Why the CPTPP is important for New Zealand

by The Listener / 01 February, 2018
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Prime Minister Jacinda Ardern. Photo/Getty Images

There is no question that our small, remote nation depends on trade. But there were times during the protracted negotiations that have now culminated in the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) when the visceral debate here could easily have led bystanders to believe New Zealanders specialise primarily in trading insults.

The fact that there is now a deal to be signed – after the efforts of successive prime ministers ranging from Helen Clark and John Key to Bill English and now Jacinda Ardern – is a cause for real celebration. Our role in recent decades as free-trade pioneers, in the teeth of other countries’ stubbornly defended protectionism, should be a source of national pride. Our exports reap more than $70 billion a year, but farmers and manufacturers know what courage it has taken to open our borders, forgo subsidies and eschew protectionism. They and the country are better off as a result.

Increased productivity and export growth have not been without cost, but there is increasing vigilance about the unwanted by-products of intensive farming, just as there is increasing vigilance about the unwanted by-products of intensive urbanisation. The reality is that we need trade to lift our standard of living. And right now, we are running a trade deficit of $3.4 billion.

On March 8, many will be pleased as the CPTPP – the 11-nation trade deal started by New Zealand and three other countries in 2005 – is signed. The withdrawal of the United States from the TPP means some of its contentious elements, such as extending copyright, have been suspended. The TPP would not, as sometimes claimed, have undermined the Treaty of Waitangi or stopped New Zealand governments from restricting foreign investment, protecting the environment or safeguarding public health. But in a smart move, Ardern’s Government has made it more acceptable to former opponents by explicitly negotiating a ban on sales of existing houses here to overseas buyers.

It remains hellishly hard to quantify the benefits and costs of the CPTPP. Member nations account for about 29% of our two-way trade, but about half of that is with Australia, with which we already have Closer Economic Relations. Yet the deal gives us agreements with Japan, Canada, Mexico and Peru. Specifically, it will help redress an imbalance in the beef trade that has given Australian producers a huge advantage in the lucrative Japanese market. New Zealand has faced a 50% tariff on beef in Japan. Since 2015, when Australia signed a free-trade agreement with Japan, its beef exports there have risen by $1 billion while ours have fallen by $30 million.

Already other Asian countries and the United Kingdom have expressed interest in joining the CPTPP. That’s excellent, given that a World Trade Organisation review in 2016 found that an average of 21 new protectionist measures were being implemented every month in G20 countries. Just last week, US President Donald Trump, champion of protectionism, announced tariffs on imported washing machines and solar panels. In trying to protect US jobs, the move will give US consumers fewer choices, result in job losses for installers and push up the cost of washing machines and solar energy.

But even here, suspicion of the TPP deal was heightened by alarmists and aided by the secrecy in which it, like all international treaties, was negotiated. Our state drug agency, Pharmac, with its centralised purchasing of pharmaceuticals, looked initially like a difficult fit with the TPP ethos but escaped unscathed. Investor-state dispute provisions in the deal understandably rankled, especially when tobacco producer Philip Morris challenged the Australian Government over its plain-packaging proposals. This fuelled anti-TPP ire, even though the case was thrown out at an early stage.

Although our then Trade Minister, Tim Groser, deserves much credit for his early TPP work, he and the National Government should have been more transparent. In the final wash, however, almost all the negative consequences feared by critics of the deal were removed as the US departed or were deferred for later debate. Labour and New Zealand First, having regularly railed against the TPP while in Opposition, are, in a positive move, supporters of the CPTPP. It is now over to New Zealand entrepreneurs and businesses to make the most of the new rules.

And we can at last agree that one of our biggest and best exports has been free trade itself.

This article was first published in the February 10, 2018 issue of the New Zealand Listener.

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