Fran O’Sullivan: Wild card entries complicate the trade game

Ukraine’s President Volodymyr Zelenskyy has announced that he hopes to join the CPTPP. Photo / AP

OPINION:

If New Zealand politicians and trade negotiators have found the going tough in getting to the end game with the UK and EU on free trade deals, then look ahead to the hard calls that have to be made when it comes to the next cab off the rank to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

This is a regional agreement between New Zealand and 10 other Asia-Pacific nations.

In July, CPTPP ministerial representatives will come to Auckland at Matariki weekend for a meeting of the CPTPP Commission.

This will be chaired by Trade and Export Growth Minister Damien O’Connor.

The UK has finalised its own negotiations to join the CPTPP — which New Zealand welcomes as a G7 nation — but it still has some domestic issues to deal with before it can press go. It’s hoped the UK will get its work done in time to join in person on July 15.

That is all to the good.

But the CPTPP and its membership is about to be embroiled in a great deal of intense politicking when it comes to deciding which country to proceed with next.

Topping the list of those seeking accession is China. Close behind, Chinese Taipei. Latin American countries such as Costa Rica, Ecuador and Uruguay have put their hands up. South Korea and Thailand are keeping a watching brief.

And a late wild card this week: Ukraine.

Volodymyr Zelenskyy has issued a presidential decree announcing he has appointed a delegation to negotiate Ukraine’s membership of CPTPP.

Economy Minister Yulia Svyrydenko was appointed as delegation head. Other delegation members include representatives of the Economy Ministry, Justice Ministry, Agriculture Ministry, State Customs Service, and President’s Office.

“The Ministry of Economy expects to join the Trans-Pacific Partnership Agreement in early 2024. At the same time, there is a prospect of joining the agreement this year,” Svyrydenko said.

All of which is news to the CPTPP secretariat in Wellington.

What is known is that an unsigned letter was sent to O’Connor from the Ukrainians. But a formal accession application has not been made to New Zealand in its capacity as depositary for the agreement.

Nevertheless, the Ukrainians are taking their accession to CPTPP as a given, saying it will give Ukraine the opportunity to liberalise non-tariff restrictions on trade in goods and services with countries in the region as well as open access to new markets. It will also allow the country to expand access to foreign direct investment.

Ukraine’s trade representative Taras Kachka noted that negotiations would start after the UK’s final decision on joining the agreement. “In particular, it is the first European country to join this transcontinental agreement in the near future,” a formal press statement noted.

China — which has long been waiting to see if its own accession bid will be allowed to proceed — has not commented on the obvious politicking around Ukraine’s move to jump the negotiating queue.

But it has stepped up its own advocacy.

The Chinese Vice-Minister of Commerce, Wang Shouwen, has argued that China’s inclusion in the agreement would triple the number of consumers covered by the pact, increase total GDP coverage by 1.5 times and provide a sizeable boost to the income of the CPTPP’s members.

“Therefore, China’s accession is in the interests of the 11 CPTPP members,” Wang said, according to an informal translation of a meeting with journalists reported by Inside US Trade.

He also argued the move would advance a proposal for a Free Trade Area of the Asia-Pacific, with two parts. These are the Regional Comprehensive Economic Partnership, to which China belongs, and CPTPP.

The Free Trade Area of the Asia-Pacific, Wang continued, “is crucial to the regional economic integration of the entire region and to the stability, safety, reliability and efficiency of our local industrial and supply chains. Therefore, we expect all 11 member states to support China’s accession to CPTPP.”

The problem China faces is not logic.

There are some inherent difficulties with China’s own commercial environment, particularly in the digital arena.

But it’s the politics which are proving thorny.

China and Australia are moving closer to patching up differences which led to that country refusing to support the Chinese bid while coercive trade measures were in place.

Singapore and Malaysia have been supportive.

But the UK is looking to potentially enforce a veto on China’s accession once it is formally around the CPTPP table

UK Foreign Secretary James Cleverly would likely have laid out his country’s position on China, if he had not cut short a plan to visit New Zealand when the Sudan crisis erupted.

Cleverly is reported as saying , “We must engage with China where necessary and be unflinchingly realistic about its authoritarianism”.

Inside US Trade reports Cleverly saying the first of the UK’s three-pillared China policy is a commitment to strengthen “national security protections wherever Beijing’s actions pose a threat” to British people or prosperity.

“We are not going to be silent about interference in our political system, or technology theft, or industrial sabotage.”

The UK also is looking at how to review Chinese investment, Cleverly said. “We have an interest in continuing to benefit from Chinese investment, but we don’t want the long arm of the Chinese Communist Party reaching towards the central nervous system of our country.”

Chris Hipkins was due to meet Cleverly in London this week. It is inevitable these concerns will be on the table.

Hipkins has chalked up a win for some 350,000 Kiwis, after Australian Prime Minister Anthony Albanese announced a direct pathway to citizenship for them in Australia.

He capped that with yesterday’s joint announcement with UK Prime Minister Rishi Sunak which will see the bilateral free trade agreement between the United Kingdom and New Zealand enter into force on May 31.

Those honours would have belonged to Jacinda Ardern if she had stayed in the top job instead of quitting in favour of Hipkins.

Later this month, he will join Albanese and other Pacific Islands Forum leaders in Port Moresby for a meeting with US President Joe Biden. Crunchy security and climate issues will again be on the table there.

Then he is off to Lithuania for the Nato security meeting, which will have a strong emphasis on the Ukraine war. Beehive officials hope he will swing by Brussels on that trip to sign the bilateral free trade agreement New Zealand reached with the European Union last June. The agreement is due to come into force from the beginning of 2024.

When it comes to notching international agreements and trade deals, there is nothing like an impending visit by an international leader to get to the final signing-off stage.

The EU is notoriously protectionist. The UK deal is more beneficial to our exporters. But taken together, the two deals will give much more opportunity for our exporters and assist the Government’s desire to have more diversification among New Zealand’s trading partners.

Hipkins now has to straddle some difficult terrain ahead as China — which is expected to be on his dance card well before the election — steps up its CPTPP advocacy against a background when New Zealand’s long-term partner, the UK, is frank in its opposition.

The easy times are over.