Negotiations on the Trans-Pacific Partnership have concluded between the 12 participating Asia-Pacific countries, as announced in Atlanta on 5 October 2015.
The agreement will bring big changes to global trade and will deepen economic ties between the Pacific-rim countries of New Zealand, Mexico, United States, Canada, Singapore, Australia, Brunei Darussalam, Chile, Japan, Malaysia, Peru and Vietnam.
What Is The Trans-Pacific Partnership?
The Trans-Pacific Partnership (TPP) is a regional free-trade agreement (FTA) that will liberalise trade and investment between member countries. The Asia-Pacific region is a key driver of global economic growth and TPP members account for nearly 40% of global GDP. The TPP should make it easier to do business across the region and will further boost investment flows, open up trade and promote economic links between these countries.
Canada and Mexico joined negotiations in 2012 followed by Japan in 2013. It is possible that other Pacific-Rim countries such as South Korea and China could join in the future.
Features Of The TPP
- Eliminate and reduce tariff and non-tariff barriers on exports
- Market access for services suppliers and investment
- Opportunity to compete for government procurement contracts in other TPP countries
- Improved access and protection for foreign direct investment between members
- Coherent regulation of intellectual property rights and pharmaceuticals
Benefits For New Zealand’s Economy
The other 11 member countries account for over 40% of New Zealand’s overall exports. Under the agreement, tariffs on New Zealand exports to these countries will be mostly eliminated, with a few exceptions. The annual savings on tariffs is estimated at $260 million. In turn, New Zealand will no longer collect $20 million annually from tariffs on imports.
The TPP is also New Zealand’s first FTA with the United States, Canada, Mexico, Japan and Peru. New Zealand currently exports over $12 billion of goods and services to these countries. The TPP will give New Zealand better access to these significant markets and allow it to diversify New Zealand’s trade and investment relationships.
The New Zealand government has forecast the following benefits from the TPP:
- 800 million potential customers for New Zealand goods and services.
- NZ economy is estimated to benefit by at least $2.7 billion a year by 2030.
- Save $259 million a year in tariffs for New Zealand exporters.
- Support more jobs and higher incomes, and allow New Zealand exporters to sell more products and services to the world.
- $28 billion of New Zealand goods and services were exported to TPP countries last year – circa 40% of New Zealand’s overall exports.
- Tariffs will be eliminated on 93% of New Zealand’s exports to the United States, Japan, Canada, Mexico and Peru.
New Zealand’s Compromises
Membership of the TPP has not come without some cost and compromise. The most significant cost will come from legislative changes to New Zealand’s intellectual property laws which are necessary in order to meet the terms of the agreement. For example, the copyright period will be extended from 50 to 70 years and the patents period on pharmaceuticals may be extended to 12 years. The latter may result in certain medicines becoming more expensive.
New Zealand will also still be required to pay tariffs on certain exports such as beef exports to Japan and certain dairy exports to the United States, Canada and Mexico.
What Happens Next?
The TPP is expected to come into force within two years once member countries have completed any legislative changes which are required under the agreement. The cost of making legislative and procedural changes is significant. However, the significant gains, from easier access to some of the world’s largest markets, should easily outweigh the implementation costs of the TPP.