How the CPTPP has become a weapon against Trump

: <p>Trade Ministers from CPTPP countries met in Chile in March</p>
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What started out as the Trans Pacific Partnership (the TPP) has ended up as a weapon against Donald Trump.

The agreement will finally come into force on December 30; not a moment too soon for its signatory countries who believe that Trump is out to wreck the WTO-based world trading system's rules..

Trade Minister David Parker yesterday confirmed that Australia was the sixth country to ratify the agreement and that brought up the number required to make it law.

The news comes with an added sense of urgency as the Comprehensive and Progressive Trans Pacific Partnership members seek to counter President Trump’s protectionist trade policies and his attempts to nobble the World Trade Organisation.

The irony is that the agreement that the United States ended up dominating the negotiations of and according to many critics in New Zealand walked away with a whole agenda of unfair advantages on issues like intellectual property and foreign investment is now being seen as a defence against that country’s aggressive nationalistic trade policies.

Parker has been particularly diplomatic on this issue even saying New Zealand shares some of the US concerns about the way world trade is run.

“The CPTPP countries have all pushes as hard as possible to get this across the line in record short time because they recognise its relative value has increased because of the WTO things,” he told POLITIK.

HE TOLD Parliament that as a small exporting nation, New Zealand relied upon the rules-based system for fair trade.

“In Ottawa last week, we put forward options to address legitimate concerns of the United States and other economies about how the WTO operates," he said.

“However, New Zealand must also be prepared if it's weakened, and although our first preference is for a functional and effective WTO, there's no doubt that CPTPP is relatively more important than it was, and we look forward to its expansion over time to better protect New Zealand's interests.”

Parker hinted at the concerns about Trump when he told POLITIK that if the rules-based framework for trade through the WTO was in disarray or undermined then the relative importance of so-called plurilateral agreements like the CPTPP increased.

Australia formally notified New Zealand of its ratification yesterday morning.  (New Zealand is the official repository of the agreement).

“This triggers the 60-day countdown to entry into force of the Agreement and the first round of tariff cuts,” Parker said.

The five-member countries still to ratify the deal are Brunei, Chile, Malaysia, Peru and Vietnam.

Officials from Japan in Wellington a fortnight ago with Japanese Foreign Minister Taro Kono made it clear that Japan put a high priority on getting the agreement ratified and into force.

Their argument went beyond a simple trade agreement.

They made the same point  as Parker --- that with the WTO under threat from the United States because of its refusal to approve the appointment of WTO Appellate Court judges, big trade agreements like the CPTPP were more important than ever.

And Parker said yesterday that some of the most significant immediate advantages to New Zealand would come from Japan.

“It’s a huge agreement, just under $NZ15 trillion turnover per anum; 13% of world GDP,” he said.

And again he hinted at the way the agreement was a defence against Trumpism.

“if you want a second layer of defence this would be the best one in the world.”

The Ministry of Foreign Affairs and Trade says the immediate benefits of the agreement will be:

  • Tariffs on New Zealand beef exports to Japan will reduce from 38.5% to 9% over 16 years including the immediate removal of Australian beef exporters’ current tariff advantage (27.5%) over New Zealand in the Japanese market.
  • Honey exports into Japan, which currently face 25.5% tariff, will benefit from full tariff elimination over eight years.
  • All tariffs on New Zealand wine will be eliminated into CPTPP markets, including immediate duty-free access into Canada (NZ's 4th largest wine market).  At present, New Zealand trades across a 15% tariff on wine into Japan, while one of our main competitors, Chile, pays tariffs of 4.6%.
  • Tariffs on buttercup squash will be immediately eliminated into Japan.
  • For onions, the 8.5% tariff into Japan that amounts to an average of $19,500 each for the 90 commercial growers around New Zealand will be eliminated within six years. 

In reality, apart from beef and wine, these are not big gains. In particular, the agreement does not eliminate tariffs on a number of dairy products into Japan, Canada, and Mexico,  That was always the point the TPP opponents made; that it offered only relatively minor trading advantage.

But what makes it important now is not so much what advantages it brings but rather in a trade world that President Trump threatens to tear apart,  New Zealand is part of an alternative structure.

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