Free trade deals with either the United States or what is left of the Trans Pacific Partnership membership look a long way off for New Zealand agricultural exporters.
In pulling the US out of the TPP President Donald Trump effectively killed the biggest regional trade agreement in the world.
Under the terms hammered out over eight years of hard-fought negotiation the 12-country deal entered into force only if ratified by the legislatures of its two biggest members – the US and Japan.
Using presidential executive powers on his first day in office Trump overrode US lawmakers – among whom support was by no means guaranteed anyway – and said he would negotiate deals with TPP countries individually instead.
Prime Minister Bill English said Trade Minister Todd McClay would travel to Washington DC as soon as his counterpart in the new administration was confirmed by Congress to assess the US’s readiness to pursue talks with NZ.
But he was realistic about NZ’s chances in a one-on-one negotiation with the world’s biggest economy under the leadership of an unabashed mercantilist president determined to squeeze trade partners to the maximum advantage of the US.
“If you asked me today I think there would be a low chance of that happening in a form that we would find satisfactory but we wouldn’t want to rule it out,” English said.
While describing its prospects the day before as “tricky” English, at his post-Cabinet press conference on Tuesday, said there was enough in it for NZ and others to push ahead with the TPP without the US.
English said the TPP still had legs after comments from Australian Prime Minister Malcolm Turnbull who said there was support for such a deal from Japan, Singapore and NZ.
But even that optimism was squashed when a senior member of the Japanese government the following day called the TPP without the US “meaningless” and said Tokyo would put its efforts towards convincing the new US administration that it was in its interests to re-enter the agreement.
Trade-watchers said Japan’s long-standing dependence on America’s military support meant it would be wary of going against it on trade and remaining in the TPP if the US was out.
The executive director of the International Business Forum, which includes primary export heavyweights such as Fonterra, Anzco and Zespri, Stephen Jacobi, said even if Japan remained it would be difficult for the deal in its current form to remain intact without the US.
TPP countries had agreed to cut tariffs – such as Japan on beef – because of the prospect of getting improved market access to the US market in return.
With the US out those remaining would want to reconsider the extent to which they were willing to open up their markets to increased imports.
Former trade negotiator and now Lincoln University professor of international trade, Crawford Falconer, said if by some remote chance the agreement was rebooted and came into force without the US either Trump or some future US president could face pressure from American companies at a tariff disadvantage to rivals in TPP markets and might eventually seek to re-join the trade bloc.
“The only way that happens is if there is something tangible out there that makes the US say we have got to change our position because this is hurting us.
“I don’t see much prospect for that but I do see some.”
Both Falconer and Jacobi agreed the prospects of NZ getting a better deal with the US in bilateral talks than was won through TPP seemed remote.
“Are they going to want to give more access to agricultural products and particularly dairy?” Jacobi said.
“I find that hard to believe given that the US dairy industry resisted that very strongly in the TPP.”
Furthermore, the US would apply pressure for extension of patents on pharmaceuticals, copyright and changes to drug-buying agency Pharmac, which NZ was unlikely to make further concessions on after fending off those demands during TPP negotiations.
Falconer said Trump had set himself a full programme on trade including re-negotiating the North American Free Trade Agreement and trade talks with Britain as well as other trade enforcement actions including against China and was unlikely to leave time for starting talks with NZ during his first term.