Reduced tariffs for New Zealand’s beef and sheepmeat exporters and an increased ability to counter non-tariff barriers to trade are among the advantages of the proposed Comprehensive Progressive Trans-Pacific Partnership (CPTPP) for this sector, according to the newly released National Interest Analysis (NIA) of the multi-lateral free trade agreement.
CPTPP is a proposed free trade agreement (FTA) between a bloc of 11 Asia-Pacific countries: New Zealand, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, Singapore, and Viet Nam. Aiming at transparency in negotiations, the comprehensive 249-page NIA document covers the pros and cons of all parts of the agreement. It shows the 10 economies account for $13.5 billion of world gross domestic profit (GDP) worth US$10 trillion.
Included in the CPTPP are four of New Zealand’s top trading partners – Australia, Japan, Singapore and Malaysia – and four countries New Zealand does not currently have an agreement with, Japan, Canada, Mexico and Peru. The NIA estimates the overall impact of CPTPP on the New Zealand economy will be a rise in real GDP of between 0.3 to one percent, or $1.2 billion to $4 billion. Without the agreement, modelling estimates a $183 million decline in GDP, “as New Zealand’s place in regional supply 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 CPTPP countries,” the executive summary says.
Seven percent of the total $15.2 billion of New Zealand’s goods exported to the other 10 countries in 2017 was New Zealand beef and sheepmeat worth $1.1 billion. Savings on tariffs alone are conservatively estimated by the NIA to be $57 million for the sector, once the agreement has been fully implemented. This is likely to be a year to 18 months after signature, which is expected to be in Santiago Chile on 8 March.
One of the biggest wins for industry, as has been noted by several commentators already, would be the reduction of Japan’s 38.5 percent tariff on beef imports to nine percent over 16 years – one of lowest tariffs offered by the country, the NIA says. This would put New Zealand and competitors on an even keel with other exporters, such as Australia, which currently have FTAs with the market. It also notes a a volume-based transitional safeguard (which will apply equally to all CPTPP exporters). The World Trade Organisation (WTO) safeguard currently being applied against New Zealand frozen beef exports will not apply to New Zealand trade once CPTPP is in force.
Canada, New Zealand’s fourth-largest beef export market, will eliminate all tariffs and quotas on New Zealand beef over six years, allowing unrestricted duty free access. Mexico and Peru will eliminate beef tariffs within 10 and 11 years respectively.
In addition, Japan’s tariffs on offal and processed meats, will be eliminated over 11–13 years with a 50 percent reduction at entry into force. Tariffs on processed meats will be eliminated at entry into force in Canada for lines of trade interest.
It notes nearly all tariffs on this country’s sheepmeat exports would be eliminated upon entry into force, including locking in preferential rates to Canada (New Zealand’s seventh-largest sheepmeat market). All tariffs will be eliminated in eight years, with nearly all tariffs eliminated at entry into force. Existing zero duty access will be locked in.
The CPTPP will also help to address the growing quantities of non-tariff trade barriers which frustrate trade for New Zealand’s goods exporters, such as the 1,500 from Japan identified by the WTO in 2017, or nearly 2,000 from Canada.
Welcoming the release of the full CPTPP text, Minister for Trade and Export Growth David Parker says that public scrutiny of trade agreements is welcome and important. Changes made to the previous TPP, including the suspension of 22 items in the earlier agreement, were a major improvement he said.
“The suspensions mean that prior expensive changes to New Zealand’s intellectual property law and our medicine-buying agency Pharmac no longer apply. The suspensions also narrow the scope of investor-state dispute settlement in the CPTPP, an area of particular concern to us.” he says.
It also includes commitments to safeguard and enforce labour and environmental standards and upholds the Treaty of Waitangi and will create more opportunities for international trade, he says.
The Minister also pointed to the increasing importance of CPTPP because of the growing threats to the effective operation of the World Trade Organisation rules.
You can read more about the CPTPP agreement at the MFAT website, where you can also read the full text of the agreement and look for answers to frequently asked questions.