Fran O'Sullivan: NZ trade deal low on envoy's to-do list

Self-described "raging pragmatist" Ron Kirk has sent a clear warning his first priority as US Trade Representative will be to strongly enforce existing American free-trade agreements rather than indulge in "deal fever".

But don't misread Kirk's testimony to yesterday's meeting of the US Senate Finance Committee as an omen that the last rites are imminent for New Zealand's prospective regional free-trade deal with the world's largest consumer nation.

Instead focus on Kirk's confident statement during his Senate confirmation hearing that President Barack Obama will seek renewed trade promotion authority (or fast-track) at the "appropriate time". This is a signal that while the Obama Administration's trade agenda is a deeply cautious one, the intention is it will ultimately include new trade deals that have to be negotiated through Congress.

The cold reality is the White House has to weigh up on a daily basis just where it spends its precious political capital. While the Obama Administration recognises the imperative to keep faith with international trading partners, it also has to grapple with a developing protectionist grouping within Congress which wants to turn back the clock on globalisation.

Hence the decision by the Obama team to request the postponement (revealed in this column last week) of the first round of talks on the expansion of the existing TransPacific Partnership: New Zealand, Chile, Brunei and Singapore; to include the United States, Australia and Peru.

The fact that Kirk had yet to be confirmed as US Trade Representative did contribute to the postponement request. The final Senate confirmation vote is not expected until next week.

But the growing "fair trader" lobby on Capitol Hill is also an issue. Congressman Mike Michaud persuaded 54 representatives to sign a letter calling on Obama to abandon TransPac among other demands such as renegotiating the North-America free-trade area (Nafta), throwing out the pending bilateral deals with Panama, Columbia and South Korea and dropping plans for a bilateral investment agreement with China.

Kirk is not of that protectionist ilk.

As the first African-American to be elected Mayor of Dallas he supported Nafta and also China's entry to the World Trade Organisation (WTO).

Kirk's oral testimony yesterday was highly nuanced.

But he did not completely remove the ambiguity surrounding last week's "Presidential trade policy agenda".

The presidential statement said Obama would use all available tools to address this economic crisis "including achieving access to new markets for American businesses large and small".

But the evolving US trade policy also needed to display a "keen appreciation of its economic consequences" for American workers, their families, and their communities - a comment which provides plenty of scope for protectionist-minded Congressional representatives to leverage.

The statement also noted that eliminating barriers to trade in the face of serious turmoil in the US economy and financial markets would be a challenge.

The Obama statement did say fast-track was an option. But there was a rider: the Administration would only ask for renewed negotiating authority after extensive consultations with Congress to establish "proper constraints" and after it had assessed its priorities and made clear to the American people what it intended to do with it.

Trouble is there was little detail.

On the bilateral and regional front, the Administration said it would consider proposals for new agreements "when they promise to deliver significant benefits consistent with our national economic polices".

The trick facing New Zealand's trade negotiators is to decide how they best use the intervening time - as Kirk concentrates on other priorities like the three existing bilateral FTAs still awaiting congressional ratification - to reframe the rationale for the TransPac expansion and get NZ's Washington allies fired up.

The clear aim should be that TransPac is the first regional deal on the USTR's trade agenda once its negotiators sort out the atmospherics over the three signature deals negotiated by the Bush Administration, and, get some traction around the completion of global trade talks.

To do that Trade Minister Tim Groser and Mark Sinclair, who is the senior NZ negotiator on the TransPac deal, will need to broaden the context to align the expected benefits with Obama's economic agenda.

It is important to remember that New Zealand is just one of seven potential negotiating parties to the expanded TransPac deal. But with "free and fairer" trade the name of the game in Washington these days, the proposed FTA will have to encompass social and environmental priorities with the economic imperatives if the talks are to be rescheduled quickly.

On the upside, Kirk breezed through yesterday's speedy confirmation hearing. There are still some written questions to come and the Senate vote itself before the new US Trade Representative can set about appointing a team to work with him on the Obama Administration's trade agenda. But it will happen.

Senate Finance chair Max Baucus threw him the soft ball by lauding him as the "best man for the job". The predicted skirmishes on Kirk's tax issues (he donated speaking fees directly to charity against IRS rules) were described as "honest mistakes" as Baucus steamrollered the hearing through in a mere 48 minutes.

Among the takeouts from Kirk's brief appearance:

The Obama Administration's top priority will be to strongly enforce the rules around existing free-trade deals - code for a more rigorous approach to China or a signal that the US would more frequently resort to the WTO to challenge trading infringements?

The Korean-US free trade deal "isn't acceptable" to the Obama Administration in its current form - Kirk did not spell out what changes the Obama Administration wants.

Advancing the Doha Round to global trade talks will be high up the batting order for the new US Trade Representative's team.

Pending deals - like the Panama free-trade agreement and Columbian deals - will be advanced.

The most gung-ho statements came from Baucus who urged Kirk to fight a "rear-guard action to combat new barriers to trade" and foreshadowed he (Baucus) would introduce bipartisan legislation to strengthen trade enforcement, and, begin consideration of the pending free-trade agreements. Other Senators were even more hawkish in their statements.