance or constrain the ability of our high-technology sectors to flourish.

This is one area where Key and his ministers could step up.

The problem with Obama's November timetable is twofold.

First, the US mid-term elections will be on November 4.

He cannot be assured that the Democrats will carry the day because of the potential effect on domestic jobs in the trade-exposed sectors.

Second, Japan and Australia - which have signed a low-ball preferential trade agreement of their own - have been opposed to slashing agricultural tariffs to achieve a high-quality comprehensive deal.

Key will be hoping to make the case to Japanese Prime Minister Shinzo Abe when he visits New Zealand, expected to be next month, for Japan to lift its own level of ambition with TPP.

If Key can help Abe refocus on the long-term gains to Japan from a high-quality TPP deal he will pull off a feat of diplomacy that Australia's Tony Abbott balked at.

A study by the East West Centre predicts the TPP could boost New Zealand's annual exports by almost $5 billion in 2025. The global effect is in the hundreds of billions.

There are plenty of pessimists, but the gains from deep economic integration are worth pursuing.

- NZ Herald

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