Wednesday, March 20, 2024

NZ could benefit from China joining CPTPP ranks

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The possibility has arisen of remnant tariffs on dairy exports to China disappearing faster if Beijing is to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). The sum of money coming New Zealand’s way could be more than $100 million a year.
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The possibility has arisen of remnant tariffs on dairy exports to China disappearing faster if Beijing is to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).

The sum of money coming New Zealand’s way could be more than $100 million a year.

These tariffs are due to disappear by 2024 anyway, under the terms of the NZ-China free trade agreement (FTA).

But a trade expert says they could go faster, depending on the attitude of the NZ government.

The CPTPP was signed in 2018 by 11 nations, including NZ and powerful economies like Japan, Canada and Australia.

It covers more than 13% of world economic output and 30% of NZ exports.

It was originally supposed to include the United States, but this was reversed when President Trump came to power and a return to the fold is low on the Biden Administration’s agenda.

Now, the Chinese government has formally applied to join the pact in a letter to Trade Minister Damien O’Connor.

Like all member states, the NZ government would need to approve Chinese membership.

This means NZ might be in a position to ask for an earlier wind-down of so-called safeguard tariffs than 2024, as a condition of China joining the CPTPP.

O’Connor could not be reached for comment on this.

But long-standing trade expert Stephen Jacobi of the NZ International Business Forum (NZIBF) says there could be a benefit for NZ in this.

“As part of an accession deal, China would have to satisfy us on market access, as well as on their ability to meet the rules of the agreement,” Jacobi said.

“And the only problem we have on market access is around safeguard tariffs for dairy products.

“We tried to remove them in the course of the (FTA) upgrade but couldn’t do it, so it is not unreasonable to think that we could try again in the context of an accession agreement.”

Safeguard tariffs were part of the original FTA agreement with China. They would come into effect when NZ exports passed an agreed milestone in terms of quantity. The aim of this was to protect local industry.

In fact, NZ exports soared past that threshold long ago, but the impact of the tariffs was blunted by high sales prices anyway.

Jacobi says safeguard tariffs are due to end by 2024, but it would be nice for them to end earlier.

In fact, NZ’s chance to win a hurry-up is moot, because it is far from certain that China’s accession will be done by 2024 at all.

Australia’s Trade Minister Dan Tehan has already sounded a note of scepticism about Chinese membership.

And the Japanese government has been quoted as saying an application by the United Kingdom to join CPTPP would have to be dealt with first.

Then there is criticism of China on human rights grounds, along with tension spurred by the new US-UK-Australia defence pact.

An extra, economic, pitfall remains: other CPTPP members are expected to demand that their companies get the same access to contracts with China’s state sector as Chinese companies do. This is thought likely to be a big problem to overcome, since Beijing has long given official protection to its own SOEs.  

Nevertheless, China’s application to join the CPTPP is welcomed in-principle by Jacobi.

“Trade agreements like CPTPP are about the spread of effective and up-to-date trade rules in the Asia-Pacific region, as well as globally,” he said.

“We welcome China’s interest to join CPTPP which is one of the world’s most advanced and high-quality free trade agreements. CPTPP … is a pathway towards a future Free Trade Area of the Asia-Pacific.”

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