Largely unnoticed by media last week was the announcement that the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) will take effect from 30 December this year. This is an enormous achievement from our trade negotiators and both the current Labour Government and the National Government before it. Before it became a comprehensive and progressive trade deal, there was a lot of opposition in New Zealand and the United States. When the newly elected US President Trump withdrew from the TPPA (as it was called then), many commentators thought it was over. But due in no small part to the efforts of New Zealand’s superb trade negotiators, it was not.
by Mike Chapman, CEO of Horticulture New Zealand
The CPTPP is very important for three reasons: first, it reduces tariffs; second, it further opens up some of our key trading partners for increased trade; and finally, for New Zealand, it gives us greater trading security.
When this trade agreement comes into force, tariff reductions will instantly return more money back to New Zealand. For horticulture this is significant. We export about 60% of the fruit and vegetables that we grow in New Zealand and we earn premium returns across the world for our exports. From what we export, 32% goes to countries that are in the CPTPP deal. That totals in value about NZ$2 billion. The big tariff win for New Zealand is from Japan where annually we pay almost NZ$45 million in tariffs. The elimination of tariffs from the CPTPP will result in a NZ$37 million saving straight away. This is significant and tangible. At the grower level, this translates into an average of NZ$12,790 for each kiwifruit grower, an average of NZ$58,800 for each buttercup squash grower, and an average of NZ$7,390 to each onion grower.
Once a free trade agreement is reached with a country not only are tariffs reduced it also opens up trade dialogue. Access issues for our exports into that country can be more readily resolved. There is good will on both sides. Then there are trade delegations that explore opportunities for new and greater export opportunities. In many respects this is an intangible benefit, but one that results in increasing trade. China is a perfect example of this. Exports to China have quadrupled since the China New Zealand FTA entered into force in 2008. China is now New Zealand’s largest trading partner, with two-way trade valued at over NZ$27 billion in 2018.
The final reason the CPTPP is so important is because we are seeing tightening of free trade conditions around the world, driven by the “trade war” between China and United States, and reducing support for the World Trade Organisation (WTO) from some countries. For many years, the WTO has provided an important framework for countries to trade with each other. The strongest feature of the WTO framework is that it provides certainty for exporters that their goods will be accepted in the country they are exported to. If the WTO framework falls into abeyance then that certainty is lost. Exporters may find their exports turned away for any reason, valid or not, on arrival at the border. What the CPTPP does for the countries in that agreement is provide trade certainty. So it is like a fail-safe for exporters and for horticultural exports that cover one-third of our exports.
So in all respects the CPTPP is a magnificent achievement and one that will be of benefit for all New Zealanders thanks to our trade negotiators and governments.