Speech by John Adank, NZ

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� Trade Ministers defined the broad outlines of a deal and this was endorsed by Leaders. It represents the base from which the negotiations will proceed. � There is a lot of difficult work still to do in order to overcome the sensitivities in the negotiation, but the broad outlines agreed in Honolulu are an important milestone in that process. � As we enter this more intensive phase of the negotiations, every participating economy has committed to delivering a high quality, comprehensive outcome in TPP. � At the Honolulu meeting, Leaders also directed negotiators to finalise the TPP agreement this year. That is an ambitious timetable, but nonetheless one to which the group is working to deliver on. � The eleventh negotiating round took place in March in Melbourne, Australia. Subsequent rounds will be held at six to eight week intervals during the year. Many of the individual working groups have also been meeting intersessionally in order to maintain the momentum. � While we are aiming for a 21 st century trade agreement – there remain some outstanding issues from the 2oth century trade agenda. It is important to appreciate therefore the commitment in the TPP Trade Ministers’ Report (endorsed by Leaders in Honolulu) to eliminate tariffs and other barriers to trade, with the goal of “comprehensive duty free access to each other’s goods markets”. � All of the TPP negotiators understand that this will not be easy. This is the political challenge facing TPP members. WTO-consistent transitional arrangements will be necessary. � With respect to the sensitive agriculture sector, it may well take a decade to allow for gradual and progressive liberalisation. But “elimination” of tariffs is the aim. � I wanted to comment here on New Zealand’s dairy objectives in the TPP and related contexts, which we know is a topic of interest to the agriculture sector here in Mexico. � There are a number of realities about this which are not well understood: New Zealand is a small producer of dairy products. We produce only 2.5 per cent of world milk, which is equivalent to the same amount that the Indian state of Uttar Pradesh produces. There is scope to increase production. Our exports could therefore increase by around 2-3 per cent per annum. Based on these projections, New Zealand could produce another 4 to 7 million tonnes of wholemilk equivalent by 2025. � But that increase in production is far outstripped by the projected growth in demand for milk – especially from the likes of China and India. New Zealand will not be flooding TPP dairy markets. There is a great future for all dairy
producers. (And New Zealand has a lot of technological expertise to share in this sector. We have a long history of agri-business innovation). � Returning to the ambition of TPP, the TPP Trade Ministers Report commits each TPP member to establishing a single schedule – a technical term used to describe legal commitments to open markets to imports – for all the other TPP partner countries. � The report also states there will be common rules of origin in TPP that will make it easier for businesses to take advantage of the agreement as well as encourage the use of TPP inputs. � Recent OECD research has shown that 56 per cent of overall goods trade flows are in intermediate products, i.e. parts or components that are traded across national borders before becoming part of a final traded product. (A recent report on US/Mexico trade under NAFTA illustrates this point. The study, entitled Working Together: Economic Ties between the US and Mexico, by Christopher E Wilson of the Woodrow Wilson International Center for Scholars, informs us that a full 40% of the content of US imports from Mexico is actually produced in the United States) The new nature of trade – Global and Regional Supply Chains � To be globally competitive, businesses need to lower operating costs and to be close to their markets and customers. The old concept of selling vertically integrated products manufactured in one country is outdated. There are huge productivity gains from this intra-industry trade leading to global supply chains which now dominate world trade. � We already have examples of New Zealand firms setting up plants in Mexico for this very reason, and I’m sure there will be more in the future. Two companies, Fisher and Paykel Healthcare and Fisher and Paykel Appliances, have established factories in the north of Mexico, which sell primarily to the US market. Another company, Avohealth, is currently establishing a plant in Jalisco, with a Mexican partner, to produce avocado oil for export. � This increased economic interdependency and complex production and distribution patterns requires clear and coherent rules for trade and investment. The TPP negotiation is addressing this challenge. � This includes examining “behind the border” issues such as regulatory and non-tariff barriers that pose major hurdles for businesses in the 21 st century. � Maintaining and enforcing this complex array of regulations is costly and resource-consuming and increasingly there is a need to harmonise standards and regulatory requirements to facilitate trade.
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Speech by John Adank, NZ

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