Tuesday 23 March 2010

NZ-US free trade: roundup

New Zealand's in negotiations with the US for a "Trans-Pacific Partnership" free trade area.

The US Dairy lobby has thirty senators complaining of New Zealand's "anti-competitive practices". Never mind that New Zealand has close to the freest market in the world for dairy products. Rather, it's Fonterra's largish size that has them worried.

Fonterra reminds the Americans that while Fonterra is big in traded milk, it's relatively small in total milk production:
American lobbyists complaining about the potential for a Trans-Pacific Partnership (TPP) trade treaty to give New Zealand greater access to the United States domestic dairy market have been urged by Fonterra to look at the issue in context.

"The US dairy industry is by far the largest among the TPP countries, producing approximately 70 percent of the milk in the TPP region, while New Zealand produces a little over 13 percent," Kelvin Wickham, Fonterra's managing director of global trade, told NZPA.

Lance Wiggs laments the strong language used by some on the NZ side complaining of anti-trade American practices; Bernard Hickey reckons NZ has been too meek.

Hickey goes further today, reiterating prior warnings that any trade deal with the US is likely to exclude dairy but include a pile of copyright nonsense.

For most countries, a free trade deal gives them a chance to kill a bunch of their own protectionist policies that are popular with voters: "We had to stop bashing ourselves in the head with the hammer if we wanted the other guy to do the same; it isn't so much that we don't like bashing ourselves in the head, but it's more important to stop the other guy from doing it because his mess occasionally splatters on us." But New Zealand stopped bashing itself in the head rather some time ago.

I'd be surprised if whatever deal went through actually wound up much constraining the Americans against continuing with dairy protectionism: dispute resolution under these agreements is long, arduous and expensive. Was the new bit of dairy protectionist legislation really the kind of thing prohibited under the TPP? Let's spend 20 years in the courts sorting it out (whaddya gonna do about it, put a tariff on US imports? You and I both know it won't hurt us 'cause we're big and you're tiny). But the copyright provisions would be enforced pretty vigilantly with retaliatory trade action: the MPAA doesn't think your ISPs are spending quite enough monitoring their subscribers; get them in line or we'll stop taking your dairy.

Says Hickey:
These FTAs are never about free trade from an American point of view. They are about creating another opportunity to strong-arm smaller countries into granting trade concessions to large American businesses. A much fairer, cleaner and freer option is proper reform of trade rules and tariffs through the World Trade Organisation. America and Europe have blocked reforms there because they would upset their apple carts of huge subsidies for farmers paid for by taxpayers and consumers through higher taxes and higher prices.

John Key is right to say a TPP without agriculture (and dairy in particular) is unacceptable. He should be prepared to walk away if the Americans try too hard to monster us in these talks.

Not so sweet

You only have to ask the Australian sugar farmers about the Australian FTA with America to find out how good that was. American sugar interests blocked sugar from the deal. American drug companies tried to shut down Australia’s version of Pharmac.

Australia’s exporters have hardly benefited from the deal.
I'm also skeptical. Worth giving it a try, but also worth remembering that no deal is better than many deals that could emerge when enforceability is factored in.


  1. I don't see the benefit for american drug companies to trade with a government run body like pharmac in the first place

  2. We'd expect them to charge lower prices here anyway just on income-based price discrimination; not sure whether the Pharmac price difference is due to that or to their monopsony position.