Australia To Join Transpacific Partnership

I was very pleased to hear that Australia has formally agreed to join the negotiations to expand the Trans Pacific Strategic Economic Partnership.  Originally nicknamed P4 (Pacific 4) the agreement currently involves New Zealand, Singapore, Chile and Brunei.  The United States announced that it was going to negotiate to join the grouping a few weeks ago.  With Australia making this announcement the chances of Peru and Vietnam following suit will increase.

The United States Trade Representative Susan Schwabb said the following yesterday

“There are a couple of countries that are APEC members that are likely to announce their desire to participate in the next couple of days,” Ms Schwab told reporters.

And she suggested the TPP was being considered as one of the building blocks for a Free Trade Agreement of the Asia Pacific (FTAAP), a longer term APEC proposal to liberalise trade in the region.

Trade ministers have identified a number of ways to progress the FTAAP proposal, including building on an existing free trade arrangement.

“The TPP could become the basis for building out an FTAAP,” Ms Schwab said.

This is pretty much our expectation also.  The following is an excerpt from a speech I gave to the Japan New Zealand Business Council a few weeks ago in Nelson:

But one development within the last month makes things even more exciting – the United States decision to begin negotiations on joining the Asia Pacific Strategic Economic Partnership.  This partnership currently comprises New Zealand, Singapore, Chile and Brunei.


Already this announcement has had a major impact on the regional economic architecture.  Peru, Australia and Vietnam have indicated an interest in joining this negotiation also.  What was known as “P4” is looking as though it will become “P8”.  And as well as the four economies that have stated an interest in joining, many others are looking on with great interest.


I foresee this process mushrooming.  In its third phase of expansion I would be amazed if P8 does not grow to be P18.  Eventually I see it encompassing the full APEC membership.  And there is no reason why non-APEC economies such as India should not join eventually also.


This development offers the particularly exciting prospect of reviving interest in liberalization within APEC.  We now have a growing core of members absolutely committed to free trade, and willing to be part of a process specifically designed to have open membership.


The process for the multilateral process will be positive also.  The EU, India, Brazil and Argentina are already watching developments very closely.  If they determine that this process within APEC has legs, then expect a rapid resumption of substantive negotiations in Geneva.  It is exactly this dynamic which saw the previous round, the Uruguay Round completed.


What does this mean for the Japan – New Zealand relationship?


I see only positives.  I believe that it will be difficult to make rapid progress towards an FTA with New Zealand if that negotiation is with New Zealand alone.  Look at the difficulty that the Japan-Australia negotiation is experiencing.  We should keep trying for rapid progress but we should all be realistic about the constraints imposed by Japanese agricultural politics.


It seems to me that Japan cannot afford to stand outside the Trans-Pacific Strategic Economic Partnership for long.


Already we see Chinadeveloping close relations with ASEAN and with Australia, New Zealand and Chile.  Korea has likewise been adventurous in its trade policy.  It already has an FTA with Chile.  Eventually it will have FTAs with the US, Australia and New Zealand also.   I see the strong chance that given the already strong crossovers between these groups that the next logical move for the Trans Pacific Strategic Economic Partnership is to include all of ASEAN, Korea, and the three Chinas plus Australia, New Zealand, Chile and Peru.


Can Japan really afford to not be part of this process?  I don’t think so, because not being part of the process risks serious marginalization.  Japan as a great trading nation cannot risk this.


There are clearly positive benefits from being part of this process, much greater benefits than those that would flow from a purely bilateral FTA with New Zealand.  And clearly the earlier Japan is part of the process the great the benefits will be.


Can I just end on an ancilliary benefit.  That is the impact that this will have on the spaghetti bowl of FTAs that exist in the region and globally.  This is rightfully a concern, one that has quite a few negative implications for the business community. 

If we get the Trans Pacific Strategic Economic Partnership right we can simplify things greatly by replacing a large number of bilateral or regional agreements on varying quality with one high quality agreement.


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