By Jane Kelsey*
The uncertainty over whether Jacinda Ardern might land a White House meeting and photo opportunity with US President Joe Biden was perhaps fitting, given the lack of clarity about one of their main topics of discussion.
On Monday in Tokyo Biden launched his Indo-Pacific Economic Framework (IPEF). He was flanked by the three other leaders from the “Quad” alliance: Japan, India and Australia, whose new prime minister, Anthony Albanese, was speedily sworn in so he could reach Tokyo in time.
Ardern joined by video and plans to discuss the IPEF directly with Biden in Washington next week, White House COVID rules permitting. But despite the high-profile launch, the IPEF remains an enigma, a high-level idea in search of substance.
We know it has four pillars: trade, supply chain resiliency, clean energy and decarbonisation, and tax and anti-corruption. We also know 13 countries have signed up: the Quad plus New Zealand, Brunei, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
The next few months will be spent scoping the framework – something you’d expect might happen before countries opt in. But the lack of substance doesn’t matter for now. The launch was symbolic, applauding US re-engagement with the Asia-Pacific (now rebranded Indo-Pacific) region.
That was the easy part. Actually bringing the IPEF to fruition faces major hurdles.
US versus China
Most commentators have homed in on the geopolitical conundrum. The Indo-Pacific Strategy issued by the White House in February complained that:
[China] is combining its economic, diplomatic, military, and technological might as it pursues a sphere of influence in the Indo-Pacific and seeks to become the world’s most influential power.
The US views the IPEF as the vehicle to reassert its economic primacy. And Australia and Japan are fully on board.
The IPEF gives Albanese an early opportunity to dispel election campaign suggestions he is soft on China, while distinguishing himself from his predecessor Scott Morrison’s belligerence as trade tensions with China escalated.
Indian Prime Minister Narendra Modi is more cautious, especially about China. Biden’s announcement was reportedly rewritten to launch “collective discussions towards future negotiations”, which leaves India’s options open.
NZ’s China tightrope
Aotearoa New Zealand has a bigger dilemma. For years successive governments have sat on the fence, assuming they could divorce the country’s economic dependency on China from strategic alliances that were increasingly anti-China.
That dependency is now overwhelming, making the IPEF’s overtly anti-China strategy a real economic liability.
To have credibility, the US also needs broader buy-in from the region. Seven of the ten ASEAN countries have agreed to participate. But these are early days. Few will want to jeopardise their relationship with China for nothing tangible in return.
US unions have already targeted Malaysia, Indonesia and Vietnam for their poor human rights and labour records. They are hardly likely to accept US demands that they accept “gold standard” labour laws.
Setting the agenda: US Trade Representative Katherine Tai at a Senate Finance Committee hearing in March. Getty Images
Domestic US politics
The second hurdle is US domestic politics. There is no question the IPEF will put “America first”. But internal US consultations reveal a battle between two camps on what this means.
The Democrats’ core labour and environment base has been promised a new trade model that prioritises workers, the environment and domestic communities ahead of US corporate profits.
They’re rallying behind US Trade Representative Katherine Tai who is responsible for the trade pillar of the IPEF. Its broad scope includes the digital economy and emerging technology, labour commitments, the environment, trade facilitation, transparency and good regulatory practices, and corporate accountability.
These are all chapters in the Trans-Pacific Partnership Agreement (TPPA), including the super-sensitive issue of cross-border data flows and data localisation. But Tai’s trade mandate excludes the domestically volatile issues of market access for goods, including agriculture, which is what most countries, including New Zealand, really want.
Corporate agendas
The US corporate lobby, on the other hand, wants to revive the tariff-cutting agenda of the TPPA, which Tai rejects as a 20th-century model that is not fit for purpose.
And corporate America wants to secure strong rules to protect Big Tech from new regulation, something that falls within Tai’s “trade” mandate. They seek a champion in Secretary of Commerce Gina Raimondo, who oversees the other three pillars.
During this week’s White House briefing on the IPEF, Tai made the administration’s priorities crystal clear. While traditional stakeholders have to be part of the solution, she said, they will be
ensuring that other stakeholders, like our workers, like our environmental organisations, the ones who are the smartest about climate and the policy solutions that we need, that they have premier seats at the table and that they will be influencing and shaping the policies that we create.
Is the IPEF worth it?
Of course, the IPEF may never be concluded. It has no bipartisan support in the US. Even if the Biden administration has the best of intentions, it cannot give an assurance that future administrations will maintain improved environmental and labour standards in the US or honour commitments to other countries taking part in IPEF.
The Biden White House wants to avoid putting the deal to a vote in Congress. But once it drags into the next presidential election cycle it risks falling into the abyss behind the TPPA.
Realistically, the IPEF is a “pig in a poke”. Aotearoa New Zealand and Australia need to take a deep breath and realistically assess the opportunities and threats from such an arrangement.
That means assessing it next to pressing challenges like the climate emergency, lessons from the pandemic, successive global financial crises, the largely unregulated private power of Big Tech, geopolitical rivalries in a multi-polar world, New Zealand’s obligations to Māori under Te Tiriti o Waitangi, and more.
Then they must weigh up the options: stand aside from the negotiations, pursue alternative arrangements, or establish a clear, public negotiating mandate that would truly maximise the nations’ interests for the century ahead.
*Jane Kelsey, is a Professor of Law, University of Auckland. This article is republished from The Conversation under a Creative Commons license. Here is the original article.
72 Comments
I doubt Singapore style policies or at least their delivery would work in NZ from the number of people that complained of being treated like children during the pandemic. I was recently in Singapore and the "cutesiness" of the mask reminders would drive many NZers the wrong way. Then there was a video of dancing anime creatures on the subway telling you to enjoy your Labour day as you've worked hard for it.
Even as many tout how Singapore has reopened, gathering restrictions are still more limited than in NZ, for example gatherings of >500 people require being fully vaccinated and boosted.
Great article.
in my opinion, NZ really needs to start decoupling from China.
This will be economically painful, but there is also huge potential in this alliance to mitigate the pain.
short term pain, mid to long term gain.
With Russia we have seen what happens when authoritarians turn nasty, in terms of economic impact.
Our total exports, mostly made up of commodities and tourism, had fallen to just 25% of GDP pre-pandemic. 15% of our international tourism dollars came from China in 2019.
30% of our meat and dairy exports by value headed for China in 2019 along with 49% of our forestry exports.
The suggested decoupling from China would be economically painful, to say the least.
It gets worse - a lot of the players in NZ's tourism sector (hotels, airlines, etc.) are non-NZ companies.
Then you have holiday workers, vehicles, boats, utensils, kitchen appliances, fuel and aircrafts that are imported from overseas to run tourism and hospo businesses.
It does make you wonder why the declining tourism industry story has been peddled so hard in recent times, where a fair amount of the money heads offshore we seem to clip the ticket locally to draw in attention in hopes of greater immigration? I don't know, just spit ballin'.
Good grief, Malamah. Are you pulling our legs, or have you been living under a rock over the past few years? International tourism has been propping up all sorts of funny little businesses all over NZ. We are really financially suffering since our government shut our borders. Heaps of businesses have shut down. Heaps are just surviving in the hope that things may get better some time in the future. Every week here another couple of businesses shut down, as they have run out of money. The international players have the deepest pockets, and will be trying to take over the spaces locally owned businesses used to operate in as and when our international recovery begins. The way it is going, in the future, Kiwis will only be able to buy off foreign owned businesses, staffed by foreigners, and stocking foreign made products. Think Countdown, Kmart, Bunnings, McDonalds, KFC, etc, etc.
You can make this argument about anything exported from nz, because NZ doesn't make a whole bunch of stuff.
Agriculture - Where's all the harvesting tractors and workers from?
Forestry - where's all the chainsaws, trucks and fuel from?
Etc etc.
With tourism, we get 15% off the top of anything that's not a duty free purchase, it props up our state owned Airline, provides jobs etc, paid for by customers outside NZ.
For a website about finance, there's a lot of economic activity people don't seem to like.
In 2017, it was estimated that a migrant has to earn at least 60-65k to meet the cost of the infrastructure burden (schools, roads, hospitals, housing, etc.) they bring to NZ. I suspect it would cost plenty more in 2022. Most tourism jobs hire migrants at minimum level or slightly over in high cost areas (Queenstown, Auckland, Taupo).
Also the costs associated with building the public infrastructure required to operate high-volume tourism in two of the remotest islands are massive and 15% GST paid by tourists won't cover it.
Migrant hires in tourism are regularly working holiday types who generally don't consume much in the way of our education and medical system.
As for paying for infrastructure, you only have to see roads in the likes of Fiordland to see without tourism dollars they would be goat tracks still.
NZ has decoupled, or more accurately, been decoupled from our largest trading partner in the past. Think GB joining the European Common Market. Which evolved into the European Government, headquartered in Brussels, which tried to ride roughshod over the top of GB's laws. That is why they left the EEC. Anyway, NZ just found new people to trade with. We can easily do it again Xing. Unlike the Solomon Islands, our politicians have not been able to be bribed by China to favour them, so we do not have dishonest baggage like that to deal with, as we leave them.
Never have, since Xi took power, it was clear to me around about when Shanghai Pengxin bought the Crafar Farms what the long term plan was. I wasn't the only one, lots us were, called it as we saw it, and were just dismissed for xenophones. Well, we are back to say "We told you so".
yes --- but decouple to where -- this deal does not open any other markets -- or further open the US to NZ exports - and for all the outrage about Trump and cancelling the TPPA -- Biden appears even more opposed to revisiting it than Trump was
Now that the housing ponzi is finally over -- the reality is that Agriculture -- and primary exports are our economy -- remove that adn there is nothing left - virtually nothing that is earning any income for NZ- and our secondary string Tourism -- is not coming back in a hurry - be a long long slow regrowth!
I's love us to decouple -- but the only markets of size and $$ that could even begin to replace China -- is the US -- not going to happen clearly and India -- again deep in the shit and refuses to condemn Russia as does China -- and will want even more migration as a payback
If china was to cut imports by even 25% -- we are down the gurgler big time -- and even as it as -- their current levels may not prevent a major recession here.
It is silly though, we are happy with the current over stretched and over expanded American Empire and are unhappy with the rise of the new Chinese Empire. In realistic terms, we should consider that both are negative for ourselves.
The American Empire is absolutely a financial parasite which uses money power to crush and mistreat its allies and enemies. Look at how they treat the EU and European nations with the energy shortages, after the US has spent decades attempting to force Europe to purchase expensive American oil rather than relatively cheap Russian Oil.
The Chinese Empire are less subtle and more dangerous to us in that it will directly punish our burgher/bourgeoisie class through economic punishments. It also has obviously used its influence to manipulate both of the mainstream parties through donations in the past few elections.
We really need to navigate a safe space between the gaps of both empires.
America and Europe...the Yanks have been underpinning Europes security since ww2, the cost of which well exceeds what all of what NATO member contribute to defense. Count the bases.
Trump suggested closing them all and the US saving billions. Where would Putin stop the...?
Germany should rule Europe, which its natural place as it is. Despite total destruction in two world wars and territorial reduction, they dominate the EU now as it is. The Americans are in their to keep the Germans down and the Russians out. It doesn't actually benefit Europe at this point.
The American bases west of Poland now are almost all hospital personnel and repair stations, very few infantry, armour or artillery in Western Europe. The Europeans should remilitarize and hold their own. As should we.
Germany is re-arming to the tune of 100 Billion Euros. The only hope I have of them not ruling europe is they have an archilles heel in the 3 million refugees they have adopted. Their lack of integration (poles apart) will mean they will not volunteer to be cannon-fodder and it will be an unlikely German who sends their son to war while an immigrant's son does not.
It is simply a product of geography. Not what I'd like or anything else like that, it is simply that it is naturally going to be a great power over the space, same way that Iran dominates its neighbourhood because of its geography, or the way the US dominates the Americas.
Von Met
The USA does have its off-setting good points in that it has contributed positive cultural benefits to the world (alright, 'popular' culture!) through the likes of Hollywood and popular music; it would be repugnant snobbishness not to concede this, as it is these very contributions that have enabled millions to endure and perhaps even find some enjoyment in this mad world. The USA has provided the world with a popular cultural heritage just as the Ancient Greeks provided the following Western civilizations with an intellectual heritage.
I can see China as a technological and economic contributor to the world but there is absolutely no evidence whatsoever that they are or will be a cultural contributor.
Militarily, you have to go right back to Genghis Khan to find any Chinese expansionist ambitions.
As evidence of how quickly empires can turn you only have to look at the 1939 German-Russian peace pact and Germany's invasion of Russia two years later in 1941.
Then there's the fact that both the USA (nuclear bomb) and Russia (1945 invasion of Japanese occupied Manchuria) equally liberated China from the harsh yoke of Japanese militarism; nowadays the USA and Japan are great mates and both are lined up against China.
But China does seem ungrateful to the USA.
We are entering a new cold war and should consider our political positions as such. The diplomatic narrative is somewhat silly. If we really wanted to mitigate the threat of Chinese economic power, we fundamentally need to return to protectionism in a sensible way.
We will never make computers or TVs or Cars. But we could be manufacturing our own shoes, clothes, ammunition, glasswares, paper, timber products, furniture and so on. Light manufacturing with a high value add emphasis. A government policy of selective tariffs as well as business loans for young men to found new industry is quite achievable. Also switching things like military uniforms, police uniforms and school uniforms back to NZ based manufacturers is an easy place to start.
In a pro-social state, we would provide interest free loans, from a state owned bank, to people to purchase NZ made goods like furniture, to stimulate demand. Even pro-natal policies like the state providing low interest home loans to young couples for first homes, with a third of loan written off for each child born to the couple.
We should continue to trade with China, but we should not be deindustrialized and have our markets manipulated by Dumping actions. We can trade mutually with China on decent terms without compromising our sovereignity.
Some points to consider.
- If we support our own industry the WHO will agree Tariffs on us to nullify the positive effect of this.
- Our small scale means that we will not get to enjoy "economy of scale" factors to lower the price. Then our economy will be paying more for this good than buying it from someone else.
- Our export sector supports our currency and therefore makes those things we must import affordable. Leading a nationalist revolution is therefore going to come back to us as a reduced currency valuation and therefore greatly increased tradeable inflation.
You are right, but we already face similar tariffs on almost all of our goods. It is how almost every nation in history industrialized, see Park Chung-Hee's industrialization policies for a recent example. China is too large/historically significant to quite fit the model in the same way.
It isn't about lower price though, it is about the GDP multiplier effects of manufacturing as well as the employment/local industry effects of manufacturing. It isn't about price alone. For every person employed manufacturing a good, approximately 5 are employed to sustain that.
Fredrich List outlines this in his book "The National System of Political Economy". The prices might be higher, but the social/economic benefits exceed the individual consumers utility of that. The benefits stack up with splinter industries and help to build competitive advantage, which allows you to reorientated towards free trade for those industries once they are more mature/established.
WHO? World Health Organisation?
But applying Tariffs is a two edged sword. Economies of scale can be countered through producing for export with a quality that would get bought. we don't have to compete much, just enough to support our own capability. As to currency - maybe but not a certainty. that really goes to how the government manages the economy and what value others find in our currency and is not a justifiable reason to do nothing.
https://mckinlays.co.nz/ has been making shoes in Dunedin since the 1800s. People are free to buy from them. They look pretty good, although I went for Adidas over them for my latest purchase - horses for courses
Von Met
The Labour Party did introduce import licensing around the late 1950s to encourage quite a few NZers to start up light businesses; in my South Auckland suburb for instance a friend's father started a clothing business which made high quality clothes. It developed into a very successful business employing many locals. I suppose it's gone the way of all flesh by now.
Very good strategy VM!
Niche, micro manufacturing utilizing local primary produce and leveraging off our oversold virtue can provide many opportunities. But patience and supportive policy setting is required. As is the will to change incentives from the one horse let's sell a house to the bigger fool cash cow.
Failing that we must rely on great business from change consulting with government departments (lol).
I built an export businesses from NZ and it was incredibly challenging. Easier returns and less tax to buy and hold a cardboard box (house) for 10 years.
Re. China. Diversity of income from across the globe is the only way to prevent bullying.
Jane Kelsey brings up some interesting points and asks a pertinent question. I see the IPEF as being an opportunity for NZ to possibly undo some of the damage that is in the earlier trade agreements. There is an opportunity to sell to America that "America First" can mean other things than rape and pillage of their trading partners. That the US can build economic and strategic alliances where everyone benefits though solid leadership not dictatorship, not just the anti-competitive big US corporations.
Culturally we are a European nation with the ideals of democracy and freedom. Our location gives us some strategic importance, and sooner or later, currently sooner, we are going to have to choose who we will align with. Neutrality will only work when we have the means to enforce and defend it, and as we have seen the UN is not that means.
Sorry to disappoint you Murray but culturally we are a Pacific nation, not European.
The America you describe is "Utopian" and certainly not the reality, particularly if Trump were ever to return. Both bloc's come with baggage - trade with China has provided access to supply chain's and prices we could not have dreamed of 20+ years ago while we have been aligned with the US militarily for >100 years.
Have a read of "The New Confessions of an Economic Hitman" if you want deeper insight into the US's MO. War/crisis and the rebuild contracts, you can bet your last $ that US firms will be re-building Ukraine. Is that better than China, I think the answer has to be yes but they are no angels.
I doubt Ukraine will ever be 'rebuilt'. I think it's being used as a proxy by the US, to take the grunt out of Russia without losing US lives. But there is no room for more than one hegemonic empire, and that, via resource constraints, will never be as big as the US got (both size-wise and relatively). I suspect the US will be the last.
are you saying that culturally we are a pacific nation? I would disagree. the evidence is that we are western European. I agree we are more egalitarian than most, and more accepting of other cultures, but our mindset and outlook remains predominantly western. The US leaves a lot to be desired but we are much closer to them culturally than we will ever be to Asian, and especially Chinese countries. But a lot of the Asian countries are also moving towards the western democratic ideals, but their Asian cultural heritage leaves them exposed to aspects that would not be tolerated here. But at the grass roots the US is very much "Utopian" in many respects.
I have no doubt that US firms will play a part to make very large profits, but so will quite a few others, but we are a very long way from that yet.
Te Kooti
The evidence is gathering momentum that NZ is fast becoming more Pacific in its orientation with murmurings of Maori Co-Governance and Auckland's exponentially expanding Pacifica population. However, at some stage NZ will be well under the Chinese economic and political thumb with the Chinese 'buying' the rulers whoever they might be.
TeKooti is just winding us up. He knows full well we are culturally European. With a British head of state. All Kiwis used to be British citizens. The treaty says so. Put in all the Co Governance and Pacific peoples you like. That won't change the culture. The Pacifica come here because our way of life is preferable to their previous one. Just like alll our previous immigrants. Right back to the first Moriori. Their numbers would have to be pretty big to change our culture. There are not enough in existence to do that.
This is typical knee-jerk politics from the Biden White House. They certainly don't do it for us in the South Indo-Pacific, they do it for their own domestic audience reasons at home. All polls point to a Democrat collapse in the mid-terms this year, so they need to get the narrative away from high inflation & the sky rocketing cost of living. The extreme left of the Democrat Party has almost total control at the moment, which is leading to the folk in middle America to think "Really?'' If this scenario plays out & the Republicans win control of either the house or the senate, then Biden will be stranded - a lame duck president. Which, to be fair, is not much different to what he is today. Sigh.
They are all just talking heads - they may have brains(?) but no body, arms or legs with which to do anything.
Realistic.
We will end up in the position of having to confront Chinese aggression, so we may as well join the club up front.
From this point on we are going to have to exercise extreme diplomacy to the point of risking but not damaging our relationship with either side. Economically we have no other option.
Our problem will be that the USA have made it patently clear up front that signatories will be screwed in favor of USA companies. We need to use what time we have to strengthen our position inside this arrangement and generate mutually respecting trade groups independent of the USA and China.
CEOs and Directors. I have been saving for years now that you need to restrict your dependence on any one market (to say 15%), most especially China. Otherwise you could lose that market overnight and along with it your business. Look at Australia.
China has already secured a gateway to huge territory to the West. Heavily under their influence already are Myanmar, Pakistan, Sri Lanka, Iran, Syria with Afghanistan just arrived and work in progress in Iraq & Lebanon. That is a tract of land from the sub continent to the Mediterranean. Russia too is poised to become largely dependent and of much lesser influence geographically at least. China has succeeded admirably here, not one shot fired not one tank rolled in. There are much easier picking than having to sail an armada into the Pacific. Mongolia was just over 100 years ago part of China and could thus be reclaimed. Nepal cannot defend itself. Those options are a logical progression if only to ascertain “Western” reaction, particularly as there is no chance from there, of significant assistance let alone intervention. If that should actually happen then it might be time for the vassal Nth Korea to break the truce and move south.
China has already secured a gateway to huge territory to the West. Heavily under their influence already are Myanmar, Pakistan, Sri Lanka, Iran, Syria with Afghanistan just arrived and work in progress in Iraq & Lebanon.
Thats like saying you've bought a house in Los Angeles, and everyone's thinking Bel-Air but it's actually Compton.
In reality, the IPEF is a desperate move by the Biden administration to burnish its economic profile in Asia as a credible counterbalance to China. It is designed to project the US in the economic leadership of the Indo-Pacific region. The goal is to make a splash in the Asia-Pacific region after the US’ ignominious exit during the Donald Trump presidency from the Trans-Pacific Partnership, which, ironically, was Washington’s brainchild in the first instance and President Obama’s signature trade agreement.
The IPEF is neither a “pact” nor a “deal,” as the Indian media seems to think. It is what it says — a loose framework of Asian countries that would provide an early warning system for supply chain issues, encourage industries to decarbonise and offer US businesses reliable regional partners outside China.
It will make no binding commitments regarding market access characteristic of trade deals or free trade agreements, because that will be a hard sell in the US where protectionist sentiments are well entrenched. But it will provide for ambitious labour and environmental standards and create new guidelines for how data flows between countries. A White House fact sheet comes straight to the point when it says, “IPEF will enable the United States and our allies to decide on rules of the road that ensure American workers, small businesses, and ranchers can compete in the Indo-Pacific.”
Under the IPEF, the Biden administration is trying to dominate the rules and standards of digital technologies like artificial intelligence and 5G. But the rules of digital trade and technology that the US wants to promote are too “American,” and many countries in the region simply cannot meet the so-called high standards. Link
Shows, more than anything else, the amateur-hour state of NZ foreign policy. The vaunted Quad is in reality a Trio with India very much swithering about which side to pick. India has deep arms and energy ties to Russia, and shares a fractious border with China. We are on Russia's (and hence China's) Unfriendly list, so can expect subtle or even gross trade glitches to multiply. Takes peculiar skills to have maneuvered ourselves into this cul-de-sac.....
As a non-Maori of European heritage but unquestionably self defined New Zealander, I'd be personally upset if our Minister had any bias towards supporting one citizen over another. Especially due to race.
I hate what this Government is doing to our beautiful country. They are hypocrites.
If NZ votes for a Labour Government in 18 months I'll sign off Interest and live in a cave.
We might as well trade with them.. we. have turned a blind eye to the uighurs. Allowed rampant immigration from China. Our politicians and media have all been groomed, crying 'xenophobe' when anyone questions where this is all heading. Allowed them to buy up vast swathes of our country, and steal key agricultural hybrid lines. Our economy is beholden to them. We have no means of defending ourselves.
We are no longer sovereign...
So many Forums but each of the country in these Forums want Chinese Business. What is the earthly use of these multiple Forums, when nothing on the ground is going to change. Political alliances form and change, but Business ties go on, overtly or covertly. Even between the US and China. US spearheading such a Forum is a huge hypocrisy. Other countries are tagging along to get some illusory mileage.
interest.co.nz is cited as a source on 4 of the graphs in the report, nice work
https://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Monetar…
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.