Scoop Election 08: edited by Gordon Campbell

On John Key’s illusory gains on free trade

November 15th, 2010

John Key’s tendency to govern by photo opportunity took a drastic new turn on the weekend. As Radio New Zealand reported this morning, the New Zealand PM emerged from the APEC meeting in Yokohama touting the Trans-Pacific Partnership trade pact as ‘New Zealand’s best chance for economic recovery and future prosperity’ and indicated that a TPP deal could be finalized at the next APEC gathering in Honolulu next year.

Are we on the same planet and talking about the same pact that the New York Times reported this morning in these terms:

The Asia Pacific leaders’ gathering produced little in the way of tangible accomplishments. The leaders said they had made progress toward a regional trade pact encompassing Pacific nations, but conceded that more work must be done to translate the agreement from an “aspirational to a concrete vision”. Mr. Obama, who has made evening out trade imbalances and doubling American exports a centerpiece of his economic agenda, is hoping this year’s meeting in Yokohama will lay the groundwork for next year, when the forum meets in the state where he was born, Hawaii.

Issuing what they called the “Yokohama Vision,” Mr. Obama and leaders of 20 other nations and territories in the Asia-Pacific Economic Cooperation forum agreed to take steps toward creating a free trade zone in the Asia-Pacific region, but set no timetable.

So our alleged ‘best chance’ for economic recovery and future prosperity turns out to currently to have only aspirational status, and no fixed timetable. Not to mention that the main player in this multilateral pact is the United States. Only a few days ago, US President Barack Obama was unable to clinch even a bilateral pact with South Korea’s leader Lee Myung-Bak. . Here’s the Washington Post account of that failure:

The two leaders failed to reach an agreement despite an intensive round of last-minute negotiations. The primary sticking point is a guarantee that South Korea will import more American cars to compete with its thriving auto industry. Any deal would have to pass Congress, where, after his party’s midterm losses, Obama has far less room to maneuver.

Sure, Lee later told Japan’s Asahi Shimbun newspaper, everyone is talking about the Trans Pacific Partnership. “Every country is considering it. South Korea is one of them, I think it has a symbolic meaning, although the actual effects are still unknown.” So once again: symbolic meaning, aspirational politics.

In the joint declaration from APEC, the leaders involved did cite the TPP as a possible starting point for freeing up trade across a region that accounts for half of the world’s economic activity. Yet only four small Asia-Pacific nations – Brunei, Chile, New Zealand and Singapore currently comprise the TPP club, with several others signaling an interest to join. Key’s suggestion that a deal among the wider grouping will be ready to sign by next year seems bizarrely hopeful, and out of sync with reality. At best, only another aspirational framework will be ready by then – and certainly not the stated TPP goal of eliminating all tariffs within the region within ten years. Nor is there much hope – is the case of either Japan or the US – of making significant gains in freeing up agricultural trade, which is the only realm where New Zealand could hope to make gains significant enough to justify the concessions it would have to make in return.

Japan and its farming lobby are not the only stumbling blocks to freeing up agricultural trade. Obama, weakened by the mid term elections, would find it virtually impossible to get any substantive deal that involved concessions on agriculture through a Republican-dominated Congress. Like Key, Obama is mainly engaging in symbolic politics. The TPP is perhaps best seen as just another forum for the arm-wrestling going on between US and China for influence in the Asia-Pacific region. After all, the most striking aspect of the TPP process is that it currently excludes China, which – as the Wall Street Journal says, has been pushing an alternative trade grouping, based on ASEAN, and not APEC.

Despite the new optimism, the TPP probably won’t come easily either. Amid the broad agreement to promote a pan-Asian trade bloc, there were signs of underlying tensions among the region’s major players, notably the U.S. and China. As it is evolving, the TPP would give the U.S. a major role in the regional economy. China hasn’t committed to join. Beijing is promoting its own vision of a regional trade bloc that would include China and exclude the U.S. That effort would be centered on the Association of Southeast Asian Nations, or Asean, and would add some non-member states: China, Japan and South Korea.

APEC’s final statement mentioned both TPP and the Asean formulations as options for advancing trade in the region, without making one a higher priority than the other.

Plainly then, the TPP is not the only multilateral trade game in town. Yet the Key government has just as plainly decided to get behind the effort led by the US, while our Asian neighbours are keeping at least some of their options open on the trade pact that includes China. For the foreseeable, these are not substantive trade deals, but forums within which the US and China are jousting for influence. To call them New Zealand’s best chances for economic recovery and future prosperity is frankly delusional, at this point.

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The last US election post-mortem.

Of all the many explanations of the Republican gains in the US mid terms, this one by Hendrik Hertzberg in the New Yorker seems right on the button. Top marks too, for sustaining one’s metaphor:

It seems clear enough that [the voters] rejection of the Democrats was, above all, an expression of angry anxiety about the ongoing economic firestorm. Though ignited and fanned by an out-of-control financial industry and its (mostly) conservative political and intellectual enablers, the fire has burned hottest since the 2008 Democratic sweep. By the time the flames reached their height, the arsonists had slunk off, and only the firemen were left for people to take out their ire on. The result is a kind of political cognitive dissonance. Frightened by joblessness, “the American people” rewarded the party that not only opposed the stimulus but also blocked the extension of unemployment benefits. Alarmed by a ballooning national debt, they rewarded the party that not only transformed budget surpluses into budget deficits but also proposes to inflate the debt by hundreds of billions with a permanent tax cut for the least needy two per cent. Frustrated by what they see as inaction, they rewarded the party that not only fought every effort to mitigate the crisis but also forced the watering down of whatever it couldn’t block.

Right, This was a vote against incumbency, and not a vote for the wreckers who had just vacated the premises, after trashing them. If the US economy improves next year, the Republicans may yet get their karmic due for the damage they’ve done.

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    1. 3 Responses to “On John Key’s illusory gains on free trade”

    2. By Pedro Garcia on Nov 15, 2010 | Reply

      It’s so good to read your work and unlearn all the tripe I’ve been forcefed by the Herald all week. Brilliant, as always Gordon.

    3. By Elyse on Nov 17, 2010 | Reply

      Gordon, you and Hendrik Hertzberg are the only commentators I read regularly. You are both brilliant. Thank you.

    4. By Joe Blow on Nov 21, 2010 | Reply

      Yeah, any free trade deal with the US would never be a truly free trade deal on the part of Washington and now that looks to be doubly true with protectionism back on the agenda. I think even a Democrat dominated Congress would have produced much the same inaction towards an agreement weighted in America’s favour.

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