Will NZs boom be affected by the Transatlantic Trade and Investment Partnership?

March 28th, 2014 at 2:00 pm by David Farrar

Sir blogs at the German Marshall Fund:

New Zealand is enjoying an export-led boom. At 3.1 percent, it boasts the highest GDP growth rate of any developed country. Reconstruction after the devastating 2012 Christchurch earthquake has provided an additional boost. Prime Minister John Key of the National Party is expected to win a third term of office in September, an achievement paralleled only by German Chancellor Angela Merkel in the period following the global financial crisis.

National is at 79% on iPredict to still be in Government after the election. This is exceptionally high. In 2011, I don’t think they were ever above 61%.

Much of New Zealand’s growth is fueled by trade with China, which has displaced Australia as the country’s largest export market. New Zealand’s exports to China rose by a spectacular 45 percent in 2013. Milk powder and other dairy products were by far the largest export items but meat and forest products also made major inroads into the Chinese market. Four factors explain the phenomenal growth figures: the implementation of the 2008 free trade agreement between China and New Zealand, Beijing’s first such agreement with an OECD country; rising demand for quality food products from China’s growing middle class, which is set to double within a decade; the high quality and competitive pricing of New Zealand’s agricultural products; and the proactive export strategy of Fonterra, the dairy giant owned by 13,000 New Zealand dairy farmers.

The FTA was Labour’s greatest gift to NZ. It’s appalling that Greens and NZ First opposed it. But one has to also credit Fonterra for their export strategy. An FTA provided an opportunity only.

Observers here worry about the country drifting into a dairy-fuelled version of the Dutch disease, with insufficient economic diversification, inflation, and a property bubble. To counter this, New Zealand’s agricultural production is moving up the value scale. The country’s eight universities are teaming up with industry to foster innovation. New Zealand increasingly exports know-how, technology, and services, linked to investment projects. Still, agriculture remains the mainstay of the economy.

It is not a choice of high tech or agriculture. We need to do both.

The Transatlantic Trade and Investment Partnership (TTIP), now being negotiated by the United States and the European Union, excites curiosity and concern. New Zealanders share Europe’s apprehensions about its possible implications for food security and about the need to maintain high health, safety, and environmental standards. They are also concerned about the bilateral nature of the agreement and the apparent absence of provisions for accession by third parties.

New Zealand is one of only six WTO members that do not have current or expected preferential trade deals with the . The abolition of transatlantic tariffs on food exports could put New Zealand at a further competitive disadvantage. There are high tariff peaks for dairy and meat products in the and United States which would still apply to New Zealand exports.

This is why the best outcome would be to conclude the Doha round and have a multilateral agreement to reduce tariffs. Without that we run the risk of bilateral and plurilateral trade agreements disadvantaging New Zealand in a relative sense.

More fundamentally, New Zealanders recognize TTIP’s potential for strengthening the rules-based international trading system, in which they have a strong interest. After the failure of the Doha Development Agenda, there may never again be another comprehensive round of global trade liberalization, despite the modest breakthrough in Bali last year. New Zealand would then have to rely on bilateral agreements such as its FTA with China, or the agreement under negotiation with Russia.

It is hard to see the Doha round ever being completed.

Kiwis are under no illusion concerning these countries’ commitments to intellectual property protection, health and safety standards, or judicial independence. New Zealand suspended trade negotiations with Vladimir Putin’s cherished Customs Union after Russia’s forceful annexation of Crimea. This and tensions in the South China Sea are reminders that Moscow and Beijing may not always be reliable partners. TPP and TTIP would effectively set global standards which could be adopted by countries around the world and codified by the WTO.

Former U.S. Secretary of State Hillary Clinton described TTIP as the economic equivalent of NATO. For all their geographic isolation and growing economic integration with Australia, Asia, and the Pacific, New Zealanders feel they belong to the West and would broadly welcome TTIP as reinforcing values they share with Europe and the United States.

I’ve not paid too much attention to TTIP (as opposed to TPP), but maybe it could be the base for a NZ-EU agreement of our own one day?

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11 Responses to “Will NZs boom be affected by the Transatlantic Trade and Investment Partnership?”

  1. wikiriwhis business (4,209 comments) says:

    W’re going to become enslaved to China. We very in debt to them. Half a mill a week and interest included.

    No wonder they keep J key so close

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  2. queenstfarmer (782 comments) says:

    It’s appalling that Greens and NZ First opposed it.

    Indeed it is, but what is/are their current position(s)? Scrap it if they get the chance? Or a case of “well we still don’t like it but we are stuck with it”?

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  3. Luke H (73 comments) says:

    > Reconstruction after the devastating 2012 Christchurch earthquake has provided an additional boost.

    How is this myth still alive? The earthquake destroyed billions of dollars worth of economic value; all the money spent on the rebuild is going towards making up that loss and cannot possibly amount to an economic benefit.

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  4. redqueen (597 comments) says:

    And this is exactly why it’s positive that, in prinicple, we’re going to negotiate a free trade deal with the EU (ableit at some point post-2015).

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  5. CryHavoc (47 comments) says:

    I think Sir Michael is right – what happens in TTIP will have a profound influence on what can happen in the WTO eventually. [And I disagree DPF that the deal won’t get done at the WTO, but I agree that it’s a long way off.]

    The other linkages that aren’t mentioned here are that the EU and Japan are now negotiating a deal, and of course the Japanese are in the TPP (for better or worse). So what you will eventually have are two or three massive trading blocks. If the rules governing them are high quality, then there will be enough mutual interest to codify the rules globally in the WTO. Big if, though.

    If it did happen, it would be a really good thing, as a meaningful WTO deal would give countries an avenue to attack the most egregious remaining trade policies in the world: the EU and US subsidies of agriculture that, in effect, condemn the developing world to poverty by undermining the price they get for their agricultural production. These subsidies won’t be dealt with anywhere other than in the WTO.

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  6. Colville (2,318 comments) says:

    Luke H
    Isnt the benefit from all the insurance money that comes in from outside the country?

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  7. dime (10,222 comments) says:

    “> Reconstruction after the devastating 2012 Christchurch earthquake has provided an additional boost.”

    no boost for Dime.. 750k + in lost sales so far…

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  8. Fentex (1,138 comments) says:

    Former U.S. Secretary of State Hillary Clinton described TTIP as the economic equivalent of NATO

    It’s akin to a military alliance? I do not think that’s an appropriate way for NZ to think of trade. We want to engage in trade, we do not want to engage in military antics.

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  9. griffith (1,111 comments) says:

    We are one of the most free economically in the world.

    What is the USA offering to advance that ?

    Restrictions on copyright ?

    Giving sovereign over our govertments trade and copyright policy to potentially biased sources for enforceable resolution?

    Is there going to be impact on

    Parallel Importing?
    Fonterra.
    PHARMAC.
    Our relationship with China?

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  10. wreck1080 (4,001 comments) says:

    “It is not a choice of high tech or agriculture. We need to do both”

    But, high tech exports are dying right. A casualty of high commodity prices pushing up the dollar thus making high tech difficult. But not impossible if you have the right idea.

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  11. tvb (4,560 comments) says:

    The TPP is never going to happen. But different countries will do bi-lateral free trade side deals along the way. The TPP is a useful umbrella process for this to happen.

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