Case for a viable partnership

NZ Trade Minister David Parker in Chile for the signing of the CPTPP.

The notion that New Zealand's food exporters might one day have preferential market access to the Japanese economy would not that long ago have been considered fanciful.

However, US President Donald Trump's withdrawal of his country from what is now the CPTPP (Comprehensive and Progressive Agreement on the Trans-Pacific Partnership) — previously the TPP — has created that very scenario.

Japan, along with Australia and New Zealand, filled the vacuum created by the US withdrawal, continuing to make the case for a viable partnership between the 11 remaining parties to the agreement — Canada, Peru, Mexico, Brunei, Vietnam, Malaysia, Singapore, and Chile.

This is good news for the Japan-NZ bilateral trade relationship, which, while historically strong, has also been relatively inert in terms of its development, relative to its potential growth and what might be achieved. Certainly there has been underlying currents of dissatisfaction on the New Zealand side about Japan's bulwark agricultural protectionism, elements of which remain even in this latest agreement, underscoring that no deal is perfect.

However, Japan's status as the only Asian nation with whom New Zealand does not have a free trade agreement, is about to change — and big time.

The economic importance of this is significant — especially in the four economies with which NZ does not already have free trade arrangements — Japan, as well as Canada, Mexico and Peru.

Taken together that's over $4 billion of trade in goods, — $3 billion for Japan — and over $1 billion trade in services — just under $900 million for Japan.

Tariffs will be reduced or eliminated on New Zealand's key exports to Japan including dairy, meat, horticulture, wood, wine, seafood, and manufactured products like agricultural machinery and medical devices.

In the case of beef, the tariff is reduced from 38.5 per cent currently to 9 per cent over 16 years — levelling the playing field for NZ with Australia in Japan.

In dairy, high tariffs won't be eliminated altogether, but products such as proteins, ice cream, and infant formula will mostly enjoy tariff-free access to Japan by the end of the varied transition periods in the agreement.

In Japan, around $217 million worth of trade in New Zealand's high-protein products will be duty-free as soon as the agreement comes into force.

Horticulture is also a big winner — for kiwifruit, where Zespri currently pays $26 million in tariffs each year, tariffs will be scrapped. Duty-free access for apples will be gained 11 years after the agreement becomes effective.

New Zealand International Business Forum executive director Stephen Jacobi is encouraging businesses to be more "ambitious"about using the transformative power of the new agreement to boost the NZ-Japan economic and trade relationship, by building new business ventures and strategic alliances, bringing significant benefits to both sides.

In the broader sense of the deal, Jacobi recommends business takes this opportunity to review their strategic and business planning, particularly from the perspective of how they can link more closely to global value chains.