Friday, March 29, 2024

ALTERNATIVE VIEW: Welcome to the Son of TPP

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I’m pleased the son of TPP — the CPTPP — is a runner. I far prefer the CPTPP to the original TPP, albeit without the United States. Effectively new agreements with Japan, Canada, Mexico and Peru have got to be good for us and we no longer have the onerous intellectual property restrictions the US had insisted on.
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It is also a credit to the politically bipartisan nature of trade negotiations shown by our political parties. It happened in the past with Labour then National over the Chinese FTA and it’s good to see it happening again with the CPTPP. 

We have another trade agreement in the wings that will continue as if we hadn’t had an election and subsequent change of government, and that is the Chinese-driven Regional Comprehensive Economic Partnership, the RCEP.

I believe the RCEP is where our future lies.

The agreement includes the nine member states of the Association of South East Asian Nations (ASEAN). These include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, The Philippines, Singapore, Thailand and Vietnam.

The additional countries are Australia, China, India, Japan, South Korea and New Zealand.

Going to our Foreign Affairs and Trade website you can read ‘RCEP builds on NZ’s already strong relationships in Asia and will open up more opportunities for NZ businesses in these fast-growing economies’.

I agree.

The website also tells us the RCEP countries have a population of more than three billion, a GDP of $US23 trillion and account for 27% of world trade, considerably more than the CPTPP.

Just as importantly, they represent 55.4% of our current trade for a combined value of $NZ39 billion.

In addition, the RCEP doesn’t demand tough conditions on issues such as the protection of intellectual property.

It is important to consider how much the Chinese position on trade has changed in recent times.

In the past we’ve had fortress China, while the US was all for free trade and a global economy.

That position has now reversed.

China is leading the charge for globalisation, a position that would have been unheard of even ten years ago, and its plans are massive.

As well as the RCEP China is developing the ‘Belt and Road Initiative’. It is a huge international infrastructure agreement aimed at increasing world trade.

It is massive and will change the face of trade, politics and relationships.

Chinese President Xi Jinping and 29 other heads of state met recently and committed to both building an open economy and ensuring “free and inclusive trade”.

The Chinese government has pledged $124b for a new Silk Road, which will be a major land route stretching from China to “Asia, Africa, Europe and beyond”.

There is an additional $57b for a trade route through Pakistan and Afghanistan to the Arabian Sea.

There’s a further corridor to Singapore and another through Mongolia to Russia.

The Chinese are also developing ports and sea routes so the Belt and Road initiative is truly global.

In total more than $US1.1t has been committed by China for the initiative.

The original signatories to the Belt and Road initiative, of which we are one, embrace a considerable number of culturally and economically diverse countries.

For example Afghanistan, Lebanon, Israel, Iran and Iraq are all involved which is interesting and has the potential to change the political landscape.

Having those countries sitting around a table and even just talking is a massive step forward.

The 68 countries also include Singapore, South Africa, India, Indonesia, Malaysia South Korea, Russia and Saudi Arabia who are all valuable or potentially important trading partners for us.

The planned infrastructure will be built to facilitate trade that will be conducted under the RCEP and we are a strong player.

That’s all positive but the joker in the pack is the US and we’re going to have to tread carefully.

I believe a trade war between China and the United States is inevitable.

I remain convinced China doesn’t want one but the US does.

In the campaign President Trump promised a 45% tariff on Chinese imports.

The US is currently investigating Chinese steel and aluminium exports as well as intellectual property, which could result in sanctions against China’s telecom and semiconductor products.

If that happens it’s been suggested China could retaliate against America’s agricultural sector.

My strong belief is our interests are with China and not the US.

I realise the old sabre rattlers will talk about traditional allies but my position is to look forward and not back.

In the year to June 2016 our trade with China was worth 30% more than that with the US.

Combine that with the fact any trade war could tip the US into recession, and would certainly reduce America’s global influence, and our choice becomes clear.

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