US free-trade deal suspect

A free trade deal with the United States may not be the economic miracle it has been painted as.

New Zealand’s chief trade negotiator Mark Sinclair privately told a visiting US State Department official that New Zealand had little to gain from a free-trade agreement. This view – recorded in a confidential US embassy cable released by WikiLeaks – differs from the one the public has been given.

When the US joined the Trans-Pacific Partnership talks in November last year, Prime Minister John Key said it could be worth “billions and billions” to New Zealand, and that a deal would “position New Zealand brilliantly for growth”.

But in a meeting in February, Sinclair told US Deputy Assistant Frankie Reed “there is a public perception that getting into the US will be an `El Dorado’ for New Zealand’s commercial sector. However, the reality is different”.

He said New Zealand would need to “manage” public expectations about the benefits of a US free-trade agreement.

Asked for comment, a spokesman for Acting Prime Minister Bill English said: “The government’s position has always been that any trade agreement with the US, TPP partners or anyone else will benefit New Zealand if it is comprehensive and high quality. We have no comment on cables we haven’t seen.” Sinclair declined to comment.

For 20 years, governments have told the public that a US agreement is crucially important for the New Zealand economy, but in the cables Sinclair explained the limited benefits were because the US was “already quite open to New Zealand trade and investment” and there were special obstacles with US negotiations.

“Although New Zealand has already negotiated many free-trade agreements, it is the first time New Zealand will negotiate an agreement that will open so many political sensitivities with a partner government.” That refers particularly to the US farming lobby, which opposes freeing up access for New Zealand produce.

He said Trade Negotiations Minister Tim Groser had said “getting the United States to agree to engage on the TPP is the easy part”. The negotiating process itself would be “gut-wrenching”.

Sinclair led the New Zealand delegation at the Trans-Pacific trade talks in Auckland, where he was publicly criticised for refusing to answer questions about the negotiations, with one reporter concluding that “what was achieved and why exactly a TPP would be good for New Zealand remained a mystery”.

Sinclair gave media briefings each day that were described as “strictly controlled” and as “short and impenetrable”.

But he appears to have been more open with the visiting US official. In the February talks he told Reed there were “a number of areas sensitive to New Zealand” in the talks.

He said “it is `no secret’ that Monsanto does not like New Zealand’s genetically modified organism regulations”. Another embassy cable complained about “onerous” regulations inhibiting conditional and full releases of genetically modified crops on farms. It said the US had “raised concerns about New Zealand’s regulatory policies regarding genetically modified organisms” in trade meetings.

Intellectual property rights were “another sleeper issue”.

And on foreign investment, he said Kiwis “can be particularly sensitive when it comes to land acquisition or New Zealand brands that are considered icons”. Pharmaceuticals were also “bound to be a contentious issue”.

Sinclair’s Foreign Affairs and Trade colleague David Taylor added that “investment involving New Zealand’s natural resources will also be a sensitive point, particularly in light of the government’s recent decision to open up some conservation areas to resource extraction”.

While playing down the direct economic benefits of a US free-trade agreement, Sinclair argued the “real payoff” of a Trans-Pacific agreement would come “in the longer term”, if it could be used to “put the squeeze” on countries such as Japan and Korea, which also protect their agriculture industries.

Sinclair anticipated “challenges” for New Zealand, especially where the US plan “reaches beyond borders” to seek changes to domestic policies opposed by US companies.

“Sanitary/phytosanitary” rules were cited as “particularly challenging”, a reference to pressure from the US for New Zealand to loosen restrictions on imports of meat and other products that officials feared might carry disease. Sinclair said “each country is hanging on to its own `little fantasy’ about what is achievable”.