No show without Punch

The idea of a Trans-Pacific Partnership free trade deal without the United States would once have seemed absurd. It is access to the giant rich market of America, after all, that mattered most to all the other partners, including New Zealand.

And it was only quite recently that major players dismissed the idea of a pact without Washington. Japanese prime minister Shinzo Abe said in November that such a pact ‘‘has no meaning.’’ In January Canadian foreign minister Chrystia Freeland said the deal could not proceed without the United States.

Now Abe has changed his tune, Australia still wants a deal, and Prime Minister Bill English is busy talking up its prospects. There might be some benefits to a TPPA without Washington, but these will be even more modest than they were before Donald Trump scuppered America’s participation.

Does that mean New Zealand should persist with the smaller pact? That is a judgement call. The most obvious appeal is greater access to the large and wealthy Japanese market for our agricultural products. Under the original TPPA, tariffs on our beef exports to Japan were to reduce from 38 per cent to 9 per cent.

That would be a considerable help to our exporters, and similar cuts to other products would be an even bigger boost. However, the Green Party argues that these benefits could be gained through a bilateral deal with Japan. Abe, after all, wants to open Japanese markets as part of his attempt to free up and revive the sclerotic Japanese economy. He might be open to a bilateral pact.

That would bring some of the benefits of the TPPA without some of the obvious costs. Those who argue that the TPPA-minus America should be largely kept as it is need to explain why New Zealand should accept the disadvantages demanded chiefly by the Americans.

It was the Americans, after all, who demanded the absurd extension of copyright from 50 to 70 years, which was estimated to cost New Zealand $55 million a year in the longer term.

In the meantime, the Government’s law changes under the pact mean that the US and other countries will benefit in any case from the US-required changes to Pharmac (estimated to cost $4.5m immediately and more than $2m a year after that).

In a way this means that New Zealand gets the worst of both worlds: no greater access to the US market, but also facing costs that the Americans demanded before dropping out of the deal altogether.

The Government argued that the TPPA including America would eventually have a net benefit of $2.7 billion a year for New Zealand. This has been strongly contested by wellqualified economists, but nobody disputes that without the US the benefits would be much lower.

So the modest pay-off of the original pact has now become even more modest. There is arguably a case for continuing to pursue the possibilities of a pact without the Americans. But the Government’s excessive enthusiasm for the original deal has now received a good shower of cold water. Nobody expects a bonanza from TPPA-11.