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Home / Business

Explainer: What is the TPP?

NZ Herald
25 Jan, 2016 10:06 PM3 mins to read

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The TPP sparked protests around the country. PHOTO Stephen Parker

The TPP sparked protests around the country. PHOTO Stephen Parker

What is the Trans Pacific Partnership agreement?
The TPP, as it's known, is a trade agreement between 12 Pacific Rim countries. It eliminates tariffs on most NZ exports to those countries, saving $259 million a year on current trade levels. In return, New Zealand will remove tariffs on imports from those
countries, worth $20 million a year.
The Government estimates it is worth at least an extra $2.7 billion a year in GDP by 2030. Critics say it will only lift GDP by a small amount more than it would have already increased.

Which countries are in it?
Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Viet Nam. Between them, the countries are home to 800 million consumers. Of those, New Zealand did not already have free trade agreements with the US and Japan, two of the three largest economies in the world, as well as Mexico, Canada and Peru.

Why should you care?
The removal of tariffs by other countries will make New Zealand goods cheaper and therefore more competitive overseas. It also opens New Zealand to more foreign investment, potentially creating more jobs. It will have little effect on the cost of goods imported to New Zealand because there were few tariffs in place.
The agreement makes it easier for foreigners to invest in New Zealand. The threshold for foreign investments, for example, is being doubled to $200 million. The TPP does, however, protect the right of Government to impose taxes on any activity.

What happens now?
Trade ministers agreed on the deal in October 2015 and it will be formally signed in New Zealand on February 4. Each country has two years to go through domestic processes required before it comes into effect. The New Zealand Government will have to make some law changes, including copyright, tariffs and patent laws. The text will be examined by the Foreign Affairs, Defence and Trade Select Committee, including public submissions.

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Can countries withdraw or join?
Yes. South Korea has expressed interest in joining, as has the Philippines, Thailand and Indonesia.

Will it impact on the Treaty of Waitangi?
One clause allows the Government to give Maori preferential treatment, including in fulfilment of its obligations under the Treaty of Waitangi. Prime Minister John Key argues it will benefit the Maori economy in the post-settlement era.

What are the criticisms?
Labour is concerned about provisions to protect foreign investors. It says the TPP would prevent its proposed ban on property sales to foreign investors.
There are concerns about provisions that allow corporates to sue governments for actions that discriminate against them. They claim it will have a chilling effect on governments, effectively stopping them taking measures in case it results in a challenge. Tobacco companies will be barred from taking cases against countries under dispute rules.

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