The New Zealand United States Council
In The News
Investment and financial services - negotiations between P4 and the United States
MFAT : Information Bulletin, 22 February 2008
The Trans-Pacific Strategic Economic Partnership between New Zealand, Chile, Singapore and Brunei Darussalam (P4) entered into force in 2006 with negotiations for chapters on Investment and Financial Services to take place within two years. The Investment and Financial Services negotiations are scheduled to get under way in the first quarter of 2008 and the United States will participate in the negotiations alongside the existing P4 partners.
As New Zealand prepares to enter the negotiations it is important that negotiators know and understand the views and interests of New Zealanders. Investors, exporters and importers of financial services, non-government agencies and individuals are invited to make submissions. The submissions will help shape New Zealand’s negotiating mandate for the negotiations. Negotiators will follow-up submissions with direct contact, if necessary.
The Government made an earlier call for public submissions from businesses and other groups with an interest in investment or financial services involving Chile and Singapore in October 2002 and again in July 2004. Negotiators would now like to receive public submissions from those with an interest in financial services and investment involving the United States. Negotiators are also interested in submissions containing any new or updated information and views on investment and financial services involving Chile, Singapore and Brunei Darussalam.
Background to the negotiations
P4 is the first multi-party Free Trade Agreement (FTA) linking Asia, the Pacific and Latin America. All four members are members of APEC (Asia Pacific Economic Cooperation).
P4 liberalises and facilitates trade in goods and services and aims to improve the business environment and promote cooperation on a broad range of economic areas of mutual interest to all four members.
The FTA includes provisions on market access and related rules (including customs procedures, rules of origin, sanitary and phytosanitary measures, technical barriers to trade, and trade remedies) for goods trade; trade in services; intellectual property; government procurement; competition policy; and dispute settlement. All P4 members are also party to an Environment Cooperation Agreement and a Memorandum of Understanding on Labour Cooperation.
At the time they concluded negotiations, the P4 members agreed that they would begin negotiations within two years to extend the FTA’s coverage to Investment and Financial Services. Negotiations on Investment and Financial are scheduled to get under way in March 2008.
P4 is open to new membership, particularly from economies in the Asia Pacific Region. The United States will join the P4 negotiations on Investment and Financial Services and has also said that it will explore whether to participate in a full FTA with P4. The United States is holding internal consultations with its Congress and with stakeholders over its broader participation in P4 over the coming months.
New Zealand/United States Trade and Investment Relations
The United States is a major trade and economic partner for New Zealand, second only to Australia in overall importance.
Investment
New Zealand and the US have a well-founded investment partnership. The US is New Zealand's second largest source and destination of Foreign Direct Investment (after Australia).
In March 2007, New Zealand investment in the US totalled NZ$26.5 billion (23.9 percent of total overseas investment). Portfolio investment accounts for a large proportion of this investment. New Zealand's outward foreign direct investment into the US was estimated at around NZ$1.8 billion (9.5 % of total outward foreign direct investment) to March 2007. Increasingly New Zealand companies are investing in production facilities in the US to be closer to market and remitting profits back to New Zealand, which does not show up in the trade statistics.
In March 2007, US investment in New Zealand totalled NZ$41.5 billion (16.3 percent of total foreign investment in New Zealand), with NZ$10.5 billion being inward foreign direct investment (11.6 % of the total).
Financial Services
New Zealand has quite close links with the United States in the provision of financial services. The United States Bureau of Economic Analysis (BEA) recorded the NZ-US bilateral trade in financial services in 2004 as amounting to US$60 million.
A significant proportion of the funding of New Zealand registered banks is sourced either directly from the USA via Commercial Paper and Medium Term Note funding or indirectly through US dollars. Two of the 17 registered banks in New Zealand are branches of US banks. However, no New Zealand incorporated bank has a US branch.
The largest non-bank financial institution (not owned by a bank) is a wholly owned subsidiary of a US corporation, while other non-bank financial institutions operating in New Zealand value financial markets in the USA as a funding source.
There are a number of insurers in New Zealand that are subsidiaries of American insurance companies are significant participants in the New Zealand insurance sector.
Some large NZ corporates have funding vehicles based in the USA or are listed on US stock exchanges.
Finally, New Zealand financial service providers are providing specialist finance services to American residents in specific sectors of the American Finance Services sector.
Other trade with the United States
During the year to June 2007, NZ/US two-way merchandise trade totalled NZ$8.81 billion and was almost evenly balanced. New Zealand exports to the US totalled NZ$4.33 billion, close to 11 percent of total New Zealand exports, making the US our second largest single market after Australia. New Zealand imports from the US totalled NZ$4.48 billion during the same period, almost 11 percent of total imports.
The US is also New Zealand’s third largest source of overseas visitors, after Australia and the United Kingdom. In 2006 US visitors increased by 5 percent to 225,629. Short-term US visitors spent $697 million in New Zealand in 2006, making the US the third largest source of tourist expenditure.
How to make your views known
The government is interested in your views on the upcoming investment and financial services negotiations with the United States. The government is also interested in any new or updated information or views on investment and financial services negotiations with the other P4 members, Chile, Singapore and Brunei Darussalam. You may wish to highlight:
· Specific issues you would like to see addressed;
· Potential benefits and risks to New Zealand; and
· Outcomes that you would like to see from the negotiations.
In particular, the government is interested in information from New Zealand businesses and/or individuals currently investing, or planning to invest, in the United States or in the other P4 members, as well as views on what measures could be adopted to help encourage further investment flows between New Zealand and the United States and the P4 partners.
In respect of financial services, the government is interested in information from New Zealand providers of financial services currently providing or wishing to provide financial services in the United States or in the other P4 members about any barriers to the provision of financial services that such providers would be interested to see addressed in these negotiations.
Negotiating team contact details
It would be desirable to receive your feedback by 25 March 2008 to allow sufficient time for analysis before negotiators seek a mandate for negotiations.
Submissions and any questions or comments about the submissions or consultation process should be forwarded to:
P4/US Negotiation Taskforce
Ministry of Foreign Affairs and Trade
Private Bag 18-901
Wellington
Attn: Jennifer Troup
Tel: + 64 4 439 8046
Email: jennifer.troup@mfat.govt.nz