Right of Reply: Why Business Supports TPP – Honestly

By Stephen Jacobi

When Rod Oram said in his column last week that business leaders are being dishonest about the Trans Pacific Partnership (TPP), he was taking issue with the 28 business associations from all sectors of the economy, which signed an open letter expressing support for TPP.  The letter can be found at https://www.tradeworks.org.nz/letter-to-the-prime-minister/.  Public debate on TPP is important, but should be based on substance.  Here are some thoughts in response.

Rod asks if TPP is an FTA? TPP eliminates tariffs on 93% of New Zealand exports to the five countries in TPP with which we do not already have FTAs (US, Japan, Canada, Mexico and Peru).  That’s not 100% – much to our disappointment – but all New Zealand’s export sectors will benefit from TPP, which covers 40% of our exports – meat, dairy, kiwifruit, other horticulture, wine, wood, seafood, manufactured products including medical technologies and agricultural equipment.  The extent of tariff reductions for dairy is less but dairy still benefits more than any other sector to the tune of $102 million in tariff cuts.  Few, if any, FTAs have achieved complete tariff elimination at the outset.  Even CER in 1983 excluded dairy products.  The China FTA provides for continuing safeguard tariffs on dairy.  Are these not FTAs?

Rod asks will TPP make us wealthy?  He points to a New Zealand study, which he co-authored, and which finds a much lower level of economic gains for TPP than the study by Professor Anna Strutt of Waikato University available at http://www.tpp.mfat.govt.nz. Tufts University has a study, which also disputes the higher gains. A number of other international studies find results broadly similar to Professor Strutt.  The difference is the methodology and assumptions, which are used in the analysis. Exporters who know their business are saying that TPP will provide better market access, lower costs and greater business opportunities.  We know from past experience how FTAs deliver jobs and growth. TPP should not be any different.

Rod takes issue with the investor state dispute settlement (ISDS) rules. Business says that we need this sort of protection when, to grow the value chain and get closer to consumers, we invest in other markets where the rule of law may not be as reliable as here.  New Zealand already has ISDS in other FTAs: we have never been challenged and won’t be as long as we deal fairly with foreign investors. That’s because there are safeguards, checks and balances in TPP, which uphold the Government’s continuing right to regulate on a range of matters including the environment, public health, the Treaty of Waitangi and the purchase of agricultural land.

Rod says TPP’s intellectual property rules are “US inspired”.  How is it then that New Zealand has to make very few changes to our own system as a result of TPP? No change to patent terms, biologics data protection, parallel importing or use of the internet. The copyright term will be extended to 70 years after death of the author, which is already the case in the European Union and many other jurisdictions.

Rod suggests the US won’t ratify and the Chinese won’t join.  He may be right.  We will have to wait and see.  It is interesting though to see the number of economies who have already expressed interest in joining – they include Korea, Thailand, Philippines, Taiwan, Colombia, even Indonesia.  That’s because TPP is set to become the “new normal” when it comes to the rules for trade and investment.

Rod suggests that there is massive work to be done on TPP.  On this, he is right.  This work can be done only if New Zealand is at the table. We initiated the TPP-project in the first place.  A lot of the thinking in TPP comes directly from our experience in CER.  If we do not continue this work, heads may turn for a moment, but others will get on with writing the rules for international trade and investment without us.  This is precisely why 28 business associations support TPP and why Helen Clark said it is “unthinkable” for New Zealand to be excluded.

Surely Rod cannot be suggesting Helen Clark is dishonest too?

Originally published in the Sunday Star-Times on 14 Feb, 2016.