NZ Chambers of Commerce submission on MFAT Regional Comprehensive Economic Partnership
From New Zealand Chambers of Commerce (Inc)
The New Zealand Chambers of Commerce (Inc), NZCCI, is an umbrella organisation serving the interests of 29 Chambers of Commerce nationwide. These, in turn, represent over 20,000 businesses around the country. While many of our members are in the SME category our membership includes most of the largest corporations in New Zealand.
NZCCI is fully supportive of New Zealand entering into negotiations with other participants in the 16-nation Regional Comprehensive Economic Partnership
(RCEP) and we thank you for the opportunity to make this brief submission.
It is critical for the growth of New Zealand economy that New Zealand business increases its level of international engagement. Trade liberalisation is an important way the government can help facilitate this.
NZCCI believes a comprehensive multilateral trade agreement should be the main goal of New Zealand’s trade policy. However, it is still in New Zealand’s
best interests to pursue bilateral and regional agreements in tandem with multilateral negotiations.
The RCEP is one such potential regional agreement. If successful it would comprise the 10 members of ASEAN plus the six countries with which ASEAN has existing FTAs – Australia, China, Japan, Korea, India and New Zealand. The participants in RCEP negotiations have a total population of over 3 billion people and a combined GDP of around $US20 trillion. They have a trade share estimated at around 27% of global trade, and receive around 57% of New Zealand’s exports.
Like many, NZCCI is watching the increasing number of overlapping FTAs between these and other economies in the region (the ‘noodle bowl effect’) which is not only increasingly complicated but has the potential more and more to distort trade flows. We are strong supporters of a single consolidated FTA in the Asia Pacific region, ultimately replacing the multitude of existing agreement and the RCEP is one way of achieving this.
We are also very aware of the existing effort being put into the Trans Pacific Partnership (TPP) which we are very supportive of, and which also tends towards an Asia Pacific region agreement. While there is a lot of overlap, we see benefit in both sets of negotiations occurring simultaneously. RCEP and the TPP are complementary with six countries already participating in both negotiations. Negotiators should keep open the idea of both the RCEP and TPP negotiations eventually coming together.
Most importantly, negotiations for the RCEP should not be at the expense of efforts to conclude the TPP negotiations by the end of this year.
As well as a potential vehicle for an ASIA Pacific Free Trade Agreement, the RCEP would be important to New Zealand in that it would involve the creation of new FTA relationships with important trade partners where they do not already exist. Japan is crucial here – it being the only RCEP economy with which New Zealand has not yet launched bilateral FTA negotiations. The RCEP could also achieve agreements with Korea and India - two very important trading partners with which negotiations are underway but seemingly slow.
Issues that should be addressed in the negotiation
As with other negotiations, it is essential that the New Zealand negotiators strive for a comprehensive, high quality economic cooperation agreement. The agreement should cover all sectors, without exclusion, and phase out tariffs and other barriers as quickly as possible.
The ASEAN-Australia agreement provides a good template not only for its comprehensiveness but also because it would be at the core of the RCEP. The lessons learned from those negotiations should be applied to this one.
The RCEP should contain a model services agreement with a negative list (i.e. all services sectors are included unless specifically excluded) and with full
liberalisation agreed across all four modes of supply. In the past New Zealand’s FTA agreements have focussed on agriculture and to a lesser extent manufacturing. The services sector is important not just as growth area for New Zealand but also as a way to make an agreement more appealing to other countries.
It is also essential that a sound agreement on investment is achieved. Investing offshore rather than exporting from New Zealand is an increasingly common business model that New Zealand free trade and economic cooperation agreements need to take account of.
There are many ways an agreement can stimulate economic activity other than by tariff phase-downs. Some fresh thinking is needed here. For example could the negotiation lead to technology agreements to stimulate R&D? NZCCI is strongly supportive of inward foreign investment and we believe there is nothing to fear from investment provisions which open up investment from the countries covered in the RCEP.
Like other recent trade agreements the negotiation should also encompass the full ambit of provisions namely market access and related rules (including
customs procedures, rules of origin, technical barriers to trade, sanitary and phytosanitary measures and trade remedies); intellectual property, competition policy, and dispute settlement.
Government procurement; and environmental goods and services are also very important areas which should be included in the negotiating agenda. We also hope trade and labour can be addressed.
Any agreement should include a Most Favoured Nation (MFN) type clause so that if any other country is subsequently granted preferential access, New Zealand will get the same access conditions. Furthermore, it is important that given the plethora of agreements in place and being negotiated that liberalisation time-tables for existing agreements do not get extended.
It is likely that some sectors of the community will fear an increase in imports arising from the RCEP. New Zealand already has low tariffs but we see this
as a benefit in terms of access to cost effective consumables and business inputs. We do not consider the further reduction of domestic tariffs as a potential risk. The complimentary nature of most of the economies and New Zealand suggests that adjustment costs to both would be small.
NZCCI is a key member of the international chamber network. As a strong advocate of trade liberalisation NZCCI works with it’s the national chambers of
commerce around the world to achieve this goal. We are in a position to do so in this case and will promote the negotiation to other participating RCEP
countries at every opportunity.
We would also like to stress the importance of a close liaison between government and business throughout the course of the negotiations. NZCCI would also be pleased to work with the government on its communications programme with the business community through its national chamber network. It is very important that there is two way communications between negotiators and the business community as the negotiations progress.
We think preferential certificates of origin are an effective way to ensure exporters meet the rules of origin and the system is not left open to abuse. NZCCI would be happy to issue these on behalf of the government as we currently do for the China and ASEAN agreements.
We encourage the government to commence negotiations as quickly as possible and we wish you well in them.