TPP more than sum of its uneven parts

by | Oct 23, 2015 | Trade Working Blog

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By Stephen Jacobi

I was asked by a television channel to award a score out of 10 for the Trans Pacific Partnership (TPP) recently concluded in Atlanta.

I gave it 7.5 because 75% of New Zealand’s exports are well covered by the deal. I added a bonus point of one for what was achieved for dairy, the other 25% of our exports.

The dairy outcome, while disappointing for farmers and for anyone involved in TPP over the last seven years, needs to be seen for what it is: the best that could be done, in the face of entrenched protectionism and anti-competitive reflexes in the world’s largest economies, especially the US, Japan and Canada.

The sense of disappointment is more acute because at the TPP leaders’ meeting held on the margins of APEC in Honolulu in 2011 it had been agreed that the final agreement would be “high quality, ambitious and comprehensive”.

This wording reflected the opportunity to create a new framework for trade and investment that would enhance sustainable growth and job creation.

Over time that vision appears to have dimmed to the extent that what we see coming out of Atlanta, while undoubtedly a big step forward, is less ambitious than the architects of TPP had in mind. The deal falls short of the goal of comprehensive tariff elimination – all duties on all products – even if no sector, not even dairy, is completely off the table.
For other agricultural products there are some positive gains that can be welcomed by farmers.

Beef farmers will be happy that Japan’s tariff will drop from 38.5% to 9% over 15 years, which should put us back on a level playing field with Australia and make a material difference to NZ exports.

Here is a sample range of other useful wins:

elimination of all beef quotas and tariffs in the US, Canada and Mexico
elimination of tariffs on high protein dairy exports in Japan, of cheese tariffs in Japan and the US, of milk powder in the US and infant formula in the US, Japan and Mexico
elimination of tariffs on all wine, fruit and vegetables and forest products exports to all markets
elimination of tariffs on honey in the US and Japan.
The timetable and process for elimination may vary, but these are nonetheless tangible export gains that will translate into new business and revenue.

Beyond market access, TPP sets up a more contemporary framework of rules for trade and investment that will lower costs, reduce the time of doing business, provide greater certainty and security and ensure that over time there is a more consistent approach to setting regulations and addressing behind the border barriers.

This is particularly important for today’s new way of doing business through complex global value chains and networks that sees our agri-businesses operating in multiple economies sometimes through trade and other times through investment.

That all this has been achieved without the likelihood of significant adjustment for NZ in areas like medicines, investment, intellectual property or the management of state owned enterprises reflects the skill of our negotiators and the fact that NZ is already at the level of world best practice in these areas.

The final text of the TPP treaty will be released to the public in the next month or so. This will hopefully enable a robust debate about the implications for NZ on the basis of fact rather than rumour.

Farmers will want to make sure their voices are heard in the select committee process that follows the formal signing of the agreement and the passing of implementing legislation, which will precede ratification by the Government.

Trade Minister Groser and his officials deserve congratulations for the achievement of a deal which overall advances the interests of the agricultural sector.

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