'New generation' free-trade deal talks start today

The Government hopes NZ dairy exports will gain greater access to Pacific markets under a 'new-generation' trade deal being negotiated. Photo / Kenny Rodger

Talks begin in Melbourne today to lift what began as a 2001 pact between New Zealand and Singapore to a powerful "new generation" regional free trade deal that the United States has made a top trade priority.

The US is already talking about expanding it beyond eight nations and sees it as a vehicle for broader economic integration, not just free trade.

Trade Minister Tim Groser called it a "highly complex new generation agreement".

The US has told Malaysia it would prefer to do a trade deal with it through the Trans Pacific Partnership (TPP) than a bilateral free trade agreement.

Canada is also thought to be a potential contender.

Deputy US Trade Representative Demetrios Marantis told an audience in Malaysia last month: "It is our aim for TPP to create a platform for economic integration across the Asia-Pacific region and it is our aim to advance our mutual economic interests with the fastest growing economies in the world."

That was reinforced in Kuala Lumpur this week by US assistant secretary of State Kurt Campbell.

Groser said through the initial scoping process that will take place in Melbourne, the TPP promised to become more than a free trade agreement.

"It is meant to be cutting edge so the boundary will be wider than the traditional negotiation and probably look more like a CER [Australia- New Zealand Closer Economic Relations] agreement," he said. "We have to define politically the boundaries of this negotiation."

Conventionally it would start with the hard-core trade issues of tariffs, non-tariff barriers, services trade, and intellectual property.

On the issue of membership of the TPP, he said it would start with eight "but we have agreed we are going to keep this under review".

New Zealand is sending a delegation of 15 to the negotiations, which end on Friday, and are for officials only at this stage.

At least three sets of negotiations are scheduled this year, the others in June and early December.

The United States, Australia, Peru and Vietnam want to join New Zealand, Singapore, Chile and Brunei in the TPP.

Vietnam is there as an observer and will decide after three sets of talks whether to remain in the grouping.

The informal deadline is to have it concluded by November 2011 when President Barack Obama will host Apec in Hawaii.

One of the decisions the group will need to make before the end of the year is whether to conclude an expanded TPP then let others in - or whether to allow other countries in during the present negotiations.

Groser said one option would be to conclude an agreement with eight "and then look to Malaysia or Canada or other countries".

"Or we may decide at some point before we have completed that it would be advantageous to add other countries.

"The fundamental point is that we all agree that this only intended as a building block for a larger Asia Pacific regional trade agreement. The way in which the blocks are stacked is totally open for discussion and decision at a later stage."

He said agriculture would naturally be a difficulty in negotiating with the US but it was not such a one-dimensional issue as 15 years ago.

Fonterra had a complex commercial relationship with Dairy Farmers of America, one of the the largest dairy milk co-operatives in the world.

They used Fonterra's uniquely well-positioned distribution system to export their milk, and in the past 10 years the export of milk had become an increasingly important component of the US dairy industry.

"They are moving with difficulty from a deeply defensive stop-all-imports philosophy to a less defensive and interested-in-exports philosophy," said Groser.

MARKETS - POPULATION

Now
New Zealand 4 million
Singapore 5 million
Chile 17 million
Brunei 0.4 million

New prospects
United States 308 million
Vietnam 88 million
Peru 30 million
Australia 22 million

Down the line
Malaysia 28 million
Canada 33 million

PACIFIC DEAL GROWS

2001: NZ, Singapore Closer Economic Partnership
2005: Chile joins and it is known as P3 (Pacific 3) or Trans-Pacific Strategic Economic Partnership
2005: Brunei joins making it P4
2008: US under Bush. Australia, Peru, Vietnam agree to negotiate
2009: Feb, Obama postpones talks
2009: Nov, Obama agrees to join talks
2010: Mar, talks begin