Long term impacts of the TPP matter more than short term gains, says NZIER
06 October 2015
New Zealand Institute of Economic Research (Inc)
Media release, 6 October 2015
For immediate release
Today’s announcement that the Trans-Pacific Partnership agreement (TPP) has been concluded is good news for Kiwi firms and households, NZIER said today in its initial assessment of the TPP’s outcomes.
“The immediate focus from industry has understandably been on short-run gains from reduced tariffs and quota expansion”, NZIER’s Deputy Chief Executive John Ballingall said.
“But the true benefits from the TPP stem from the boost it will give Kiwi firms in terms of medium- to long-term competitiveness and enhanced participation in regional production networks in the Asia-Pacific, plus the impetus the deal will give to trade liberalisation on a global level”.
Based on information available to date, NZIER suggests that the costs of the TPP to New Zealand will not be as significant as some have previously suggested, although a fuller assessment will have to wait until the full text is released.
Tariff reductions will boost Kiwi firms’ returns
“If you had suggested eight years ago that New Zealand firms would enjoy full tariff elimination, aside from beef into Japan and some dairy products, on all of our exports to the US, Japan, Canada and Mexico, you’d have been laughed out of the room”, Mr Ballingall said.
“Yet this is precisely what the TPP has now delivered for New Zealand. It’s an impressive outcome. Of course it’s not perfect, and we’d have loved more dairy access, but overall most New Zealand firms will be pleased with the result”.
Lower costs of doing business will also help
In addition to the market access, the TPP will remove some of the grit in the wheels of Asia-Pacific supply chains. We should see improved trade facilitation, lower non-tariff barriers and improved regulatory coherence. Barriers to services exports should fall, and inwards and outwards investment will be made easier and less risky.
“These factors will all lower transaction costs for Kiwi firms, again boosting competitiveness and opening new avenues for regional economic integration. Over time, this will positively contribute to lifting Kiwis’ living standards”, Mr Ballingall said.
More importantly, the TPP is a boost to ongoing trade liberalisation efforts
On the wider stage this New Zealand-initiated process has delivered the first large scale improvement in the global trading environment for years. This is one more step in the long road to further integration in the Asia-Pacific region and puts pressure on others not involved to make similar adjustments.
“The demonstration effect of this achievement cannot be overstated. An enormously complicated deal was pulled and pushed into being. It shows what can be done to promote regional – and hopefully global – economic integration if the political will is strong enough”, Mr Ballingall added.
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Deputy Chief Executive
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