Negotiating the Trans Pacific Partnership (TPP)

Eleven economies in the Asia Pacific region - Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, Viet Nam and the United States - are currently negotiating the Trans Pacific Partnership (TPP).  A successful conclusion to these negotiations will provide a freer trade and investment relationship between all eleven members including New Zealand and the United States.  The TPP will also promote further trade, investment and services liberalisation between TPP members and provide a potential pathway to a Free Trade Area for the Asia Pacific (FTAAP), involving other major economies in North Asia and elsewhere in the APEC region.

Background

2. TPP is an existing trade agreement between Brunei, Chile, Singapore and New Zealand.  It entered into force on 1 January 2006 but was designed to allow other countries to negotiate to join over time.  In September 2008 the then US Trade Representative, Ambassador Susan Schwab, announced that the US would negotiate to join TPP.  Similar announcements followed from Australia and Peru in November 2008.  Viet Nam was also given permission to observe the first three rounds and subsequently admitted as a member. Malaysia was admitted in November 2010.   At APEC in Honolulu in November 2011 Japan, Canada and Mexico announced their interest in joining TPP¹.

3. Negotiations commenced in March 2010 following a year-long delay during which the new US Trade Representative (USTR), Ambassador Ron Kirk, was confirmed and the new US Administration undertook a review of its broader trade policy.  President Obama confirmed that the United States would participate in the negotiations in November 2009 and Congress was notified accordingly in December 2009. Successive rounds of negotiations have now been held between the nine parties. At APEC in Honolulu in November 2011 the Leaders from TPP economies released the broad outlines  of TPP. President Obama further indicated that negotiators had been instructed to finalise the negotiations in 2012.

United States Involvement

4.  TPP is the only trade initiative currently under implementation by the Obama Administration.  Following ratification by the United States Congress on 12 October of three outstanding FTAs negotiated by the Bush Administration (with Korea, Colombia and Panama², TPP has moved to the front and centre of the American trade policy agenda.  Significant political capital is being invested in the negotiation and a successful outcome.

5.  In his November 2009 announcement that the United States would “engage” in negotiations to join the TPP, President Obama made it clear that US involvement was predicated on the expansion of the agreement to include more economies across the Asia-Pacific region and the negotiation of a high standard “21st century trade agreement”. In his formal advice to Congress of the President’s intention, the USTR, Ron Kirk, expanded on these themes:

“This agreement will create a potential platform for economic integration across the Asia-Pacific region, a means to advance US economic interests with the fastest growing economies in the world, and a tool to expand US exports, which are critical to our economic recovery and the creation and retention of high-paying, high-quality jobs in the US.  Successful conclusion of the TPP negotiations will require a high-standard, 21st century agreement with a membership and coverage that provides economically significant new market access opportunities for America’s workers, farmers, ranchers, service providers, and small businesses.”

6.  Solid support exists for US involvement in the TPP. US business and trade associations have played an active role in stakeholder activities during negotiating rounds.  These include the USNZ Council, the US Chamber of Commerce, the National Foreign Trade Council (NFTC), Emergency Committee for American Trade (ECAT), Council of the Americas, National Association of Manufacturers (NAM) and the US-ASEAN Business Council.  TPP is also supported by well-known think-tanks including the Petersen Institute.³   In March 2009, 70 companies and trade associations signed a letter of support for the TPP. 

TPP as a pathway to a Free Trade Area of the Asia-Pacific

7.  APEC Leaders’ have identified TPP as a possible pathway towards a Free Trade Area of the Asia-Pacific (FTAAP). Their 2010 Summit statement declared:

“we will take concrete steps toward realization of a Free Trade Area of the Asia-Pacific (FTAAP), which is a major instrument to further APEC’s regional economic integration agenda. An FTAAP should be pursued as a comprehensive free trade agreement by developing and building on ongoing regional undertakings, such as ASEAN+3, ASEAN+6 and the Trans-Pacific Partnership, among others. To this end, APEC will make an important and meaningful contribution as an incubator of an FTAAP by providing leadership and intellectual input into the process of its development, and by playing a critical role in defining, shaping, and addressing the “next generation” trade and investment issues that FTAAP should contain.”⁴

Negotiating a 21st Century Trade Agreement

8. 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 high quality and comprehensiveness and indicate the progress made and still to make on the range of issues under negotiation. These issues go beyond border measures such as tariffs to behind the border issues including regulatory issues and other “behind-the-border” impediments.  Negotiators say they have made solid progress in framing new horizontal, cross-cutting issues such as promoting connectivity to deepen the links between companies and the emerging production and distribution networks in the Asia-Pacific; making the regulatory systems of TPP countries more compatible so companies can operate more seamlessly in TPP markets; helping small-and medium-sized enterprises participate more actively in international trade; and supporting development.

What’s in it for New Zealand?

9. 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, high quality free trade agreement (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.

10.  From New Zealand’s perspective an FTA 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.

11.  In March 2002 a report prepared by Fred Bergsten and Rob Scollay found strong economic, political and trade policy reasons for the early launch of negotiations between New Zealand and the United States. Bergsten and Scollay estimated that New Zealand exports to the United States would increase by 51 percent in the case of a bilateral NZUS FTA. United States exports to New Zealand would rise by about 25 percent and virtually every US sector would benefit. The adjustment costs for the United States would be minimal – production in the most impacted sector – dairy – would decline by only 0.5 percent.

12.  In October 2011 a report prepared by Peter Petri, Michael Plummer and Fan Zhai found that liberalisation through TPP would result in welfare gains to the global economy of US$104 billion by 2025.  Further analysis of the Petri report undertaken by NZIER in May 2012 found that, if successfully concluded, TPP could add around $2.1 billion to the New Zealand economy by 2012.  Further economic analysis of the potential gains of TPP can be found here.

Freer  Trade Promotes Growth, Innovation and Security

13.  New Zealand has a proud record of making a strong contribution to international trade liberalisation since the mid-1980s:

• In 1983 New Zealand concluded CER with Australia - arguably the world’s most comprehensive and successful free trade agreement;
• Since 1984 an ongoing process of economic restructuring has made the New Zealand domestic market one of the world’s most open and transparent;
• In the World Trade Organisation (WTO) and its predecessor the GATT New Zealand has always played a role disproportionate to its size reflecting the heavy export orientation of New Zealand’s economy.

14.  More recently New Zealand has demonstrated its commitment to the principles of openness and the rule of law in international markets by:
• Concluding free trade agreements with Singapore, Thailand, Brunei, Chile, China, Malaysia, Hong Kong and ASEAN;
• Progressing negotiations with the eleven TPP parties; the Gulf Co-operation Council (GCC); Korea; India; the Customs Union of Russia, Belarus and Kazakhstan; and Chinese Taipei;
• Initiating negotiations with the sixteen members of the Regional Comprehensive Economic Partnership (RCEP).

15.  For its part the United States has 19 bilateral agreements in force

Negotiating challenges for New Zealand 

16.  Opposition to an FTA involving New Zealand has already been signalled from various US agricultural (particularly dairy) lobbies. Other areas where the United States’ position differs from New Zealand and other TPP partners include pharmaceuticals (where the US has concerns about aspects of New Zealand’s pharmaceutical management regime) and intellectual property rights. Civil society stakeholders in New Zealand have also identified concern with other aspects of TPP including investor/state dispute settlement and proposals relating to state owned enterprises. 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.

Conclusion

17.  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 between New Zealand and the United States.  The prospect of other major APEC economies such as Japan entering the negotiations makes the opportunity provided by TPP even more important.

18.  It is clear that a comprehensive free trade agreement between New Zealand and the United States, achieved either bilaterally or through the TPP, would bring together two countries which share fundamental beliefs and values and have been among the most committed to trade liberalisation. New Zealand business stakeholders will need to take every opportunity to continue to reinforce the case for a high quality, comprehensive and ambitious outcome negotiations with Congress and influential US business interests if an agreement securing real benefits for New Zealand and the wider region is to result.

Note - for further information visit TPP Talk on the MFAT website.

NZ US Council
November 2012

1. More than four years after negotiations concluded between the Bush Administration and Panama, Colombia and Korea, the US Congress ratified the Korea, Panama and Colombia FTAs on 12 October 2011, the eve of an address to a joint session of Congress by Korean President Lee Myung-bak.
2. See for example, www.iie.com/publications/papers/print.cfm?researchid=1482&doc=pub
3. "Yokohama Declaration – The Yokohama Vision – Bogor and Beyond”, 18th APEC Economic Leaders’ Meeting, Yokohama Japan 13-14 November 2010 available at
http://www.apec.org/Meeting-Papers/Leaders-Declarations/2010/2010_aelm.aspx