13 Jun 2016

Economic benefits of 'Asian TPP' questioned

9:13 pm on 13 June 2016

Critics are questioning the economic benefits of a proposed Asia-focused trade pact, arguing the gains would be tiny.

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Photo: 123rf

The 13th round of talks for the Regional Comprehensive Economic Partnership (RCEP) - the Asian version of the Trans-Pacific Partnership (TPP) - is under way in Auckland, and the government argues that easier and better access to the fast-growing Asian region will provide significant benefits.

"One of the real opportunities that RCEP presents to New Zealand is finding ways to reduce some of these barriers to trade that New Zealand exporters face," Trade Minister Todd McClay said.

On paper, the RCEP trading bloc looks compelling for New Zealand.

It covers 3 billion people and represents 27 percent of global trade. The combined national output of the 16 nations negotiating it is $US23 trillion*.

But an opponent of this type of trade and investment deal, Auckland law professor Jane Kelsey, said she doubted the potential gains to New Zealand firms were worth much.

Jane Kelsey

Jane Kelsey Photo: RNZ / Kim Baker Wilson

"The purported economic gains from RCEP are about as illusory as the ones with the TPP. And the modelling that that relied on has been very heavily and rightly criticised."

Estimating the gains from these regional trade deals has been controversial.

A study by the US-based Tufts University argues the usual modelling used for FTAs (free trade agreements) is flawed, and overall the TPP was likely to result in job losses and wages being screwed down.

The New Zealand government's own modelling predicted that the economy would be a modest 1 percent larger with TPP compared to without it, adding $2.7 billion to GDP in 2030.

Nevertheless, agricultural trade envoy Mike Petersen said one clear winner for New Zealand would be agriculture, since many countries heavily protected their farmers.

"The biggest challenge clearly comes down to agricultural goods market access. And so this is no different any other set of negotiations we enter into. The agricultural areas are the most difficult," Mr Petersen said.

New Zealand already has free trade agreements with all of the countries involved in RCEP but India and Japan, and Japan is part of the TPP.

Prof Kelsey said India represented the only real gain, and it was unlikely to give up much to New Zealand.

"The big one that we don't have [an agreement] with - India - reportedly offered very little to New Zealand in terms of market access.

"So what we need to have is a proper cost-benefit analysis that is independent and engages with all the potential costs and benefits while the negotiations are still concluding, so we can really see whether this is in the New Zealand national interest," Prof Kelsey said.

International Business Forum executive director Stephen Jacobi agreed India would be a key prize in a successful RCEP agreement.

The Executive Director of the NZ International Business Forum, Stephen Jacobi

Stephen Jacobi Photo: SUPPLIED

But he said there were smaller but no less important gains if an agreement was reached, including overcoming the unevenness of the current FTAs that exist between the nations in RCEP.

"We have a very good FTA with ASEAN, the one we negotiated alongside Australia a number of years ago. If that could be the starting point for RCEP that would be a lot different.

"Unfortunately a lot of the other FTAs that ASEAN has negotiated around the place aren't quite as comprehensive," Mr Jacobi said.

"The other issue of course is [that] the big north Asian economies don't have FTAs with each other either. So there are a lot of potential stumbling blocks."

The talks will continue this week in Auckland, and negotiators aim to conclude RCEP by the end of the year.

* There are 16 countries involved in RCEP: the 10 members of ASEAN - Brunei-Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam - plus the six countries with which ASEAN has free trade agreements: Australia, China, India, Japan, Korea, and New Zealand.

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