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A seismic shift in world trade

NZ NewswireNZ Newswire 24/11/2016 Peter Wilson, Political Writer

Editor’s note: The opinions in this article are the author’s, as published by our content partner, and do not necessarily represent the views of MSN or Microsoft.

The Trans-Pacific Partnership agreement won't be ratified by the US Congress before the presidential inauguration in January.

The possibility of that happening was being held out as a last chance strategy by President Barack Obama, and Prime Minister John Key had clung to a diminishing hope that it might happen.

President-elect Donald Trump has destroyed the TPP, as it currently exists.

He has backed down on several major campaign promises since winning the election, but taking the US out of the TPP wasn't one of them.

He's done the opposite, vowing that it will happen on the first day of his presidency.

"It is a potential disaster for our country," said Trump.

"My agenda will be based on a simple core principle: putting America first."

The chances of any country negotiating a free trade agreement with the US, let alone New Zealand, are now remote.

All governments put their own countries first when they go into trade negotiations.

That's the way it works. When the bargaining is over, agreement is reached based on the best deal they've been able to achieve.

The US has always had more clout than anyone else but it's been prepared to give a little.

Trump doesn't appear to be prepared to give anything.

His "America first" policy will effectively rule out any meaningful deals with any country.

Key believes the TPP can survive without the US, and that the other 11 countries can renegotiate it in a way that will still benefit New Zealand.

He estimates New Zealand would get about two-thirds of the $2.7 billion forecast benefits from the TPP, because it doesn't have FTAs with countries such as Canada, Mexico and Peru.

However, it has been pointed out that without the US in the mix, other TPP countries which made concessions would be less likely to do so if the world's largest economy was excluded.

Japan, the other big TPP player, doesn't seem interested.

"The TPP would be meaningless without the US," said Prime Minister Shinzo Abe.

After Trump's demolition job, the most likely scenario is that the other TPP countries will renew their individual attempts to secure a free trade agreement with the US, however hopeless that may seem.

That was why they were in the TPP in the first place, to win the ultimate prize through a multi-national FTA.

New Zealand had been trying for decades, with very little success.

It wasn't even on the list for starting talks about talks.

That's simply because the US doesn't need us.

The New Zealand economy is relatively tiny, the number of consumers is less than the population of many cities.

If Trump doesn't change his attitude, world trade is in for a seismic shift.

"Whether it's producing steel, building cars or curing disease, I want the next generation of production and innovation to happen right here on our great homeland, creating wealth and jobs," he said during his "TPP is dead" speech.

That's protectionist talk; he means the US will raise tariffs against imports from other countries, including China which has seized vast swathes of the American consumer market.

Key believes that if the US surrenders its position as a trade liberalisation leader, China will step in and set the agenda.

That could shift economic power and influence in the Asia Pacific region, which could be the one thing that might, just might, cause Trump to have second thoughts about his attitude to world trade.

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