Trade Minister Tim Groser is positive about the overall result, but less so on dairy. Photo / Getty Images
Trade Minister Tim Groser is positive about the overall result, but less so on dairy. Photo / Getty Images
• TPP deal struck after final, brutal hours of negotiations • Hailed as the biggest deal of a generation • Has power to affect 40 per cent of world's economy • NZ dairy sector is disappointed • Tariffs on 93 per cent of NZ exports to new free trade to be eventually eliminated • But no change to the 20-year patent period for pharmaceuticals
After years of talks, the controversial and secretive Trans Pacific Partnership trade deal has been finalised.
The 12 countries negotiating the Trans Pacific Partnership have struck a deal after five years of intense negotiation.
The deal was announced just after 2am this morning NZ time after a marathon session in Atlanta, where talks on dairy continued right up to the wire, Trade Minister Tim Groser told the Herald from Atlanta this morning.
Groser was very upbeat about the overall result but less so on dairy.
"You'd have to say from a New Zealand point of view, it just reflects the view that finally, against the combined might of Canada, Japan and the United States they just couldn't bring themselves to more fully liberalise their dairy sectors."
One surprising element that should please critics is that tobacco companies will be specifically banned from taking cases under the Investor State Disputes Procedures.
There would be no change on the current patents for biologic medicines, although an extension on copyright by 20 years will be phased in.
Groser said Pharmac's decision-making would become more transparent and the measures would cost $4.5 million in the first year, then an added $2.2 million annually.
But the Pharmac model would remain the same.
Prime Minister John Key welcomed the deal.
"This agreement will give our exporters much better access to a market of more than 800 million customers in 11 countries across Asia and the Pacific, and help Kiwi firms do business overseas," Key said. "In particular, TPP represents New Zealand's first FTA relationship with the largest and third-largest economies in the world - the United States and Japan.
Successive New Zealand governments have been working to achieve this for 25 years. "He said TPP would eliminate tariffs on 93 per cent of New Zealand's exports to new free trade partners the United States, Japan, Canada, Mexico, and Peru. "We're disappointed there wasn't agreement to eliminate all dairy tariffs but overall it's a very good deal for New Zealand," Key said.
Many concerns raised previously about TPP are not reflected in the final agreement. For example, consumers will not pay more for subsidised medicines as a result of TPP and the Pharmac model will not change.
"We've seen with China how a free trade agreement can boost exports of goods and services and deepen trade and investment links," he said."The overall benefit of TPP to New Zealand is estimated to be at least $2.7 billion a year by 2030.
"Many concerns raised previously about TPP are not reflected in the final agreement. For example, consumers will not pay more for subsidised medicines as a result of TPP and the Pharmac model will not change."
Key said the Government was negotiating with several other countries and actively pursuing a free trade agreement with the European Union.
The tariff elimination scheduled as part of the deal would save exporters $259 million a year once fully implemented.
New Zealand in turn would have to remove $20 million a year in tariffs on imports from TPP countries.
Officials estimate the benefit of TPP to New Zealand to be at least $2.7 billion a year after 15 years.
Groser said the deal would show that opposition to the deal was "a massive hot air balloon which will be punctured by the facts."
He also said the "TPP bus" as he likes to call it, would be carrying on and picking up more countries, with South Korea already in line to join the others.
The Trans Pacific Partnership would deliver New Zealand its long sought-after free-trade deal with the United States, the largest economy in the world, and Japan, the third largest economy, as well as Canada, Mexico and Peru.
Other TPP players are Australia, Singapore, Brunei, Chile, Vietnam, and Malaysia, all of which New Zealand has deals with.
New Zealand already had a free trade agreement with the world's second largest economy, China, which was not part of TPP.
While the dairy deal was less than hoped for, Groser believed that within a few years, once the deal had settled in, there might be a political climate to accelerate some tariff elimination.
But there were some gains. In the United States, for example, tariffs would go within 10 years on infant formula and on some cheese.
Outside dairy, there is only one exception and only for one market and one tariff line where we cannot say that in the long run, no matter how long it takes, we have complete free trade for everything New Zealand exports, which is quite a big statement to be able to make.
Where New Zealand couldn't get elimination of tariffs, it had got quota expansion deals, although some were very modest.
On beef exports, Japan agreed to a reduction from a 38 per cent tariff to 9 per cent. That applied to all countries although Australia's beef farmers, through a separate FTA with Japan, had a head start.
"Outside dairy, there is only one exception and only for one market and one tariff line where we cannot say that in the long run, no matter how long it takes, we have complete free trade for everything New Zealand exports, which is quite a big statement to be able to make."
Groser will be heading back to New Zealand today to begin the hard-sell on the deal.
The deal has to be turned into text and released within 30 days.
It is understood the Government has a public relations programme ready to go, however, outlining in detail how it believes New Zealand will be better off in the deal, not outside it.
It does not intend to leave a vacuum for the next month for opponents to fill.
New costs for Pharmac - Labour's Annette King
Labour's Acting Leader Annette King said the TPP had saddled Pharmac with new costs. "The deal falls well below expectations with ... extended patents on new drugs which will cost the taxpayer millions and leave New Zealanders without life-saving drugs."
King said Labour supported free trade, but Labour would not back the TPP if Pharmac was not protected. "The government must come clean now on what 'ugly compromises' they have made behind closed doors," she added. "The devil is definitely in the detail in these agreements.
New Zealanders must be told whether the government has traded away our right to further restrict foreign ownership of housing or farm land and what agreements have been made to allow foreign corporations to sue New Zealand for regulating in the public interest."
Green Party co-leader James Shaw said the TPP "does not look like a terribly good deal". He said the estimated value to New Zealand of $2.7 billion a year in 15 years' time added just 1.1 per cent to the country's GDP.
"Five years of intense negotiation doesn't look like its yielded much beyond the status quo," he said.
These gains did not outweigh the new risks created by investor-state dispute mechanisms which have been included in the agreement.
Dairy industry disappointed
The Dairy Companies Association of New Zealand (DCANZ) said it was disappointed the TPP agreement had not delivered more for dairy.
"It was always going to be very hard given the starting point for dairy as one of the most protected sectors globally," DCANZ chairman Malcolm Bailey said.
"While the dairy outcome is far from perfect, we appreciate the significant effort made by Minister Groser and his negotiators to get some gains in market access for our farmers."
Horticulture industry welcomes announcement
For horticulture, the TPP agreement had its positives. New Zealand Horticulture Export Authority chief executive Simon Hegarty said he welcomed the announcement, particularly as Japan's inclusion in the TPP provided for elimination of an estimated $28m in tariffs.
"While the TPP involves 12 countries resolving a range of trade issues, tariffs are a prominent trade barrier component," he said.
Tariffs paid by the New Zealand horticulture export sector across the remaining TPP markets are comparatively low based on existing trade agreements. "As our 3rd largest market, Japan's inclusion is significant for the future growth of the New Zealand horticulture export sector," he said.
New Zealand exports approximately 60 per cent of its annual horticulture production, worth $2.7 billion and the TPP countries are the destination for $1.19 billion, or 44 per cent, of that total.
Japan's 6.4 per cent on kiwifruit alone amounted to a cost of $17.5m, he said.
Beef and Lamb New Zealand and the Meat Industry Association (MIA) said they were confident New Zealand's negotiators had secured the best possible deal for sheep and beef farmers. "The TPP will have a significant impact on the competitiveness of our exports in TPP markets," Beef and Lamb chairman James Parsons said in a statement.
The sheep and beef sector's exports to TPP countries were worth more than $2.4 billion in 2014, nearly one-third of the sector's total exports. That trade incurred about $94 million in tariffs last year. New Zealand does not have free trade agreements (FTAs) with Japan, the US, Canada, Mexico or Peru.
"This deal is particularly important for us in relation to those markets, some of which currently charge very high tariffs on our exports but are highly valuable to the sector," Meat Industry Association chairman Bill Falconer said. New Zealand's FTAs saved $161 million in tariffs on the sheep and beef sector's global exports last year, and the conclusion of the TPP means that number will continue to grow, he said.
What does the TPP deal include?
PHARMAC Under TPP the Government has agreed to set up an internal review process for funding applications that are declined by Pharmac. It has also agreed that there will be a timeframe set for the consideration of funding applications. Any extra costs will be borne by the Government. There will be no change to the standard 20-year patent period for pharmaceuticals in New Zealand but other countries will be required to extend the period on specific drugs if the approval processes are too long. On the issue of biologics, the present five-year period of data exclusivity will remain.
INTELLECTUAL PROPERTY New Zealand's existing copyright is 50 years but under the deal it will have to be extended gradually to 70 years, bringing it into line with most OECD countries and half of TPP countries. It is estimated that it will cost consumers an extra $55 million - in foregone savings they would otherwise have made from books music and films coming off earlier.
INVESTMENT The threshold above which an investor must get approval from the Overseas Investment Office will increase form $100 million for all countries except Australia, to $200 million for TPP countries. Australia gets more favourable treatment. The deal will prevent the Government banning nationals from TPP countries from buying property in New Zealand. But it does not alter its ability to impose taxes on property.
