23 Jan 2017

'Plan B' TPP on the cards - PM

8:57 pm on 23 January 2017

The government's attempts to keep the Trans Pacific Partnership (TPP) alive have been described as a political own goal and a commercial disaster.

Professor Jane Kelsey at her home

Professor Jane Kelsey Photo: RNZ / Philippa Tolley

Auckland University law Jane Kelsey said moves by the government to proceed with the TPP despite US President Donald Trump's outright rejection of the controversial deal smacked of desperation.

Without the US, Professor Kelsey said the already questionable economic benefits would be wiped out.

"The economic modelling the government relied on to sell the TPP last year had zero credibility and failed to account for the costs. Take the US out of that equation and any attempt to pitch the agreement as having net benefits to New Zealand is risible," she said.

Professor Kelsey said it would also be a political miscalculation to try and sell the controversial deal to the public in an election year.

"Because the text would be substantively different from the one that National rammed through the New Zealand Parliament last year, the new version and a new National Interest Analysis would have to be tabled in the House and referred to the select committee.

"Not allowing submissions would inflame anti-TPP sentiments; allowing them would provide a platform to expose the government's stupidity."

The Labour Party would also have to engage, which Professor Kelsey said it would desperately want to avoid.

Officially, TPP could not go ahead if the US was not part of it.

Professor Kelsey said if the US withdrew its signature then the calculation would change to reach the threshold of 85 percent of GDP to bring the agreement into force.

She estimates a TPP made up of the remaining 11 nations would require ratification by Japan, Canada and Australia, as well as either Mexico (87 percent of GDP) or four of the other larger countries (Malaysia, Singapore, Chile and either Peru or New Zealand) which total just over 85 percent.

Professor Kelsey said American corporations would be delighted if the TPP was successfully ratified, because they would get the benefit of contentious changes on rules surrounding next generation drug patents and foreign investment.

TPP still feasible?

But the government is refusing to sound the death knell for the TPP, despite the US's imminent withdrawal from the controversial trade pact.

New Zealand passed legislation late last year allowing the government to ratify the agreement, which was negotiated by 12 countries.

Prime Minister Bill English told Morning Report that the US decision to withdraw from the agreement was not in New Zealand's interests, "and we would argue that it's not in America's interests".

However, some form of the agreement could still go ahead, he said.

Earlier this month, Japan and Australian leaders signalled they would work together to bring the TPP into force.

"We're working on Plan B. It was promising that last week the Prime Minister of Japan, when he was in Australia, made quite a positive statement about trying to proceed with a version of TPP without the US in it, if it comes to that."

The agreement was "probably" still a good deal for New Zealand, even without US involvement, Mr English said.

"We don't believe it's dead but Plan B could be a bit tricky. It's great though that an economy the size of Japan, and of course the Australian Prime Minister (Malcolm Turnbull) was positive as well, can see there's benefits in it, even if the US was the big prize."

Mr English said it was possible the TPP could be scrapped and replaced with something else.

The International Business Forum's Stephen Jacobi said repackaging the TPP without the US would not be easy.

"The agreement was negotiated on the assumption that the Americans would be part of it and the partners have made concessions to each other on that basis and they'll need to want to see whether it still stacks up," said Mr Jacobi.

"The American economy is still heavily integrated with the rest of Asia. And the same sense doesn't come forward when you take them out of the picture.

"But maybe it's possible to conclude TPP amongst the 11 [nations] or even a subset of that and keep the door open to the United States for the future."

The ratification process runs until February 2018 before the TPP agreement lapses.

New Zealand still has other trade irons in the fire, including the regional Asian trade deal, the Regional Comprehensive Economic Partnership, which involves China.

The government is also actively pursuing deals with the European Union, Britain, the Middle East and Sri Lanka.

New Zealand will start talks with China to upgrade its free trade agreement, with the first round of negotiations to start in the first half of this year.

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