NZ’s biggest trade deal

Prime Minister John Key has welcomed the successful conclusion of negotiations over the Trans-Pacific Partnership Agreement – New Zealand’s biggest free trade agreement.

“This agreement will give our exporters much better access to a market of more than 800 million customers in 11 countries across Asia and the Pacific, and help Kiwi firms do business overseas,” Mr Key says.

“In particular, TPP represents New Zealand’s first FTA relationship with the largest and third-largest economies in the world – the United States and Japan. Successive New Zealand governments have been working to achieve this for 25 years.”

TPP has been a significant focus for the National-led Government, as part of its wider plan to diversify the economy by building strong trade, investment and economic ties around the world.

“As a country, we won’t get rich selling things to ourselves. Instead, we need to sell more of our products and services to customers around the world, and TPP helps makes that happen,” Mr Key says.

TPP will eliminate tariffs on 93 per cent of New Zealand’s exports to our new FTA partners, the United States, Japan, Canada, Mexico, and Peru.

Dairy exporters will have access to these markets through newly created quotas, in addition to tariff elimination on a number of products.

Tariffs on all other New Zealand exports to TPP countries will be eliminated, with the exception of beef exports to Japan, where tariffs will reduce significantly.

TPP also reduces non-tariff barriers to trade, ensures fair access for New Zealand firms doing business in TPP countries and provides greater opportunities to bid for government procurement contracts overseas.

“We’re disappointed there wasn’t agreement to eliminate all dairy tariffs but overall it’s a very good deal for New Zealand,” Mr Key says.

“We’ve seen with China how a free trade agreement can boost exports of goods and services and deepen trade and investment links.

“The overall benefit of TPP to New Zealand is estimated to be at least $2.7 billion a year by 2030.

“That’s more jobs, higher incomes and a better standard of living for New Zealanders,” Mr Key says.

“Many concerns raised previously about TPP are not reflected in the final agreement. For example, consumers will not pay more for subsidised medicines as a result of TPP and the PHARMAC model will not change.

“Now the negotiations have concluded, people will see that TPP is, overall, very positive for New Zealand,” Mr Key says.

The conclusion of TPP follows recent trade agreements with Korea, Chinese Taipei, Hong Kong, ASEAN/Australia and Malaysia. The Government is continuing negotiations with a number of other countries and is actively pursuing the launch of an FTA with the European Union.

John Key's photo.

Trade Minister Tim Groser and the team of people who have been working on this for years deserve the praise they are getting.

This deal isn’t as good as it could be but it is a lot better than what we have now.

The Minister says it will deliver significant benefits to New Zealand and build on the hard-won gains from previous free trade agreements:

“This comprehensive agreement offers much better access for New Zealand goods and services in 11 important markets across Asia and the Pacific.

“TPP breaks new ground for us. It is our first FTA relationship with the United States – the world’s biggest consumer market – as well as with Japan, Canada, Mexico and Peru.

“As a result, New Zealand will now have FTAs covering our top five trading partners – Australia, China, the United States, Japan and Korea.

“We’ve seen from previous FTAs, including the China FTA, how positive they have been for New Zealand trade and investment, and therefore in supporting jobs and growth for New Zealanders.

“Not being in TPP, on the other hand, would put New Zealand at a competitive disadvantage compared to other countries,” Mr Groser says.

Tariffs will be eliminated on 93 per cent of New Zealand’s trade with its new FTA partners, once TPP is fully phased in. This will ultimately represent $259 million of tariff savings a year – around twice the savings initially forecast for the China FTA.

As a result of TPP:

  • Tariffs on beef exports to TPP countries will be eliminated, with the exception of Japan where tariffs reduce from 38.5 per cent to 9 per cent.
  • New Zealand dairy exporters will have preferential access to new quotas into the United States, Japan, Canada and Mexico, in addition to tariff elimination on a number of products.
  • Tariffs on all other New Zealand exports to TPP countries – including fruit and vegetables, sheep meat, forestry products, seafood, wine and industrial products – will be eliminated.

TPP also reduces non-tariff barriers to trade and ensures fair access for New Zealand firms doing business in TPP countries.

“TPP sets high standards in many areas,” Mr Groser says. “New Zealand is already an open, transparent and trade-friendly country, which means only a fraction of TPP’s obligations will require changes to our current practices.”

The most significant change is an extension of New Zealand’s copyright period from 50 years to 70 years. The cost of this to consumers and businesses will be small to begin with and increases gradually over a 20-year period.

“Other potentially far-reaching or costly proposals raised earlier in the negotiations were not included in the final agreement,” Mr Groser says.

“Consumers will not pay more for subsidised medicines as a result of TPP and few additional costs are expected for the Government in the area of pharmaceuticals. There will also be no change to the PHARMAC model.

“Regarding data protection for biologic medicines, New Zealand’s existing policy settings and practices will be adequate to meet the provisions we have finally agreed on,” Mr Groser says.

Investor-state dispute settlement provisions have been included in TPP, as they have in previous FTAs.

“This will give New Zealand investors more confidence and certainty when doing business overseas and does not prevent the Government regulating for legitimate public policy reasons.

“TPP also contains a provision that allows the Government to rule out ISDS challenges over tobacco control measures,” Mr Groser says.

“Overall, TPP is a very positive agreement for New Zealand, further improving access to international markets, which supports our exporters to grow and create new jobs.

“New Zealand supports the release of the text before it is signed by TPP governments but arrangements are yet to be finalised.

“TPP, like any free trade agreement, will go through New Zealand’s Parliamentary processes. We expect it to come into force within two years.”

There’s a Q&A here and more information on outcomes for specific industries here.

Some of us are old enough to remember Fortress New Zealand as it was before we opened our doors to trade.

The misguided doctrine of patronage and protectionism fostered inefficiency and divorced producers from the realities of the market. It limited what we could buy, made much of what was available more expensive and/or of poorer quality, gave far too much power to politicians and bureaucrats and provided far too much opportunity for corruption.

The TPPA hasn’t got rid of all protection. That means it isn’t as good as it could be, especially for dairy but it is an improvement on existing access and we’ll find other markets.

The people who will be hurt most by the failures in the agreement are those still behind the fortresses which add to their costs and limit their choices.

Their politicians have failed them by allowing the interests of a powerful, but small, group of sectional interests to trump the best interests of their countries.

5 Responses to NZ’s biggest trade deal

  1. Richard says:

    Wonderful deal. Details are to come and note on the dairy side that processed products did very well. This means that processing i.e. “added value”, will need to be done in NZ providing more jobs- a very sharp reminder to Fontera to get their act together and for farmer suppliers to look further beyond their farm gate–

  2. Mr E says:

    Well done Tim. Well done John. Well done National.

  3. farmerbraun says:

    ” on the dairy side that processed products did very well. This means that processing i.e. “added value”, will need . . .”

    Where are you reading that? I see no mention of added-value products e.g. cultured foods , ice cream , soft and fancy cheeses.

  4. Richard says:

    Farmer B – Mozilla cheese is the highest gross margin product produced by Fontera- more of the same, Fontera, has been well behind on its promise of value added- fixated on producing powder.

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