Submission to the Parliamentary Foreign Affairs, Defence and Trade Committee

INTERNATIONAL TREATY EXAMINATON OF THE REGIONAL COMPREHENSIVE ECONOMIC PARTNERSHIP AGREEMENT, JANUARY 2021

Introduction and Summary

• This submission is made on behalf of the New Zealand International Business Forum (NZIBF) whose members are listed at Annex A^[1]. NZIBF is a forum of senior business leaders working together to promote New Zealand’s engagement in the global economy.
• The NZIBF supports the early ratification and implementation of the Regional Comprehensive Economic Partnership (RCEP) which will advance New Zealand’s trade and economic relationships with the 14 other member economies [2] and assist our economic recovery from the COVID19 pandemic. While the immediate market access gains are modest and we regret India’s decision not to be part of this Agreement, thus missing an opportunity to establish their first free trade agreement with New Zealand, there are sufficient other strategic and commercial gains to make it well worth New Zealand ratifying this significant regional trade deal. 

About NZIBF

• NZIBF provides a voice to articulate the needs and priorities of New Zealand’s international business community, and in particular the importance of open markets, to the New Zealand Government and public stakeholders.  The NZIBF Board brings together leaders from amongst New Zealand’s largest internationally oriented companies and peak business organisations representing many exporters of all sizes. (A list of Board Members is in Annex A.)
• Incorporated in May 2007, NZIBF works with companies, business organisations and government agencies to implement projects in the international trade and economic sphere, including working to develop New Zealand’s key international business relationships and conducting activities to promote New Zealand’s competitiveness. NZIBF receives no direct government funding for its operating budget but from time to time receives funding for jointly funded projects. Funding in respect to the policy advice and support which NZIBF provides to the New Zealand members of the APEC Business Advisory Council (ABAC) is provided by both NZIBF and the Ministry of Foreign Affairs and Trade (MFAT).

NZIBF Supports Ratification of the RCEP

• During the RCEP negotiating process from 2013-2019, NZIBF contributed a lot of input and advocacy both on our own behalf and on behalf of the regional business community through the East Asia Business Council (EABC) RCEP Working Group of which NZIBF was Vice Chair.  That Working Group held numerous face to face dialogue meetings with the RCEP Trade Negotiations Committee (comprising Chief Negotiators) to ensure they understood the needs of businesses across the region.  Within the EABC Working Group, NZIBF consistently advocated for an Agreement that was ambitious, high quality and comprehensive.  The resulting Agreement does not fully meet these aims but nevertheless marks a significant step forward in the search for a more open, rules-bound trading environment.
• The signing of the RCEP agreement in November 2020 after eight years of effort was a welcome development. The RCEP will be an important new rulebook for trade, consolidating into one Agreement up to nine sets of trade rules contained in various bilateral free trade agreements (FTAs) to which New Zealand is a party, thus further facilitating the ease of doing business in the Asian region.

Trade Benefits for New Zealand

• We note the estimated trade benefits arising from RCEP as set out in the National Interest Analysis but as we have not undertaken our own economic modelling to assess the size of the trade gains, it is difficult to confirm the assessment.  However there are a number of gains which will be of material benefit to New Zealand exporters as outlined below. 

Goods Market Access

• New Zealand, with some exceptions, already enjoys good market access into most RCEP member economies. A notable exception is New Zealand’s limited dairy market access into Japan and Korea which New Zealand should seek to address outside the RCEP; similarly improvements in market access for red meat into Japan over and above current levels would also be valuable. Beyond those elements, the market access gains arising from RCEP are more modest than NZIBF had advocated for, primarily due to the absence of India which withdrew from the negotiations in 2019. We hope India will take up the fast-track provisions to join RCEP in the future. Nonetheless we are pleased that the RCEP will deliver some new and commercially meaningful market access for primary product exports to Indonesia, including for sheep meat, beef, other red meat products, fish products, liquid milk, cheese, honey, avocados, tomatoes and persimmons.
• We are pleased that RCEP contains enhanced trade facilitation measures and other provisions that respond to concerns raised by New Zealand goods exporters regarding non-tariff barriers impacting trade.  There are improved rules to address non-tariff barriers including faster customs clearance of perishable products, such as seafood, chilled meat and horticultural products, within six hours of arrival including (in exceptional circumstances) release of such goods outside normal business hours which should reduce risk of spoilage and save exporters money.  RCEP also includes a new consultation system for addressing non-tariff barriers, and a forum for discussing good regulatory practice around trade in goods.  We welcome the greater transparency on import licensing procedures that will be conferred by the RCEP.
• The RCEP also delivers improvements in a range of technical areas affecting goods market access including rules of origin, customs procedures, standards, technical regulations and conformity assessment procedures, and sanitary and phytosanitary requirements. 

Trade in Services

• NZIBF had advocated for all services trade to be liberalised according to a negative list so that all services trade would be on an equal footing with domestic suppliers and other international suppliers except where specified by an exception in a Member’s Schedule of Commitments.  While some RCEP members agreed to use a negative list, others committed to a positive list (so only specified services sectors would be subject to liberalisation commitments) with a transition to a negative list over either six years (Indonesia, Philippines and Thailand), or 15-years (Cambodia, Laos and Myanmar). The MFN provision for services means New Zealand will automatically benefit from any additional liberalisation offered to third countries in future agreements.
• New Zealand stands to benefit from new commitments made by some RCEP partners on services, including some that go beyond their commitments to New Zealand in existing FTAs, including:
  • Indonesia: education services, engineering services and computer related services
  • Philippines: professional services, computer related services, research and development services (R&D) , distribution services and education services.
  • Laos: professional services, R&D services, distribution services, education.
  • Cambodia: R&D services.
  • In addition, there will be greater transparency and/or improved disciplines in the telecommunications, financial services and professional services sectors across RCEP, as set out in the Annexes to the RCEP Agreement.  These commitments are consistent with New Zealand’s current regulatory settings.
• Improved services commitments are also valuable for goods exporters so that they can support their international business by establishing an in-market presence, form commercial partnerships and provide after sales support services.

Investment

• We are pleased that the RCEP delivers a negative list approach on investment liberalisation for which NZIBF had advocated during the negotiations.  This means that RCEP Members commit to providing investment access on an equal footing with domestic investors and other international investors except where specified by an exception in a Member’s Schedule of Commitments.  This is a particular step up from the Australia-ASEAN-New Zealand Free Trade Agreement (AANZFTA) in which the ten ASEAN members used a positive list for their investment commitments. 
• We note that there is no Investor State Dispute Settlement (ISDS) mechanism (which is separate to the State-to-State Dispute Settlement mechanism which is included) to protect New Zealand investments in RCEP markets.  While the NZ Government has reservations about ISDS, NZIBF does not share this view. We note that ISDS will be addressed in a future work programme to be considered by RCEP members within two years after entry into force.

Intellectual Property

• We welcome the intellectual property (IP) commitments made in RCEP which will provide more certainty for New Zealand exporters when protecting and enforcing their IP rights.  Importantly, the RCEP also ensures due process around Geographical Indications which continue to be a significant trade policy concern for the NZIBF. 
• As noted in the National Interest Analysis (Section 4.13, pp 43), the RCEP’s IP framework includes harmonising and aligning procedures and standards for the protection and enforcement of IP rights; reducing regulatory and business compliance costs related to those procedures; enhanced transparency and due process in the IP regimes of other RCEP member economies and facilitating information sharing and cooperation on IP.  There is also a new consultation mechanism to address any IP obligation that has not been met.  We note that no changes to New Zealand IP laws are required to give effect to RCEP commitments. 

E-Commerce

• Throughout the course of the RCEP negotiations, the size of the global e-commerce sector rose dramatically in size and importance (and even more so during the COVID19 pandemic).  It is therefore pleasing to note the benefits arising from RCEP’s Electronic Commerce Chapter which will facilitate safer online transactions, help to protect the privacy and rights of consumers; and provide a framework for discussing emerging issues. There will be specific e-commerce rules for the first time in a trade agreement with South Korea, and existing e-commerce rules in AANZFTA and the New Zealand-China FTA will be expanded, thus modernising the trading relationship with RCEP partners, particularly those not party to CPTPP. That said, we are disappointed that the strong provisions for the free flow of data that were agreed in CPTPP have been made conditional in RCEP with the inclusion of broad exceptions that may permit the maintenance or introduction of significant new restrictions on legitimate cross-border data flows. This works against realising the full potential of the digital economy.  We hope future reviews of the RCEP will address this situation.

Treaty of Waitangi

• We are pleased that New Zealand has retained its standard Treaty of Waitangi exception so that the Government can continue to meet its obligations to Māori, as well as retaining the right to regulate for legitimate public policy purposes.

Labour and the Environment

• NZIBF had advocated in favour of the inclusion of the environment and labour in the RCEP but we understand that was a bridge too far for some other RCEP members, despite New Zealand’s efforts to include these issues on the agenda.  It would be good to see these issues addressed as the RCEP evolves.

Commitments for New Zealand

• We note the advice in the National Interest Analysis (Section 6.1, page 116) that New Zealand’s existing domestic legal and policy regime already addresses most RCEP obligations and that “there are a small number of minor legislative and regulatory amendments that would be required to implement certain obligations under RCEP and thereby enable New Zealand to ratify RCEP”^[3].  NZIBF supports the passage of those amendments to give effect to the RCEP Agreement.

Conclusion

• Ratification of the RCEP Agreement will enable New Zealand to take advantage of new trade and investment opportunities with a group of countries that comprise nearly a third of the world’s population and include many of New Zealand’s key export markets. Were New Zealand not to ratify, our competitors in RCEP markets would gain benefits denied to us and New Zealand would not be party to future evolution of the Agreement. We agree with the National Interest Analysis which notes (page 8) that if RCEP goes ahead without New Zealand then our “place in regional value chains would be eroded, exports from competitors would be favoured and comparably cheaper than New Zealand’s, and investment would likely be diverted away from New Zealand to other RCEP countries.”  Ratification of the RCEP will help our national economic recovery from COVID19 and send a valuable signal about the ongoing importance of trade liberalisation to the global community.

Recommendations to the Committee

• NZIBF recommends that the Committee:
• note NZIBF’s support for ratification of the RCEP Agreement,
• note NZIBF’s support for Parliament to make the minor amendments to the Tariff Act 1988, and the Customs and Excise Regulations 1996 necessary to give effect to the RCEP Agreement. 
• note NZIBF’s willingness to make an oral submission before the Select Committee.

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[1] The views in this submission are those of NZIBF as a whole.  Individual members may make their own independent submissions on specific issues.

[2] The RCEP covers the members of ASEAN (Brunei-Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Viet Nam), Australia, China, Japan, Korea and New Zealand.

[3] The three amendments are (1) An amendment to the Tariff Act 1988 to enable Orders in Council to be made to identify RCEP countries for the purposes of the Tariff Act and amend the ‘Tariff’ (as defined in that Act) to enable the application of the preferential tariff rates agreed in RCEP. (2) An amendment to the Tariff Act 1988 to provide for the transitional RCEP safeguard mechanism under the Trade Remedies Chapter.  (3) An amendment to the Customs and Excise Regulations 1996 to implement the agreed rules of origin and product specific rules (PSR) for goods imported from RCEP countries.