Today's challenging and unsettled political landscape makes it easy to presume the worst from a global trade perspective – but that's without factoring in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
With a combined GDP of NZ$16.7 trillion (according to the Ministry of Foreign Affairs and Trade), the 11 member countries of the agreement, including New Zealand, represent a healthy slice of the overall global economy – and the CPTPP promises to deliver significant financial benefits to those involved as it unfolds.
So what and who exactly does the CPTPP involve? In simple terms, it's a progressive free trade agreement that removes most duties up front and tackles non-tariff barriers like regulatory impediments and customs administration.
The CPTPP has been in effect for six of its members – New Zealand, Australia, Canada, Mexico, Japan and Singapore – since December 30, 2018, with Vietnam joining the fray in January and more to follow. As at June, Stats NZ figures show total two-way trade between members at NZ$50.58bn, up from $NZ44.49bn in 2017 – an increase of 13.7 per cent.
A promising start, then. But what about some of the big names missing from the list so far, like the US, the UK and China? How is New Zealand looking to bring these financial heavyweights into the mix?
The signs there are favourable too. For example, the New Zealand government recently concluded a deal to upgrade its free trade agreement with China. In negotiation for several years, the upgraded agreement is set to make exporting to China easier than ever and reduce compliance costs for New Zealand exports by millions of dollars each year.
As for the US, New Zealand left the recent East Asia Summit with various reports pointing to a positive pathway towards a future trade deal. Even with the looming uncertainty of Brexit, the UK and New Zealand have signed the Mutual Recognition Agreement to secure trade once the UK leaves the EU.
The CPTPP has also motivated other nations in the Asia-Pacific region to embrace the push for free trade. Some, such as Thailand, Taiwan and South Korea, have expressed an interest in joining the CPTPP – designed to accommodate new members as long as they meet certain provisions.
Meanwhile the CPTPP has also spurred Regional Comprehensive Economic Partnership members to push forward with finalising their pan-Asian deal, as well as looking to bring other countries into the fold.
All trends seem to signal that the CPTPP heralds the arrival of a more liberal, market-oriented blueprint for international trade.
In spite of the ongoing uncertainty, last month a HSBC poll of over 9000 companies in 35 countries and territories revealed over 80 per cent remained confident about their international trade prospects. Meanwhile 79 per cent of respondents said that, despite protectionism being on the rise, they expected their international sales to increase over the next 12 months.
So this ground-breaking CPTPP agreement is also having a positive effect on the political economy of global trade as a whole – and with a worldwide network spanning more than 65 countries, HSBC is perfectly poised to help NZ companies looking to capitalise.
"We're a natural choice for Kiwi businesses with ambitions to expand their business internationally," says Jarron Boulter, Head of Global Liquidity and Cash Management at HSBC New Zealand. "Our global presence enables us to have a consistent approach to service delivery and seamlessly connected banking platforms, making it easy for companies to conduct cross-border business.
"Liquidity is tightening in the market, so our corporate clients are forced to think outside the box to reduce costs. One solution we offer is turning expensive international transactions into cheaper local transactions, known as Global Disbursements," adds Boulter. "Therefore it makes no difference whether you're doing business in Australia, Malaysia, Germany or elsewhere - ideal for the new trade era."
All of which may just prove the CPTPP to be the start of a brave new world for free trade everywhere. As a local New Zealand bank with a truly global perspective, HSBC is fully geared up to enable New Zealand businesses to break down borders - wherever those borders may be.
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