The TPPA - Is it rising from the grave?
Almost immediately upon taking office, President Trump withdrew the USA from the TPPA. The agreement was dead in the water, and with the biggest economy out, the incentives to revive it were not compelling for some of the 10 remaining members.
Three months later things have shifted and a resurrection looks more likely every day. Japan has swung in behind the TPPA “minus 1” and New Zealand is championing its revival in meetings of officials and ministers, including making it “top of the agenda” in the Prime Minister’s recent visit to Japan.
TPPA may end up being more “Asia Pacific” than “Pacific” as some countries, including Chile and Peru, are not interested without the US’s participation. However, Japan, Canada and other markets closer to home are seen as important enough for New Zealand to stay on board.
Significant benefits will not be immediate, as most changes are to be phased in over time. So what is the benefit of the TPPA “minus 1” to New Zealand’s agricultural exporters?
Beef exporters won’t get the big wins from the USA, which included immediate elimination of tariffs on in-quota beef, and phasing out all quotas and tariffs over 5 years. Canada, not yet a major export destination, will phase out all tariffs over 5 years. Japan is a big market for New Zealand beef, but their concessions on tariffs are miserly and slow to take effect.
Sheep meat exporters also lose a tariff free agreement with the US, but will get tariff free entry to Canada immediately (if Canada stays in). Other members will phase out barriers over time.
The benefits of TPPA for dairy exporters were always disappointing, with other key members being highly protective of their own dairy sectors, and are even more marginal without the USA. Remaining changes to tariffs and quotas will be phased in over years.
Fruit and vegetables:
The USA is the third largest export market for New Zealand fruit and vegetables, but exporters will still get gains from the TPPA without it. Some tariffs (notably, kiwifruit and apples) will eventually be eliminated across the whole TPPA free trade area. Japan, already the second largest market for fruit and vegetables, is immediately or over time eliminating tariffs on others such as squash and avocados.
In the last few years New Zealand wine exports to the USA have overtaken all other markets, despite tariff barriers which would have been dropped under TPPA. However, benefits remain: all tariffs in the TPPA zone on New Zealand wine exports will be eliminated (mostly over time).
Tariff elimination on processed timber across the free trade area may create new opportunities for forestry, however China, its biggest export market by some distance, is outside the TPPA.
Fisheries and seafood:
Most of the benefits of TPPA remain, as most trade to the USA was already tariff-free.
Some re-writing is needed to bring the agreement into force, and it should be clear whether that can happen, and what countries will join, in the next few months. Some are still holding out the possibility of the USA re-joining the agreement at some point in the future, but this seems unlikely during this presidential term.
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