NZ Herald | 5 October 2022

UK may have extra momentum for CPTPP bid - Trade Minister Damien O’Connor

By Audrey Young

The chaotic events in Britain this week have put pressure on the UK to complete its accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) soon, but New Zealand is not the blockage.

Trade Minister Damien O’Connor will meet CPTPP ministerial colleagues in Singapore this weekend with two recent free trade agreements in his back pocket, the UK – NZ bilateral FTA concluded a year ago and the EU deal concluded just three months ago.

China, Taiwan, Ecuador and Costa Rica have also all applied to join the 11-party trade deal and so what happens with the UK accession is a template for how they will be treated.

O’Connor said that concluding the UK before the end of 2022 was "ambitious." But the working party would update CPTPP countries in Singapore.

"And there may be some new momentum from the UK to try and conclude as soon as possible, given the value for them of reaching one more formal conclusion of a trade agreement post-Brexit."

He agreed that the events of the past week in Britain – the backlash against and backdown of tax cuts on the wealthy – had given the UK greater incentive to conclude its accession to the CPTPP under new Prime Minister Liz Truss, a former Trade Minister.

"Liz Truss has always been an enthusiastic advocate for the UK reaching out to the rest of the world and building trade arrangements through formal and informal agreements."

New Zealand will be taking over CPTPP chairing responsibilities from Singapore on January 1 and steering CPTPP through the likely accession of the UK and the likely establishment of a working party to consider China’s application.

That makes O’Connor’s meeting in Singapore significant.

"I will be really interested to get first-hand the feedback from all the ministers about how the UK is progressing, and from there, what it means for other applicants," O’Connor told the Herald.

Following on from Singapore, officials will be meeting in Sydney to continue formal talks with the UK on its accession.

O’Connor said he was expecting the UK to meet all the requirements of the CPTPP which were hard fought, "and should not be diluted or diminished in any way as these application processes proceed".

He said there were "many moving parts" to the large structure of CPTPP which was of high value now, and more so into the future.

The CPTPP is a deal among 11 countries – and Chile and Brunei have yet to ratify it so will be able to participate in discussions but have no decision-making powers until they do.

As a multilateral deal, it is of a lower standard than a bilateral deal. Some of the phase-ins take 19 years.

New Zealand’s deal with the UK is considered the "gold standard" on improving market access for goods through the reduction of tariffs and quotas – most goods will be tariff-free within five years.

But the EU deal is considered the highest quality deal in terms of "sustainability" measures such as climate change, environment and labour market clauses. Most tariffs are phased out over seven years.

The UK’s bilateral deals with New Zealand and Australia, however, are part of the problem with the UK’s accession to the CPTPP.

Canada and Mexico, in particular, look at the UK agreement with New Zealand, and the UK deal with Australia, and expect to get as good a deal as the UK in terms of market access.

They have asked the UK to improve its offers.

"These are the complexities of a multilateral framework," said O’Connor.

The EU is also a factor. It already has a trade deal with Canada and when Britain left the EU, the quota Canada had set for the EU on sensitive products, remained with the EU. It was not split with the UK. So the UK has less leverage than it might have had.

And it is an accession, not a classic negotiation. The 11 countries have already agreed to rules and done the deal on market access. The UK has to agree to the rules, which is not a problem, and say how low it is willing to go on market access and investment.

O’Connor said the NZ – EU deal set a very high standard "that ensures social licence and stakeholder endorsement".

"The UK deal was a far better deal in terms of goods market access but the EU deal covers a wider range of aspirations and which all the member states of the EU consider necessary."

Asked if he would like to see the EU join CPTPP at some point, he said architecture which delivered certainty and protection for exporters and importers was good.

"And so expanding this to include the EU would be a positive move but it is not something we are hanging around waiting for. The EU will decide if there is value in that at some stage."

Bernd Lange, a powerful member of the European Parliament when it comes to trade issues, does not believe the EU will be aiming to join the CPTPP, saying it is not a high-quality enough.

"It is not sufficient for our approach regarding trade agreements on sustainability and labour rights," he told the Herald during a visit to New Zealand in September. "I don’t think we will go ahead like Britain."

He said the UK was looking for agreements regardless of what is in them.

They concluded with Japan, more or less a copy and paste of the EU deal with Japan with some changes, in favour of the Japanese car industry.

"Or the agreement with Australia opening the agriculture market for the disadvantage of the farmer in Britain.

"They are trying to rebuild this global Britain and I guess at the end of the day they should really look at the economic effect it has."

Lange, whom Politico called "Big Beast" in an article on the most powerful members of the European Parliament, chairs the trade committee which recommends a Yes or No vote (it scuttled the ACTA anti-counterfeiting agreement in 2012).

He was in New Zealand in September to talk to interested groups here about the EU – NZ deal which was signed by Prime Minister Jacinda Ardern and European Commission president Ursula von der Leyen.

He calls it a gold-standard agreement – referring to the sustainability measures - and does not anticipate any problem getting it passed through the European Parliament by mid-2023.

He also says New Zealand should remember that and market access could be improved in time, as had happened with Mexico and Chile.

"This is a living agreement, no doubt about it, and nobody knows what it will be like in 10 years."

He indicated that the New Zealand dairy and beef sector had to be realistic.

The two sectors which were disappointed had to recognise that farmers in Europe were under pressure as well to reduce their emissions and use of fertilisers and pesticides.

"In this environment, I guess it was a little bit of an illusion to think that the European market could be totally opened for tariff-imports for beef and dairy from New Zealand."

Negotiations with Australia fell behind those of New Zealand because of the Aukus security agreement (which cancelled a major submarine-building deal with France), and because of the climate change policy of the previous Government - EU deals now include trade sanctions against countries that breach their Paris Climate Change commitments.

He said Australia was ready now to negotiate but it would also have to be realistic about what was possible. And it would not get any advantage over New Zealand in terms of market access.

"They will not have better access," he told the Herald.

Asked about the Common Agricultural Policy in which the EU pays about $100 million a year to subsidise farmers in the EU, Lange said he was not happy with the situation as it was.

"Yes, we have to spend money for the protection of our environment but the subsidies at the moment are not [being paid] in a very specific way. This has to be improved.

Lange previously visit New Zealand in 2017 and said the thing that impressed him this time was the integration of Māori in the economy.

"In 2017 I recognised they were playing a big role in the economic field but now they are more integrated. I learnt a lot and will take this back to Europe."

Among the groups he met were the Federation of Māori Authorities, Iwi Chairs, Manuka Trust, NZ Māori Tourism Council, and Te Taumata trade group.

The EU- NZ trade agreement has a specific chapter designed to facilitate trade by Māori businesses.