Don’t let risk aversion derail progress on TPP
In the final months of 2015, the Trans-Pacific Partnership (TPP) took centre stage in the world economy. The rush towards the negotiation deadline in October 2015 and the signing of the agreement in February 2016 were followed by heated debate about what individual member countries stand to gain or lose.
Many countries on the outside joined the debate by giving thought to whether they should eventually participate in this major partnership.
It is almost impossible for any country to conclude whether the TPP can add value, as it’s far from operational. Yet, on many fronts, the excitement has gone away.
As the dust settles, risk aversion has started to set in in the minds of many, especially given the uncertainty surrounding the United States presidential election in November. This doesn’t really help those who have poured significant resources into the creation and signing of the largest trade partnership to date.
Consultations across the 12 member countries are ongoing, as part of the ratification process.
Yet, we must not lose sight of the fact that businesses are the ultimate consumers of the TPP. Individuals will only stand to gain if businesses engage in the pact.
We also have to bear in mind that, as with any free trade agreement, the TPP opens up access to other markets, but also exposes our home market to foreign participation.
From this viewpoint, it’s not a bad thing. New Zealand has a shortage of really good foreign direct investment.
A significant factor in the success of the TPP will be how well it can promote the participation of businesses, in particular small and medium-sized enterprises. The ratification process represents an opportune time for this to happen.
Credit goes to Vietnam, one of the 12 member countries and a country that many believe has the most to gain from the TPP.
For one, significant public awareness programmes, such as conferences and seminars, are in place in Vietnam. Some of these events have even been customised for the banking, insurance, agriculture, fisheries and textile industries, among others.
The events aren’t just about talking through what the TPP covers and the benefits. They are also about sharing information about the barriers to TPP implementation and success.
Companies are already being encouraged to boost product quality and brand names in anticipation of the TPP.
As the TPP opens the floodgates for cheaper imports, the positioning of better quality products or premium brands will protect a firm’s domestic position.
We should be similarly encouraging our New Zealand SMEs. Quality and brand provide both a competitive and defensive mechanism for our companies to engage in any competitive market.
In the case of Vietnam, many firms have limited knowledge of what is covered in the TPP, let alone the details on how it functions. Some do not even know of its existence. To this end, the Vietnam Chamber of Commerce and Industry has released a TPP handbook in Vietnamese.
This translation from policy into business language is essential to the success of the partnership, or any policy designed for businesses for that matter.
This is another area that both New Zealand private and public sectors need to address. Adopting a wait-and-see approach to the TPP’s ratification, and the pending outcome of the US election, is a reflection of the lack of confidence in the value of the TPP.