John Milford: Why we still need the TPPA
OPINION: February 4 last year was a day that small countries relying on trade to maintain a high standard of living can only dream of.
That was when the Trans-Pacific Partnership Agreement was signed in Auckland, opening markets worth billions of dollars to the 12 signatories.
For New Zealand, the eventual benefit was estimated at $2.7 billion a year. That's a lot of dairy, meat, kiwifruit, seafood, wine and everything else we sell.
It was to be our first free-trade agreement with five of the countries, including the biggest and the third-biggest economies in the world – the United States and Japan.
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Former prime minister John Key called it "a giant vote of confidence for future prosperity for the economy and our people" that would help diversify our economy and bring jobs and boost incomes.
It wasn't perfect, but what wasn't to like about having access to 800 million people, eliminating tariffs worth $259m a year, and boosting economic activity by 3 per cent?
On January 24 this year, the dream was shattered when the US killed the deal before it could be ratified, and all seemed lost.
There was talk again of looking to the United Kingdom and Europe, but that's a long way away when there are boundless opportunities much closer in the growing economies on the Pacific rim.
Here's another significant date: May 18.
That's when we woke to hear Prime Minister Bill English and Japanese Prime Minister Shinzo Abe had achieved what had seemed out of reach – an agreement to maintain the unity among the signatories and "early entry into force of the TPP".
The impossible was now possible, and last Sunday, 11 trade ministers signed to press on, TPPA two was born.
So, what would TPPA two mean?
Sure, we have lost a market of 326 million, but about 500 milion would remain, and that's a lot of people we don't currently have free access to.
Look at three of the bigger countries and what they could offer us:
- Japan is the world's third biggest economy. Our main exports are aluminium, cheese, kiwifruit and beef. Goods subject to tariffs include beef (47 per cent) and cheese (35 to 40 per cent). There is potential for increased exports of wood products and tourism and education services exports. GDP is US$4.9 trillion (NZ$6.95t), population 126 million.
- Canada is a high-value market for our food and wine, specialised manufacturing, and ICT, with potential for wood, specialty food and beverages, and agritech. Our dairy is subject to quotas and out-of-quota tariff rates of 250 to 300 per cent. GDP is C$1.5t (NZ$1.6t), population 36 million.
- Mexico takes mostly dairy, which attracts a 20 per cent tariff along with wine and fruit. Milk powder has a 63 per cent tariff and a quota system. There is great potential for food and beverage, and electrical machinery. GDP is US$1.04t, population 130 million.
These three countries alone offer great opportunities for our tiny US$180b economy.
With protectionism becoming a real risk to the global economy, we need to find a way to access them, and TPPA two is our best chance.
The US has gone, probably for a long time, and we need to work hard with the stayers to make it happen.
In the background to all that, Wellington Chamber of Commerce is doing its bit by helping celebrate export successes with the inaugural regional export awards, on June 21.
Entrants are contesting four categories: Innovation in export, most sustainable in export, emerging exporter, and excellence in export services.
The winners of each will contest the ASB Exporter of the Year Award.
Every little bit helps. As John Key was very fond of saying: "As a country, we won't get rich selling to ourselves".
John Milford is the chief executive of the Wellington Chamber of Commerce.