NZ’s gains from trade pact deal downgraded in analysis

Government figures show the fully implemented Trans-Pacific Trade pact could add up to 1 per cent of New Zealand’s annual GDP – or just 0.3 per cent.

This is a significant downgrade on prior analysis of the agreement which estimated gains would be at least 1 per cent, or $4 billion.

The Ministry of Foreign Affairs and Trade have released the National Impact Analysis of the new-look trade pact, now known as the Comprehensive and Progressive Agreement for Trans-Pacific Trade (CPTPP), along with the full text of the agreement.

This is the first National Interest Analysis to cover the new-look agreement, which took shape after the United States pulled out of the agreement.

It puts the gains to New Zealand’s economy at between 0.3 and 1 per cent, or about $1.2b to $4b.

Most of those gains come from non-tariff barriers, which are harder to model than straight up tariffs. The Government expects tariff reductions to add about $760 million a year at full implementation.

Full implementation expected by 2040 at the latest.

A prior analysis by the Government of the agreement with the US in it estimated that it would add at least 1 per cent to our GDP.

CPTPP critic Jane Kelsey has argued these gains are minuscule compared to risks involved with signing up to the agreement.

The analysts estimate that the costs of not signing the agreement at a $183m reduction in GDP, and is an erosion of supply chain competitiveness as the other countries increase trade without New Zealand.

Trade Minister David Parker made the point that New Zealand had estimated lower tariff gains before signing its Free Trade Agreement with China, which ended up producing much more economic uplift.

The CPTPP countries represent about 13.5 per cent of the world’s total GDP.

New Zealand exports $5.5b in goods and services to the four CPTPP countries we do not yet have a free trade agreement with – Japan, Canada, Mexico, and Peru.

The analysis includes a section on potential disadvantages to New Zealand, including around the controversial Investor State Dispute (ISDS) clause.

ISDS clauses allow foreign investors to sue governments for law changes in an overseas tribunal.

New Zealand and Australia have signed a ‘‘side letter’’ which will stop investors from both countries suing under ISDS. New Zealand negotiators have also secured exceptions to allow them to freely regulate medicines and tobacco.

‘‘The CPTPP’s safeguards, reservations and exception ensure New Zealand retains the ability to regulate for public health, the environment, and other regulatory objectives,’’ the analysts write.

New Zealand has included ISDS provisions in other agreements but a claim has never been made against the country.

The agreement is expected to be signed on March 8 in Chile.