Fran O'Sullivan: Key searching for solid ground

Prime Minister John Key will be intent on ensuring greater economic paydirt for New Zealand when he talks turkey with Hillary Clinton this week.

As it should, much of the hoopla will concentrate on the Wellington Declaration - an essentially political document that will create a platform for future bilateral engagement on issues like security, climate change, the Pacific and so forth.

After an absurd 25-year standoff - sparked by David Lange's mercurial performance during the anti-nuclear row (a factor some on the US side still regard as treacherous) - both sides are finally prepared to use what they have in common as the platform for a 21st century strategic partnership.

But the real economic gains for New Zealand come from gaining better access to the US consumer market through the Trans Pacific Strategic Economic Partnership (TPP) trade talks.

After a year of equivocating, President Barack Obama announced on the eve of last year's Apec leaders meeting that the United States would engage with the TPP negotiations.

Obama spelt out the goal was to shape a regional agreement that would have broad-based membership and "the high standards worthy of a 21st century trade agreement".

While many parties saw the negotiation resulting in a more open trade relationship with the United States.

The reality is - as our foreign affairs officials suggest - the greatest potential for TPP probably lies as a pathfinder agreement for wider regional economic integration.

It's important that the Key Government gets the domestic political preparation right on TPP, particularly as Obama ideally wants to be in the position to announce the completion of the deal when he hosts the Apec leaders meeting in Honolulu in November 2011.

It's not yet hugely obvious to the wider community just what fillip the New Zealand economy will get from the TPP. There will inevitably be winners and losers.

If past negotiations are an indicator to the future, New Zealand's negotiators will focus on achieving more upside for Kiwi agricultural exporters than the growing services sector.

But the devil lies in the detail. A factor which sometimes results in more than a little jibing (behind scenes) that our Foreign Ministry should be renamed the Ministry of Fonterra and Trade.

The TPP is a wide-ranging deal. But in many respects it seems more like a patchwork quilt of Asia Pacific bilateral deals (with some additional icing on top) rather than the broad-brush approach of the World Trade Organisation (WTO) framework.

It is important to note that New Zealand already has free trade agreements with most of the TPP negotiating parties: Singapore, Brunei, Chile, Australia and Malaysia. Vietnam is within New Zealand's orbit as a result of the Asean-Australia-New Zealand FTA. But we don't have deals with either Peru or the US.

It's obvious that the 2008 China FTA has been a boon for New Zealand's agricultural exporters. But while the FTA resulted in increased access for specific New Zealand services - it was not an across the board liberalisation.

And when Chinese companies sought reciprocity within the New Zealand market - particularly through the investment chapter - we were ill-prepared.

It simply did not seem to occur to New Zealand politicians that they ought to prepare the public for the eventuality that Chinese firms would also seek reciprocal advantage by investing in New Zealand land and/or production capacity particularly in the lucrative dairy sector in which Fonterra is seen as a "national champion".

I doubt that too many Kiwis - outside the negotiating players and activists who are opposed to free trade - do in fact realise that the US side wants to use the TPP to get rid of what it considers are long-standing New Zealand protections such as foreign investment clauses (it is unclear how the US views New Zealand's latest revision of the overseas investment rules); Pharmac's virtual monopoly on imported medicines which has long been in the sights of US Big Pharma, greater copyright protection and vigilance in relation to DVDs and music, and changes to some biosecurity rules which the US believes we use as a form of de facto protectionism for our agriculture sector.

Each time New Zealand negotiates a deal, a national interest case is prepared which is tabled in Parliament. But there is little in-depth publicity given to the real national interest perspectives of our trading partners.

The fourth round of negotiations will be held in Auckland from December 6-10. On the table will be further discussion on issues such as industrial goods, agriculture, standards, services, investment, financial services, intellectual property, government procurement, competition, labour and environment.

TPP officials have agreed a process to begin market access negotiations, including initial technical work to facilitate offers being made in early 2011.

Japan, China, Canada and the Philippines will be briefed on TPP on the sidelines of this month's Asia-Pacific Economic Co-operation (Apec) leaders' meeting in Yokohama.

But bigger will not necessarily better for an agriculturally-led nation like New Zealand, if the US (which now claims leadership of the TPP negotiations) opts for a down and dirty essentially political deal which cements its leadership in the Asia Pacific at the expense of a high quality comprehensive trade agreement.

In Beijing, where I have been this week, informed commentary suggests that China - which is still somewhat irked by the admittance of the US to the East Asia Summit process - has a strong preference that the real economic gains in East Asia will be unlocked by an FTA between Asean (10-strong group of Southeast Asian nations), China, Japan and South Korea. The East Asia process is now seen as more political in its emphasis.

What we don't want as a nation is for TPP to go down the same route where the feel-good factor is more tangible than solid economic gains.