Oz and Kiwi ministers sing different tunes at APEC

Oz and Kiwi ministers sing different tunes at APEC en route to the “Asian Century”

Both the New Zealand and Australian trade ministers are true believers in hard-core globalisation. Yet they were singing different tunes on how to achieve their goal at this week’s APEC Business Forum in Honolulu.

Australia’s Craig Emerson argued that the logjam in the World Trade Organisation’s Doha round could and should be broken by signing off on parts that enjoy some consensus at the ministerial meeting next month in Geneva. In his typically blunt fashion, Tim Groser, a former New Zealand ambassador to the WTO, said there was no chance to rescue the Doha round.

Conversely, Emerson seems not to share Groser’s passion for the Trans-Pacific Partnership Agreement, which did not rate a mention in his speech – indeed, he made no mention of any free trade arrangement aside from the WTO. It is interesting to speculate on what implications this divergence may have for the TPPA, especially as Australia has been a leading proponent of an APEC-wide free trade deal.

For much of this year the Australian government has been pushing a way to rescue the Doha round by abandoning attempts to get a comprehensive deal where “nothing is agreed until everything is agreed”, and banking areas on which there is a significant level of consensus. Emerson’s version at APEC is a much-diluted version of Australia’s original the “doha-lite” package. Clearly, they have had to wind it back for lack of support in Geneva. The new focus is the purportedly benign element of the Doha Agenda, the “trade facilitation” package, which aims to simplify customs procedures, rulings on tariffs classifications, and treatment of products entering developed country markets – which for poorer countries actually means lost customs revenue, increased costs and a worsening trade balance. It is not surprising, as Emerson conceded, that his perceived “substantial consensus” on those issues evaporated when it was proposed to proceed to a final text.

Emerson’s position is consistent with the Australian government’s trade policy released in April this year, which largely reflects an Australian Productivity Commission’s final report on trade liberalisation from December 2010. That report said the economic value from bilateral free trade deals had been “oversold”, with little evidence that the six existing agreements had generated significant commercial benefits. It was especially critical of the costs to Australia from its free trade deal with the US. The Commission argued that Australia should focus instead on trade liberalisation at the multilateral (WTO) level and through unilateral domestic policies.

Specifically, the Australian Labor government has little to gain economically from the TPPA and a lot politically to lose. It already has bilateral deals with New Zealand, the US, Chile and Singapore, and with Malaysia, Vietnam and Brunei through the ASEAN-Australia-New Zealand agreement. The US has so far refused to reopen the agricultural market access schedules in its existing deals, including with Australia where it blocked guaranteed access for sugar and set long lead times for several other products. In return, it has made aggressive demands to rollback some of the concessions that Australia secured in highly sensitive areas, such as their equivalent to Pharmac and the rights of US investors to sue to the government directly in foreign arbitral tribunals. Those remain highly sensitive. Indeed, the Australian government has drawn a line under investor-state disputes, and become even more adamant about that position since Philip Morris used an existing investment treaty with Hong Kong to launch a challenge to Australia’s plain packaging tobacco laws.

Groser is coming from a very different space. He takes personal credit for the long-term strategy to build a Free Trade Area of Asia Pacific from below, with the gold plated TPPA as the penultimate step to the final goal. A TPPA is also the only way that New Zealand’s free trade campaigners will secure the holy grail of a free trade agreement with the US, however lopsided it may be.

In his APEC speech, Groser located this agenda in a defence of the “Washington Consensus as a metaphor for orthodoxy”. While acknowledging the global financial crisis and what he explicitly declined to term “the train wreck in the Euro Zone”, the ever-optimistic Groser argued that “we will find a way through on macro-economic challenges. It could be ugly for some, but it is not end of Western civilisation as we know it.”

Far from being dead, elements of the Washington Consensus, such as fiscal discipline and low public debt, would be strengthened. Aspects of international monetary policy and financial market regulation would need to be rethought.

As for trade liberalisation, there was “no evidence that governments are collectively turning their backs on trade liberalisation and hard evidence to suggest the opposite”. There was limited resort to protectionism in the wake of the post-2007 financial crisis. The last major economy, Russia, would join the WTO in December. Groser quipped “I don’t think they came to join a cemetery; they realised that if they are not in WTO they aren’t in the game”.

While the Doha round was stuck in the mud with no obvious way forward, “not moving forwards does not mean moving backwards”. His explanation for the deadlock in Doha was the shift in global economic and political power to emerging economies, who had not yet assumed the same sense of responsibility for the system as created in past when the US was the single hegemon, supported by the EU. Groser insisted “the world is not moving away from free trade, it just can’t find a way forward multilaterally”.

There was a common subtext to both speeches: by strategically positioning ourselves within Asia, we can ride the coattails of China and India as the superpowers of the 21st century, and distance ourselves from direct fallout from the crises in Europe (and America) which would be channeled indirectly through its impacts on the Chinese economy. But even here there were different nuances.

Emerson’s failure to mention the TPPA and the future role of the US in “the Asian century” is consistent with a very explicit shift of geopolitical focus to Asia. His government has already embarked on a white paper exercise on “Australia in the Asian Century”, commissioned in September “to guide Australia’s planning as Asia undergoes profound economic growth and change”.

Groser also believes the shift in power to two emerging superpowers of China and India will be accelerated by economic storms in Eurozone and to some extent in US, although he was less concerned about the latter. “We are here in APEC to try to ride that wind, and build by regional trade agreements a better deal for our people.” Without a free trade deal with the US in his pocket, Groser’s vision will fail. He needs the TPPA. The questions for New Zealanders in the lead-up to the election and beyond are whether we share Groser’s vision for a future defined by free trade deals and what price he would have us pay.

Jane Kelsey in Honolulu
11 November 2011

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