“Current Situation and Outlook for NZ and Japan: CPTPP, RCEP and the Global Economy”

Kashiwa, Chiba, 18 September 2019

Stephen Jacobi, Executive Director, NZ International Business Forum

It is a pleasure to be with you in Kashiwa today and my warmest congratulations to the Chairs of the Japan and New Zealand Committees and to the members of the Business Council for its 46^th annual joint meeting.

I had the honour of speaking to the 39^th Joint Meeting which was held in Auckland in 2012.

At that time negotiations to establish the Trans Pacific Partnership were still underway but Japan was not a member.

In my remarks I said that “there is no doubt Japan’s involvement would help strengthen TPP’s credentials as a pathway to a wider agreement in the Asia Pacific region and would increase the gains to the region’s economy”.

Now here we are, seven years later, back once again in Japan, still talking about challenges to the regional economy but now Japan and New Zealand are both proud members of the Comprehensive and Progressive Agreement on Trans Pacific Partnership (CPTPP).

This gives us, as two nations with so much in common despite our obvious differences in size and scale, a very firm foundation on which to continue to work to build inclusive and sustainable growth in the region and to open up new business opportunities even despite a difficult geo-political context.

This is indeed a very, very good thing !

I am grateful for the opportunity to chair this session focused on the situation and outlook for the global economy and am pleased to welcome my colleagues and panellists Mr Muneo Karauchi from MUFG Bank, Mr Stephen Toplis from BNZ and Mr Yasushi Akohashi from JETRO.

I am looking forward to their contributions and to the debate that will follow.

Before we begin I would like to make a few scene-setting remarks.

CPTPP

The first observation is that we can be very proud of the positive effects which CPTPP has had on trade between us.  

From a New Zealand perspective CPTPP restored a level playing field in the market for beef, particularly vis-à-vis our good friends in Australia.

While a CPTPP-wide beef safeguard continues to apply, trade is running well below the trigger volume, although the prospective deal between the United States and Japan may yet have an impact – we certainly look forward to seeing the detail of that arrangement as soon as it is available.

New Zealand exports of kiwifruit, wine, honey, wood, dairy proteins and cheese, along with other products, have all benefited from tariff elimination or reduction under CPTPP.

It is fair to say that there have been some implementation issues particularly in the area of tariff quota implementation, but some changes to arrangements announced in June give us hope that these problems can be overcome.

Beyond these commercial considerations, CPTPP has served to demonstrate, at a particularly difficult time for trade policy, that trade liberalisation and more effective trade rules are still possible.

We have overcome our disappointment at the departure of the United States and to the great credit of our political leaders, including here in Japan, we have continued with CPTPP conclusion, ratification and implementation.

In many areas CPTPP’s provisions are world class and finding their way into other negotiations, including in the World Trade Organisation – whether in terms of digital trade, regulatory coherence or business facilitation especially for SMEs.

CPTPP stands as one of the most inclusive trade agreements in the world at a time when many in the world are looking for ways to include those groups who have previously been left out when it comes to globalisation.

CPTPP also features ground-breaking chapters on trade and environment and trade and development, speaking to the search for greater sustainability and to ensure that trade goes hand in hand with other important aspects of the global agenda.

Against this very positive background, it is perhaps disappointing that some of our partners are taking their time in ratifying CPTPP – certainly we hope this process can be accelerated in the coming year.

We are also keen to other economies joining us – if ever there were a time to demonstrate a commitment to openness and plurilateral co-operation, that time is now.

It is important too that our Business Council continues to advocate for ever deepening integration within CPTPP and its expansion to new members – we should be keen to share the benefits with others who are prepared to meet CPTPP’s high standards and ambition.

RCEP

Even as we celebrate the success of CPTPP, it is important to note that another important negotiation is underway in which both New Zealand and Japan are involved.

The Regional Comprehensive Economic Partnership (RCEP) initiated by our friends in ASEAN is drawing to a conclusion – we hope – at the end of the year.

Like CPTPP, RCEP has proved challenging to conclude – even without the United States !

RCEP may be somewhat less ambitious than CPTPP but it is bigger, encompassing an even wider range of stages of development amongst its members and including India, which has not participated as actively as others in trade liberalisation in the past.

We need to wish negotiators well as they work to finish this agreement and to hope that to the greatest extent possible it lives up to its vision of a “…a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement.”  

Both CPTPP and RCEP are seen as pathways to a wider Free Trade Area in the Asia Pacific (FTAAP) and each can play a role in getting us closer to this important goal.

Global economy

It may seem somewhat unrealistic to talk about such lofty goals as FTAAP at a time when some in the world seem to be turning inwards.

These are challenging times indeed for trade: trade growth is slowing sharply and economic growth is taking a hit from the uncertainty caused by the growing trade war between the United States and China.

Protectionism is also on the rise – Global Trade Alert tells us that 618 harmful measures have been introduced so far this year.

Even the World Trade Organisation seems to be on life support.

My colleague wrote in her blog recently about the “great unravelling” – global value chains which had become the dominant model of doing business around the world are becoming decoupled.

I will leave our panelists to comment further on these impacts, but I think at times like these it is critically important that business organisations like our Business Council, which has always stood for free trade and investment, continue to speak out in favour of integration and openness, to reject protectionism and exclusion and draw attention of the significant benefits of agreements like CPTPP and RCEP.