Jane Kelsey: Long way to go yet for mega trade deal

New Zealand and Australia have said commitments to open Japan's agricultural markets are a bottom line. Photo / Bloomberg

Opinion

There are a lot of issues to resolve and the contentious TPPA trade agreement still might be 'Doha'd' by Japan.

Last September US President Obama, Prime Minister John Key and political leaders from the other nine countries negotiating the Trans-Pacific Partnership Agreement (TPPA) set a new deadline of this October to conclude their economic template for the 21st century. That is when the leaders next meet for Apec in Bali.

Deadlines for negotiations are not usually taken seriously. The World Trade Organisation's Doha round missed at least four deadlines before it was put on ice. The TPPA has missed two targets already. With 16 rounds over three years, and tens of millions of dollars spent on travel, hosting meetings and officials' time, media wits suggested the TPPA was so complex and controversial that it too was becoming "Doha'd".

This credibility gap spelt trouble for the Obama Administration, which until recently has had all its eggs in the TPPA basket. The President claims the "gold standard 21st-century" deal, coupled with a stronger military presence, will restore US leadership in the Asia Pacific region against an ascendant China.

A proposed mega-deal between all of Asean, China, India, Japan, Korea, Australia and New Zealand, but not the US, has intensified the pressure to pull off the TPPA.

The US brought a rescue plan to the latest round of talks just ended in Singapore. To ensure there was something to sign in October it was prepared to offer compromises, provided the other 10 countries accepted most of its remaining demands.

That alone would not be enough. The President lacks what is known as "fast track" authority, so the US Congress can pick apart any final deal and reject terms it does not like. Congress is sceptical because the present TPPA offers little job-creating economic value. The US has free trade agreements with six of the parties. Of the remainder, New Zealand, Brunei and Malaysia are relative minions. Only Vietnam offers any real economic gains. In return for a signable deal, the US could have to make politically damaging concessions in sensitive areas, notably textiles, agriculture and pharmaceuticals.

Hence, the trump card of Japan. Last month Obama and newly elected Prime Minister Shinzo Abe made a backroom deal that cleared the way for Japan's formal request to join the negotiations. The US told the other 10 countries in Singapore that it wants Japan at the TPPA table by September, before the October Apec meeting. The US expects that process to be completed before July. Mexico and Canada took over a year to reach that stage, and their entry was much less contentious.

As a first step, the Abe government must convince existing TPPA countries that Japan can deliver on their principal demands, despite inevitable protests, dissent in the ruling party and a lower house election in July. Dissident Diet members have attacked the Obama-Abe deal as "a fundamental surrender of sovereignty".

The Asean countries, Chile, Peru and Mexico, already have agreements with Japan, so the real pre-entry negotiations will be with Canada, Australia, the US and New Zealand.

A resolution of the ruling Liberal Democratic Party cleared the way for Abe to join the talks, but said tariffs on key farm products, especially rice, wheat, beef, dairy products and sugar must be maintained and Japan's public health insurance system defended. The US has promised to be sensitive about Japan's farm products. But New Zealand and Australia have said comprehensive commitments to open Japan's agricultural markets are a bottom line. Expect that position to be fudged to meet the US's July deadline. The US has a further 90-day notification process to the US Congress. Opposition by powerful players such as the car industry and unions to Japan's participation will flow on to the floor. But Obama can play three trump cards.

He will cite Japan's entry as tangible evidence that the goal of expanding these rules to economically meaningful countries, and ultimately the whole of Apec, is achievable. New Zealand will say the same.

Japan has reportedly accepted the same terms as Canada and Mexico. That means they cannot reopen any text that is already agreed and will not be allowed to see in advance the legal text they are accepting. Provided Japan gets to the table by September, and the US has secured agreement to its main proposals by then, Japan would be signing a blank cheque in many sensitive areas and its entry would not complicate the negotiations.

And most important for New Zealand, agreement to special treatment for sensitive agricultural products would strengthen the US's own negotiating position. After 16 rounds of talks, it is still refusing to discuss substantive market access for New Zealand dairy exports.

Can the US pull this off? Some logjams were cleared in Singapore, but stalemates remain, including on US dairy and state-owned enterprises, both crucial to Japan. Expect a Clayton's signing of something less than a final text in October, after which negotiations including Japan could still become "Doha'd".

Jane Kelsey is a law professor at the University of Auckland.