Twelve Pacific rim countries have sealed the deal to create the world’s largest free trade area. Working around the clock for days past their deadline, haggard trade ministers announced on Monday they had reached agreement on the ambitious Trans-Pacific Partnership just before dawn, capping five years of difficult talks led by the US. The deal aims to set the rules for 21st century trade and investment and press China, not among the 12, to shape its behaviour in commerce, investment and bu
siness regulation to the TPP standards.
“After five years of intensive negotiations, we have come to an agreement that will create jobs, drive sustainable growth, foster inclusive development, and promote innovation across the Asia Pacific Region,” said US trade representative, Michael Froman.
Business lobbies, wine growers and the country’s meat sector have welcomed the Trans-Pacific Partnership trade and investment agreement, which left Fonterra Cooperative Group cold after prolonged negotiations wrung only small, slow access to some of the world’s most protected dairy markets.
Early responses to the deal announced overnight in the US has been mixed, with business lobby groups touting the benefits lower tariffs will bring to local industry and the First Union calling it a “betrayal”.
New Zealand Winegrowers anticipates the deal will help the industry reach its target to lift exports to $2 billion by 2020 from the $1.46 billion in foreign sales currently, while Beef + Lamb New Zealand (B+LNZ) and the Meat Industry Association (MIA) say the agreement will “have a significant impact on the competitiveness of our exports in TPP markets” and estimates it will deliver an additional $72 million a year in tariff savings for beef and sheepmeat once it is fully implemented.
“B+LNZ and the MIA are confident that NZ’s negotiators have secured the best possible deal for Kiwi sheep and beef farmers,” said B+LNZ chairman, James Parsons.
“The sheep and beef sector’s exports to TPP countries were worth more than $2.4 billion in 2014, nearly one-third of the sector’s total exports. That trade incurred about $94 million in tariffs last year.”
According to MIA chairman, Bill Falconer, NZ does not currently have free trade agreements (FTAs) with Japan, the US, Canada, Mexico or Peru. “This deal is particularly important for us in relation to those markets, some of which currently charge very high tariffs on our exports but are highly valuable to the sector,” he said. “The TPP will also open the door to addressing some complex and costly non-tariff barriers.”
NZ’s FTAs saved $161 million in tariffs on the sheep and beef sector’s global exports last year, and the conclusion of the TPP means that number will continue to grow.
“This is an excellent outcome for the NZ’s wine industry,” commented Philip Gregan, NZ Winegrowers CEO. “Finalising the TPP is strategically very important for our export future as the TPP countries already account for over 60 per cent of NZ wine exports.
“While we have not seen the detail of the agreement we understand it will provide improved access into key TPP markets, and a secure rules based system that will help us to improve market access.”
NZ wine exports are currently NZ’s sixth largest export.
While meat and wine were relatively happy with the outcome, Fonterra said it was “very disappointed” at the deal falling short of an original goal to eliminate all tariffs over time, though there are some useful gains for the country’s biggest exporter.
Industry lobby group Business NZ said the TPP opened access “to an influential group of trading partners in the pivotal Pacific arena, including the US and Japan,” the country’s third and fourth biggest export destinations respectively.”While we did not get all we wanted out of dairy access, sitting on the side-lines was not an option,” Business NZ chief executive, Phil O’Reilly, said. “If NZ wants to broaden its economic base and move away from an over-reliance on selling commodity products to the world, we needed to secure a high quality deal that gives greater market access to both goods and services exports and one that encourages investment.
“Multilateral trade deals are the only way to go for a small country like NZ.
“This has been a hard deal to conclude with all the competing interests. Concluding these deals requires all parties to make compromises.
“The deal will also see a fair and predictable investment environment for companies investing in overseas markets.”
Zespri said the TPP agreement which will generate significant value for the NZ kiwifruit industry as it will eliminate tariffs on kiwifruit exports into all 12 Asia-Pacific nations when it comes into force. Zespri CEO, Lain Jager, explains the most immediate impact will be in Japan.
In 2014, the industry paid over $15 million in tariffs into Japan, which is Zespri’s largest country market.
“If this tariff relief was passed straight through to NZ growers, it would equate to savings of over $1000 for every hectare of kiwifruit grown in NZ. This tariff elimination will also benefit Japanese consumers by supporting our competitiveness against other fruit in Japan,” said Jager.
Annual sales volumes to Japan are expected to increase around nine per cent over the next five years.
The TPP knits together some 40 per cent of the global economy, having begun nearly a decade ago as a four-way negotiation involving just NZ, Singapore, Brunei, and Chile. Since then, the US, Japan, Canada, Mexico, Australia, Vietnam, Malaysia, and Peru have joined, with the initiative now widely described as a legacy project for outgoing US president, Barack Obama.
The parliaments of all signatory countries will need to pass legislation to bring the newly minted agreement to fruition, a process that could take two or more years and is likely to spark impassioned debate in many countries. Significant opposition to the deal has emerged, in part because of the secrecy under which it was negotiated.
Industry lobby Internet NZ said it would participate in legislative process, saying announcements to extend copyright terms to 70 years from 50 years was an area it had been concerned about, and should not be subject to closed-door negotiations.
“No definite conclusions on these, or any other issues, can be reached until the detail of the TPPA is made public,” its CEO, Jordan Carter, said. “We hope that our concerns – and those raised by other technology sector organisations – have been listened to.”
NZ government has said that an increase in cost for pharmaceuticals will be met by government and not patients.
The deal was slated by First Union, saying “even on the government’s primary metric for success – dairy access – they’ve fallen remarkably short,” and that the investor state dispute settlement provisions, where investors can seek remedies against government regulation to protect their investment, undermined NZ’s sovereignty.
US labour unions and their allies among consumer and environmental groups are also among the biggest critics of the TPP.