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New Zealand’s objectives for CPTPP

NZ Herald | 16 January 2023

New Zealand’s objectives for CPTPP

In the final of a two-part series, Fran O’Sullivan talks to Trade Minister Damien O’Connor about the big issues for New Zealand ahead of the CPTPP.

Powerful Asia-Pacific trade ministers are set to converge on Auckland at Matariki weekend for a meeting which host chair Damien O’Connor hopes will turn heads in protectionist-leaning Washington DC and Brussels.

It’s New Zealand’s turn to host the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) Commission - the biggest international trade event to be held here in some time.

While most of the country will be enjoying a holiday weekend, trade ministers from 11 nations - and probably also G7 member the United Kingdom, if it completes its accession bid in time - will be reviewing and updating the rules of this mega-regional pact.

“It’s a huge opportunity for us to be on a world stage,” O’Connor said. “There are 11 economies - a huge, big trading bloc that we are part of, and one that is growing.”

O’Connor is conscious that the Covid-19 pandemic put paid to New Zealand’s plan to host political leaders, foreign and trade ministers, officials, business people and journalists from 21 economies for Apec 2021.

But he says the July 15-16 meeting will be a “really big event”.

“There will be an opportunity to showcase our country, not just through those 11-plus economies. But also it’s a trading bloc that is seen by many as having huge potential, hence the applications for accession.”

The trading bloc currently has 11 members: Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam. Talks are getting close to a conclusion with the UK.

As chair of the CPTPP Commission for 2023, O’Connor’s role is to bring consensus among his colleagues on the way forward as they seek to formally review the agreement.

“We have to be careful not to go back to the start but we’ve got to upgrade the agreement,” O’Connor said. “Otherwise it gets locked into the past, and innovation and commerce moves on.”

“It is a living agreement.”

From a national perspective, New Zealand - which will be represented by O’Connor’s colleague Phil Twyford at the meeting - is seeking to address a Waitangi Tribunal ruling that the risks to Māori interests arising from the CPTPP’s e-commerce provisions are significant, and that reliance on the exceptions and exclusions to mitigate that risk falls short of the Crown’s duty of active protection.

“The focus on and the importance of social and cultural issues and inclusion is now accepted across most of our trading partners - how we then incorporate that into formal agreement is challenging so that will be worked through in a sensitive and progressive way,” explains O’Connor.

He concedes there is a risk that introducing Treaty obligations may spur others to reopen issues dear to them, like market access.

There is a lengthening queue seeking accession: China, Chinese Taipei, Ecuador, Costa Rica and Uruguay. Thailand and South Korea are potential aspirants. O’Connor says there have been no collective decisions to start the accession process with anyone else. “Everyone’s been focused on the UK process as delivering some lessons and some guidelines as to how we manage that for other applicants.”

From a national perspective, the Government wants New Zealand’s hosting year to reflect the interests of all New Zealanders. An important aspect will be the involvement of the Treaty of Waitangi partners and other stakeholders, demonstrating a commitment to open plurilateralism.

New Zealand has three objectives for 2023: to support the ongoing ratification and accession to the free trade pact, to implement and review aspects of the CPTPP make the agreement as up-to-date and effective as it can be, and to look at how to bring the inclusive and sustainability elements of the Government’s agenda into the agreement.

With the World Trade Organisation (WTO) faltering, the prospect of bringing the UK into the fold will cause some “sharp intakes of breath”, added an official who predicted that the new rules of global trade are going to be written in clubs.

This stance is reinforced by The Daily Telegraph’s influential Ambrose Evans-Pritchard who writes: “Step by step, the Pacific free trade pact is emerging as the epicentre of a new international trading order. It will increasingly set the tone and the rules of global commerce.”

Says O’Connor: “There were ambitions to have the UK accession concluded by the end of 2022. It’s got stalled as often these agreements do at the last hurdle.”

Lorand Bartels, who chairs the UK’s Trade and Agriculture Commission, is reported as saying the UK was so generous on agriculture access for New Zealand and Australia in its bilateral deals that other CPTPP members want the same.

“I don’t think any of the members are going to concede in a way that would undermine the value of the agreement for us all,” O’Connor said, confirming the stumbling block is around goods access. “For us, it’s ensuring that some of the tariff quotas reductions and market access are not diluted by the addition of the UK, so that what were hard-won access volumes can’t be diluted by applicant economies that would ultimately leave us with very little goods market access into a couple of markets, such as Canada and Japan.

“It’s growing the cake, not just further distributing it, that is important.”

The CPTPP members continue to signal interest in engaging with the US, which withdrew from the pact after Donald Trump was elected US president in 2016.

From a New Zealand perspective, the Government is engaging on two other parallel tracks with the US, the Indo-Pacific Economic Framework for Prosperity (IPEF) and Apec, which the US will host in San Francisco from November 12.

The Ministry of Foreign Affairs and Trade’s Vangelis Vitalis is chairing the CPTPP senior officials group for 2023.

Vitalis - now Deputy Secretary Trade and Economy at Mfat - was in the seat as chief negotiator when New Zealand concluded its negotiations to join the free trade pact.

“It’s worth reminding [that] the CPTPP economies together are worth more than $23 billion of exports - exactly the same amount as we export to China and Hong Kong,” Vitalis told a stakeholder briefing in December. “If we add in the future accession of the United Kingdom, we will be building out the importance of this really important set of hard trade rules, which provide certainty and transparency as well as preferences to us.”

New Zealand companies have been beneficiaries over the last two years of more $300 million of tariff savings alone. Working papers on the Mfat website estimate that companies exporting to CPTPP partners are paying up to 10 per cent more in wages to their staff. Some 31 per cent of Māori exports are going to CPTPP partners, with flow-on effects on incomes to the 80,000 jobs involved.

The upshot is with more than half a million New Zealand jobs depending on access to these markets it is very important to be part of an agreement that is going to write the rules in our region.

Late last year, Chile finally ratified the agreement. Brunei is the remaining outlier.

But it’s not all rosy. New Zealand has challenged Canada to live up to its CPTPP commitments on dairy tariff rate quotas (TRQs).

“Canada is not living up to the commitments it made under CPTPP to allow dairy products into Canada,” O’Connor said. This is impacting New Zealand exporters, who remain effectively locked out of the Canadian market, and Canadian consumers, who are missing out on the increased consumer choice that CPTPP promises.

“It is important for the economic security of all New Zealanders that the rules of our trade agreements are being upheld.”

New Zealand is now pursuing a formal disputes settlement hearing.

Reflecting on this, O’Connor adds: “I think that we agree on pretty much everything with Canada apart from this tricky area of dairy.

“Food production is always a challenging area for trade negotiations - the industry is a very strong lobby in Canada and domestic protection has been part of discussions with them for a long time.

“We’ll just work our way through that and allow the legal process to run its course. It is the first time it’s been tested, but it is important that it works.

“I’m not going to prejudge, other than to say it is a really important part of our participation in CPTPP.”

“We have to look forward rather than look back, that’s where disputes and things like the challenge with Canada is not productive when we could be looking at the new areas like e-commerce.”

CPTPP at a glance:

  • The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a free trade agreement (FTA) between Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam.
  • CPTPP represents 27 per cent of NZ’s total trade - $23b in annual exports to the 11 partners.
  • The UK is poised to join in 2023.

 source: NZ Herald