The Future of the Trans-Pacific Partnership – Phil Houlding

On 4 February 2016, Ministers representing Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam signed the Trans-Pacific Partnership (TPP) agreement. At the time, the Ministers remarked, “After more than five years of negotiations, we are honoured to be able to formalise our collective agreement of TPP which represents an historic achievement for the Asia-Pacific region.” However, the United States officially withdrew from the TPP agreement earlier this year. To understand the impact of this development on others in the Asia-Pacific Region, Emma Schneck, a 2016-2017 Future Hawaiian Diplomat, reached out to the Trade and Economic Counsellor at the Embassy of New Zealand in the United States, Philip Houlding.


Many supporters of the TPP, most notably exemplified by US trade ambassador Michael Froman, have claimed that the economic partnership is not exclusively, or even primarily, based on economic incentive or gain. Rather, such supporters argue that the TPP is meant to focus on establishing international norms in regards to employee working standards for conditions and wages. What does New Zealand believe is the most influential aspect of the TPP and why does the country feel the need to support it?

From New Zealand’s perspective, TPP is really a strategic economic agreement. We [New Zealand] are very much an export-dependent and agricultural-dependent economy, so a lot of our exports are agriculture-related. It is very difficult to export agricultural products, because the rules can be quite challenging through the use of high tariffs and other barriers, so from New Zealand’s perspective–as we are a tiny country with 4.5 million people export to over 100 countries–what an agreement like TPP does is alter rules for exporting to make it easier for our companies. This really applies to all exports, from agricultural products through to digital products – it’s easier to deal with one set of rules than several. So, from an economic perspective, it is very crucial to New Zealand that we try to forge better conditions for us to trade.

In regards to the quote from Ambassador Froman, there are lots of positive rules that TPP members are expected to uphold, such as stronger labor standards and stronger environmental standards. These standards are very important to New Zealand and we are very supportive of such measures. We have also been able to get in some other good standards into the TPP agreement, such as a clause stopping international wildlife trafficking. If countries want the economic benefits of being a member in this agreement, then they must adhere to these higher standards.

The United States’ president has officially withdrawn from the TPP. While the involvement of the United States is not completely off the table, the odds of passing such an agreement in this current political climate look rather grim. If the US is out, what does this mean for the future of the TPP? What does it mean for the future of relations between New Zealand and the United States?

Yeah, well on the relationship front, New Zealand and the United States have a wonderful relationship. TPP was a big part of our engagement, however regardless of the US’s involvement with the TPP, we still have a strong relationship with the country. We, like everyone else, are just trying to get to know the new administration, and are trying to figure out the best places in which the US and New Zealand can work together.

This is actually a great time to be talking about the US’s involvement [in TPP], as we just had a meeting with the now 11 member countries of the TPP in which we discussed the future of the agreement. These member countries agreed that they will meet again within the next 6 months to discuss whether or not we can take the TPP forward as 11 instead of 12 member nations, after rounds of negotiations with their own government leaders. I don’t know yet, until the 11 countries have our next meeting, what the state of the agreement is. The positive thing is that all 11 countries have said that they are still committed, and that’s a discussion that is going to continue within the next 6 months or so.

In 2006 New Zealand had spearheaded the “Pacific 4”, an economic partnership between Brunei, Chile, and Singapore. The agreement had “phased out” most tariffs between the nations and put member countries’ goods on an equal platform as local products, resulting in an $145 million and $1 billion trade increase with Chile and Singapore respectively. As this agreement serves as precedent for the current proposed partnership, how does New Zealand plan to transfer this smaller-scale economic partnership to the larger, more encompassing TPP? Likewise, if the TPP fails to be implemented, what would this mean for the fate of the P4?

P4 was initially established as an organization or group that other countries would be able to join. P4 was what we call a “comprehensive agreement”, and phased out as many tariffs and other barriers to trade as possible–so in that respect it continues to serve as a model for TPP. When the United States joined in 2010 under the Obama administration, just with a country as big as the United States coming aboard, it really brought a new life into the agreement.

TPP itself is therefore more of a new agreement rather than a transition from the P4. However, some of the concepts remain. But, the shape is much bigger and more things are covered by the partnership. Legally, P4 is still in effect, nothing has happened to that. But, we will see TPP as a much larger evolution from P4. Formally speaking, the two agreements do not interact with each other. However, I think the philosophy of P4 remains in that TPP is also a comprehensive agreement, and we could invite other countries to join over time.

One of the United States’ proposed amendments to the TPP was the introduction of a judicial entity with the obligation to settle disputes between member countries. Many of those opposed to the TPP agreement have voiced concerns regarding a State’s entitlement to sovereign rule and jurisdiction. Where does New Zealand stand on the incorporation of this judicial body and how does the country believe the inclusion of this entity will alter the future discourse on the TPP?

I think that it’s important to understand that every county has a sovereign right to be part of the agreement or not and the right to withdraw at any point. The agreement itself cannot force a country to do anything, but what it can do is say that the parties think that a particular country is not meeting a part of the agreement. There is a detailed process to follow, but if one country is not upholding its obligations, then the complaining country may be able to withhold some of the benefits of the agreement based upon that decision. We believe that the complaints about the dispute settlement clause are a bit overstated, and countries fundamentally retain their sovereign rights under this agreement – the most basic one being that you can either decide at any point whether your country wants to continue to be in the TPP. We also ensured that there were plenty of safeguards in the TPP, which protect the Government’s right to regulate in the public interest (i.e. to protect the public health or environment).

We have had some of these dispute arrangements in some of our other agreements, and most countries in these agreements don’t take a combative approach to dispute settlement. Having these arrangements in place is helpful, though, because it means that if two countries are unable to resolve a certain issue, you can appeal to an independent body to adjudicate. This being said, if the countries don’t like it, then it is up to them whether they continue to be part of the agreement which is the ultimate retention of sovereignty. The thing that keeps them together is that they believe the benefits of the agreement are worth the costs and will keep these countries together. All of these things are sovereign decisions, and our outlook is that our [New Zealand’s] sovereignty remains intact, which has been our experience with these types of trade deals.

Prior to the United States withdrawal, the proposed TPP member states accounted for 40% of the world’s economy and housed over a billion middle class consumers. Because of the massive scale of this deal, most trade in the Asia-Pacific region would be dominated by the TPP and its members. How would this deal affect New Zealand’s trade relationships with nonmember states, most notably China, who alone accounts for $12 billion of New Zealand’s current trade? For example, is New Zealand open to China being invited to join the TPP negotiations? If so, how would this affect New Zealand’s trade with the United States?

New Zealand and China have a great trade relationship, China is our largest single goods trade partner. As you can understand, we have our own bilateral free-trade agreement that we have signed with China in 2008. So, we don’t see much effect of the TPP on China-New Zealand trade. In terms of whether China will join the agreement, I think that question is probably quite a long way down the track.

What I think would happen, if another country was interested, is that they’d come to the members and basically ask, and we would see from here, but there would have to be a negotiating process between current member states, so it is a long way down the line. New Zealand has always supported a model of open regionalism, which means that if we set standards in these groups and other countries can meet these standards, then we will consider their application. That applies to basically every other country, and we could consider on a case-by-case basis. We support the open model for TPP, but we need to bring it into force first, as I mentioned, before considering any other members. In the meantime, we will continue to have a great relationship with China, and we’re pretty confident and supportive of the entire structure of TPP as well.

 


Phil Houlding

Philip Houlding has been Trade and Economic Counsellor in the New Zealand Embassy since January 2015. He is responsible for leading the Embassy’s advocacy efforts in Washington on trade and economic issues, including the conclusion of the Trans-Pacific Partnership trade agreement.


Emma Schneck

Emma Schneck is a 2016-2017 Future Hawaiian Diplomat. She hails from the island of Kaua’i, Hawai’i. Currently, she is attending Trinity College, where she is pursuing her interest in International Relations. In the future, she aspires to become a diplomat or foreign relations advisor.


The views expressed represent those of the respective contributors. Alternative viewpoints are always welcomed. Please send any responses to pr@islandssociety.org. Our editors will consider any and all responses for future publication.

Image Credit: blueSkySunHigh (Flickr CC)