6 Oct 2015

Should dairy have a cow over TPP deal?

1:49 pm on 6 October 2015

Fonterra says it is disappointed with the dairy outcome in the Trans-Pacific Partnership deal, but New Zealand is now in a better position.

Chairman John Wilson told Morning Report some progress in market access had been made.

"We're in a better position than before we had TPP, but it's not the elimination of tariffs that had been the undertaking or the expectation some years ago as TPP got underway and built out of the original P4."

He said the position was better than some months ago, and the gains that come through for farmers and New Zealand over the following decade, would be the prize.

Trade Minister Tim Groser earlier admitted the deal fell far short of a gold-standard in dairy, but said it still left New Zealand much better off.

Organic Jersey cow on a Rongotea farm.

Fonterra said the outcome for dairy was far from perfect. Photo: RNZ / Alexander Robertson

The largest regional trade agreement in history, covering almost 40 percent of the global economy, was finalised in the early hours of the morning in Atlanta.

Fonterra said while there were useful gains in the protected markets of the United States, Japan and Canada, the outcome was far from perfect.

Mr Groser said it was "unquestionably a good deal."

Trade Minister Tim Groser speaks at a media conference announcing the TPP deal.

Tim Groser said the deal fell short of a gold standard for dairy but New Zealand was still better off. Photo: Twitter / @carlworker

Tariffs would be eliminated or quotas expanded in all TPP countries, but would vary from one dairy product line to another.

"Of course I would have wanted a better dairy deal than this, but at the end of the day, the decision as you go up to five o'clock in the morning with the conference finishing two hours later, you take what you can get." he told Morning Report. "Simple reality of world politics."

John Wilson (centre).

Fonterra chair, John Wilson. Photo: RNZ / Diego Opatowski

Prime Minister John Key said by removing tariffs, the TPP would give New Zealand exporters much better access to a market of more than 800 million customers in 11 countries across Asia and the Pacific.

He said it would eliminate tariffs on 93 percent of New Zealand's exports to the United States, Japan, Canada, Mexico, and Peru.

New Zealand's special agricultural trade envoy Mike Petersen told Morning Report that while the deal fell short for dairy, the benefits far outweighed the costs.

He said the alternative was for the country to not sign, which was not viable.

"It falls short on dairy, but the alternative was for New Zealand not to sign up to this deal.

"And we would have had TPP 11 and New Zealand would have effectively walked away from those markets forever."

Mr Petersen said officials estimated the tariff elimination would cost about $20 million.

One of the lead negotiators in the 2008 New Zealand-China free trade agreement, Charles Finny told Morning Report while dairy could have been better the deal was "overwhelmingly positive for New Zealand".

"Even dairy - it's a good deal when you've got $103 million of tariff savings, so it's much better than the situation before, plus there's real opportunity to improve on this.

"We have a number of countries lining up to join, Korea being the most obvious ... China may join in the future. When every major economy joins there's a chance to re-negotiatie and improve upon this agreement.

Mr Finny dismissed some US commentary that the deal aimed to be a counter-balance to Chinese economic power.

"I don't agree with all US commentary, and that's one thing I totally disagree with, and I've been in the room several times when ministers from around the TPP have said this is rubbish.

"Everyone would like China in eventually, if they're prepared to buy in to these rules."

Political reaction to the deal

Labour Party acting leader Annette King said the trade deal had fallen short and there remained many unanswered questions.

"What we need now is to pull apart the veil, open up to the New Zealand public [on] exactly what's been negotiated," she told Morning Report. "We've waited long enough to know what's happened in secret."

Green Party co-leader, James Shaw, agreed and said the deal contained a great deal of risk for everyday New Zealanders.

"It looks like the deal will only add 1 percent to New Zealand's GDP after 15 years, and in return for that we've got these huge risks in terms of medicines, in terms of foreign ownership of New Zealand land and our ability to legislate to protect the environment."

United Future leader Peter Dunne said New Zealand could not afford to miss out on a trade deal involving 12 countries and it stood to benefit greatly.

"I think the opportunities are hard to quantify at this stage, if you look at every other deal we've made over the years the gains usually far out-weigh the initial expectations."

Executive director of the Sustainability Council Simon Terry said the government was handing over national sovereignty to foreign investors, in order to sell a bit more butter and beef.

"These include giving rights to sue foreign entities in an offshore tribunal if they believe they have a loss of future profits, it's about agreeing to restraints on what government-owned enterprises can do.

"It's about never favouring local producers, and it's about agreeing to waive the right to impose any new controls on foreign purchases of New Zealand land."

'Cleaning up' in Japan

Trade academic Crawford Falconer said New Zealand's food exporters were set to do very well in highly protected markets under the deal.

He said the Japan part of the deal was "hugely significant".

"Well at the moment I've got to talk to my share broker to figure out who I invest in, because you're going to clean up there.

"In the meat sector, for instance, Japan has huge tariffs, 38 percent tariffs on beef, and they're going to come right down, and that's going to become a very commercially lucrative market."

He said the same was true of fruits and vegetables.

"In all these other areas, there's no reason that New Zealand, which is fantastically competitive, can not do extremely well, and you know we were out of that market.

"Other countries like Chile and Australia had access to that Japanese market and we didn't and thanks to TPP we get into that market on equal footing with others who had a preferential advantage."

Key elements of the TPP deal (Source: NZ government)

  • Tariffs on New Zealand exports to TPP countries will be eliminated, apart from beef exports into Japan and a number of dairy exports into the United States, Japan, Mexico and Canada.
  • Tariffs on beef exports to Japan will reduce from 38.5 per cent to 9 per cent. To other TPP countries - including the United States - they will be eliminated.
  • New Zealand dairy exporters will have preferential access to new quotas into the United States, Japan, Canada and Mexico, in addition to tariff elimination on a number of products.
  • Tariffs on all other New Zealand exports to TPP countries - including fruit and vegetables, sheep meat, forestry products, seafood, wine and industrial products - will be eliminated.
  • New Zealand will, in turn, have to remove $20 million a year of tariffs on imports from TPP countries.
  • Consumers will not pay more for subsidised medicines as a result of TPP.
  • However Pharmac will have to make some administrative changes to increase transparency. These include setting a timeframe for considering funding applications
  • Under TPP, there is no change to New Zealand's standard 20-year patent period, but countries will have to extend the term of a particular pharmaceutical patent if there are unreasonable delays in examining the patent or getting regulatory approval.
  • New Zealand's copyright period will extend from 50 to 70 years. The government says the cost in terms of foregone savings on books, films, music and other works increases gradually over 20 years and averages around $55 million a year over the very long term.
  • TPP is expected to come into force within two years, once countries have completed their domestic legislative procedures, the New Zealand government says.

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