New Zealand Labour leader Jacinda Ardern speaks to the press in Wellington on October 19, 2017. Photo: Reuters / Charlotte Greenfield
New Zealand Prime Minister Jacinda Ardern speaks to the press in Wellington, in a file photo. Photo: Agencies

New Zealand’s change of government is another nail in the coffin of the TPP-11 revival and sets new boundaries for multilateral trade in the Asia-Pacific region.

The leader of the moderately populist New Zealand First political party, Winston Peters, has announced that he will back the Labour-Green bloc to form a coalition government, making the Labour Party’s leader, Jacinda Ardern, the country’s youngest ever prime minister. Ardern, 37, is replacing incumbent National Party PM Bill English thanks to an exhilarating campaign run on a platform of political rejuvenation after nearly a decade of conservative rule.

The emerging economic policy under the Labour-Green-populist coalition is poised to disappoint Japan and Australia in their quest to sustain the regional status quo balance through multilateral economic integration within both the US and Chinese spheres of influence.

In fact, the previous conservative government was firmly set alongside Japan and Australia in trying to revive the so-called TPP-11, hoping to keep the door open for the US at a later time by not changing the terms negotiated in the Trans-Pacific Partnership agreement before the notorious US withdrawal.

The foreign-affairs and trade policies of the New Zealand coalition parties now in office reveal the new international coordinates for the country. Even though the Labour Party trade manifesto vindicates the successful outcomes of the China free-trade agreement (FTA) negotiated by the last Labour government a decade ago, the policy revolves around the necessity to safeguard the regulatory sovereignty of New Zealand.

The Labour Party thus openly opposes investment protocols in trade agreements that relinquish government protection in the sale of farms, homes, state-owned enterprises, and monopoly infrastructure to overseas buyers. In this regard, the Labour Party manifesto specifically mentions the South Korea FTA and the TPP as examples of trade agreements to be reneged.

The new deputy PM is Winston Peters, the leader of New Zealand First, which runs a peculiar platform of socially minded populism, somewhat akin to the Nationals Party of Australia, the rural conservative coalition partner of the Liberal party currently in office in that country. In other words, Winston Peters is no Marine Le Pen and New Zealand First is a far cry from the extreme populist parties on the rise in Europe.

Yet the New Zealand kingmaker displays certain policy preferences that do not bode well for Asia-Pacific multilateral integration. This is evident in the NZ First foreign-affairs and trade policy, stating for example strong commitment to New Zealand’s anti-nuclear policy, while opposing the previous government’s sponsorship of United Nations Security Council Resolution 2334 concerning the Israeli settlements in Palestinian territories occupied since 1967.

Peters also advocates against the exploitation of Antarctica (a geopolitical ticking bomb) and for the cessation of all whaling, a notorious sore point of regional contention with Japan.

New Zealand First is faithful to its name by opposing “investor-state dispute settlement (ISDS) provisions in bilateral and multilateral agreements and by extension the Trans Pacific Partnership-11”.

Peters echoes US President Donald Trump in seeking to “revise current FTA deals being negotiated to make sure they are real and are in our interests (such as protection of land and strategic assets)”, and to “renegotiate existing poor-quality deals to increase their quality and benefit”, with a priority on “free and fair trade deals” with Japan, the United Kingdom, the EU and the United States.

Peters’ trade policy clearly leans toward cultural nostalgia as it pledges to “initiate Closer Commonwealth Economic Relations (CCER) to deepen existing bilateral deals with Commonwealth countries”.

It is not clear how Ardern and Peters will deal with the Green Party, whose trade and foreign investment policy wishes to “replace the World Trade Organization … with regional trading agreements that respect and uphold international labor and environmental agreements”.

The Green Party in essence runs a sovereign economics agenda, closer to that of NZ First than to Labour’s. Among other protectionist measures, the Greens support “stronger controls on foreign investment in New Zealand” by “reserving land ownership for New Zealand citizens and permanent residents”, as well as “the option of using an across-the-board tariff to address balance of payments problems”, and “measures to assist import-substitution industries and reduce dependence on imported products”.

In specific regards to international trade policy, the change of government takes New Zealand “back to the future” with a unique political experiment of left-wing national-populism. Despite the tyranny of distance, the geographical position right in between East Asia and the West Pacific for once puts New Zealand under the spotlight, as the success or failure of its new course will make waves in a crucial juncture of global geopolitics.

The TPP-11 fiasco and WTO-system backlash across the Pacific is a wake-up call for complacent Western powers stuck in a late-20th-century mentality that seeks to tame emerging Asian forces only with flailing economic instruments based on free trade in exchange for security.

As the status quo camp of Asia-Pacific economic integration further shrinks, the silver lining of a protectionist shake-up in New Zealand may well be to instigate a geopolitical paradigm shift across the region, which is very much in need of facing the discordant pressure mounting from the US retreat and China’s major-power diplomacy.

Nevertheless, the shifting of the East Asian trade pivot further away from the West Pacific is yet another blow to the liberal order in Asia, and the transition to any new order will be ridden with pitfalls.

Giovanni Di Lieto

Dr Giovanni Di Lieto teaches international trade law in the International Business program at Monash University in Melbourne, Australia, and engages in expert analysis on the geopolitics of trade and investment for media, industry and government outlets. His professional career developed as a commercial law practitioner in Italy, and then as a global value chain specialist across the US, Europe and China.

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