Last week NZ, along with Australia, China, South Korea, Japan and the 10 countries of ASEAN, signed the Regional Comprehensive Economic Partnership (RCEP) after beginning negotiations in 2012.
The door has been left open for India to rejoin the agreement after it left last November.
The current RCEP countries account for 30% of global population and economic output, eclipsing the 11-country Comprehensive and Progressive TransPacific Partnership, which accounts for 13% of world GDP, which NZ is also a part of.
Before the withdrawal of the United States in 2017, the then-TransPacific Partnership accounted for 36% of world GDP.
Unlike other trade deals, the benefits to NZ’s agricultural exporters from the lowering of tariffs are minor.
That’s because NZ already has agreements with all of the countries involved to lower or eliminate tariffs.
In addition, some of the tariffs that remained from those previous agreements weren’t up for negotiation in RCEP.
According to an analysis for the Ministry of Foreign Affairs and Trade (MFAT), tariff reductions across all of RCEP will actually deduct $410 million, or 0.08%, from GDP as NZ exporters lose some of their competitive advantage from previous tariff-busting deals to rivals who are getting the advantage of lower tariffs for the first time.
More happily, there are bigger gains predicted for NZ exporters from other parts of the agreement.
These include $1.7 billion from the lowering of non-tariff barriers and another $410m of benefits from streamlining customs procedures.
The Meat Industry Association’s Sirma Karapeeva says the agreement contained a number of provisions that would be helpful to meat exporters.
These included an expectation all goods should be cleared by customs authorities within 48 hours, and perishable goods within six hours.
“A six hour clearance process is hugely fast and will be really beneficial for our chilled meat exports into that region,” she said.
Improving procedures for allocating import licenses would also be helpful.
In 2016, the Government won a World Trade Organisation (WTO) case against Indonesia for using import licensing rules to block NZ beef.
To get the licenses, Indonesian importers had to buy designated quantities of locally-raised and slaughtered beef before they could import any from NZ.
Even then, Indonesia issued the licenses late and for only three months at a time.
“You might ship it and then suddenly realise that it arrives outside that window and the importer no longer has a license,” she said.
Karapeeva hoped RCEP would prevent countries from using import licensing to favour local producers in the future.
“These might not sound like sexy issues, but they are really where the rubber hits the road for a lot of our members because they hold up trade, regardless of what the level of tariffs might be.”
As part of its WTO lawsuit, NZ put the cost of Indonesia’s tactics at a billion dollars in lost sales between 2010 and 2015.
A 2016 study by the New Zealand Institute of Economic Research (NZIER) estimated non-tariff barriers cost NZ beef exporters a billion dollars annually in the Asia-Pacific region.
“That gives you a sense that there is money being left on the table because of these regulatory barriers,” she said.
Why India’s presence matters
India's absence from the Regional Comprehensive Economic Partnership (RCEP) is a significant lost opportunity for NZ agricultural exporters, according to an official analysis of the agreement.
Tariffs ranging from 130% on dairy products to 30% for sheep meat and 30% to 50% for apples and kiwifruit gave NZ negotiators plenty to aim for until India withdrew from negotiations last November.
With NZ having trade deals with all other RCEP members except India, the potential gains from the agreement from tariff reductions after it left were significantly reduced.
According to an analysis of the deal for MFAT, the anticipated economic benefit to NZ from cuts to tariffs across all RCEP countries went from $260 million with India included to minus $410m without it, a difference of $670m.
Without India, the RCEP is expected to add $2 billion to NZ’s GDP by 2045.
If India were to rejoin the net benefit would increase by more than a billion dollars to $3.2b.
A fast-track accession process has been included to encourage India to reconsider its membership.
India’s concerns with the agreement stemmed partly from a fear lowering tariffs would open its farmers to a flood of imports from Australia and NZ.
RCEP at a glance
– Signed by NZ, Australia, Japan, South Korea, China and the 10 countries of the ASEAN trading bloc (Thailand, Brunei-Darussalam, Singapore, Vietnam, Philippines, Malaysia, Cambodia, Laos, Myanmar and Indonesia).
– Estimated net boost to NZ’s GDP of $2b by 2045.
– Two-thirds of gains from lowering of non-tariff barriers to goods exports.
– Small gains from elimination of 5% tariff on sheep meat and beef exports to Indonesia.
– Expected to enter into force in 2022.
