From Our Blog
The sun will surely rise on February 5
You heard it here: the sun will rise the day after the TPP signing. Contrary to wide-spread belief, the sky will not fall on 4 February, but neither will a new dawn for freer trade be with us just yet – at the very least we will need to wait until the treaty is ratified in each member country and until the required number of ratifications by TPP members is achieved. In New Zealand there is an extensive parliamentary process to conclude and a vote by MPs on the final implementing legislation.
TPP will be the subject of extensive debate in coming months. At this stage we see at least three ways in which we believe TPP will deliver benefits for New Zealand.
First, New Zealand’s trading interests are well covered, if not comprehensively. All sectors will benefit from tariff reduction and/or elimination – dairy (yes even dairy – because dairy faces the highest barriers), beef, kiwifruit, other horticulture, wine, seafood, wood and manufactured products including medical devices and agricultural technology. These are tangible trade gains that will over time improve our competitiveness, reduce costs and open up new markets.
Second, the Government’s continuing right to regulate is secured even while foreign investment is protected. Important areas like public health (including in relation to tobacco), the environment, the Treaty of Waitangi and the purchase of farm land are all safeguarded. High hurdles are established for initiating investor state dispute settlement and it will be highly unlikely New Zealand would be successfully challenged.
Third, the only major change to existing policy in New Zealand is the increase in copyright term which will move from 50 to 70 years after the death of the author. For most New Zealanders the effect of this will be hardly noticeable at all. The Government has estimated over the very long term a cost of an additional $55 million spread across the economy as a whole. That compares with an estimated $2.7 billion increase in GDP.
On 5 February the issue before the country will be whether New Zealand should proceed to ratify or not. The deciding point for our elected representatives will be whether the trade benefits outweigh potential policy risks. We believe a significant trade outcome has been achieved at minimal cost. Those opposing TPP will need to be able to explain why their concerns are of such overwhelming impact that these tangible trade benefits should be set aside.
This post was prepared by Stephen Jacobi, Executive Director of the NZ International Business Forum.
From Paris to Nairobi - political will required
OP21 in Paris showed that multilateral solutions can be found to the world’s most pressing problems – if there is political will. In contrast, expectations are low for a robust outcome from the World Trade Organisation (WTO) Ministerial meeting getting underway in Nairobi on 15 December. That’s a shame - for New Zealand, for developing countries and for the multilateral trading system. As the pre-eminent body of multilateral trade rules and the arbiter of global trade disputes, the WTO is critically important to all economies.
Today economies are looking to bilateral and regional agreements like TPP to boost trade growth. While this approach furthers the trade liberalisation agenda, it risks leaving behind the world’s poorest countries, which need the WTO to provide the means for them to compete on a more level playing field in global trade. It was precisely to foster a more inclusive approach to trade and investment that the WTO’s Doha Development Agenda, launched in Doha, Qatar in 2001 was dubbed a “development round”.
Unfortunately Doha has languished since Ministers came close but ultimately failed to conclude the round in July 2008. It now seems unlikely that the WTO members will be able to ratify even something so straightforward as the Trade Facilitation Agreement (TFA), concluded at last year’s Ministerial in Bali two years ago. So far only 57 members (including New Zealand) have ratified and 108 ratifications are required to enable TFA to enter into force. TFA is a no brainer – if this can’t be done, how will the WTO move on to more complex issues of relevance to the way global business is being done today?
From a New Zealand perspective a further problem with regional agreements like TPP is that they do not deal effectively with issues like agricultural and export subsidies which need solutions involving all trading partners. Only a comprehensive outcome which delivers benefits for all participants is likely to achieve the consensus necessary to put an end to subsidies.
The world is also waiting for the Ministerial to take decisions on other key issues including a package of measures to assist development, liberalisation of environmental goods and services (which would clearly support the Paris COP21 outcome) and a future expansion of the WTO Information Technology Agreement (ITA) covering trade in electronic products.
Paris worked where an earlier gathering in Copenhagen didn’t because the world’s leaders have become increasingly aware that something needed to be done to address dangerous climate change. Trade and development need the same medicine. Hopefully something of the ‘spirit of Paris’ can flow over to Nairobi to show that multilateralism can work as much for trade as it can for climate change.
This post was prepared by Stephen Jacobi, Executive Director of the NZ International Business Forum.
The RCEP – another building block towards regional integration
The process of integrating key economies in the Asia Pacific region is well underway. The conclusion of the Trans Pacific Partnership (TPP) negotiations was a big step forward. Another set of negotiations making progress but with a lower public profile is the Regional Comprehensive Economic Partnership (RCEP).
RCEP involves some TPP economies, including New Zealand, Australia, Malaysia and Viet Nam plus all the other members of ASEAN and the giant economies of China, Japan, South Korea and India. Collectively these 16 economies encompass over 3 billion people and GDP of US$21 trillion; and they already take 60% of New Zealand’s goods exports.
Clearly RCEP has the potential to be a very significant trade agreement if it lives up to its goal of being a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement. RCEP seeks to build on ASEAN’s network of bilateral free trade agreements (FTAs). The trouble is that some of these FTAs weren’t all that ambitious to start with. At the half way stage of the RCEP talks, there are signs that the market access provisions will be less exciting than TPP, cutting tariffs on 65% of goods at the start and rising to 80% by the time the deal is fully implemented in 10 years. That would leave 20% of tariff lines untouched which is hardly ideal.
To live up to its potential, RCEP’s market access provisions must cover all items of export interest to New Zealand and the other participating economies. The business community also needs liberal and workable rules of origin in order to take advantage of any new market access opportunities. The RCEP also needs to address the plethora of non-tariff barriers that impede access to markets in many sectors.
There is still time to achieve these outcomes. RCEP’s timeframe was recently extended into 2016. The next negotiating round will take place on 15th-19th February in Brunei. The next few months would be an excellent time for the business community to advocate to the governments involved in RCEP to lift their sights and push harder for liberalization of goods and services trade in the region. Otherwise there is a risk that RCEP won’t live up to its tremendous potential as a building block towards a free trade area of the Asia Pacific.
This blog was prepared by Fiona Cooper Clarke, Associate Director of the NZ International Business Forum.
It’s more fun in the Philippines!
The Philippines was the exuberant host for this year’s series of APEC meetings in Manila.
The political backdrop was all about terrorism in Europe and the Middle East, growing concern about security in the South China Sea and rising concerns about the impact of dangerous climate change. All this would have given food for thought for the 21 Leaders including President Barack Obama and President Xi Jinping as they sat down for their retreat on 19 November.
Earlier in the week the economic issues were to the fore as Trade Ministers concluded their discussions and the region’s business leaders gathered at the APEC Business Advisory Council (ABAC) and then at the APEC CEO Summit. The focus was squarely on the Trans Pacific Partnership (TPP) and how it could be used once signed and ratified to build a Free Trade Area of the Asia Pacific (FTAAP) amongst the 21 member economies of APEC.
ABAC’s last meeting for 2015 was notable for the production of three reports – a study about new business issues that could be included in FTAAP, a detailed investigation about barriers to SMEs accessing e-commerce and an a analysis of the region’s most liveable cities in which Auckland ranks 6th out of 28 (but with some very low scores about affordability and connectivity). These reports will be posted to www.abaconline.org.
ABAC welcomed the conclusion of TPP but not without considerable debate –with those who think TPP falls short of the high quality agreement it was meant to be and with those who contend it sets standards that are too high for others in the region to follow. The NZ team made it clear that while TPP does not achieve all we hoped it would especially for dairy the deal overall is a very good one for us and for the region.
When ABAC Members (including Tony Nowell, Katherine Rich and Stephen Jacobi) sat down for Dialogue with Leaders, the emphasis was squarely on trade in both goods and services, the digital economy and the concerns of SMEs. It is particularly powerful way for business leaders to present these concerns directly to those responsible for the directing the course of the region’s economy.
The news has now broken that New Zealand has offered to host a signing ceremony for TPP. This reflects New Zealand’s role in initiating TPP in the first place and hopefully can show that when it comes to trade things can be fun in New Zealand too.
This post was prepared by Stephen Jacobi, an Alternate Member for the APEC Business Advisory Council.
TPP Contains Major Advances at Manageable Cost
At eleventh hour in Atlanta last week Ministers managed to conclude the long-running TPP negotiations. Members of the New Zealand International Business Forum (NZIBF) are both delighted and relieved.
The deal was without doubt a testament to the perseverance and skill of New Zealand’s negotiators, led by Trade Minister Tim Groser.
Early analysis of the detail released by the Government in the course of last week suggests that New Zealand’s trade interests look to be well served by substantial liberalisation in most sectors with the exception of dairy. The dairy outcome is certainly not what we hoped could be achieved but marks nonetheless a step forward with some useful access opened up in Japan and the United States. Tariff elimination is achieved over time for horticulture, wine and forest products in all markets. Significant new access, again over time, is achieved for beef, seafood and manufactured goods in Japan, the United States and Mexico. A range of services sectors get a major boost. Some useful provisions are included for wine labelling and medical equipment regulation and a range of provisions will improve supply chain connectivity , regulatory coherence and help address non tariff barriers. These are all major advances.
Contrary to the worst predictions we expect New Zealand’s adjustment arising from this agreement to be manageable. Pharmac is preserved; there are only marginal increases likely in the costs of medicine; New Zealand’s existing policy settings in intellectual property (with the exception of copyright term) are largely secured; the continuing right to regulate in public health, the environment and the Treaty of Waitangi is maintained; investor state dispute settlement will not apply to New Zealand’s overseas investment regulations, government services, fisheries quotas or tobacco measures; and New Zealand’s state owned enterprises will be subject to existing laws.
And for the first time ever for an FTA TPP contains some useful advances in environment and labour which should be welcomed by environmental organisations and unions.
Attention now turns to the ratification process in New Zealand and especially to the release of the text within the next month,which will allow us to assess the benefits and any possible costs on the basis of facts. NZIBF will engage in this process and hopes for the widest possible bipartisan support from New Zealand political parties
This post was prepared by Stephen Jacobi, Executive Director of the NZ International Business Forum (NZIBF). More information about the TPP Atlanta outcome is available at http://www.tpp.mfat.govt.nz.
Welcome to the TPP negotiators.
New Zealand has been a key player in the Trans Pacific Partnership agreement. Given the potential benefits of TPP for New Zealand in terms of economic growth and job creation, it is good to see that negotiations are being held in Auckland between 3 to 12 December. As such, the representatives of some major New Zealand businesses and business organisations have written to Government endorsing its current approach to TPP negotiations. They note that there are complicated public policy issues involved in negotiating such an agreement, and that solutions need to be sought that are in New Zealand's overall interests. They also welcome the hard working negotiators.