TPP negotiators were in Australia this past week. First there were the negotiations at official level in Canberra, and then the ministers arrived for three days of higher-level discussions in Sydney.  Tim Groser is New Zealand's minister for trade, and today's quote is from his comments earlier today to The New Zealand Herald.  Though generally positive about the recent meetings, Mr. Groser was blunt about his concerns on dairy: specifically, his fear is that the United States and Japan will cut a deal in the dairy sector that may be good for the U.S. and Japan but not so good for New Zealand.

"The U.S. interests are not New Zealand's interests," he said.  "They [presumably the U.S. and Japan] know that if they try to make a sweetheart deal that benefits just them, it is going to cause a massive political problem in getting us on board."

Where to begin?  Let's start with some general observations and then move to the particulars of Mr. Groser's concerns.  Putting the dairy issue aside, Mr. Groser reportedly thought the ministers' meeting in Sydney was very good, and certainly the official reports were upbeat.  In their statement, issued earlier today - Sydney is currently 15 hours ahead of Washington - the TPP ministers said, "[W]e have made significant progress on both components of the TPP agreement: the market access negotiations and negotiations on the trade and investment rules." 

Not everyone was quite so upbeat.  The headline for one Japan Times story on these most recent TPP talks was "TPP Talks in Sydney end with no breakthrough."
The official ministers' statement also commented on procedure.  It said:

Presumably, it is those bilateral discussions - especially those regarding dairy between the United States and Japan - that so concerned Tim Groser.

We have always thought it awkward, if not odd, that an agreement that is described as the FTA of the future should in fact be, not a single FTA, but a series of bilateral agreements under a common umbrella.  Yet where goods are concerned, that seems to be the case.  And as the negotiations with Japan are unfolding, that large irony is generating smaller ones.  Consider these two.

First, the world has been told for months now that Japan needs to really open up in its negotiations with the U.S.; that if it doesn't, that failure will cast a shadow over the entire agreement, including, of course, the other bilaterals.  Now Tim Groser - one of the most effective voices in the TPP chorus - is warning us that a sweetheart deal between the U.S. and Japan could poison the TPP well.

Second, Mr. Groser's reference to Australia as well as New Zealand is a reminder of America's disadvantage in the whole TPP process.  Japan already has free trade agreements with seven of the other 11 TPP countries: Mexico, Malaysia, Chile, Brunei, Peru, and Australia, and might well add others before TPP is concluded.  Canada and New Zealand, for example, both have separate FTA negotiations with Japan.  For the United States, however, TPP is the only route to an FTA with Japan.

And the language of some of those FTAs might well have a bearing on how different countries react to bilateral deals in the context of TPP.  When Japan's FTA with Australia was announced last April, Australia's dairy sector expressed more disappointment than praise. 

At the time, the vice chairman of the Australian Dairy Industry Council, Robert Poole, expressed his strong disappointment.  He was particularly disappointed that the agreement did not offer Australia anything new on fresh cheese, his industry's top priority for the talks.  He also made this observation:

So yes, Tim Groser was on the mark in suggesting that a U.S.-Japan deal on dairy - especially a very good one - might cause heartburn in Canberra as well as Wellington.  Does that mean that, for the sake of the wider TPP family, the U.S. should shoot for a watered-down Goldilocks deal or some other broadly acceptable compromise?  We don't know.

We have highlighted Tim Groser's recent remarks on TPP and dairy because they are important, because he is always worth listening to, and because - albeit through a somewhat circuitous route - it is yet another reminder of the alternating meanings of the phrase MFN or "most-favored nation." 

In the long period of the GATT and the WTO, MFN has mainly meant "a concession to one is a concession to all."  In short, it has been a protection to the last party to a negotiation.  Indeed, it has meant benefits (lower tariffs) for countries that may not have been party to the specific negotiations at all, so long as they were members of the GATT-WTO system.

MFN's beginnings were quite different, however.   In the early 19th century, it was a protection for the first party to a negotiation, not the last.  Consider this passage from The Search for Modern China by Jonathan D. Spence:

For the most part, the United States has, in its own laws, changed the phrase "most-favored nation" to "normal trade."  Still, our guess is that MFN has a pretty solid future as an instrument of trade policy, especially in this earlier meaning.