NZ: MFAT keeps ’24-hour watch’ on Trump, seeks US bilateral trade deal while TPP still on the table

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Business Desk | 9 Feb 2017

MFAT keeps ’24-hour watch’ on Trump, seeks US bilateral trade deal while TPP still on the table

The Ministry of Foreign Affairs and Trade is keeping a 24-hour watch on the Trump administration while it works towards a bilateral free-trade deal, even while a Trans-Pacific Partnership deal excluding the US remains on the table.

At the ministry’s annual review this morning before the foreign affairs, defence and trade select committee, chief negotiator David Walker said it hadn’t been a surprise that President Donald Trump pulled the US out of TPP, but it had been a disappointment. New Zealand still stands to gain about two-thirds of the estimated value of the trade deal without the US involved, he said.

"It was a major achievement for us. It was the first free-trade agreement we had with a number of the players around the table," Walker said. "The US is a significant loss, but it still has considerable economic value to us and we understand that other members feel the same. We intend to talk with the 11 other signatories to discuss how we might all want to move forward."

The ministry is also working on the Regional Comprehensive Economic Partnership (RCEP), an agreement being negotiated between 16 nations in Asia and the Pacific, with a meeting due to be held which will be the first test of how different countries negotiating the agreement want to approach the situation now, Walker said.

Many of the countries negotiating RCEP were also intending to sign the TPP, although RCEP also includes China, which was excluded from the TPP.

"Regional agreements provide added value over a series of bilateral agreements," Walker said. "We didn’t have all our eggs in the TPP basket."

New Zealand has long been interested in a free-trade deal with the US but negotiations would likely involve pushback on areas the country pushed back on during TPP negotiations - intellectual property and pharmaceuticals, Walker said.

MFAT has set up a 24-hour taskforce to monitor the Trump administration "as things unfold, what’s happening and whether our interests might be affected," chief executive Brook Barrington said. "We won’t be going back to BAU (business as usual) until we have a clearer sense of the lie of the land."

Barrington said there was a long way to go for the super-structure underneath Trump to be completed, with the last report he had seen showing there have been just 32 nominations for positions in the new administration while 1,220 positions need to be confirmed by the US Senate.

New Zealand has some significant areas of longstanding cooperation with the US, including Antarctica, the East Asia Summit and APEC, which Barrington said he would expect to continue.

"We have never hesitated to disagree with the US on issues which matter to us, and I don’t expect that to change," he said. " We have systems, processes, and people in place to make sure New Zealand interests aren’t compromised."

A free-trade deal with the EU is another goal for the ministry, although New Zealand’s high exports of products like sheep meat and butter doesn’t help its case with EU members, Barrington said.

"At the strategic political level, there’s definitely support to conclude an FTA and a suggestion we might be able to do so quite quickly by European standards - two or three years," Barrington said. "But I would certainly not be ruling out the reality that interest groups on the ground will continue to make this a challenging process and our negotiators will have to be absolutely on their game."

Walker said the EU has seen the trade agreements New Zealand has developed with other countries, particularly in the fast-growing Asian region, and those links make the country a more attractive prospect.

"The interest now is genuine two-way interest to advance negotiation, and as the discussions recently with the prime minister and minister of trade indicated, we intend to try to launch the negotiations some time this year," Walker said.

Labour’s David Parker said he felt misled by Barrington over the Saudi sheep deal at last year’s annual review of the ministry. The Opposition MP said he had obtained a copy of the briefing Barrington was given before that hearing, which advised the ministry’s chief executive how to deflect questions "so as not to concede that you never got any legal advice as to whether there was a real legal threat from the al-Khalaf group."

Barrington said the ministry holds the view that legal advice, and the existence of legal advice, is privileged information, and on that basis it would have been inappropriate for him to discuss the issue with the committee.

Parker also criticised what he saw as a shift in MFAT’s policy with trade deals stopping New Zealand from banning foreigners from buying land.

New Zealand’s free-trade deal with South Korea, which allows that country to stop New Zealanders from buying houses in South Korea but includes a provision stopping New Zealand from adding new categories of screened or banned investment, arguably stops New Zealand banning South Koreans from buying homes here, Parker said, while the ’most favoured nation’ clause in the free-trade deal with China means those conditions could also be claimed by China. The TPP also conceded New Zealand’s right to ban foreign land buyers from participant countries in future.

"The ministry has moved in its principles that it seeks to achieve in respect of trade agreements in respect to an issue which is very important to the Labour Party," Parker said. "Given we try to maintain a bipartisan approach to trade, I wonder whether our concerns have been heard. It seems pretty obvious that we would’ve been able to protect that right given South Korea maintained that right for themselves and gave it away to Australia."

Walker said he would have to come back with a detailed response, but in general, each trade negotiation had different dynamics.

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