Fran O’Sullivan
Time for PM to polish his trading skills
Prime Minister Bill English should put Washington DC on his dance card, sooner rather than later, if he wants to secure a trade deal from Donald Trump.
The US President yesterday said he would invite the Trans Pacific Partnership (TPP) members to open talks on bilateral deals.
English has been openly optimistic about the Trump presidency. But he will need to play strong strategic cards, such as New Zealand’s membership of the Five Eyes security pact and its first-class trade credentials, to get past the starting line with a bilateral free trade agreement (FTA) and not be sold a pup.
Trump yesterday collapsed the TPP by formally withdrawing the US. He has instead offered up negotiations on bilateral deals to the 11 TPP parties, combined with a threat to walk away within 30 days if any party does not uphold its side of the bargain.
English yesterday was not impressed by Trump's suggestion that a deal could be dumped in 30 days if a trade partner “misbehaves”.
“That's one aspect of it we would find unattractive,” he said at his post cabinet press conference.
He thought the chances of a good FTA with the US were low but said he “wouldn't want to rule it out”.
The mere fact that Trump has not completely closed the doors with the TPP members — Japan, New Zealand, Vietnam, Malaysia and Brunei — takes some of the sting out of his decision to walk away from the deal.
But as NZ knows from experience, getting the US to signup to a highly-comprehensive, high-quality bilateral deal will be no mean feat given the US lobbies.
NZ does not have a huge amount of negotiating coin.
We’re basically an open book when it comes to international trade. It is likely negotiators would try to transfer some elements from the TPP framework into a bilateral deal and ring-fencing issues such as Pharmac might prove more difficult in one-to-one negotiations than within a multi-lateral framework.
The trick will be getting to the negotiating table in the first place.
The first step is to create a political climate which will persuade Trump and US trade representative Robert Lighthizer (who must still get through the nomination hearings) that despite New Zealand’s small economy, a deal would make sense. Ambassador Tim Groser, a consummate trade pro himself, needs little introduction around the Washington establishment. The NZ embassy also has good contacts with the key players such as House Ways and Means Committee Chairman Kevin Brady, who was pro-TPP. Trade Minister Todd McClay will be in the box seat when it comes to talking with Lighthizer in a few weeks’ time (assuming he is appointed). Christopher Liddell, the New Zealand businessman appointed to a White House position as the President’s point man with the private sector, was among a number of business people who got behind the formation of the NZ-US Council in 2001, which supported a lengthy NZ Government campaign in Washington.
Liddell works for the United States. He is likely to advocate for New Zealand as a first-class trading partner but not lobby for the substance of a deal.
Former Trump campaign manager Stuart Jolly, who has worked with the NZ embassy to connect the diplomats with Trump insiders and the new Administration, will be an ally.
Assuming New Zealand gets to the negotiating starting line, the next challenge with be for any FTA to be comprehensive and high-quality.
It’s notable that NZ already has a FTA with China which is seen to be effective. For instance, tariffs on dairy products reduce to zero in the early 2020s.
At the World Economic Forum in Davos last week Chinese President Xi Jinping said protectionism was akin to “locking oneself in a dark room”.
Whatever Trump says now he is not in the long run going to want to hand over regional economic leadership to Xi.
China has talked previously about acceding to TPP.
With several of TPP members, including Japan and Australia, now talking openly about a “TPP minus one” agreement the ability for China to accede will also be under discussion (even if behind closed doors).
While this might not worry Trump, who backs his own deal-making skills, it will worry the Washington establishment.