From Our Blog
All eyes on Washington
The US NZ Pacific Partnership Forum, the fifth in a series, initiated by the US NZ Council and the NZ US Council opens in Washington DC on Sunday May 19. This year's Forum is markedly different from earlier versions – bigger (over 250 attendees), more diverse (including 45 future partners in the age range 20 to 30) and open to the press. This year’s Forum comes as good progress is being made on devising a new foundation for the economic relationship in the form of the Trans Pacific Partnership (TPP), which links not only the United States and New Zealand but ten other economies. This development is long over-due. Research by NZIER shows that over time the two countries have become economically less important to each other. Today New Zealand provides 0.15% of the US’s total goods imports, down from 0.26% in 1991. The US share of New Zealand imports has dropped from 17% to 9.3% in the same period. The US remains our third largest export market and a major partner for investment, tourism, film and education.
TPP is about more than just the United States. Japan’s prospective entry has radically changed the economic prize for New Zealand with GDP set to rise by $2.2 billion up by 2025 up from $0.5 billion without Japan. TPP is about setting a new framework for trade and investment in the Asia Pacific region. In an age of the global supply chains, US involvement remains critical. So we can expect a lot of discussion about TPP at the forthcoming Forum, reflecting the significant political and business interest in TPP in Washington right now, along with some discussion about what's next for the NZ/US relationship once TPP is concluded.
Extract from Trade Minister Tim Groser's address to the Japan Press Club, Tokyo, 24 April 2013
"I have tried to follow closely the debate in Japan over the past two years or so on whether Japan should join TPP. It is a fundamentally a debate about change. As is the case in other countries, it is important to keep matters in perspective. Wildly exaggerated accounts of what TPP might or might not do should be treated with extreme suspicion. We hear a few of these voices in my own country as certain people attempt to make the case against TPP.
We need to differentiate those exaggerated claims, often made by people who have an ideological problem with all trade agreements, from legitimate public concerns about the implications of a poorly drafted agreement. In public health, for example, it is essential in my country that our public health system is fully protected as we work through the detail of some of the provisions. And I have given absolute assurances to the public that the New Zealand Government will never enter into any agreement, whether it is TPP or another international agreement, that would undermine fundamental institutions in our public health system.
Investor-State Dispute Settlement provisions are another example. Drafted without care and without proper safeguards, they would indeed be a problem for sovereign Governments. Drafted appropriately and with adequate safeguards to ensure that this or any Trade Agreement does not interfere with the legitimate right of future Governments to legislate proper public policy in fields such as health and the environment, they are a useful part of the agreement. We have such provisions in other Trade Agreements, such as our FTA with China and the FTA between Australia, New Zealand and ASEAN. We value those provisions. We want to encourage outward investment into Asian emerging markets. These provisions provide an additional element of security to such investments.
Having said that, we should be clear about one thing. TPP is indeed about change. But it is about economic change of a manageable, useful and finally necessary nature if our economies are to continue to participate fully in the extraordinary development of the 21st Century Asia Pacific economy."
See the full text here.
A new star rising in the West...
As the Trans Pacific Partnership (TPP) continues to make progress, with Japan set to join the negotiations later this year, a big new deal is in the making between the giants of world trade, the United States and the European Union. Last month, following announcements in Washington and Brussels, the US Administration gave 90 days notification to Congress that the President intended to negotiate a “Trans Atlantic Trade and Investment Partnership (TTIP).
The acronym is a bit of mouthful but this is an undertaking on an unprecedented scale. As US Congressman Erik Paulsen (R-Minnesota) blogged this week, "the transatlantic economy is the largest and most integrated in the world, comprising 50 percent of global GDP and US$5 trillion in total commercial sales. This agreement has the potential to boost (our) economy and create jobs”.
Yes, it’s the “trade works” message that is behind this negotiation. As EU President Jose Manuel Barroso said “We've made important progress on what I believe is a game changer, not only in transatlantic terms, but for the world in terms of trade”.
For all this optimism, this deal – like TPP – will not be easy to negotiate. Importantly both governments realize that in the current economic climate only through expanded trade and investment can business play a role in getting economies growing again.
New Zealand has a close interest in this unfolding negotiation. Not only is the United States our key partner in TPP, but we have longstanding and important trade and investment links with the EU, our fourth largest trading partner. An FTA between us may not be a realistic option, at least not at this time, even though many of our differences in agriculture have been resolved in the Uruguay Round.
TTIP is also significant because bilateral negotiations between the US and EU were once the means to bring about a multilateral deal. With the rise of large developing countries like Brazil, Russia, India and China, this trans Atlantic hegemony is a thing of the past in the World Trade Organisation. But a deal in the east, through an ever expanding TTP, and a trans-Atlantic deal in the west, raises the tantalizing prospect that the global community might one day find a way to bring these together in Geneva, in a restarted and refreshed Doha. Now there’s a thought …
Japan announces keen to join TPP
Japan's prospective entry into the Trans Pacific Partnership (TPP) negotiations has been welcomed by organisations representing New Zealand's international businesses.
"Japan is a major partner for New Zealand in the Asia Pacific region" said Sir Graeme Harrison, Chairman of the New Zealand International Business Forum.
"Japan has for some time been the missing link in terms of New Zealand's network of free trade agreements in the region, although we are already committed to negotiating with Japan in the context of the Regional Comprehensive Economic Partnership (RCEP). TPP is a more ambitious negotiation and is already well underway and so we welcome Japan to both sets of negotiations which aim to deliver an even stronger economic partnership between both countries".
"Japan's entry into TPP potentially increases both the negotiation's coverage and economic impact" said Rt Hon Jim Bolger, Chairman of the NZ US Council.
"Japan's entry also brings additional complexity which we hope can be worked through expeditiously by negotiators. If TPP is to play a part in the region's economic recovery it must be concluded as soon as possible".
Japan is New Zealand’s fourth largest bilateral trading partner, with two-way trade worth NZ$6.1 billion in 2011. In the year ending December 2012, New Zealand exports to Japan totaled NZ$3.21 billion. Major exports included aluminium, wood, dairy products, fruit and meat. Japan imports into New Zealand totaled NZ$3.05 billion over the same period.
Both organisations highlighted the importance of concluding TPP as a high quality, comprehensive and ambitious agreement.
"TPP cannot begin to address the issues of the 21st century if it doesn't finally put to bed the issues of last century. That includes barriers to agricultural trade and both Japan and the United States are now both committed to negotiate the removal over time of high agricultural tariffs," said Sir Graeme.
"TPP is a complex undertaking and a lot is riding on its success. We continue to stand ready to work with New Zealand negotiators and our business allies in the United States, Japan and other TPP economies to encourage a substantive outcome" said Mr Bolger.
It's a big deal!
TPP is a big deal – a seriously big deal.
It’s a big deal in terms of its economic coverage, with a combined GDP across the 11 participants of almost $US21 trillion and $US4.4 trillion of goods and services exports.
It’s a big deal in terms of the potential welfare gains too. By 2025, New Zealand alone could be better off to the tune of $NZ2.1 billion just from the trade liberalization benefits and our exports are expect to rise by almost $NZ4 billion.
And it’s a big deal in terms of the impact this agreement might have in enticing other nations to join, particularly those from APEC and specifically Japan, Korea, Russia and China.
Two papers released recently by US think tanks make some interesting observations. The Wilson Centre paper “Negotiations for a Trans-Pacific Partnership Agreement” notes there is significant benefit for the US in the elimination of trade barriers with 4 new countries – New Zealand, Brunei, Malaysia and Vietnam. The authors were also enthusiastic about the prospect of Japan joining the talks. They note it is the best opportunity at the moment for developing trade rules for the 21st century and endorse the point made above about the momentum TPP generates for an APEC wide free trade area.
The Petersen Institute released “Understanding the Trans-Pacific Partnership” last month. It is available on line and seeks to address a lack of understanding of the progress being made and the complexity of the issues being dealt with in the TPP negotiations. The authors look at some of the sticking points in the negotiations discussing agriculture, IP, services and investment, capital controls, environment and labour.
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.