Robert Scollay: New world of market access outweighs imperfections

Despite disappointment over dairy, New Zealand is a substantial beneficiary of this trade breakthrough. Photo / Mark Mitchell

It may be difficult at first for observers - especially New Zealanders conditioned to think of trade only in terms of dairy products - to grasp the magnitude of what has happened with the agreement on trade liberalisation just reached in the TPP.

As a comparison, gradual progress in eight rounds of the General Agreement on Tariffs and Trade (Gatt) negotiations over 47 years left tariffs and other trade barriers in place on most products, in many cases at very high levels.

Since 2001, World Trade Organisation members have struggled, so far unsuccessfully, to agree on further trade liberalisation and have not reached consensus on new measures to address the realities of 21st century trade.

In the TPP, by contrast, 12 countries accounting for over a third of the world economy have agreed on complete elimination of tariffs on all but a handful of products, as well as a range of measures designed to address new issues of modern trade.

From both a global and regional perspective this is a quantum leap.

Despite disappointment over dairy, New Zealand is a substantial beneficiary of this breakthrough.

The elimination of tariffs on almost all other products represents entirely new market access for New Zealand exporters to the United States, Japan, Canada and Mexico -- respectively the largest, third largest, 10th largest and 13th largest economies in the world.

Realistically, there is no other way these new opportunities for almost all our export industries could have been provided.

The comprehensiveness of this new market access will be especially important for any diversification strategies aimed at reducing our dependence on dairy exports, or on the China market.

The fact that eleven other countries in our region will share in this increased market access also means the costs to New Zealand of non-participation would have been high.

By opting out, New Zealand would not only forgo the substantial new market access provided by the TPP, but would find itself competing in these important markets at a serious disadvantage with other TPP members.

The refusal of Japan, Canada and the United States to extend tariff elimination to all dairy products, capitulating as they did to protectionist interests in their own dairy sectors, is of course reprehensible as well as disappointing, and does not sit well with the stated commitment of TPP participants to a "high standard, 21st century agreement".

But the market access gains in dairy are by no means insignificant.

Judging from the information provided so far, the apocalyptic scenario presented as "fact" by opponents of the TPP has simply not materialised.

The potential costs and risks, a number of which have rightly been of serious concern, have been either neutralised or kept within manageable limits.

Pharmac remains intact, subject to a transparency requirement that is understood in any case to be not subject to dispute settlement.

Additional costs of pharmaceuticals for our health system are estimated to be minor.

The line has been held on data exclusivity for biologics.

Provisions have been included under investor state dispute settlement to safeguard against the various unacceptable outcomes, including those that have occurred elsewhere under other, earlier agreements, and legal expertise will be needed to confirm these provisions are sufficiently robust.

An extra 20 years of copyright protection is both unwelcome and probably unjustified, but should be mitigated if the pending review of our own copyright regime introduces exemptions and flexibilities already available in some other jurisdictions, including the United States.

The conclusion?

Absent any unpleasant surprises in further information to be released, this is a very worthwhile, though by no means perfect, outcome for New Zealand.

But no participant could expect a perfect outcome in a trade deal requiring agreement among 12 very diverse countries.

Robert Scollay is director of the Apec Study Centre and Associate Professor in the economics department at the University of Auckland Business School.