Oct 21, 2008

Guest Opinion: Why an American free trade deal is a great and important idea

Stephen Jacobi - Executive Director of the NZ-US Council has e-mailed us in an opinion piece which he is happy to have published under his own name. As we agree with every word we are happy to oblige. Thanks Stephen for contributing this and keep up the good work you are doing on the relationships with the US, Japan and Korea. Anyone else wanting their opinions published should feel free to submit these to us. If we agree we will happily ensure that these views are published. The Hive is read daily (Monday to Friday) by close to 2,000 0f New Zealand's most influential politicians, business leaders, and opinion formers. It is also read by the Wellington based diplomatic corps and internationally by a number of foreign ministries, intelligence agencies, and international media operations - so don't just confine your opinions to New Zealand's borders....

Why an American free trade deal is a great and important idea

By Stephen Jacobi, Executive Director, NZ US Council

Amongst the varied responses to the United States decision to join New Zealand in the Trans Pacific trade agreement the silliest must have been this piece by Bernard Hickey http://www.stuff.co.nz/blogs/showmethemoney/2008/09/23/why-an-american-free-trade-deal-is-a-ludicrous-and-dangerous-idea/. It was not widely known until now that Bernard does not like Americans – a “hypocritical, lying bunch of cheats” he calls them, scarcely better than Europeans and Japanese. Oh to live in a world like Bernard where you only have to do deals with people you like ! Beyond the playground name-calling the more serious part of his thesis is that Americans cannot be trusted to negotiate with us freedom loving Kiwis (tell that to the Canadians who wanted to buy an airport …). There are nasty lobbyists in Washington who will see it as “a chance to make money by blocking our dairy, beef and sheep exports”. It may not have occurred to Bernard that it is precisely to constrain the activities of protectionist lobbies that we need an FTA. And here’s some real evidence - when President Bush decided to apply safeguard tariffs on steel a few years back America’s FTA partners were exempted. Of course the dairy industry will do its best to block an FTA but, Bernard, that’s just further evidence of why we need it !

Bernard says an FTA will also threaten Pharmac and New Zealand’s intellectual property regime. It’s true that the Americans will raise those issues – yep, they are such a dastardly bunch that they publish on the Internet what their main gripes are with New Zealand (see http://www.ustr.gov/assets/Document_Library/Reports_Publications/2007/2007_NTE_Report/asset_upload_file424_10966.pdf) ! Bernard forgets that what we have agreed to do at this point is negotiate. Each of us has interests to advance and others to protect. Trade negotiations are the ultimate art of the possible. If the outcome is not beneficial for New Zealand’s interests then the deal will not be done. And, who knows, some improvements to Pharmac’s operating model, which are already under consideration by the Government, may be enough to address the Americans’ concerns.

The reason trade negotiations never get off the ground is that sectoral interests try to hold them hostage to certain outcomes – like the dairy lobby in America, and Bernard in New Zealand. We need to get beyond this sort of thinking if progress is to be made for New Zealand exporters who face an uneven playing field in the US market when compared to Australian or Chilean exporters. Bernard doesn’t like the Australian deal but the fact is it has already given them four years advantage over New Zealand. This includes the beef sector where the small in quota tariff for beef has been removed but continues to apply to New Zealand costing us around $13 million annually.

Bernard does not mention the role of Trans Pac in promoting broader trade liberalisation in the Asia Pacific region. With the WTO faltering and other APEC models lacking substance at this point, Trans Pac is the only game in town for those who see freer and fairer trade as a means of addressing both economic uncertainty and escalating food shortages. That’s another reason why free trade with the United States, in the context of Trans Pac, is a great and important idea !