World Bank: TPP better for NZ than US, MFAT confirms signing

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More for NZ than US in TPP, says World Bank study, as MFAT confirms NZ signing ceremony

More for NZ than US in TPP, says World Bank study, as MFAT confirms NZ signing ceremony

By Pattrick Smellie

Jan. 12 (BusinessDesk) – New Zealand stands to reap considerably greater benefits from the Trans-Pacific Partnership trade and investment agreement than the United States, says a new study of the controversial pact by economists at the World Bank.

However, the biggest long term benefits are likely to be in emerging economies like Vietnam and Malaysia, where a combination of manufacturers shifting production to their more competitive economies and structural economic reforms are expected to deliver more than in countries where many of those transitions have already largely occurred.

“The largest gains in GDP (economic growth) are expected in smaller, open member economies,” the report, titled ‘Potential Macroeconomic Implications of the TPP’, says. Vietnam and Malaysia could expect GDP gains by 2030 of 10 percent and 8 percent respectively, based on modelling the World Bank concedes is not highly reliable.

“Estimating the impact of deep and comprehensive trade agreements is still very much a work in progress,” the report says. The combined effect for the 12 member countries of the TPP, the few studies undertaken find overall impacts for members in the order of 0.8 percent to 1.8 percent of GDP.

The report was released ahead of today’s official confirmation that the TPP will be signed by representatives of Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam in Auckland next month. Trade ministers rather than leaders are expected to attend the signing ceremony, which is expected to attract protest action from groups opposed to aspects of the deal, including controversial international dispute resolution mechanisms, as well as new standards on labour rights, environmental protection, the competitive neutrality of state-owned businesses, and harmonisation of rules relating to border protection and trade in services.

The Ministry of Foreign Affairs & Trade confirmed the already widely reported assertions from South American signatories Chile and Peru last week of a signing ceremony, which is expected on Feb. 4, although that date is not yet officially confirmed.

Twelve countries agreed in principle to the TPP deal in October, although all 12 must pass domestic legislation to bring it fully into force, with support from the US vital to its implementation. Political opposition to TPP in the US exists across the political spectrum, with reports from Washington trade newsletters continuing to speculate it may not be able to advance in the Congress and Senate until the so-called “lame duck” session at the end of this year, after the US presidential election.

The World Bank study estimates an increase in economic output for New Zealand by 2030 from TPP of around 3 percent, compared to less than 1 percent for the US and Australia. New Zealand would be the fourth largest gainer behind Malaysia, Vietnam and Brunei, roughly equal with gains estimated for Singapore. New Zealand could expect small increases of around 2 percent in output growth, with slightly greater gains in unskilled than skilled labour-intensive industries.

The study says gains from TPP are likely to be slow to materialise and that “despite overall long term gains, member countries could experience sizeable adjustment costs in the short run.”

“The TPP agreement reductions in non-tariff measures and implementation of common regulatory practices are back-loaded, and so will be any transition effects and gains from TPP.”

Tariff reductions were expected to account for only about 15 percent of the GDP increases forecast for TPP member countries, since most had relatively low tariffs on goods already. The biggest gains were likely to be in service industries.


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