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Free Trade Between Mexico & New Zealand On The Horizon

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A free trade agreement has been proposed between New Zealand and Mexico following the break down of a larger group agreement known as the TPPA. This Agreement is only at the proposal stages, however should it go forward what would the benefits be and what is a free trade agreement?

What Are Free Trade Agreements?

Free trade agreements are put in place between two or more countries with the purpose of encouraging trade by making it more accessible, increasing efficiency and profitability. This is generally achieved through the reduction or elimination of tariffs placed on goods traded between two countries, modifying customs procedure to enhance efficiency, removing restrictions on tradable items and increasing the ease with which business delegates can travel or live the opposing country.

These agreements can also be between groups. They are highly focused on the economic benefits available to each side, however they can have other purposes such as aid, political or strategic benefits. They are contractual agreements and are thus enforceable by law. This provides a level of security and understanding for parties, exporters, importers and investors whilst fostering healthy and competitive commerce.

An Example Of A Free Trade Agreement In Place

New Zealand currently have 16 free trade agreements in force around the world, one of which is with China. Between the agreements commencement in 2009 and 2014 trade New Zealand and Chinas has doubled from NZD 10 Billion to NZD 20 Billion. New Zealand goods exported to China grew 50% in the year ended June 2014.

This was the worlds first Free Trade Agreement, and it can be seen to have been largely successful. Some of the benefits are:

  • Better market access to China for New Zealand trade service and investment businesses.
  • Duty free access for 96% of the categories of goods New Zealand exports to China. This represented about $115.5 million in annual saving to exporters at the time of signing. In 2012, the saving was estimated at $250 million.
  • Future-proofing rules mean under the favoured nation status enjoyed by New Zealand that ensure service suppliers in some sectors will benefit from any improved access that China grants to other FTA partners in the future.
  • Faster and easier temporary entry to China for business people through improved visa processing.
  • Greater cooperation in the areas of customs, phytosanitary measures and intellectual property.
  • Improved security of investments in China, as well as a provision to ensure that New Zealand investors remain competitive with investors from other countries.
  • A clear process for settling disputes.

What Would Free Trade With Mexico Mean For New Zealand?

The proposed FTA between New Zealand and Mexico is a bilateral agreement which has come from the previously discussed Trans Pacific Partnership Agreement negotiated between America and ten other countries

The TPPA has broken down following the U.S.  withdrawal. However the proposed FTA between New Zealand and Mexico should bolster trade between New Zealand and Mexico with benefits such as:

  • Increased access to principle markets
  • Enhanced transparency in pharmaceutical trade
  • Supported open data flow
  • A Waitangi treaty exception clause to protect the rights of the Maori
  • Increased agricultural and motor vehicle trade.

Should the FTA between New Zealand and Mexico come into effect it is sure to increase relations and have a fiscally positive impact on both sides.

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