Keith Woodford says 'big' is not always beautiful if you are 'small'. Here are his concerns

Keith Woodford says 'big' is not always beautiful if you are 'small'. Here are his concerns

By Keith Woodford*

The failure to reach closure at the recent TPP negotiations in Hawaii may be a blessing for New Zealand. It may give some time for our negotiators to reflect on what we hope to achieve and what we are prepared to concede.

Most farmers will be supporters of the TPP. They will be working on the apparently reasonable assumption that more free trade has to be good value.

However, the TPP is something different. It does send shivers up my spine. It is much more than a free trade agreement in goods. It is also about the power of international corporations to operate the way they wish to operate across the world. The devil will indeed lie in the detail.

It is insightful to note how the American Government portrays the TPP to its own people. The argument presented by The White House to the Congress is that it is of fundamental importance to America’s role in the world. It is all about writing international trade rules to America’s advantage, and it is about constraining the influence of China as a Pacific and global power.

My own concern has been that our Government over-estimates the benefits that are to be gained, and will therefore give away too much in terms of our sovereignty, and hence our ability to regulate these international corporations.

The notion that New Zealand is somehow going to benefit from Canada de-regulating its dairy industry leaves me shaking my head. It is true that Canada has quotas on production and that farmers are well paid. However, the rest of the supply chain through to consumers is very efficient, and so consumer prices are reasonable.

If Canada does deregulate its dairy industry, then initially it will be the USA that benefits. They can shift cheaply-produced milk across the border.

Once the quotas are removed, the Canadians themselves will quickly restructure their own industry to mimic the American environment. It is no more difficult to produce milk in Ontario than it is in the American Midwest, where production is booming.

I also find it unlikely that we will sell a lot more milk to Mexico. The Americans are the big suppliers there, particularly of cheese, and we New Zealanders will struggle to compete. To the extent that Mexico is important to us, then I would much prefer we focus on a bilateral arrangement where we know exactly what each side is giving up.

The prospects of dairy in Japan are more difficult to read. Maybe we will benefit from product into the food service industry, but we are not well set up to provide consumer products.

Overall, Japan is a shrinking market with the population now in decline. Birth rates are so low that Japans population is likely to reduce from the current 127 million to about 87 million over the next 45 years. Currently, the population is decreasing by about 250,000 each year and that will soon accelerate. As their population declines, so will their need for imported food.

Yes, Japan will gradually restructure its agricultural industries as the old style farmers retire. Given that the average Japanese farmer is now more than 65 years old, this has to occur. But assuming that somehow we will benefit from tariff reductions is a big leap of faith.

Overall, I see little benefit for dairy from the TPP. Our opportunities lie elsewhere. Fifteen years ago when the USA was internationally non-competitive it could have been a different story. It seems that in relation to dairy our negotiators have got locked into old-style thinking.

Improving the beef access into Japan could bring some benefits to New Zealand. But once again there has been a tendency to over-estimate those benefits. For example, I heard a Beef+ lamb executive recently expounding the potential for reducing Japanese tariffs. But the assumption was that producers rather than Japanese consumers would be the beneficiaries.

The economics of who finally bears the cost of a tariff is situation dependent. It can be the producer or the processor or the consumer. In relation to prime beef, my assessment is that the main beneficiary will be the processors but that some of this could flow through to farmers. But in relation to cow and bull beef, there are minimal Japanese tariff benefits that will come from the TPP.  Any benefits that do accrue will be to the Japanese consumer.

In relation to lamb, I see almost no benefits of the TPP. We already have free access to the USA for lamb, despite the efforts of President Clinton to constrain that ability in the late 1990s. We won that dispute through the WTO.

For Mexico, our lamb is currently taxed 10% and that could change under TPP. But my assessment is that it is the Mexican consumer that bears most of that cost. New Zealand also periodically supplies live sheep to Mexico, ostensibly for breeding. However, most of these end up on the barbeque.

So the real question has to be, how will New Zealand really benefit from the TPP? And how will those benefits balance the costs in relation to Pharmac and other aspects of sovereignty that will effectively be ceded to the big international corporations?

Our Prime Minister has said that it will be the Government and not the consumers who will pay the extra costs of Pharmac. Surely he must have meant taxpayers will be the ones who pay.

My own sense of events is that the momentum of public opinion is now shifting towards opposition to the TPP. Until recently, it was something that was too abstract for most people to bother about. The problem for our Government is that it has got locked into a position where, if other countries do finally agree to dairy restructuring, then the politicians will find themselves praising a dead rat.

The way I read the situation is that it is the USA which is going to come out as the TPP winner. They will still have to manage some internal opposition from their blue collar organisations, but the pathway to fast track Congressional approval has now been cleared. However, with the presidential election looming, time is now the essence.

The key problem with the TPP negotiations for New Zealand is the fundamental power imbalance between ourselves and the USA. And the dispute mechanisms within the TPP will reinforce that imbalance. Our business leaders will say that we cannot afford to be left out in the cold, but I would prefer a much more measured approach based on bilateral negotiations. Big is not always beautiful, especially when you are small.

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Keith Woodford is Honorary Professor of Agri-Food Systems at Lincoln University. He combines this with project and consulting work in agri-food systems. This a regular column here. His archived writings are available at http://keithwoodford.wordpress.com

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"New Zealand also periodically supplies live sheep to Mexico, ostensibly for breeding. However, most of these end up on the barbeque"

It is my understanding that prices for breeding stock are higher than prices for stock for slaughter.

Who then are these wombles in Mexico who are paying high prices for a lower value product? And why is that New Zealand's problem?

10
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What's the point even talking about something when there's been no transparency or disclosure?
We can hardly constructively debate a topic when we don't know the details.
If the TPP is (potentially) so awesome, then the National Party should show us the draft!!
Pffft... as if.

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If they're not doing anything wrong then they've got nothing to hide...isn't that what the politiciians always say about privacy and policing. Ain't no way you'll get to see the real thing.

I can understand the reason for secrecy until the deal is finalised and is then voted on.

My concern is a) the self-interest of at least 2 parties i) The National party, both for personal gain and philosophical ii) some sectors who think they will benefit and bugger any issues any other NZ sector will suffer. b) It will not go to an open vote with a substantial majority? say 66% of MPs voting for it so it could pass with barely more than the Govn majority.

hmm... I don't understand the need for secrecy.... Transparency is EVERYTHING..
Transparency ... kinda keeps them from doing the devils work... so to speak..

steven there will be no parliamentary vote on tppa, once it is signed it will be a done deal, able to be ratified at executive level. The only things that will go through the parliament the normal way will be various laws that need changing to accommodate the tppa. If that is not bad enough, there is the bit where parts of it will not be made public for another 4 or 5 years, so lord alone will know what will emerge then.
All I can see in all this noise about removing protectionism and such is one whole lot of protectionism being transferred to corporations and unlike voting for a government to do this or that, we will never get a vote about that again.
This thing cannot happen.
I wonder how many perfectly good bi-lateral agreements we may have been able to achieve in all the time we have been wrestling with this monstrosity

Most farmers are not pro-TPPA. do your homework.

PS FYI "farmers" are the guys with the dirty rough hands...

wasnt the farmers rep very pro tppa though? fairly sure he was gung ho for it in here a while back?

Um, hand picked?

Good nuanced article

18
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I used to think that deep down, NZ governments had our best interests at heart. I no longer think this is the case..

I've gone seven years knowing that, as soon as they passed the income tax cuts for the wealthy substituting rising fees and GST, fired able bureaucrats, talked up asset sales for "mom and dad" investors, instituted their 19th century economic policies based on dig it, drill it, burn it, turned a surplus into staggering public debt, and denied climate change. NOTHING they have done has helped me or, I suspect, the country and its long-term viability.

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US politics is very much in the hands and pockets of corporations, I fear we are becoming the same

Key's recent comments on Chinese buyers make this very clear. He has grown arrogant and now feels comfortable showing his true colors.

Unfortunately, he's an astute politician and knows that most of his voters are ignorant about TPP and believe roaring house prices are a good thing. We're talking about financially comfortable boomers who get their news from the Herald. Not exactly free-thinkers.

I fear for New Zealand's future.

TPP ministerial talks unlikely to be held by end of August

Trade ministers from the 12 countries involved in a Pacific Rim free trade deal are unlikely to meet again by the end of this month amid remaining differences that prevented them from finalizing negotiations last week, sources said Thursday.

Japan, the United States and the 10 other countries negotiating the Trans-Pacific Partnership will look at possibly reconvening a ministerial meeting in September, but the outlook is uncertain due to political schedules in some of the member countries, the sources said.

http://www.japantimes.co.jp/news/2015/08/06/business/economy-business/tp...

This is a good article.
What took you so long to wake up?