One of the interesting things about trade pacts is that while they promote harmony and mutual dependence among the signatories, they’re not regarded quite as warmly by those countries left out in the cold. For New Zealand – one of the original band of nations that first conceived of the Trans Pacific Partnership Agreement - the fact that the United States came along and gatecrashed the TPPA party was always something of a mixed blessing. That’s partly because the Americans conceive of the TPPA as being a security pact as much at is a trade pact, and one that is aimed at projecting and promoting US power and influence in the Asia-Pacific, while curbing the influence of China. That’s certainly how Barack Obama depicted the TPPA in one of the recent presidential debates with Mitt Romney:

And when it comes to our military and Chinese security…. we believe China can be a partner, but we're also sending a very clear signal that America is a Pacific power; that we are going to have a presence there. We are working with countries in the region to make sure, for example, that ships can pass through; that commerce continues. And we're organizing trade relations with countries other than China so that China starts feeling more pressure about meeting basic international standards…

Problem being: if we’re to be on a Team TPPA led by a US that is plainly feeling its competitive oats in the Asia/Pacific, how will China then respond to us? Well, that may not be such a big problem, after all. Because a new wrinkle is emerging in this diplomatic dance. Just as local activists are getting their heads around the TPPA, there will soon be another game in town. Namely, the Regional Comprehensive Economic Partnership (RCEP) due to be launched in November at the next ASEAN summit. According to this article in the Manila Standard a few days ago, the RCEP is really the better game to join:

“In support of greater integration with the global economy, Asean countries are actively working to launch the start of negotiations for the Regional Comprehensive Economic Partnership [RCEP] with China, Japan, Korea, India, Australia and New Zealand by the end of this year,” Asean deputy secretary-general Lim Hong Hin told a business forum in Makati City Tuesday.

Hin said Asean aimed to start negotiations with China, Japan, South Korea, Australia, New Zealand and India before the end of the year. “Despite differences, we want to move forward… and come out with a guiding principle to create RECP,” Hin said. He said compared with the Trans-Pacific Partnership, RCEP would be more feasible and realistic. “Once completed, it will be the largest FTA in the world,” Hin said, adding Asean alone is comprised of about 600 million people.

Hmmm. “More feasible” and “more realistic” than the TPPA. The timing is interesting, given how sensitive these diplomat types are supposed to be about symbolism. It means that New Zealand will be hosting the next round of the TPPA in Auckland – a grouping that does not include China – when, only a few weeks beforehand, our Trade Minister Tim Groser will have been among the ministerial cheerleaders at the launch of a different, potentially more comprehensive trade pact – that excludes the United States. It will however, include the Asian powerhouse economies of China, India, South Korea and Japan. I would love to have been a fly on the wall when this dawned on the Americans. One imagines that a few honest Montana beef-fed brows will have furrowed, and someone’s ass will have been kicked.

It's not just us, of course. Australia is playing the same hand right alongside us.

In early September 2012, Australia’s trade minister Craig Emerson and the trade ministers of China, Japan, India, Korea, New Zealand and the ten ASEAN countries met in Cambodia and “laid the foundations” for another: a Regional Comprehensive Economic Partnership. Australia already has a free-trade agreement with ASEAN; this ASEAN-plus-six deal would include eight of Australia’s top ten trading partners. Ministers will meet again in November, when negotiations are expected to be formally launched. According to the minister’s media release, this “will constitute the early delivery of work being conducted for the Gillard Government’s White Paper on Australia in the Asian Century.”

So Australia is negotiating a TPPA with the United States but not China, India and Korea, and a Regional Comprehensive Economic Partnership with China, India and Korea but not the United States. Emerson didn’t call the Regional Comprehensive Economic Partnership just “another possible pathway”; it was, he said, “the perfect vehicle for advancing Australia’s interests in the Asian Century.”

So if Craig Emerson is right and the RCEP is indeed “the perfect vehicle for advancing Australia’s interests in the Asian century” where does that leave the evidently less than perfect TPPA? Are we hosting something of a lame duck here in Auckland in December? And how do we propose to juggle a deal under the TPPA umbrella led by the US that – for example – promotes tighter copyright, patent and other IP provisions to which we apparently object, while negotiating a more “feasible” deal on much the same matters with China, Japan and the rest of ASEAN? In the end, which set of provisions will have priority under NZ law? Such a juggling act may test the skills of even the redoubtable Mr Groser.

Because let's be clear here. The RCEP is not some airy fairy mission statement of good intentions. Groser may try to portray the RCEP as only a side issue, whereby old hands like Australia and New Zealand are generously helping the Asians to sort out the contradictory elements of their regional FTAs. But that sort of cuteness – where we talk down the RCEP publicly when we want to extol the TPPA, and talk up the RCEP behind closed doors when we want to wring concessions from the US within the TPPA negotiations – will be impossible to sustain. Lest we forget, the world under a President Romney may soon become a far simpler place, in which there will be far less room for confusion as to which team New Zealand is on. To the Americans, it may already look like Australia and New Zealand are running a good cop/bad cop routine inside the TPPA – where the Aussies oppose the investor/state mechanisms and we oppose the IP provisions – to the ultimate benefit of a deal with Asia that will probably contain neither.

If New Zealand is indeed – as we claim – playing the long game on trade, then for the rest of the Asian Century, it shouldn’t even be a contest. The RCEP looks like evolving into a genuinely inclusive pact with Asia, while the TPPA looks like an American delusion. The ultimate aim of the RCEP is to create an Asian Economic Community, the biggest FTA in the world. Here’s how the Singaporean government described the RCEP vs TPPA options in the wake of the Singapore-Australia Joint Ministerial Committee meeting, held in Canberra on 10 September:

On the Trans-Pacific Partnership Agreement (TPP) Ministers agreed that officials should continue to work closely in pursuing a high-quality agreement.

Ministers also discussed the proposed launch of the Regional Comprehensive Economic Partnership (RCEP) at the time of the 21st ASEAN Summit and the East Asia Summit in November 2012. They viewed RCEP as another pathway to eliminating trade and investment barriers within Asia and promoting deeper and broader economic integration across the region. The Ministers recognised the significance of RCEP in strengthening regional economic architecture, and committed to making RCEP a modern, high-quality agreement, to promote further economic integration of the participating countries.

Is it just me, or do the Singaporeans sound noticeably more enthusiastic about the RCEP? Note their use of the terms “modern, high quality agreement” when they refer to the RCEP. These are not vague generalities. In trade talk jargon, “modern” and “high quality” are buzzwords for these attributes:

A high-quality agreement means it should cover all sectors of economic activity, including sensitive ones like agriculture and textiles, and require liberalisation with minimal exceptions.

A [modern] twenty-first-century agreement…. means it should not only aim to limit restrictions like tariffs, import quotas and export subsidies that have impeded cross-border trade in the past, but also target the trade restrictions that matter most now and in the future. These include the “behind-the-border” restrictions that obstruct the creation and flow of intermediate and completed goods and services through the complex, multi-country production and supply chains that are now common. It also means the agreement must deal with digital economy, electronic commerce and green technology issues and be useful to the small and medium-sized enterprises that are now responsible for so many of the new jobs created.

The RCEP is, in other words, shaping up as a strong contender for Asia-Pacific trade pact supremacy. Sometime in 2013, New Zealand is going to have to decide which pact - the TPPA, or the RCEP – is more important to it. Meanwhile, the New Zealand public will be left entirely in the dark on the competing attributes of both pacts, and on all substantive issues related to which one - or neither - we would prefer to join, if given any say in the matter. No public debate is being allowed. As a result, we won’t know on what basis New Zealand makes its ultimate choice, even though – if we can believe the Australians – the outcome could well decide this country’s economic future for the rest of the 21st century.

ENDS

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