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US-Japan trade deal robs NZ exporters of CPTPP advantage

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New Zealand Herald - 27 September 2019

US-Japan trade deal robs NZ exporters of CPTPP advantage
By: Pattrick Smellie

New Zealand beef and cheese exporters to Japan will be robbed of the recently acquired advantage over US producers, who will gain access to the high-value market on the same terms as CPTPP signatories, despite the US walking away from the trade and investment pact.

Japan and the US signed a ’limited’ trade agreement when US President Donald Trump and Japanese Prime Minister Shinzo Abe met this week in New York at the United Nations General Assembly, liberalising trade in just a few, mainly agricultural product areas.

However, New Zealand trade policy-watchers were quick to express concern about the precedent set by allowing the US the same market access as those won under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, but without making any of the same trade-offs as New Zealand and the other 10 signatories to the ground-breaking Pacific Rim pact. The CPTPP almost collapsed when Trump abandoned US participation as his first executive act as president after his inauguration in 2017.

"This cannot be good," said former trade negotiator Charles Finny.

It would discourage other countries from signing up to CPTPP if they believed side deals could be achieved for similar access without making the same concessions, would create more competition for New Zealand beef and cheese, and was "illegal as it does not meet the World Trade Organisation ’substantially all trade test’" for free trade agreements, he said.

The International Business Forum’s executive director, Stephen Jacobi, echoed that concern but doubted any country would have the appetite to seek redress through the WTO’s review systems, which are in disarray thanks to the US obstructing the appointment of enough adjudicators to allow WTO appeals to be heard.

The US-Japan deal was "unlikely to be a major commercial problem" for New Zealand exporters.

"The more worrying thing is the bigger picture. It’s giving to the US the same access as us, but we had to pay for that with a comprehensive trade agreement whereas the US only has to do a few bits and pieces," Jacobi said.

Trade analyst Stephanie Honey, writing on the Tradeworks website, said the "’demonstration effect’ of a less-than-comprehensive deal" was worrying.

Increased beef exports to Japan have been among the few large early gains for New Zealand from the CPTPP agreement, through which New Zealand hoped to open market access to Japan and the US. With the US out of the deal, Japan became the most promising prize for New Zealand exporters when the deal came into force late last year.

Pre-CPTPP, beef exports faced an 38.5 per cent tariff at the Japanese border, but that is down to 26.6 per cent and will continue to decrease to 9 per cent over the next 15 years.

In the nine months since CPTPP came into force, New Zealand beef sales to Japan have increased 22 per cent in volume and 15 per cent by value, said Sirma Karapeeva, trade and economic manager at the Meat Industry Association.

"Outside of China, Japan is the only major beef market where New Zealand exports have grown this year," she said. One key reason for that increase is that New Zealand beef is now on the same footing as Australian product, which had stolen a march on the Japanese market since the signing of a bi-lateral FTA between Japan and Australia in 2015.

"While the details of the US/Japan deal are scant, there has been some suggestions that the deal delivers a ’CPTPP-style’ outcome," said Karapeeva. "Depending on how and when this deal is implemented, it could potentially see the US gain tariff parity with New Zealand and other CPTPP countries and quickly erode our market share."

Speaking to BusinessDesk in Hokkaido in May, meat exporter ANZCO Food’s Japanese president, Makoto Kinjo, said removal of the price gap with Australian beef had been useful in allowing New Zealand to rebuild market share after its sales to Japan halved following the Japan-Australia FTA.

Finny said the only country likely to be more attracted to joining CPTPP as a result of the mini-deal was Taiwan.

"Given the nature of the Taiwan-US-Japan dynamic, this deal probably increases CPTPP’s appeal to Taiwan."


 source: New Zealand Herald