Trade

Where to next for the CPTPP trade deal?

With members of the CPTPP trade deal set to meet in Auckland as its one-year anniversary looms, how has the deal helped Kiwi exporters so far - and where is it heading next?

As the US-China trade war bubbles away, the CPTPP has understandably not been at the top of trade watchers’ minds.

But with the CPTPP Commission holding only its second formal meeting in Auckland this week (from October 7 to 9), members of the 11-nation trade deal will have a chance to take stock and look at the agreement’s successes, failures, and its future.

The deal came into force on December 30 last year, and with the one-year anniversary rapidly approaching some of the benefits are already being felt by exporters.

The Meat Industry Association said New Zealand beef exports to Japan had increased 22 percent by volume and 15 percent by value in the eight months after CPTPP came into force, with the pre-deal tariff rate of 38.5 percent already cut to 26.6 percent.

Former trade negotiator and Saunders Unsworth consultant Charles Finny says the effects of the deal have been “pretty positive in the Japan market but more modest elsewhere” - a summary which tracks with economists’ comments to the NZ Herald’s ‘On the Map’ podcast about trade.

“Certainly in terms of Mexico and Canada, it’s helpful but not totally game-changing,” Finny says.

The art of the bilateral deal

However, some of the early gains in Japan may be undercut by a new US-Japan deal on agriculture products, signed by Trump and Japanese Prime Minister Shinzo Abe on the sidelines of the United Nations General Assembly.

The agreement is expected to give US exporters the same or similar tariff reductions for products like beef and pork as those secured by CPTPP countries, which Finny acknowledged was “potentially unhelpful” to New Zealand businesses.

“It’s unfortunate that Japan has agreed to it, but I can understand why they’re doing it given the guillotine hanging over their auto exports [from threatened US tariffs].”

While some Kiwi exporters were “a bit philosophical” about the new deal given they had planned for the US to be part of the original TPP deal, Finny says there are two more systemic concerns.

The first is whether or not the US-Japan deal adheres to WTO rules, with NZ International Business Forum associate director Stephanie Honey arguing it is “hard to see how this deal meets the...benchmark”.

The second is whether this augurs a continuation or acceleration of bilateral agreements at the expense of multilateral deals which are more helpful to smaller countries like New Zealand.

“There is a risk that could occur, hopefully not... I guess a lot will depend on the outcome of big elections next year,” Finny says, with a future US administration potentially more inclined towards multilateralism than Trump.

But while the US focuses on the art of the bilateral deal, there are other countries interested in joining on to the CPTPP.

New members?

Finny names Thailand, Taiwan, and South Korea as the nations most likely to enter the fold at some point, although it is unlikely there will be any new additions announced at the Auckland meeting.

Under the prime ministership of Theresa May, the United Kingdom publicly announced it was considering joining the CPTPP post-Brexit.

There have been no formal comments on the idea in recent months, something Finny says does not indicate a change of heart under Boris Johnson but the reality over more pressing domestic issues - as well as a focus on bilateral trade deals, most significantly with the US.

“I’m not sure everyone is fully aware of how complex a negotiation that might be - they might come back to it [the CPTPP] once they realise how complex the negotiations are.”

Then there is China. There has been sporadic talk about the Asian superpower joining the deal, with a recent opinion piece in the CCP-aligned Global Times saying it was time for the country to consider accession.

Finny says there are plenty of Chinese think tanks raising the idea, with some seeing it as a “brave” way to respond to Trump’s tariffs and allegations the country is not playing by international trade rules.

However, he believes the country is “not quite in that space yet”, although its position may change in the coming years.

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