Chatter about the US rejoining the Pacific rim trade deal is growing, with Jacinda Ardern facing questions about whether NZ would welcome Washington back. There are more than a few obstacles, Sam Sachdeva writes
In his first 100 days (and counting) in office, US President Joe Biden has done his best to act as the antithesis of everything Donald Trump stood for.
Given that, the idea of the Biden administration joining the CPTPP trade deal – an agreement Trump theatrically withdrew the United States from during his first week in office – feels apt, and it appears to be a topic of discussion within his team.
Earlier this year, Biden’s Agriculture Secretary Tom Vilsack reportedly floated the idea of the US re-joining the CPTPP as he pushed for the renewal of a fast-track legislative process for trade agreements.
Some foreign policy watchers in Washington have called for the country to seek entry to the pact again, in large part to act as a counterweight to Chinese economic influence in the Asia-Pacific.
Although led by ASEAN members, the Regional Comprehensive Economic Partnership (or RCEP) trade deal signed last November has been seen by some as further evidence of Beijing expanding its reach, while Xi Jinping has suggested China could itself seek to join the CPTPP.
Given those geopolitical considerations, seeking to rejoin the pact could make sense for the Biden administration as it seeks to offer up a more reliable and predictable approach in the region compared to his predecessor.
Certainly, if the US wants to address concerns about countries like New Zealand becoming too economically reliant on China – concerns raised by Foreign Affairs Minister Nanaia Mahuta herself – it could do worse than provide an alternative source of revenue for exporters.
For New Zealand, the benefits of improved access to the world’s largest economy (one with GDP of almost $30 trillion in 2019) are self-evident.
Indeed, the withdrawal of the US from the original TPP deal slashed the projected economic benefit for New Zealand from “at least” an additional one percent increase to GDP at full implementation, to between 0.3 percent and one percent.
“There were issues that New Zealand, early on, had with some of the conditions and preconditions that the United States had posed in the early negotiations of TPP and I imagine that those issues would still exist if there were attempts to renegotiate on those terms.”
– Jacinda Ardern, Prime Minister
A possible American return to the fold was among the topics Prime Minister Jacinda Ardern faced during a virtual question and answer session with the US Chamber of Commerce last week.
Asked by former American trade negotiator and Asia Society Policy Institute vice-president Wendy Cutler whether New Zealand would welcome back the US if it required “significant revisions” as the cost of re-entry, Ardern offered a cautious note of positivity conditional on meeting standards in the existing agreement.
“TPP was designed, of course, to be available to others … so our view would be that we would welcome conversation and entry of those countries who are willing to meet those standards.”
As Ardern pointed out, renegotiating the deal would be another matter altogether.
“There were issues that New Zealand, early on, had with some of the conditions and preconditions that the United States had posed in the early negotiations of TPP and I imagine that those issues would still exist if there were attempts to renegotiate on those terms.”
Those issues present a significant obstacle to the US joining the CPTPP club, given the 2015 and 2016 protests within Aotearoa – including from Labour, then in opposition – about potential lawsuits from investors and extensions to intellectual property rights and pharmaceutical patents for corporations.
A number of US-backed clauses were merely “suspended” rather than removed entirely after Trump’s withdrawal, making it possible they could be reinstated.
But any revisions would require consensus from the 11 CPTPP members, giving New Zealand, or any of the 10 other countries, an effective veto over American membership.
Ardern and her Cabinet would need to consider carefully whether the financial gains for the economy would offset the vitriol any concessions would likely arouse among many of the Government’s own supporters.
Domestic considerations would also come into play on the US side, with Republican and Democratic politicians alike still much more sceptical about the benefits of free trade than in the past.
Then there is the China-shaped shadow looming over any American accession.
Given the tensions between the two countries, it is likely that one signing on would preclude the other from doing the same.
In the United Kingdom, which has taken a similarly hawkish stance on China to the US, the Labour opposition has raised concerns that joining the CPTPP could serve as “a back door” to a China-UK trade deal despite the Conservative government having ruled out any bilateral agreement.
China would face its own impediments to joining the pact, given questions over whether it could meet the required labour standards and rules for state-owned enterprises, but in terms of domestic process Xi would find it easier than Biden to fast-track ratification.
That the US is at least mulling the idea of re-entry is heartening for New Zealand, given the Government’s push for economic diversification and long-standing promotion of multilateralism.
But any real prospect of Washington signing on the dotted line, at least in the near future, seems slim.
