From Our Blog
Brexit: Keep Calm and Carry On (Doing Business)?
The Big One or just a tiddler temblor? The initial dust of the British vote to leave the EU may have settled, but we are likely to see ongoing aftershocks for New Zealand and in global trade. New Zealand businesses have already experienced currency and market volatility; over the longer term the predicted slow-down in UK and EU economic growth are likely to dampen demand for our exports and we may see a drop in inwards investment too. The EU is a significant trading partner and the UK has traditionally served as a stepping-off point for New Zealand exports into the rest of Europe as well as accounting for a large share of trade itself, taking around one-third of NZ goods exports to the EU and nearly half of services exports. Demand aside, in the short term at least the British market should not get any tougher: current rules will apply until the UK leaves the EU (which could take two years or longer), and even after that, the UK seems likely to default to the status quo (that is, the EU’s WTO commitments) – at least until it can negotiate new terms. (There may be complexities for agriculture products, but the picture is still murky.)
Looking ahead, New Zealand has a strong interest in making an early start in negotiating an ambitious, high-quality and comprehensive bilateral UK FTA. Britain has a solid trade-liberalising pedigree and senior British figures have already signalled a strong and urgent interest in negotiating with key partners such as China, India and the US. For New Zealand, a UK-NZ agreement would complement the FTA negotiation that we already have underway with the EU. (For the NZIBF’s EU FTA discussion paper, click here.) That said, it is daunting to contemplate the choreography involved in the next months and years as the EU and UK try to settle the terms of the UK exit and then negotiate a new bilateral arrangement; as the EU effectively renegotiates current FTAs with some 50 trading partners along with continuing the scheduled negotiation of new FTAs (including with New Zealand); and whether or not (technically and politically) the UK can negotiate with others prior to its exit from the EU. As far as New Zealand is concerned, the European Commission is still well-disposed, but politically the Brexit impact continues: the Commission has just announced that under pressure it has scuppered earlier plans for a fast-track approval of its landmark FTA with Canada, giving EU Member States a stronger national parliamentary role in ratification. More broadly, it is hard to gauge the extent to which there will be any broader geopolitical Brexit impacts, at a time when many countries globally are engaged in efforts towards negotiating regional trade deals. For better or worse, Brexit may yet come to be seen as a seismic shift in global trade.
This post was prepared by Stephanie Honey, NZIBF Associate Director
RCEP COMES TO TOWN
It’s not a secret – negotiators from the sixteen member economies of the Regional Comprehensive Economic Partnership (RCEP) are meeting in Auckland 12-18 June.
RCEP brings together the ten ASEAN economies plus the three North Asian giants (China, Japan and Korea) and Australia, New Zealand and India. RCEP is sometimes styled as a sort of Chinese-led version of TPP. It is not. ASEAN is in the driving seat, not China. And while on paper RCEP might appear as ambitious as TPP, it may not yet reach as far.
As we posted on this site back in December “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”.
Some water has flown under the bridge since then but RCEP needs to be more ambitious if it is to deliver for the region’s businesses. That includes a high level of tariff elimination, flexible rules of origin, services liberalisation and measures to streamline regional value chains through trade facilitation, investment and regulatory coherence and co-operation. Measures to ensure the agreement is relevant to SMEs are important. Don’t hold your breath though for the sort of enforceable environment and labour commitments we see in TPP.
New Zealand already has FTAs with 14 of the 16 RCEP participants. TPP, once ratified, will deliver an FTA with Japan leaving India as the main interest for us. Our own bilateral FTA negotiations with India have languished in recent years. An ambitious and comprehensive RCEP could also play a role, alongside TPP, in creating a pathway for wider regional trade liberalisation.
As host for this 13th round of RCEP negotiations the New Zealand is organising two stakeholder sessions on Tuesday 14 June at the Sky City Convention Centre for those wanting to find out about or make input into these negotiations. Further information is available at https://mfat.govt.nz/en/trade/free-trade-agreements/agreements-under-negotiation/rcep/
This post was written by NZIBF Executive Director Stephen Jacobi.
Non tariff barriers – a new frontier for trade policy.
A recent report from the forest industry has drawn attention to the increasing prevalence of non tariff barriers (NTBs).
NTBs are the next frontier for trade policy. As tariffs are brought down through comprehensive trade agreements, governments tend to make greater use of non tariff measures (NTMs).
NTMs and NTBs are not the same thing. NTMs can be instituted for a range of public policy reasons – to protect human health, the environment or biosecurity. NTMs only become NTBs when they are more trade restrictive than necessary.
Some governments use NTMs/NTBs for protectionist reasons. When the measures apply only to imported products, or differentiate between trading partner, you can be fairly sure something is rotten in the state of Denmark.
Other NTBs are notoriously difficult to identify and even more to address. Compulsory standards, often not based on international norms or legitimate science; technical regulations requiring amendments to the way products are manufactured; testing regimes which require labyrinthine procedures; product approvals requiring inspection of individual premises – all these are examples of NTBs which frustrate New Zealand exports.
The forest industry is by no means alone in this. The food industry faces a large number of NTBs given that it deals with perishable products, traded across long supply chains. Manufacturing is also highly affected.
Other countries occasionally accuse New Zealand of maintaining NTBs. Our strict biosecurity regulations, applied for good reason, are often cited. Our regulations prohibiting the commercialisation of trout are less easily able to be defended.
What can be done about NTBs? Trade agreements like TPP seek to put in place new disciplines around the way regulations are made and thus restrict the scope of NTMs. The ability for trading partners to express their views on proposed measures before they are implemented is a case in point. That’s why the Government is saying that the greater benefit from TPP will come from addressing NTBs rather than reducing tariffs.
It's also important for business to work closely with the Government to identify these NTBs. That’s why the work of the forest industry is welcome. Another example is the annual report published by the horticulture industry.
On the new frontier of trade policy we need all players to lend their shoulder to the wheel.
This post was prepared by Stephen Jacobi, Executive Director of the NZ International Business Forum.
TPP will be good for New Zealand - A Kiwi farmer's view
Canterbury farmer Craige Mackenzie expresses his support for TPP on the Global Farmer Network.
Here in New Zealand, we expect a pitched battle over TPP. As an island nation, we’re an outward-looking country. We produce high quality food, with an emphasis on ethics and environmental sustainability. My own farms focus on seed production and dairy farming on the South Island, New Zealand’s larger but less populated island.
All of us New Zealanders depend on our ability to trade with other countries—and TPP will give us better access to 800 million middle-income customers, eliminating tariffs on 93 percent of our exports.
TPP will improve our ability to buy and sell with the United States and Japan. The agreement is the equivalent of opening new storefronts in the world’s largest and third-largest economies. In addition we’re looking forward to better economic relations with Canada, Mexico, and Peru, which are also TPP signatories.
The benefits are mutual. Just as we’ll sell more to Americans and others, they’ll sell more to us. I don’t know that TPP will add many jobs to New Zealand’s economy, but it may change the jobs we do, as we constantly learn new skills, create new and more products and discover new ways to help each other.
Read Craige’s full post at http://globalfarmernetwork.org/2016/02/the-trans-pacific-partnership-will-be-good-for-new-zealand. Tradeworks is grateful to the Global Farmer Network for their permission to use this post.
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.
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.