ANALYSIS - Trade Minister Todd McClay is backing controversial rules for an Asian-focused trade deal that would allow foreign corporations to sue governments. The issue will be on the table at the 13th round of talks for the Asian version of the TPP - the Regional Comprehensive Economic Partnership (RCEP) - hosted in Auckland this week.
So what does it all mean?
Trade Minister Todd McClay. Photo: BEEHIVE.GOVT.NZ
The TPP has dominated New Zealand's trade agenda, but it has been floundering in the United States, raising doubts it will come into force.
That has given greater impetus to RCEP, with the Trade Minister Todd McClay saying it is no less important than the TPP, since it covers Asian nations which account for 27 percent of global trade, and more than half of New Zealand's exports.
"It's 16 Asian countries, including Australia and New Zealand, representing 3 billion people. So it's really important New Zealand is part of these trade rules that are developing amongst these countries who are important to our country."
New Zealand has free trade agreements with all but two of the RCEP nations - India and Japan, though Japan is part of TPP.
Bilateral trade talks with India have stalled, and Mr McClay said he conceded India would be the real prize in a successful RCEP.
However, International Business Forum executive director Stephen Jacobi said the RCEP's ambition to unshackle trade and investment was already too low, and India highlights the difficulties of reaching a deal.
International Business Forum executive director Stephen Jacobi. Photo: SUPPLIED
"India has quite a different approach to trade negotiations than the other economies. Remember they have not been part of the habit of rule-making around trade and investment in APEC (Asia Pacific Economic Cooperation) that everybody else has been involved in.
"And this is quite a challenge. But it's also an opportunity. Can they be brought into that regional framework?"
That may be difficult.
India is proposing a three tier approach on market access, offering to slash duties or tariffs on 80 percent of items for ASEAN (Association of Southeast Asian Nations) members, 65 percent for Japan and South Korea, but only on 45 percent of products from New Zealand, Australia, and China.
New Zealand and China reject that approach.
New Zealand Agricultural Trade Envoy Mike Petersen said it would be a backward step.
"We don't favour, in the primary sector, a tiered approach at all, and that's not surprising from New Zealand's point of view because in RCEP we're seen as one of the more developed nations and therefore we would get the least benefits out of a trade agreement structured in that way."
Mike Petersen. Photo: Twitter
India has also clashed with other nations over controversial TPP-type rules that allow multinationals to sue governments.
India want to revise the Investor State Dispute Settlement model (ISDS), while leaked documents show Korea and Japan support it.
Mr McClay said he too wants ISDS included in RCEP.
"The New Zealand government's position is that ISDS should be in RCEP, but we would want safeguards in place so we can keep doing an important job in as far as governing is concerned."
An opponent of these type of trade and investment deals, Auckland law professor Jane Kelsey, said ISDS is increasingly viewed globally as a mistake.
Auckland law professor Jane Kelsey. Photo: RNZ / Mihingarangi Forbes
"There's a huge backlash internationally against these old style investment chapters that have a little bit of tweaking to make them look a little bit less bad. But really the tide is turning and there needs to be a total rethink."
Professor Kelsey said she is also critical about the secrecy surrounding the talks, pointing out the government would not even say how many chapters were being negotiated.
But Mr McClay is keen to take some of the sting out of the debate.
While the talks remain behind closed doors, he said a live-streamed public meeting would be held in Auckland tomorrow with New Zealand's negotiators to allow people to air their concerns - a first for the secret talks.
"I get the sense over the 50 or 60 TPP meetings I've done over the last couple of months around New Zealand that people accept that trade is good for the country. They're uncertain of how trade is good for them.
"I want to offer opportunities for New Zealanders to learn more, ask questions and to continue to engage and comment during the negotiation."
Mr McClay said he was optimistic RCEP could be concluded by its year-end deadline, though commentators believe that would be hard to achieve.
What is RCEP?
RCEP stands for Regional Comprehensive Economic Partnership.
It is a proposed trade agreement involving the 10 members of ASEAN - Brunei-Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam; and the six countries with which ASEAN has existing FTA's (Free Trade Agreement's) - Australia, China, India, Japan, Korea, and New Zealand.
These countries have a total population of more than 3 billion people. The also account for about 27 percent of global trade and have a combined GDP of $US23 trillion.
When did talks start?
Negotiations were formally launched in November 2012, and 12 rounds have been held so far. The thirteenth round is currently being held in Auckland.
ASEAN is officially considered to be driving the negotiations, but some analysts consider the RCEP led by China as an alternative to the United States-led Trans-Pacific Partnership agreement. China is not a member of TPP, while the US is not part of RCEP.
Negotiators had aimed to complete the talks in 2015, but are now targeting the end of this year. Commentators doubt they will meet the deadline.
What's the difference between RCEP and TPP?
Like TPP, RCEP is designed to standardise the rules for doing business in the region.
The two trade deals are stepping stones in helping APEC reach the Bogor Goal of free trade and investment in the region by 2020. APEC will complete a feasibility study into the proposed Free Trade Area of the Pacific (FTAAP) later this year.
RCEP is not as wide ranging as TPP. It does not include chapters on labour and environment, or the politically sensitive government procurement.
What are the benefits for New Zealand?
RCEP covers at least 55 percent of the country's goods exports, and six of New Zealand's top ten trading partners.
New Zealand already has FTAs with all but two of the countries involved in RCEP - India and Japan (though Japan is part of TPP).
An agreement would help the region's 'noodle bowl' of rules operate better together, reducing the cost of doing business there.
The real prize would be greater access to India. Bilateral free trade talks between New Zealand and India, which stared in 2010, have stalled recent times.
