Tag Archives: TPP

Benefits of CPTPP to New Zealand.

On 23 January 2018, in Tokyo, the negotiations for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) were concluded. Its inception came from the TPP Agreement but that could not come into force until it was ratified by four other signatories, including the United States. After the election of Donald Trump the US made it clear that it did not intend to become a party to the Agreement. However the remaining eleven countries continued negotiations.

The eleven countries in the CPTPP are: Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

The economies  account for 13.5 percent of world GDP – worth a total of US$10 trillion. These are economically significant for New Zealand. The 10 economies:

• Are the destination for 31 percent of New Zealand’s goods exports (NZ$15.2 billion) and 31 percent of New Zealand’s services exports (NZ$6.9 billion) annually (year to the end of June 2017).

• Include four of New Zealand’s top 10 trading partners (Australia, Japan, Singapore, and Malaysia).

• Include four countries with which New Zealand has never had a free trade agreement (Japan, Canada, Mexico and Peru). We export over NZ$5.5 billion of goods and services to these four countries.

• Are the source of 65 percent of total foreign direct investment in New Zealand (as of March 2017).

The CPTPP will provide significant benefits for New Zealand goods exporters across a range of sectors. Tariffs will be eliminated on all New Zealand’s exports to CPTPP economies, with the exception of beef into Japan; and a number of dairy products into Japan, Canada, and Mexico, where access will still be improved through partial tariff reductions and duty-free quotas.

Source: New Zealand Foreign Affairs and Trade.

Trump and Trade

In his US Presidential campaign one area that Donald Trump was clear about was trade. During the oil crisis years of 1973 (oil prices quadrupled) and 1979 (oil prices doubled) the traditional US car / truck became very expensive to run and Americans started to buy significant numbers of Japanese cars which were much more reliable and cheaper to run. Trump alluded to this and stated that Japan was robbing America blind. He also criticised inept and corrupt elites for moving jobs abroad – ‘China is killing us’ he said.

In order to even the playing field he has vowed to:

  • impose a 45% tariff on imports from China to compensate for their manipulation of its currency.
  • impose a 35% tariff on goods from Mexico in order to protect American jobs.
  • renegotiate existing agreements like the North American Free Trade Agreement with Canada and Mexico
  • pull out of the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership.
  • Trump has threatened to withdraw from the World Trade Organisation (164 members)

America has free-trade agreements with 20 other states and the percentages below tell you how important trade is. See also the graphic from The Economist.

  • 33% of America’s imports come from countries they have free trade agreements
  • 50% of Americas’ exports come from countries they have free trade agreements

us-trade-by-destination

If Trump does go ahead with a trade-war it is estimated employment in private companies employment would decline by 4.8m jobs by 2019. It is ironic that the very group that supported Donald Trump will be the most disadvantaged. Furthermore, with anti-free trade policies comes higher prices which will harm living standards and worsen Americas fiscal position. Although it might preserve some jobs it will worsen prospects and lower well-being for others – OECD.

With America pulling out of the TPP China maybe keen to take the place of the US in this agreement with 11 other Pacific nations.

TPP [would be] a good thing in the long run because it sets high standards for international trade and investment,” says Prof. Larry Qiu, of Hong Kong University’s School of Economics and Finance. He adds that what the world needs is not “more trade and investment … but higher quality and better ordered trade and investment

TPP deal for New Zealand

The TPP deal sees New Zealand join 11 other countries that accounts for 40% of the world economy. The 11 other countries are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, Singapore, USA and Vietnam. Based on current trade volumes, the deal amounts to tariff savings of $259 million a year once the TPP is fully implemented. In return, New Zealand will have to remove $20 million a year of tariffs on imports. The deals gives exporters access to 800 million customers in 11 countries across Asia and the Pacific. Below is a summary of the impact on certain sectors of the NZ economy.

Source: Radio New Zealand

NZ TPP

Free Trade with NZ – Russia keen and Japan?

At the current APEC summit in Japan New Zealand has become the first country to commence negotiations towards a free trade deal with Russia. Remember on 7th April 2008 New Zealand became the first OECD country to sign a free trade deal with China which has seen two-way trade nearly double since it came into force.

At the same summit the U.S.-backed Trans-Pacific Strategic Economic Partnership (TPP), has Japanese farmers scared that cheap farm products from overseas will overwhelm their highly protected markets. TPP originally set up in 2006 by New Zealand, Singapore, Chile, Brunei.

As Japanese Prime Minister Naoto Kan will seek to accelerate its efforts to reduce trade barriers in the Asia Pacific region, he faces resistence from the agricultural sector who have been protected from exports by huge tariffs –Japan places a 360% tariff on imported butter and a 778% tariff on imported rice.

But John Key has made it clear to the Japanese that if they do not want agriculture to be on the table during talks on a regional free trade agreement then New Zealand did not want them at the table. Furthermore, New Zealand is concerned that Japan’s inclusion in TPP will lead to compromises, particularly when concerned with agricultural products.