CPTPP a real win for New Zealand

09 Mar 2018


Once you strip away all the figures, data, and modelling, there remains one essential fact: free trade deals generate incredible wealth for those who are party to them.

In reality, free trade agreements have two main benefits besides tariff reductions. The first (and most beneficial) is what could be termed an invitation to work with each other, or an “invitation to treat”, where government and business doors on both sides of the free trade deal are opened up, and the exporting country is treated preferentially. For example, the China free trade deal was estimated to be worth $115 million, but a less tangible benefit is that that New Zealand’s annual exports to China have quadrupled. This increase in trade has generated far more wealth than the base $115 million. 

For New Zealand as a small economy, opening us up to bigger economies has a multiplier effect, and it is impossible to accurately model what that is worth; it depends on the ingenuity of our entrepreneurs. The Comprehensive Progressive Trans-Pacific Partnership (CPTPP) opens up 10 markets to New Zealand, with a combined population of 480 million people. Opportunities are boundless and, with the growth of Asia as one of New Zealand’s most important markets, the CPTPP could not come at a better time:  particularly with Japan, Singapore, and Malaysia, three of our top ten trading partners, as signatories. 

The other significant advantage is a reduction of non-tariff barriers, or NTBs; these are the real trade stoppers. It is all very well to get tariff reductions, but if your exports cannot gain entry in the first place, or if entry is made difficult, the free trade agreement isn’t doing what it was designed to do. 

NTBs for fruit and vegetables can place restrictions on their import that are not based on solid scientific grounds. The CPTPP addresses these; savings are expected to be between $363 million to $1.2 billion. The benefits of the effect the CPTPP will have on these barriers cannot be understated, and will only serve to enable trade. It is, after all, a two-way street; or should I say an eleven-way street!

Japan is of particular note for horticulture. Kiwifruit tariffs will immediately drop, with a saving of $26 million per year, and apple tariffs will be fully eliminated in 11 years. This will bring New Zealand kiwifruit and apple exports to a level playing field with Chile and Australia; both these countries currently have significant tariff advantages over New Zealand in the Japanese market.

Importantly, the Treaty of Waitangi and the Government’s right to regulate for policy purposes has been preserved under the CPTPP; our signature will not lead to any loss of sovereignty. 

What has been achieved is of great economic benefit to New Zealand, and the Government is to be congratulated. The CPTPP will promote growth of our exports, and generate incredible wealth for New Zealand. 

Let the trading begin!

- Mike Chapman, CEO