New Zealand has been hosting the Trans Pacific Partnership (TPP) talks in Auckland for the past week, but you’d have to say things haven’t worked out quite as well as some had hoped. In fact, it has been a bit sad to watch, up close. This country put on its dancing shoes, flirted openly with the United States and yet has still ended up the week in a corner, dancing almost entirely by itself.
Among the analysts and lobbyists floating around the Sky City Convention centre and adjacent Sky Grand hotel foyer, there has been general agreement that no marked progress has been made in Auckland on the core issues in contention – and as a consequence, the TPP can will be kicked down the road again to the next meeting in March 2013. The best you could say is that the Auckland talks may have helped to clarify the points that will require risk taking by the political leaders, if any substantial results are ever to be achieved. Canadian consultant Peter Clark likened the Auckland round to running on the spot. Issues of significance – drug patents, SOEs, dairy access etc – have all been put in the “ too hard” basket for now:
The U.S. has delayed tabling a revised proposal on pharmaceutical patents until the next round, which is scheduled for Singapore in March. Also delayed are discussions on access to the U.S. market for dairy products — as New Zealand is strung along again.
Few of those involved believe that the latest target date for completion – October 2013 – has much hope of being realized, not for a deal of any significance. Plainly, the TPP could well end up suffering the same deadlocked fate as the Doha Round, and largely for the same reasons. The slate of “WTO Plus” issues being driven by US business lobbies are simply unacceptable in their current form to far too many participants, who are not being offered enough in return to justify the political and economic costs of surrender to the American agenda.
The issues in deadlock are pretty familiar. The Aussies for example, want access to the US sugar market – which is about as fanciful as our dreams about greater dairy access – but unlike us, they’re playing hardball. For now, they’re blocking progress on the reform of state owned enterprises, which we see as an investment opportunity in Malaysia and Vietnam, yet Vietnam isn’t going to budge on SOEs unless the US lets in their footwear and apparel and gives ground on cumulative rules of origin, which the Mexicans would be very unhappy about and…. to go right back to square one, the Mexicans also happen to have their own position to protect on the sugar issue re the Australians etc etc. Pick any sector and you’ll find a similar tangle of conditional trade-offs and “no go” signs in the interim. Unless and until…the US breaks the logjam by (a) taking some of its more ridiculous demands (e.g. on IP, copyright and patenting) off the table or by (b) offering some genuine concessions, rather than expecting everyone else to comply with its wishes.
These kinds of tactical impasses did not stop New Zealand – as the anxious host – from making something of a spectacle of itself at this particular pre-Christmas party, by being overtly amorous with the Americans, in plain sight of everyone. Meaning: at the outset of the Auckland round, Trade Minister Tim Groser signalled to the Americans our willingness to change the way that Pharmac operates, and our interest in playing a brokering role on certain dairy quality assurance measures – all by way of showing our readiness to be flexible, and co-operative. What we were angling for in return, Groser indicated, was greater access to US markets for our dairy products, at some feasible point in the glimmering middle distance.
If this was a peace offering, the US promptly kicked it to the curb. Almost immediately, the Americans showed what they thought of flexibility by pointedly refusing to budge on the question of food aid – a bugbear of several TPP participants, who have seen the Americans make use of food aid as a tool of market penetration, and regardless of the disruption that this de facto dumping causes to local markets, and the harm to local producers. Thus, some TPP members were seeking to impose disciplines on the US programme, in the shape of independent assessment of the need for emergency aid in any given situation. Regardless, the US ruled such matters of “export competition” right off the table, despite having expressed an earlier willingness to discuss them – although this earlier readiness appears likely to have been only within the wider context of demands by US dairy farmers to, quote, “include provisions that would impose special competition rules on Fonterra, New Zealand’s largest dairy cooperative” unquote. So New Zealand may have dodged a bullet on that one, for now at least.
Our friendly waving to the Americans didn’t stop there. By the end of last week, this sort of thing was appearing in Inside US Trade’s coverage of the Auckland round:
Observers here say the New Zealand government’s recent shift in position on the issue of the patentability of software could be a nod to potential U.S. demands in the Trans-Pacific Partnership (TPP) and an initial negotiating move meant to help convince the U.S. to provide New Zealand with significantly improved market access for its dairy exports in return.
Note the word “potential.” We seem to have been offering this olive branch to the Americans before they even asked for it:
The real surprise is that New Zealand was willing to give up a potential bargaining chip in the TPP so soon, these observers said…But despite this perception here that New Zealand is interested in trading off software patents for dairy, it is still unclear whether the U.S. is actually seeking to include language in its intellectual property rights (IPR) proposal that would require software to be patentable. A senior U.S. negotiator, speaking with Inside U.S. Trade in a Dec. 7 interview, declined to say whether a revised U.S. IPR proposal would include patentability of software.
That’s the impression you get overall from our bargaining stance at the TPP. We have adopted a curiously supine approach to these negotiations. Remember how with respect to security issues and asylum claims, we used to worry about being seen as a “soft touch” by the wider world? No such worries in the trade arena – where we seem to have a touching faith that if we give away our bargaining chips before the game even begins, we will thereby earn the lasting gratitude and a stack of major brownie points from the Big Man on Campus that we’re trying so hard to impress. Clearly, Groser and his negotiating team haven’t been watching enough teen movie romantic comedies – which would tell them that the BMOC never makes a lasting commitment to the overly compliant cheerleader, but leaves her sadder but wiser, come the dawn.
The offers of “flexibility” on Pharmac and patents were bad enough in themselves. The outcome was that the TPP reports from Auckland in Inside US Trade served to underline our “pushover” reputation. Having given ground so readily, more could now be expected of us, as a virtual US surrogate:
For the U.S. to offer more dairy market access, New Zealand might also be forced into a position of siding with the U.S. on some of its other demands that have generated opposition among TPP participants, such as disciplines on state-owned enterprises (SOEs), this source said.
As the week rolled on, New Zealand seemed to be engaged in a conflict over bio-security issues as well. In the TPP context, this included negotiations touching on our sanitary and phyto-sanitary barriers (aka SPS), on say, pork and chicken meat imports. A so-called “rapid response mechanism” (RRM) has been mooted, and this new system would have two main components:
First, it would create an expedited review process when SPS trade issues arise that could be triggered at the request of any TPP partner. Such a review would be conducted by “neutral experts from TPP countries” and provided within 15 days…
Second, the proposal calls for immediate detailed notification to the importer or exporter of record of any measure involving risk detection, assessment and management. The notification should detail the methodology, findings, enabling authority and recourse or compliance measures related to the action taken against a shipment. This notification should be provided within three days of a request made by the importer or exporter of record.
Additionally, the notification should be recognized as supporting documentation if a country decides to pursue WTO litigation, the paper stated. An industry source said this notification, which includes a degree of justification for the action, could be used by a country that decides to pursue a WTO case or enforcement actions under the TPP based on the SPS or TBT measure that was taken.
In sum… the RRM would create a kind of small claims tribunal, yet one requiring speedy documentation of sufficient standard to defend this country against any subsequent dispute resolution. It points up an interesting quirk of the entire TPP process. While you might think that a free trade pact would be all about cutting red tape and reducing regulation, the TPP seems likely to deliver the exact reverse. The greater “transparency” that Groser is talking about at Pharmac, and the RRM mechanisms being mooted in bio-security would in both cases, be more complex and costly to administer than current practice. It would be interesting to see the government’s assessment of the likely cost implications of TPP compliance. Dimly, the government seems aware of this possibility. It has been embarrassing to discover that our stance on bio-security in the TPP negotiations appears to be being driven by us crying poverty on the costs involved. Over the weekend, Canadian trade consultant Peter Clark spelled out this somewhat pathetic situation:
Several parties have taken dead aim at New Zealand’s sanitary and phytosanitary (SPS) regime. Proposals for a Rapid Response Mechanism to resolve disputes about restrictions and bans on imports of perishable products, allegedly for health reasons, have hit a stone wall with Australia and New Zealand. Proper enforceability of “WTO plus” SPS obligations is an issue….We understand that Australia is isolated in resisting enforceability. New Zealand claims it does not have the human and budgetary resources to cope with rapid response obligations.
Right. So we’re too poor to pay for those 21st century, high quality trade provisions? It would seem so. In the meantime, our SPS protectionism against uncooked pork is costing us. The lack of import competition, Clark points out dryly, means that the price of bacon here is twice what it is in Canada.
Finally, there are ample grounds for skepticism about Groser’s ability to bring home the bacon when it comes to winning greater access to the US dairy market, at least within any useful timeframe. Fonterra certainly itself isn’t putting all of its eggs in the US basket. It has hired the London-based Hogan Lovells multinational law firm to assist its access efforts in Asia, and the cosiness of the relationships involved is reflected in this January 2012 press release, which celebrates the fact that former US Trade Representative Clayton Yuetter (now a Hogan Lovells employee) was given honorary membership of the New Zealand Order of Merit for his services to US agriculture, for which New Zealand apparently, is eternally grateful. It remains to be seen whether the ardour with which New Zealand is wooing the Americans will accomplish anything beyond encouraging the Americans to enlist us as a credulous partner on other TPP warfronts. For now, the only New Zealander who seems likely to benefit from this country’s embarrassing flirtation with the Americans in Auckland will be Groser himself – who will have done his candidacy to become the next leader of the WTO no harm by being so openly compassionate about the problems that the US is facing within the TPP. Conflict of interest here? You would think so. When is Prime Minister John Key going to replace Groser?
Ultimately, the only chance of New Zealand making any significant inroads into the US farm markets would be if a quantum shift occurred in market access to all of North America. That’s not going to happen. Partly because there’s nothing sufficiently substantial in it for the Canadians. They kept their extensive dairy support scheme out of NAFTA, and also out of Canada’s current trade talks with the EU, to any significant degree. Certainly, the Canadians aren’t going to budge on their dairy support scheme within the TPP context.
As Yves Leduc (the Dairy Farmers of Canada director of international trade) told me in Auckland, he’s actually getting a little sick of being lectured by New Zealanders on the subject: “ I have good friends in New Zealand. And every time I have a chance to meet with them they don’t really miss the opportunity to lecture me, or to promote the benefits of free trade. It’s one thing to talk about the protection measures we have in Canada to protect and maintain the supply management system. But when I look at the very, very stringent sanitary and phyto-sanitary measures that are maintained by countries like New Zealand and Australia – which in effect, results in a complete ban of fresh meat products – then you don’t need tariffs.”
Leduc readily admitted that he can’t speak for the Canadian negotiators, and could speak only on behalf of the farmers he represents. Still, he remained supremely confident that the Canadian government would not be trading off the interests of its dairy farmers. “From our perspective, we have nothing to gain from these [TPP] negotiations. Which is why we are maintaining a very, very firm position opposing any concession with respect to access to Canadian dairy markets.”