TPPA to be signed next week: Taking the final steps

With the TPPA negotiations completed and the deal due to be signed off in Auckland on the 4th of February, Idealog talked to AUT professor of international business Peter Enderwick, on where the controversial trade agreement stands now and what’s left to do.

Now that the negotiations have concluded it seems as if there’s little – (“Nothing short of extreme weather or other catastrophic event”, as executive director of the NZ International Business Forum, Stephen Jacobi puts it) – standing in the way of the TPPA deal being greenlit, in this country at least.

But what about internationally? The US seems to have cooled significantly on the deal with both congress and candidates on both sides of the house taking anti-TPP stances. Is there still a chance the deal could fall through?

Idealog: The TPPA is due to be signed off in this country on the 4th of February. Could anything conceivably stop that happening?

Enderwick: It's unlikely that anything in NZ could derail the process. Primarily we are hosting a signing and the challenge has been bringing all the parties together in one place and time. Much of the discontent and protest has been based on the secretive nature of the discussion process. That is no longer the case, with supportive reports being issued both here in New Zealand and in the US. Of course there are always those that will be opposed to the new style of agreement encompassing more than trade and including ISDS [Investor-state dispute settlement provisions]. 

Internationally, what’s most likely to stand in the way of the Agreement coming into force?

For the TPPA to come into force it must not only be signed here in New Zealand on February 4, but must be ratified by the member states. Ideally it was be endorsed by all 12 member nations but this is not actually necessary. It could proceed if six or more members endorse it, provided those six member nations have a combined GDP equal to 85% or more than the 12 original signatories. This suggests that if a bloc such as the US/Japan/Canada/Australia agreed, any two other countries would be required. The Agreement could come into effect 60 days after. It is not clear if the supporting national legislation that would be required has to be completed first or could occur concurrently.

There are concerns that there might be delays from the US Congress ratifying the Agreement. What are the costs to New Zealand if it doesn’t get signed?

A loss of face and a huge boost to detractors/critics; the opportunity cost that predicted benefits would be lost or take longer to emerge; costs of renegotiation to overcome sticking points.

Given that we’ve had to agree to less than ideal terms in regards to dairy, how good would a signed deal actually be for New Zealand?

Given that New Zealand is a major exporter of basic commodities we would still gain from the easing of trade restrictions. These have to be offset against less than desired progress on dairy and higher costs for us with regard to IP. In my view the IP concerns simply reflect the ongoing restructuring of business models in sectors such as music, publishing and TV. In the recent past consumers have enjoyed free and often illegal access to such products. That cannot continue and the TPPA is being used to implement a more profitable business model. Even then it is technology that is the key driver of change and consumers are immensely better served in these industries than they were a decade ago.

How do these deals typically work out for New Zealand? Is the TPPA fundamentally just ‘business as usual’?

New Zealand typically enjoys net gains from trade agreements, think China, but is sometimes myopic in allowing over-dependency, again, China. The TPPA does offer more balanced opportunities with some members being future emerging markets that we need to better explore (Malaysia, Vietnam, Singapore, Brunei), [while] others enable us to diversify from Asia (Chile, Peru, Canada). It gives New Zealand better access to 800 million consumers accounting for more than one-third of world trade.

TPPA is more than a trade agreement, it also encompasses labour, environment, services, digital commerce and global investment. This is the trend in many other multilateral and regional agreements which reflect international commerce rather than simply international trade. In the same way mechanisms such as ISDS are not new, they are just unfamiliar to many in New Zealand.

Overall, New Zealand is likely to be a net beneficiary because:

1. Our businesses will have better access to more than 800 million consumers, many of whom are discerning and will pay for premium products (agricultural, tourism etc);

2. Our major gains will be in the area of trade because we are primarily a trading nation and lag behind in areas such as foreign direct investment;

3. The Agreement may help reduce our over dependence on China;

4. We can only gain from attempts to dismantle the artificial advantages that state owned enterprises enjoy in a number of other countries such as Vietnam.

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What's still to happen?

The government will host 12 international ministers for the ceremonial signing next week after five years of negotiations.

Following the signing, signatory countries will begin the ratification process. Signatories have up to two years to ratify the Agreement. If, after two years, all the signatories have not ratified the Agreement, the TPPA can still come into force if:

  1. At least six original signatories have ratified the Agreement
  2. Those signatories represent 85% of the total GDP of the original 12 signatories

This means that the failure of either Japan or the US to sign off on the Agreement would prevent it from coming into force.

In this country, following the signing next week, the final text will be submitted to parliament, along with the National Interest Analysis document where the deal will pass through legislative process.  

To see Idealog’s breakdown of the TPPA benefits specific to New Zealand, see Stephen Jacobi’s editorials, TPP explained, part 1: How does NZ benefit from the TPP? and TPP explained, part 2: Which sectors benefit from this mega FTA?

To see the full text of the TPPA Agreement, go to http://www.tpp.mfat.govt.nz/text