Bernard Hickey argues the TPP's proponents should not be surprised by the ungrateful response, but that luckily, it was a bullet dodged rather than the free trade triumph

By Bernard Hickey

The growing opposition in recent months to the Trans Pacific Partnership both here and overseas has surprised a few people.

The less-than-grateful response to the deal itself was more than a shock to those who had worked for a couple of decades to get a trade deal with two of our biggest trading partners -- Japan and the United States.

The contrast with the response to New Zealand's Trade Agreement with China in 2008 could not be more stark. That deal, rightly, was judged a huge win for New Zealand diplomacy that would open up an enormous new market. That deal set the stage for merchandise exports to China to rise from NZ$1.6 billion in 2008 to NZ$11.6 billion in 2014. Without it, New Zealand's recovery from the Global Financial Crisis might have looked very different and not in a good way, although it's worth noting that Australia's exports to China rose by even more over the same period and it did not have a deal.

This TPP deal, which on the face of it delivers more than than twice as many tariff reductions as the China deal, has instead sparked so much opposition that tens of thousands marched against it it before it was even agreed.

The first response by many this week was to focus on the disappointing deal for dairy, to criticise the permanent block on a ban on foreign buying of property and to highlight the extra costs of longer copyright protections for drugs, books, movies and music.

A trade deal done with America and Japan a decade ago would have sparked a national celebration. This time around all we got was a collective round bout of nitpicking and fossicking through the entrails. Even Trade Minister Tim Groser, the TPP's biggest cheerleader, set the scene by talking about how New Zealand would have to swallow a few "dead rats" to get a deal.

So what has changed? Firstly, this was far from the 'free' trade deal of olden days where tariffs on commodities were reduced over time and a whole range of restrictions on investment and freedom of movement for people were removed. The gold standard example is New Zealand's Closer Economic Relations agreement with Australia.

The TPP was much more about winning a few tariff reductions (and remember Canada and America will still have painfully high barriers to entry for our dairy after this deal) in exchange for a US-led drive to strengthen intellectual property protections for America's music and movie studios and its drug companies. It was also mostly about the United States 'pivoting' its strategic focus towards Asia in the face of China's rise. The inclusion of Japan and the exclusion of China was the main game.

President Barack Obama gave the clearest indication about the TPP's role in the world this week when he said: "When more than 95 percent of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy. We should write those rules."

Even Nobel Prize-winning and avowedly pro-free trade economists such as Joseph Stiglitz and Paul Krugman have ridiculed the TPP's attempts to describe itself as a free trade deal. These American economists argue the TPP was much more about US companies trying to protect their interests than any sort of blanket removal of trade restrictions.

Luckily for us, the US companies driving the TPP's 'rule writing' didn't get most of what they wanted. The TPP even includes a clause allowing countries to keep cracking down on tobacco use without being sued and the drug companies got far less than the 12 years of patent protection they were wanting, although it's not quite the slam dunk retention of the five years Australia pushed to keep.

But the biggest difference between now and 2008 was the Global Financial Crisis and the destruction of the consensus about a 30-year drive towards free trade, particularly in the parts of the developed world where the gutting of manufacturing jobs due to the globalisation of trade in goods has helped lead to a stagnation of wages for those on middle to lower incomes.

Essentially, globalisation of goods trade helped lift hundreds of millions out of poverty in Asia and drove down the real prices of all sorts of things, but it has also pressed down on the real wages of millions of workers in America and Europe. New Zealand has fared better, but also hasn't been immune from that downdraft.

The bitter opposition to the TPP from both sides of politics in America is a testament to how much the political and economic landscape under the free trade debate has changed. The grumpiness here is a paler reflection of that.

So the proponents of the TPP have an awful lot of work to do to convince a sceptical public of its benefits and to demonstrate its costs are relatively low.

They may even be better to highlight the TPP's actual irrelevance in the future of trade, which will mostly be about trade in services such as tourism, financial, health and education, rather than trade in physical goods and commodities. These are barely touched by the TPP and are now surging for New Zealand, thanks in large part to more realistically valued currency. Xero didn't need the TPP to launch into the US and British markets and the explosion in Chinese tourism here has nothing to do with the 2008 free trade agreement.

It may be best to move on and paint the TPP as just another diplomatic agreement that was more about politics than real trade in goods and services.  

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A version of this article first appeared in the Herald on Sunday. It is here with permission.