Twelve economies in the Asia Pacific region - Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, Viet Nam, the United States, and most recently Japan - are currently negotiating the Trans Pacific Partnership (TPP). Twelve countries have identified the major economic opportunity that opens up as barriers to trade and investment are removed. Twelve governments can foresee the major gains producers and consumers will receive if they continue to negotiate TPP.
Collectively, these economies involved in TPP are worth more than US$27 trillion in GDP. More than 70 percent of New Zealand’s trade and investment already flows through the Asia-Pacific region. Prior to Japan joining the negotiating economies, a 2012 study estimated New Zealand could gain around US$2.9billion of GDP if negotiations were successful. With Japan included, the gain is estimated to be US$4.1 billion by 2015.
These tangible benefits for our exporters and consumers are not the only gains that will result from TPP. New Zealand would be far closer to achieving long-term goals such as wider, regional economic integration and opportunity to shape future trade liberalisation in the Asia-Pacific region.
This is important because the somewhat inconvenient truth is that after 30 years of on-off economic reform the New Zealand economy is neither big enough nor of sufficient depth to provide the resources we need for the lifestyles to which we have become accustomed.
How did it all start?
1 January 2006 - The existing Trans-Pacific Strategic Economic Partnership between Brunei, Chile, Singapore and New Zealand entered into force, but it was designed to allow other countries to negotiate to join over time.
September 2008 - the former US Trade Representative, Ambassador Susan Schwab, announced that the US would negotiate to join TPP.
November 2008 - Similar announcements followed from Australia and Peru. Viet Nam was also given permission to observe the first three rounds and subsequently admitted as a member.
November 2009 - President Obama confirmed that the United States would participate in the negotiations.
November 2010 - Malaysia was admitted in November 2010.
November 2011 - APEC in Honolulu - Japan, Canada and Mexico announced their interest in joining TPP¹. The leaders of the then nine TPP countries announced the broad outlines of an ambitious TPP. President Obama further indicated that negotiators had been instructed to finalise the negotiations in 2012.
June 2012 - Canada and Mexico were formally invited to join the TPP negotiations.
September 2012 – At APEC in Vladivostok the direction of TPP was confirmed.
November 2012 - In the margins of the East Asia Summit in Phnom Penh, Cambodia, seven TPP Leaders expressed their desire to see an agreement concluded in 2013.
December 2012 - Canada and Mexico, joined the negotiating table for the first time at the 15th round of negotiations hosted in Auckland.
April 2013 - Japan was welcomed as the newest TPP participant, bringing the membership to 12.
July 2013 - Japan joined the negotiating table for the first time during Round 18 of the negotiations hosted in Brunei.
October 2013 – At APEC in Bali Prime Minister John Key chaired a meeting of TPP leaders.
December 2013 - TPP Ministers met in Singapore, and agreed these negotiations are to continue in 2014.
For regular updates on progress in the negotiations, visit TPP Talk.
So what’s in it for New Zealand?
A study by the East West Centre predicts an agreement could generate the following GDP and export gains from lowering of trade barriers and regional integration benefits:
• estimated GDP gains for New Zealand of US$2 billion in the year 2025 (a 0.9% increase in GDP);
• estimated export gains for New Zealand of US$4.1 billion in the year 2025 (a 6.8% increase in exports); and
• further income gains (up to US$2.1 billion) are estimated from a lift in the terms of trade and greater consumer access to goods and services.
New Zealand exporters and consumers have a lot to gain from both TPP and an FTA with the United States. Not only would the tangible benefits increase the value and competitiveness of New Zealand products, TPP allows our country to have just as much say as the big players in setting the rules for regional trade and investment.
From New Zealand’s perspective an FTA with the United States in the context of TPP can be expected to:
• lower the costs of doing business with the United States by eliminating or reducing tariffs for dairy products, beef and a range of other products
• provide greater security for existing business by making it more difficult for new protectionist measures to be applied to New Zealand products
• open up new access to US Federal Government procurement
• put New Zealand’s economic relationship with the United States on the same footing as key competitors Australia and Chile, both of whom already have FTAs.
In 2009, MFAT and NZTE surveyed 854 New Zealand exporters to assess the impact of FTAs on their companies. More than 75 percent of respondents saw increases in profitability from the removal of trade barriers.
So, the question is – why haven’t we signed it already?
Negotiating a 21st Century Trade Agreement
The answer is that, with eleven countries now involved and a goal to achieve a high quality agreement, the TPP negotiations are necessarily complex. The broad outlines of TPP released in Honolulu, and reaffirmed in Vladivostok, confirm the commitment to ambition, high quality and comprehensiveness. As we have seen with other complex negotiations, it takes time to get things right.
Negotiators say they have made solid progress and are close to achieving an agreement which would deepen the links between companies and the emerging production and distribution networks in the Asia-Pacific; make the regulatory systems of TPP countries more compatible so companies can operate more seamlessly in TPP markets; help small-and medium-sized enterprises participate more actively in international trade; and support development.
Why can’t we all know what’s going on inside the negotiations?
Some stakeholders are concerned that TPP negotiations are conducted in secret. There are very good reasons why this is so. Of course it’s in everyone’s interest to find ways to make the process of trade negotiations more transparent – who could argue with that? The problem is that this negotiation includes sensitive matters, which are of national political and economic importance for the governments involved.
Some of the work in less controversial areas is believed to have been closed – this may include matters such as regulatory coherence, competitiveness, development, temporary entry of business persons, cooperation, and small- and medium-sized enterprises.
A range of other issues remains under active negotiation. Some of these are highly complex – these include intellectual property, state owned enterprises and investment, as well as the all important issue of market access.
It is important to remember that nothing has yet been agreed in the context of TPP and nothing will be agreed until everything is agreed. It is also important that those with an interest in the negotiation make their views known to New Zealand negotiators.
NZ and the US – why does it matter?
The US is the world’s largest economy, with over 300 million consumers. An FTA with the US has been one of New Zealand’s top trade policy goals for many years, with the US being New Zealands 3rd largest trading partner.
The NZ US Council has consistently advocated that a comprehensive, high quality free trade agreement (FTA) between the United States and New Zealand would make sense for both parties. A comprehensive FTA between the United States and New Zealand should bring benefits for both parties whether it is achieved bilaterally or through a pluri-lateral agreement such as TPP. An FTA in the context of TPP should:
• expand two-way trade and investment
• open up new opportunities for business in both countries
• accelerate economic growth and foster innovation, strategic investment and entrepreneurship in the New Zealand economy.
The TPP negotiations provide a real opportunity for New Zealand to work together with other TPP partners towards a freer trade and investment environment in the Asia Pacific region. For New Zealand TPP marks a very significant development in the long-term efforts of successive New Zealand governments, officials and the NZ US Council to secure freer trade and investment between New Zealand and the United States.
Refer here for the latest updates from MFAT.