Tiny NZ a big part of US trade growth plans

A proposed Trans Pacific Partnership among nine countries is the top trade priority for United States President Barack Obama and New Zealand Prime Minister John Key who meet at the White House this morning.

Amid all the shenanigans on Capitol Hill over the US debt ceiling crisis, the committed free trade community has been watching intently for possible consequences.

Among them is Susan Schwab, a former member of George W. Bush's cabinet as US Trade Representative from mid-2006 to early 2009.

It was she who turned down New Zealand's bid for a free trade agreement and decided instead to launch the TPP - the Trans Pacific Partnership talks - at Apec in Peru in 2008, her last as Trade Representative.

She credits the "New Zealand leadership" at the time, particularly the work of Labour leader Phil Goff who was Trade Minister.


Schwab is delighted that the President has been heavily promoting free trade during his crisis press conferences as the way to increase jobs and meet the goal of doubling exports in the next five years.

"At the end of the day it is only if the President of the United States embraces trade agreements and uses his bully pulpit to make the public case that you can have the kinds of votes that you need in the Congress, particularly when it's a Democrat," she told the Weekend Herald.

"It's really nice to hear the President saying positive things about trade agreements."

She is less delighted about delays to the three outstanding free trade agreements the Bush Administration negotiated with South Korea, Columbia and Panama, which the executive has not sent to Congress.

"It is incomprehensible that they haven't passed already, '' she said, but she is hopeful the Administration will get into action after the August recess, if not before.

"Before they are credible domestically on TPP, they're going to need to be credible domestically on the three FTAs."

She said the debt limit debate is not likely to have an impact but to the extent that was slowing down what might otherwise have been passage of the [three] free trade agreements before the August recess, "then it makes it more complicated for the American negotiators in the TPP negotiations to be pushing up against the November Apec summit [hosted by Obama] where they are trying to get some deliverables.

"So it is tangential."

And why wouldn't the US negotiate directly with New Zealand?

She said she had not seen the potential for an agreement between the US and New Zealand primarily because of the dairy sector issues but also because free trade deals with small countries had become hard to get through Congress.


She also saw the potential of expanding a high quality regional TPP on services, investment, intellectual property and agriculture for example to inject life back into the World Trade Organisations's Doha Round by building "concentric circles" around it in the direction of the highest common denominator negotiations "rather than the lowest common denominator negotiations that the Doha Round was turning into".

She said the prospect of building a high quality agreement involving developing and developed countries and not necessarily confined to just one region "could, over time, become the salvation of the WTO, a way of leading the WTO by example".

If the impetus for TPP over time was to bring along the rest of the multilateral trading system to a high quality set of trade agreements, "then one has to be thinking about it in the context of Japan, China, the EU, Brazil, India, others eventually wanting to join, or to participate".

And while Schwab saw too many difficulties in a direct deal with New Zealand she explained the importance of New Zealand to the United States in the TPP.

"Your standard economic and political rational for negotiating a free trade agreement doesn't necessarily fit with New Zealand."

Yet we have had two administrations now very desirous of negotiating an agreement [TPP] with New Zealand. Why is that?

"The principal reason is that New Zealand is capable of helping to deliver in a negotiations, advocating within a negotiation this complicated where you've got nine different countries, New Zealand is capable of advocating a very high quality, high bar outcome.

"That is the fundamental importance of the role that New Zealand can play."

Trade history

2001: NZ and Singapore sign Closer Economic Partnership
2005: Chile joins (Ape) and Brunei joins (Paw)
2008: USA under Bush plus Australia, Peru, and Vietnam agree to negotiate with the P4.
2009: Obama agrees to continue talks.
2010: Malaysia joins talks.