Editorial: Kiwis can be proud NZ has leading role in trade talks

Prime Minister John Key. Photo / AP

Opinion

New Zealanders will be mildly amused that their Prime Minister has stepped into the breach left by US President Barack Obama's inability to be at Bali this week to chair an important meeting of the proposed Trans-Pacific Partnership trade agreement. But we can be proud, too, that New Zealand still has a leading role in this project.

The TPP was conceived by four relatively small, free-trading states: New Zealand, Singapore, Brunei and Chile. It has grown to comprise 12 countries, including the United States and Japan, and it is being watched closely in Europe where attempts are beginning to match it with a Trans-Atlantic Partnership.

The TPP has taken up most of the challenges that faced the World Trade Organisation in the Doha Round and has become the new frontier of efforts to break down national barriers to trade and investment and write international law for related concerns such as government procurement and intellectual property.

It would be easy for such an ambitious project to become unwieldy and lose focus as more countries join the talks. There is always the risk that late-comers are joining the talks for the sake of appearances rather than with a serious intent.

But the last to join, Japan, seems serious. In fact its reformist Prime Minister, Shinzo Abe, may be the leader keenest to have something definite agreed by the end of this year. That goal, set by President Obama, should concentrate the minds of the meeting that it falls to John Key to chair.

It will be held in conjunction with Apec, an Asia-Pacific trade initiative that, like the Doha Round, set a target it could not reach. Apec survives as a shadow of its original purpose. The strength of TPP may be that it has no institutional existence yet. If it fails, there will be no disguising the fact.

Until the Doha Round failed, multilateral negotiations had been afraid of failure. Previous rounds had been "rescued" by last-minute deals cobbled together for fear the world would otherwise slide back into protection. That fear has gone. Doha's failure was not followed by a general regression in national policies. Open competitive markets remain recognised almost everywhere as the source of economic efficiency and strength. Free trade agreements remain the holy grail of diplomacy, though they usually leave a lot to be desired by the weaker party.

Protection lingers in most countries only for industries that are not expected to be internationally competitive. Agriculture is the most common. Japan, for example, protects its rice farmers for reasons of heritage, sentiment and food security, not economic gain. If the TPP cannot produce concrete agreements on reduction of food barriers, New Zealand would do better to walk away.

But if it can lower barriers to our exports, New Zealand may have to make concessions in other areas. Since trade negotiations typically proceed in secrecy so that positions are not solidified by political pressure, the possible concessions can arouse fearful speculative opposition.

Opponents of TPP in New Zealand fear the Government will have to compromise on pharmaceutical purchasing, forcing Pharmac to buy prescription drugs on terms dictated by suppliers, particularly in the United States. More generally, opponents warn that the foreign companies will be able to claim damages in international courts against any Government decision that harms their investment here.

All Governments will want to preserve their sovereign power to make policy. It should not be hard to preserve democratic rights as long as the policy does not favour domestic industry. That, of course, may be what the opponents really want to do, especially those in film and entertainment. TPP is a larger vision.