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Aussie trade deals hold risks for NZ

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NZ Herald | Apr 23 2014

Fran O’Sullivan: Aussie trade deals hold risks for NZ

Pragmatic agreements with Japan and Korea have potential to cause disruption for our agricultural producers.

Australia is on track to notch what experts are calling an "Asia Inc" trade trifecta.

The three Aussie deals — South Korea and Japan which are already agreed, as well as an expected conclusion to the China free trade agreement which has been under negotiation for a decade — are indicative of a new pragmatism under Tony Abbott’s Government.

Abbott believes "it’s better to take small steps in the right direction in the absence of large steps".

His philosophy is that "if you can’t get what you want today, take what you can get and go for the rest tomorrow".

That rests on the assumption there is a ready "tomorrow".

Because the history of free trade agreements (or more precisely the closer economic partnerships that Australia’s two deals are) is that is takes many years — sometimes decades even as with the investment chapter for the Australia New Zealand Closer Economic Relations Agreement — for an economic imperative to emerge to get on and deepen an agreement along with the requisite political will to make negotiating space.

The two Aussie deals are also arguably indicative of the realpolitik which is born out of Australia’s declining economic fortunes.

Trade purists have poured scorn on the Japanese deal.

This preferential deal does not result in Japan reducing its agricultural tariffs to zero over time as for instance happens with dairy in the 2008 China New Zealand free trade agreement. But it does at least result in this protectionist country beginning the process of reducing agricultural tariffs.

Similarly, South Korean tariffs on beef are coming down along with other products like fruit and vegetables, seafood, sugar and cheese.

It is easy to mock aspects of Australia’s recently completed agreements.

But the problem for New Zealand’s trade negotiators who are imbued with the purist spirit (this is still a good thing) is that these pragmatic deals have the potential to cause trade disruption for our own agricultural producers. That is because Australian producers will be able to price more competitively against their New Zealand counterparts.

Our producers cheered the cementing of the China FTA. But there were wrinkles. For instance, that deal favoured log exports over processed timber. And it has taken a very long time indeed for the controversial exclusion of product from some of New Zealand’s meat processing plants to be addressed.

What is interesting is that New Zealand is still waiting to conclude its own deals with South Korea and Japan. There is little suggestion from the business community that this country should adopt Abbott’s pragmatism. Instead the focus remains firmly on the Trans Pacific Partnership (TPP).

But the wheels of multilateral trade grind very slowly indeed.

And even a regional free trade deal like the TPP is up against a political wall in the United States where Barack Obama has yet to convince Congress that he should be given the negotiating clout to ink the deal.

The most support within New Zealand for a limited preferential trade agreement has been for the Indian FTA. Niche manufacturers and ICT services exporters had suggested New Zealand should opt for an "early harvest" and leave the more difficult issue of agricultural access for later. This suggestion was brushed aside. But it may be worth a relook.

There are two important philosophical concessions that Australia is making in its Asia Inc deals which will resonate here.

First, to include Investor State Dispute Settlement procedures which are a controversial topic within the TPP. Second, to likely concede to China’s wish for Australia to allow its SOEs to invest within that country. These concessions are likely to have an overspill here.

 source: NZ Herald