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Trade deal with US remains elusive

NZ Newswire logoNZ Newswire 26/01/2017 Peter Wilson, Political Writer

"We are going back to those countries, one on one, and that will be beautiful."

With those words, US President Donald Trump signed the executive order to withdraw his country from the 12-nation Trans-Pacific Partnership.

The remaining 11 TPP partners are setting out, without much optimism, to look for ways to keep it alive without the US.

Trump's apparent intention is to negotiate bilateral FTAs with those countries, which include New Zealand and Australia.

Successive New Zealand governments have tried to secure an FTA with the US, without even getting on the list of countries its administrations were prepared to talk to.

The New Zealand market is very small by international standards, and there are hardly any tariffs left anyway.

Prime Minister Bill English knows that, and says he expects New Zealand to be somewhere near the bottom of the list.

And even if talks begin, the prospects of a successful conclusion aren't good.

Trump has an "America first" policy which English interprets as meaning the US would come out of any trade deal ahead of the other country involved.

Then there's Trump's bizarre condition that any future trade agreements will have a 30-day "out clause" in them.

"If somebody misbehaves, we are going to send them a letter of termination, 30 days, and they will either straighten it out or we're gone, not one these deals where you can't get out of them and it is a disaster," he said.

What Trump means by misbehaviour isn't clear, but he seems to be saying the US wants the right to pull out of any deal that he considers isn't turning out to be sufficiently beneficial to his country.

English describes that as "an unattractive aspect" and it's really difficult to see any country signing up to it.

Even without it, Trump's lopsided view of trade agreements would make negotiations at best extremely difficult and at worst pointless.

Trade Minister Todd McClay will go to Washington when Trump's new US Trade Representative is installed, aiming to find out what's really going on.

New Zealand's ambassador in Washington, former trade minister Tim Groser, is already onto it.

ExportNZ, which represents companies at the sharp end of FTAs, wants the government to focus on keeping the TPP alive.

"The partners who have worked so hard negotiating the deal to this point don't want to go back to square one," said executive director Catherine Beard.

"Nor is there a lot of enthusiasm for simply negotiating more bilateral deals - in such deals, the stronger partner is always the biggest winner."

English is working on both scenarios, and has told McClay to prioritise attempts to keep the TPP alive.

He's also pointing out that it's not the only trade game in town.

English travelled to Europe earlier this months to discuss an FTA with the EU, and was given a positive reception.

The government is confident it will be achieved, and believes New Zealand is well placed to secure an agreement with Britain after its departure from the EU is finalised.

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