ANZ on the TPP

Some interesting analysis from the ANZ Bank newsletter on the TPP. They make the point:

FTAs aren’t solely about tariff elimination. They are also about the ability to trade with as few impediments as possible. In this respect, TPP looks comprehensive at first glance, with the promise to breakdown compliance and non-tariff barriers across the Pacific Rim. These benefits are significant, especially for smaller economies and companies.

Also:

Closer connectivity with the major players on the trade and investment scene adds another string to our bow. The likes of the United States, Japan and Canada have some of the highest incomes and thus purchasing power of all countries. New Zealand isn’t the lowest cost producer in many sectors anymore and needs access better market access to wealthy consumers to capture margin, and to deliver on the “value-add” strategies that many sectors are pursuing.

But what I found interesting was their analysis of estimated tariff savings as a proportion of current earnings per industry. They are:

1. Meat 3.1%
2. Dairy 2.2%
3. Fruit & Vegetables 2.2%
4. Fish & Fish products 1.4%
5. Wine 1.2%
6. Other agricultural goods 1.1%
7. Forestry 0.6%
8. Wool, leather and textiles 0.6%
9. Manufactured goods 0.1%

So when people say dairy was such a bad deal, actually the dairy sector gets the second largest savings as a proportion of current earnings. The dairy deal was a lot less than what full tariff removal would have been, but the savings are actually higher than most other sectors.

ANZ make the point again it is not just about the tariff reductions:

1. We can create new markets where tariff levels have previously been prohibitive to trade;
2. Gain parity with competitors who have already obtained free-trade concessions;
3. Increase competitiveness through reducing or eliminating tariff costs, compliance and other non-tariff costs. The elimination of non-tariff barriers and streamlining of compliance requirements is particularly beneficial for many of New Zealand’s smaller exporting companies;
4. Increase access through harmonising or eliminating technical standards; and
5. Increase confidence in New Zealand products as a result of closer economic cooperation. Indeed, one of the key noted features is a platform for regional integration, with the potential to add additional countries in the future.

And finally:

There is a raft of empirical evidence suggests trade liberalisation benefits overall welfare and lifts nationwide GDP, particularly for open trade dependent economies like New Zealand. Studies by the Peterson Institute suggested that the gains to New Zealand from TPP would cumulate to around 2% of GDP by 2025. Some of the numbers being bandied around by Government officials look a little on the high side, but considering the surge in two-way trade between New Zealand and China following the signing of the FTA less than a decade ago it leaves little doubt as to benefits on overall trade (and GDP) from increasing trade liberalisation.

Also NZIER have done an analysis here. Their conclusion:

Our negotiators have delivered a good deal, given the hand they have been playing. Their skill and the way they have clearly respected the fundamental interests of the community, while gaining real returns, is now evident. The end result is that, outside of some dairy products and beef into Japan, all of New Zealand’s goods’ exports to all TPP countries will see tariffs completely removed over time.2 New Zealand’s exports of fruit, vegetables, wine, seafood, forestry products, wool and manufactured goods, which account for around 65% of our $20 billion of goods exports to TPP countries, will all enjoy tariff-free access to TPP markets over time.