Key's sun rises in Japan

John Key chats with Australian Prime Minister Julia Gillard. Photo / Supplied

Wednesday, November 10

6pm: Ginza, Tokyo

The neon-lit canyons drip Cartier, Louis Vuitton and Chanel. Here on the streets of Ginza - Tokyo's upmarket shopping precinct - credit card-fuelled homage is paid to the gods of conspicuous consumption.

The Japanese even have a term for it - shinhatsubai, or "new product syndrome". In the food sections of major department stores, a 500g block of butter (were it to come in that size) would set you back a cool $18.

A 100g piece of English cheddar is priced at a ridiculous $8.80. It is effectively priced off the market by sky-high tariffs on food imports which have protected Japan's highly-inefficient farmers for eons. Now, even the Japanese have had enough.

Sirens help force a motorcade through the rush-hour Ginza traffic, before the vehicles sweep into the Imperial Hotel forecourt (rooms from upwards of $700 a night) and disgorge New Zealand's Apec delegation into the cavernous lobby.

Barely an hour off his 10-hour-plus Air New Zealand flight from Auckland, John Key begins his evening agenda with a "stand-up" with his accompanying New Zealand media contingent. Given the Prime Minister has barely set his feet on the ground, this briefing is not expected to yield much by the way of news. To the contrary, however.

Key deliberately rises to the bait when asked whether Japan's huge tariffs can ever make it a serious candidate to join the Trans Pacific Partnership of supposedly free trading nations.

Otherwise known as the TPP, this grouping of nine countries - New Zealand, Brunei, Chile, Singapore, Peru, Vietnam, the United States, Australia and Malaysia - is currently negotiating a free trade pact which would phase-down tariffs to zero in all sectors, including (most importantly for New Zealand) agriculture.

Japan's effective closure of its borders to food imports and other goods is now causing it serious problems in terms of access to markets for its manufactured goods. One set of figures tells the story.

The few free trade agreements Japan does have cover barely 16 per cent of its trade. South Korea, one of its principal export rivals and plagued by even higher tariff walls protecting its farmers, has been negotiating deals which would cover 36 per cent of its trade.

Japan's new Government seems determined to finally bite the bullet and undertake a major restructuring of economic fundamentals - even to the extent of putting out feelers to the TPP.

New Zealand has mixed feelings about Japan joining the TPP. It obviously wants that country to lower its food tariffs. What worries New Zealand is that Barack Obama - desperate to reinvigorate the recession-hit American economy - has set a target of doubling exports in order to create jobs.

The concern is that the Americans will flex their negotiating muscle to get better access into Japan for their manufactured goods by offering Japan concessions in other sectors to entice it into the TPP, such as by allowing Japan even more time to phase out protection from food imports.

Thus the quandary for New Zealand. Privately it knows there will have to be compromises. There always are in such talks. But not yet. Key tells the journalists that Japan's joining of the TPP will have to be on New Zealand's terms.

"It is as simple as that. We don't want them being a sea anchor which weighs us down." His ramping up of the rhetoric is very deliberate. It is all about keeping the TPP participants on the straight and narrow. It is a message he will repeat all week in public and private.

For there is something else much more at stake here for New Zealand. The TPP represents what is probably New Zealand's one and only shot at a de facto free trade deal with Washington. Says one high-placed source bluntly: "We don't want Japan to wreck it."

Thursday, November 11

10am: Japan Travel Bureau store, Roppongi, Tokyo

The brochures portraying everything New Zealand has to offer the Japanese tourist are on prominent display. A New Zealand flag has been found and unfurled.

The Prime Minister is wearing his other hat, as Minister of Tourism. The rumble of the subway trains beneath and above the store reduces Key's patter to a mumble.

Then it's on to meetings at the Tokyo Stock Exchange and the powerful business lobby, the keidenran. They tell Key Japan must liberalise its economy - or risk slipping behind the pack.

The meeting in Yokohama of the leaders of 21 Asia-Pacific economies - Apec for short - is still two days away. Key has a day of appointments in Tokyo before heading for Yokohama, which is (depending on the traffic) about 45 minutes south of Tokyo.

By now he has been well briefed by Murray McCully and Tim Groser who have been attending the meeting of Apec foreign and trade ministers which precedes the main show at the weekend.

What they know is that Tuesday's vague language by the Japanese Cabinet to "gather further information" before "initiating consultations" with the TPP is talk designed to appease Japan's vociferous farm lobby and malcontents within the governing party.

It is not a case of Prime Minister Naoto Kan and his colleagues backing away from earlier enthusiasm about joining the TPP. That intelligence proves to be accurate.

Kan accepts an invitation to a meeting of TPP members on the coming Sunday, although he tries to downplay the significance of his presence by deeming it to be only in the guise of "host observer" , while prevailing upon the United States to ensure there are no television cameras in the vicinity to record him being there.

Each TPP economy - Apec members are "economies" not "countries" - is allowed a stills photographer into the meeting for a few seconds. But Key is unimpressed with the ban on television cameras and tries to get it reversed. Without luck. What must worry him is the collusion between the US and Japan over something relatively trivial.

Friday, November 12

8.30am: Imperial Hotel, Tokyo

"The Prime Minister will make a statement in 45 minutes," Lesley Hamilton, Key's press secretary, tells the New Zealand journalists imploring her to confirm Pansy Wong will be sacked from the Cabinet. Trouble at home is always an unwelcome distraction for a Prime Minister on the road. But the Wong case looks cut and dried.

12.15pm: Pan Pacific Hotel, Yokohama:On to Yokohama and lunch with Chilean president, Sebastian Pinera who moved heaven and earth (literally) to save his trapped countrymen. Chile is a founding member of the TPP. New Zealand can count on its backing.

This is the Harvard-trained conservative's first Apec. It is Key's third. What is apparent is that the latter's performance has markedly lifted a gear on last year's Apec in Singapore. Rather than being there for the "silly shirt" photo and getting into the same shots as Obama, Key is now relishing the Prime Minister's role in shaping foreign policy.

He has come with a definite purpose in mind - establish the TPP as a "high quality" free trade pact which will prove the forerunner to a Pacific-wide free trade area. Unlike his predecessor Helen Clark, whose life was - and is - foreign policy, Key has had to start from scratch.

He is willing to stick his neck out. Whether anyone is listening is another matter, given New Zealand's size. However, on trade, New Zealand does carry weight as an honest broker which has gone through the pain of tariff cutting.

Much of the Apec dynamic is also about contact-building. By alphabetical chance, Key has got to know Mexico's president Felipe Calderon well by being placed next to him at dinners. And, of course, Calderon has a lot to do with the big neighbour to Mexico's north.

There is more than one route into the thinking of the White House for a Prime Minister willing to pick up the phone.

2.45pm: Yokohama Royal Park Hotel, Yokohama

Key addresses the CEO summit of business leaders which runs parallel to Apec's proceedings. With the G20 meeting in South Korea at that very time, Key offers his take on the international currency wars. Reuters picks up a couple of paragraphs. The New Zealand media is concerned with other matters. Key has been well and truly Wong-ed.

Saturday, November 13

5.35pm: Intercontinental Hotel

Formality Asian-style. Key and Dmitry Medvedev, the president of Russia, are sitting in oversized armchairs looking for all the world as if they are about to wind up the evening with a cigar and cognac. Or should that be vodka? Except it is only 5.30pm and there are at least 50 other people in the room watching them.

The Russian media must find it mind-boggling. One minute it's all superpower politics, the next they are being dragged along to witness their president sign up to talks on a free trade agreement with a country to which it exported only $12 million-worth of products in 2008.

New Zealand's scoring of a major trade coup is largely down to Tim Groser, the Trade Negotiations Minister, who made informal contacts with Russian officials late last year which were followed by discussions between the two foreign ministers.

For Russia - along with its customs union partners Belarus and Kazakhstan - New Zealand is an attractive partner as it is strategically well placed in the Asia-Pacific region due to its track record in securing high quality and comprehensive FTAs.

Russia also has to start policing its trade rather than continuing what has been a "wild west" attitude to such things as copyright, piracy and dodgy food standards. New Zealand gets entry into an increasingly wealthy market.

The deal reflects New Zealand's three-pronged trade strategy. First, push for gains through the World Trade Organisation. That process has stalled. Second, use a building block approach for creating larger and larger free trade areas. Third, if all that fails, negotiate mutually beneficial two-way arrangements with other countries.

New Zealand now looks like having free trade agreements with two of the world's three super-powers. Where's the United States?

Sunday, November 14

11.45pm: Pan Pacific Hotel, Yokohama.

Blink and you might have missed it. Just 20 minutes has been allotted for the much-anticipated meeting of TPP members. As usual its communique was drafted days, if not weeks, ago. But there is still time for Key to reiterate the message he has been hammering all week.

Chile's Pinera backs him up, declaring Japan has to decide whether it is in or out of the TPP. In other words: don't mess us around.

It may not matter. The TPP is about to get down to the real nitty-gritty of negotiating exemptions and phase-out periods regarding tariffs. Japan may be too late to take part - at least in this round - which Obama wants finished by next year's Apec, which he is hosting in Hawaii.

Key has secured reference in the communique seeking the "objective" of a "high-standard" TPP.

Holding the line may be judged a good week's work, though not very tangible. At least Bronagh Key got to take home a free kimono from one of Japan's foremost designers, courtesy of the Apec organisers.