TPP negotiations conclude

UPDATE: The Beehive site has some details on the deal. The savings on tariffs, once full implemented by sector are:

• Dairy $102 million
• Meat $72 million
• Fruit and vegetables $26 million
• Other agriculture $18 million
• Wine $10 million
• Manufacturing $10 million
• Forestry $9 million
• Fish $8 million
• Wool $4 million

It’s taken eight years, but TPP negotiations have now been concluded. They started under Labour and Phil Goff in early 2008 and it has expanded from five countries (the original P4 and USA) to 12 countries, with another six saying they may join also.

Before I look at the substance, I think it is worth reflecting that just getting an agreement is significant. The Doha round of WTO multi-lateral negotiations has been going on for 15 years, and is far from complete (and may never complete). This is the largest trade agreement since the Uruguay round completed in 1994.

The New Zealand Government has had many negotiators working on this for the last eight years – from MFAT, and from other agencies such as MBIE. This has been their life month in and month out with 19 rounds of negotiations.and 23 meetings of chief negotiators and/or ministers. I’ve got to meet a few of them over the years and they’re extremely dedicated and effective public servants, who will be very pleased to see this work complete.

In terms of the substance, there seem to be three broad themes.

1. Eventual elimination of all tariffs in all industries except beef and dairy
2. Minor concessions from Canada on dairy but better deal with Japan on beef (tariff dropping from 40% to 9%)
3. Most of the potentially “bad” stuff has been resisted (change to Pharmac model, the US demands on ISP liability for copyright, tobacco companies can’t use ISDS provisions)

This is not a gold plated deal, as was the aspiration. Canada and Japan especially have been unwilling to fully open up their markets to competition. Canada has almost a soviet style dairy system where a 30 cow farm has a quota worth $1 million. Some cows sell for almost $200,000 due to the law restricting either domestic or international competition. So incumbents quota owners fight hard against losing their quota, just as taxi firms fight hard against Uber.

With the benefit of hindsight, it may have been better to not allow Canada and Japan to join the TPP. They promised in joining that they understood the aim was the elimination of all tariffs. But their domestic pressures were too great. However the argument to have them in, is that the US would have been less able to get fast track approval through Congress without those two large economies as part of the deal.

But while the benefits are less than what they could have been, it will still be a beneficial agreement for NZ. As Helen Clark said, you’d be basically nuts to walk away from a deal with 40% of the world’s economy. And the net benefit to the NZ economy through the tariff removals and overall agreement is (I understand) in the hundreds of millions of dollars.

There are always some dead rats to swallow in deals, but we appear to have avoided the larger nastier ones. When the full text is released in a month, we’ll have a clearer idea, but the US Trade Representative has a summary of each of the 30 chapters. The removal of tobacco companies from ISDS provisions will reassure many, the US failed to get much progress on extending drug patents, the Pharmac model is unchanged, and the early US demands on Internet and intellectual property issues (some of which were deeply concerning) appear to have fallen away, and the current chapter seems reasonably palatable. That is not to say there won’t be some stuff in there which we’d rather not have at all. For example the length of term of copyright looks set to be extended by 20 years. This is stupid, when in fact copyright terms (life + 50 years) are already too long in NZ. But from what I can see the negatives in the TPP are outweighed by the positives by a very considerable margin.

The FTA with China has been hugely beneficial to New Zealand. Parties such as NZ First and the Greens which opposed it should be embarrassed, as exports to China skyrocketed since the FTA, resulting in billions of extra dollars into the NZ economy. The history of our trade deals is that the benefits and increases in exports have almost always been far greater than anticipated.

RAW DATA: Ministry of Foreign Affairs and Trade's summary of the Trans-Pacific Partnership (PDF here)

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Poilitical commentator and pollster David Farrar posts at Kiwiblog.