TPP – a prize worth the effort

by | Sep 15, 2015 | Trade Working Blog

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By Stephen Jacobi

Few trade agreements have generated as many column inches – or as much protest – as the Trans-Pacific Partnership.

The recent meeting of TPP Ministers in Maui represents an important turning point in the quest for this complex agreement. Ministers succeeded in significantly narrowing the remaining issues – of which market access, intellectual property and investment are among the most important for New Zealand.

Our economy is built on trade, yet we face ludicrously high tariffs on agricultural products in a number of markets, including Japan, Canada and the United States.

What’s more as economies become increasingly integrated and inter-connected, trade and investment are changing. The focus is shifting from goods, to services and investment, and the speed and cost of doing business. The time has come to put tariffs to bed and concentrate on issues like investment, supply chain connectivity, regulatory alignment and innovation.

Back in 2011 TPP leaders committed to concluding a “high quality, ambitious and comprehensive” agreement. From a New Zealand perspective, this means an agreement that, over time, results in tariff elimination for all products, with all participants sharing equally in the benefits. Timetables and safeguard arrangements may vary, but there should be no exceptions.

For New Zealand the crunch point relates to dairy products, which represent some 25% of our exports. The question is whether New Zealand is able to gain access to a meaningful share of dairy consumption in Japan, Canada, the United States and Mexico and under what conditions.
Dairy is to New Zealand what motor vehicles are for Japan, wheat and grain for Canada, textiles for Viet Nam but with one major difference – global dairy markets are even more plagued by high trade barriers. New Zealand cannot be expected to accept an outcome on dairy that is significantly inferior to what others receive for their products of major export interest.

But dairy isn’t the only issue. Tariffs paid to TPP economies in just four sectors – beef, horticulture, seafood and wine – amount to more than $130 million a year. It is also important to remember that other participants have significant unresolved market access issues – Australia on sugar, Viet Nam on textiles – while products like rice and motor vehicles continue to be problematic.

Much concern has been raised about intellectual property, with wild rumours circulating about software patents and illegal downloads. Much of this has proven to be misinformation. The advice of New Zealand negotiators is that TPP largely upholds the status quo in New Zealand, except in the area of copyright where the current term of life plus 50 years may be extended.

On the question of medicines, the Prime Minister has said that the role of Pharmac will be protected and that where increased patent terms or longer protection of data for new generation biologic medicines results in increased costs, there will be additional funding and New Zealanders will not pay more for prescriptions.

With regard to investment, the Government advises there will be protections for the continuing right to regulate regarding public health and the environment, and the Treaty of Waitangi will be fully protected. Provided the text is well drafted, the risk to New Zealand from future investor state dispute settlement should be minimal.

Nor will TPP be thrust upon us in secret. In New Zealand, established constitutional practice for all treaties – including TPP – is that the text is concluded and signed by the Government. Before the treaty can be ratified, the text will be published and scrutinised by parliament. Anyone with concerns will have the opportunity to make submissions to the Select Committee.

TPP may not be the long hoped-for ‘big bang’ for trade and investment liberalisation, but nor will it be the Armageddon for domestic sovereignty and policy making that some would have us believe.

TPP represents an extraordinary attempt on the part of twelve governments to deliver a more seamless environment for business. It is more than the sum of its parts: beyond dairy products, beyond motor vehicles, beyond intellectual property, what is at stake is the future of economic integration in the region.

That makes the potential prize of TPP worth the effort.

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