Final-stage stutter an ill omen for TPP

After domestic turmoil over the TPP, Prime Minister Jacinda Ardern had put New Zealand in a position to sign off on the free trade deal - only for Canada to scupper talks at the last minute. Sam Sachdeva reports on the state of play from the Apec summit in Da Nang, Vietnam.

The day had started so well for Jacinda Ardern.

Gracing the stage at the Apec CEO Summit in Da Nang, the Prime Minister was described as "one of the youngest and most vibrant leaders we have ever seen on this stage" before she spoke powerfully about the urgency of climate change action.

A round of bilateral talks came with a surprise gift from Vietnamese Prime Minister Nguyễn Xuân Phúc - an oil painting of Ardern herself, which she received with surprise and delight.

Then it was on to talks with the leaders of the other 10 Trans Pacific Partnership countries, hoped to be a simple formality in signing off, figuratively if not literally, on a final agreement.

Yet by the end of the day, the Prime Minister was preparing to talk to media about what a senior staffer described, ominously, as “developments”.

Vietnamese Prime Minister Nguyễn Xuân Phúc presents Jacinda Ardern with an oil painting of herself. Photo: Supplied.

Those developments turned out to be Canada’s unexplained no-show from the leaders’ meeting, leading to the indefinite postponement of talks and what feels like a critical, if not fatal, blow to the TPP.

Canada had been involved in bilateral talks with Japan right before the final meeting, failing to emerge and creating confusion and anger among the 10 other countries jilted at such a late stage.

Exactly why the country pulled out of talks without explanation is unclear.

It may be that it feared the TPP would undermine its supply management system, which controls the price of dairy, poultry and eggs within the country. Farmers have lobbied hard against changes in the past, and may have been again exerting pressure within their own borders.

It could also be pressure from next door: Canada is currently involved in negotiations with the United States over NAFTA, and may fear angering US President Donald Trump by pushing ahead with the TPP he so publicly scorned.

"The view of the ministers in the room was that we had an agreement that was acceptable to all parties, and there was celebratory clapping and backslapping amongst those officials that had been working so hard on this for so long.”

In truth, the outcome of the deal was far from a fait accompli before Ardern arrived.

The Prime Minister described talks as going “down to the wire” on Thursday evening, and her Trade and Export Growth Minister David Parker was refreshingly candid on Friday morning when discussing a breakdown in communication during ministerial talks.

"The view of the ministers in the room was that we had an agreement that was acceptable to all parties, and there was celebratory clapping and backslapping amongst those officials that had been working so hard on this for so long.”

Yet officials from one country - believed to be Vietnam although Parker would not name them - felt otherwise, leading to confusion.

However, Parker said on Friday afternoon those issues had been resolved, with Canada’s late concerns an unforeseen spanner in the works.

A silver lining?

A cynic could argue this represents the best possible outcome for Ardern and her new government.

After all, none of the three coalition partners were remotely enthusiastic about the deal while in opposition.

Although Parker managed to devise a clever workaround to implement Labour’s proposed clampdown on foreign buyers, the Investor State Dispute Settlement clauses were another matter.

While Ardern said the Government had made good progress on its concerns, the reality was it would have had to swallow a dead rat, agreeing to ISDS clauses with at least Japan and several others in order to move ahead.

That would have been seen as a betrayal by some ardent TPP critics, and raised the spectre of the Greens and New Zealand First voting against the deal in Parliament and leaving Labour reliant on National’s pledged support.

Spike the deal over those concerns, however, and the Government would have faced an outcry from exporters already inclined to be less friendly towards a left-leaning administration.

With Canada executing the seemingly fatal blow, and no blood on New Zealand’s hands, Ardern gets none of the downsides of signing on to the TPP without any of the blame for scuppering a potentially lucrative deal for Kiwi exporters.

A TPP leaders' meeting was scuppered after Canada withdrew at the last minute. Photo: Supplied.

Of course, those political calculations will be cold comfort to those in the agricultural sector who had anticipated greater gains in the Japanese market, and now face falling back comparatively through Japan’ FTAs with Australia and the European Union.

Where the TPP goes from here is unclear: Ardern was not prepared to pronounce a time of death, although she was candid enough to acknowledge some major revisions could be needed.

“We would all be guessing at this point [on its fate] but It’s certainly fair to say for the here and now there’s been postponement.

“It’s difficult to say what position Canada will take from here - it’s a significantly different deal without Canada in it.”

A TPP-10 would still have value for New Zealand - Japan alone was expected to provide New Zealand more than three-quarters of the $274 million in tariff savings from the original TPP, including the US.

Multilateralism faces a test

Yet there is a broader question to be asked about the future of sweeping multilateral deals.

With the rival China- and ASEAN-backed RCEP regarded by some as a low-quality arrangement, and both the United States and China emphasising bilateral approaches, the death of the TPP adds to a sense of uncertainty that will concern small countries like New Zealand which gain leverage from taking on bigger partners as a negotiating bloc.

Parker has not held back from questioning the value of FTAs, describing them as “sexy but not the be-all and end-all”.

He favours a focus on increasing investment into productive sectors, rather than simply signing any trade deal put in front of New Zealand.

Of course, that does not preclude signing further FTAs, and the TPP may not be dead; Parker and other officials were continuing talks with other countries on Friday night, perhaps in the hopes of salvaging something.

However, it will be difficult for ministers and leaders to find the time to reach a conclusive agreement before Apec wraps up, and as the months since the signing date drag on a deal seems less, rather than more likely.

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