SYDNEY/TOKYO -- New Zealand's Labour Party will lead the country's next government, a shift in power seen as a major setback for Japan's efforts to conclude the Trans-Pacific Partnership trade deal despite the U.S. withdrawal.
The change in Wellington comes as the New Zealand First party, which finished third in the Sept. 23 general election, revealed Thursday that it decided to form a coalition government with second-place Labour. The National Party, which led a ruling coalition for nine years and strongly supported the TPP, lost power despite winning a plurality of seats.
A high-ranking official at Japan's TPP Task Force gasped upon hearing the news Thursday afternoon. "It is a tough result, but we have to go on even without New Zealand," the official said.
Renegotiation push likely
Jacinda Ardern, the 37-year-old leader of the Labour Party, will become New Zealand's youngest prime minister in over 150 years and only the third woman to lead the country as soon as next week. Ardern told reporters Thursday that her coalition government would seek to renegotiate the TPP.
Her party was critical of the TPP during the campaign, arguing that the deal as it stands would not give the government sufficient power to limit foreign ownership of housing and land. Ardern reiterated Labour's position on the trade pact during Thursday's news conference.
New Zealand First leader Winston Peters, who played the role of kingmaker in forming the new government, declared that his party will support Labour's stance on the TPP.
Peters also revealed his desire to work with Labour to seek a review of the investor-state dispute settlement provision, the last sticking point in the original TPP negotiations, which included the U.S. The provision, known as ISDS, is controversial because it lets investors and corporations challenge regulatory sovereignty by suing national governments in international courts.
Following President Donald Trump's decision to withdraw the U.S. from the trade pact, the 11 remaining members -- including Japan and New Zealand -- have worked to enact the deal quickly with minimum alterations. They have adopted a strategy of limiting changes to "freezing" a small number of provisions that were sought by the U.S.
New Zealand submitted no requests for a freeze, but the new government may present one or demand a renegotiation of the overall deal. The 11 countries, known as "TPP 11," plan a summit in Vietnam, taking advantage of the Asia-Pacific Economic Cooperation conference there early next month.
Some in the Japanese government predict that TPP negotiations will be whittled to 10 members. "We will probably be working without New Zealand to sign the deal among the remaining 10 countries," one official said.
However, it remains to be seen how the other nations would react if New Zealand demands a renegotiation. The 11 countries are scheduled to hold a meeting of their chief TPP negotiators or equivalent officials in the Tokyo metropolitan area as soon as this month.