October 19, 2015 5:00 pm JST
TPP

Scrappy New Zealand keeps shaking up pact's talks

ATLANTA -- New Zealand Trade Minister Tim Groser was not in Atlanta on the evening of Sept. 29 though ministerial talks on the Trans-Pacific Partnership trade liberalization pact were about to begin.

     Groser, 65, was in New York, and he issued a statement saying that he would not attend the meeting without enough progress in working-level talks on a dairy trade deal.

     New Zealand, with a population of 4.6 million, comparable with that of the U.S. state of Louisiana, showed an overwhelming presence at the final stage of marathon TPP negotiations that had already been going on for five and a half years.

     Wellington's arm-twisting stance in the pursuit of opening markets for dairy products aroused ironic remarks from Japanese, U.S. and Canadian negotiators, such as "a flea on an elephant's bum."

Outsized player

New Zealand abolished all agricultural subsidies in the 1980s when it fell into a financial crisis. Farmers began boosting exports for the sake of supporting themselves.

     Dairy products now account for nearly 30% of New Zealand's total exports. A market-opening deal for dairy products is extremely important for the country.

     On Sept. 30, Japan proposed an increase in dairy imports by the equivalent of 30,000 tons of raw milk. But former New Zealand Agriculture Minister John Luxton, 69, who heads a dairy business association, brushed the proposal aside as a joke, noting that it equals the annual production of three average New Zealand farmers.

     Groser joined Luxton, saying that countries involved in TPP negotiations "can't just ignore our small country because we are small."  He turned down U.S. and Canadian proposals, aimed at winning a compromise with New Zealand, as well.

Using the pharmaceuticals chip

Given its small market, New Zealand cannot gain much from other countries in exchange for opening it. Wellington turned to the protection of development data on biological drugs as its bargaining chip.

     New Zealand, together with Australia, Chile and Peru, called for a protection period of five years against 12 years proposed by the U.S. In other words, New Zealand urged the U.S. to buy more of its dairy products in return for the longer drug data protection period.

     New Zealand does not see drugs as its bargaining chip alone. With the government purchasing pharmaceuticals on a lump-sum basis, the development of generic drugs based on the early release of data directly reduces its financial burden.

     Australia is in the same position in regard to pharmaceuticals. The Oceanian neighbors gained a position to determine the fate of TPP negotiations by linking the key issues of drugs and dairy products.

     New Zealand changed its bargaining strategy at a ministerial meeting in Atlanta on the evening of Oct. 2 as Groser said Wellington would accept the U.S. proposal for pharmaceutical data and the start of deliberations on dairy products after those on drugs.

     Other negotiators were puzzled by the sudden change in New Zealand's stance.  A lawmaker of the ruling Liberal Democratic Party, who was in Atlanta to monitor the ministerial negotiations, frowned in confusion, and said, "I'm afraid New Zealand will make a bargain on dairy trade with the U.S. and thrust imports on Japan."

     In disregard of concern on the Japanese side, Groser watched a Rugby World Cup game on television in a bar in Atlanta on Oct. 3 with Malcolm Bailey, 57, chairman of the New Zealand Dairy Companies Association, and other people.  Australia, New Zealand's partner in the negotiations, beat England in the match.

     This was the second consecutive day that Groser watched the rugby tournament. Negotiation watchers wondered if he intended to demonstrate that New Zealand would not give an inch in talks on dairy trade.

     Revealing the background of the strategic change, Mike Petersen, 52, New Zealand's special agricultural trade envoy, said he thought the U.S. would not pay attention to dairy trade before concluding a deal on drugs.

     In short, New Zealand tried to do the U.S. a favor in advance to purse a return on dairy trade while encouraging the U.S. and Australia to settle the question of drugs.

     The U.S. and Australia agreed to an eight-year protection period for drugs on Oct. 4. The deal sent the situation moving faster than expected, and small countries found themselves caught off guard.

     Chile said the proposed eight-year protection was unacceptable. Peru and Malaysia followed suit. New Zealand, for its part, became more aggressive on dairy trade at the final stage of negotiations.

Not quite the endgame

But small countries successively succumbed under pressure from the U.S. and Japan, which were eager to wrap up negotiations. New Zealand, which adhered to its stance to the end, eventually laid down its arms on the morning of Oct. 5.

     A senior official of a dairy business association in New Zealand said he was "unhappy" with the TPP accord. But full assessment of the deal is difficult.

     Dairy exports to Japan from New Zealand are likely to increase by 30,000 tons per year. Though the figure is much smaller than an initial call for an increase of up to 300,000 tons, it represents a 30% rise from current annual exports of 100,000 tons. Exports to the U.S. and Canada are also expected to grow.

     At a press conference on Oct. 5, Groser disclosed New Zealand's real intention as he said details of the negotiations, such as "tons of butter" did not matter because they are "regarded as a footnote in history."

     The TPP initiative is based on the Trans-Pacific Strategic Economic Partnership Agreement, or P4, concluded in 2006 by New Zealand, Singapore, Chile and Brunei in a bid to realize ambitious free trade arrangements.

     The TPP is only halfway to the goal as member countries still need to ratify the deal. But the initial spirit of the four countries acts as an engine to move forward negotiations that tend to mark time.

     Noting that more countries will join the free trade pact, Groser said, "The TPP bus will not stop at Atlanta."

(Nikkei)

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