Ambassador's statement on probable economic effects of duty free imports if TPP includes Malaysia

New Zealand Ambassador to the United States Rt Hon Mike Moore, gave evidence 17 November before the U.S. International Trade Commission Inquiry into the probable economic effects of Malaysia's participation in the Trans-Pacific Partnership.

The following is the full statement:

New Zealand Ambassador to the United States of America to the US International Trade Commission inquiry into the probable economic effects of duty free imports under a US Trans Pacific Partnership FTA that includes Malaysia

17 November 2010

Madam Chairman, Mr Vice Chairman, and distinguished Commissioners of the ITC.

It gives me great pleasure to appear before you to reaffirm the New Zealand Government's strong support for the Trans Pacific Partnership an important initiative for regional integration and economic growth, which offers strong economic and strategic benefits for the United States, New Zealand, and the other seven participants.

I am delighted to be able to report to you that, just last week, President Obama and the leaders of the other TPP participants, including Australia, Brunei, Chile, Peru, Malaysia, New Zealand, Singapore and Vietnam held their first meeting together as the leaders of TPP economies. This was a significant event it increases the profile of this important initiative, and reaffirms each country's strong commitment to negotiating a state-of-the-art, 21st century trade and economic framework that addresses the issues faced by businesses, be they large companies or small and medium enterprises, in today’s trading environment.

Today I want to quickly recap on the reasons for New Zealand's strong support for the TPP initiative; to reemphasise its value to the US as a means of increasing exports and creating new jobs; and to focus on the huge economic potential of TPP as the Agreement continues to expand to include others who, like New Zealand and the United States, are committed to negotiating a comprehensive, high quality Agreement spanning the Asia Pacific region.

TPP: a means to boost US exports to the Asia-Pacific region

Since your initial hearing on TPP in March this year, the TPP process has moved on some considerable way. Officials have now had three full negotiating rounds; there have also been specialist inter sessional meetings; and officials in New Zealand are right now gearing up to host the fourth full negotiating round in Auckland, in early December. As President Obama and other TPP Leaders recognised last week in Yokohama, the negotiations are well underway, making TPP "the most advanced pathway to Asia Pacific regional economic integration".

One of the most exciting things about TPP is its capacity for ongoing expansion. In March, TPP Ambassadors addressed you on the basis of a group of seven formal participants. Vietnam was an Associate Member and Malaysia was not in prospect. Now, nine months on, we are absolutely delighted that Vietnam has been able to formally confirm its status as a full participant and we're also absolutely delighted to welcome Malaysia to the negotiations.

And let's consider for a moment what this means for US exports. You will recall that New Zealand's earlier testimony before this Commission drew attention to our concern about the US's declining share of trade in Asia. US exports to New Zealand provide one example. Notwithstanding the fact that US exports have grown on average by 2% each year since 1990, the United States’ share of total New Zealand imports over the same period has dropped from nearly 18% to around 11%.

This trend – an overall declining market share for US exports, despite increasing value of US exports – is consistent with trends for US trade across Asia, and represents lost opportunities for US exporters and workers.

Most economic commentators attribute the declining US share of exports, in part, to the growing network of bilateral and regional trade and economic agreements of which the United States has not been a participant.

One of the attractions of TPP is that it provides the US with a ready made vehicle to start reversing this trend to improve the terms of US trade into a region that is enjoying strong and sustained economic growth, and to create new, higher paying jobs.

And with Vietnam and Malaysia's participation now confirmed, the value of TPP as a marketplace has further increased. Excluding the US, the TPP economies have a population of some 190 million people , with a collective GDP of US$1.98 trillion . Existing US exports to the region are some $117 billion , with nearly $4 billion in agricultural exports .

As I noted earlier, negotiators are already making good progress on laying the foundations to significantly improve the terms of trade between countries in the TPP area. By reducing and removing barriers to trade and investment, and addressing important 21st Century issues faced by our exporters, such as regulatory coherence and rationalising supply chains, TPP offers a unique opportunity to level the playing field for US companies in the Asia Pacific region; to rebuild your share of trade in Asia; ultimately making a sound contribution to the President's goal of doubling US exports by 2015, and creating two million new US jobs.

Malaysia

As I said earlier, the New Zealand government warmly welcomes Malaysia's participation in the TPP. We do this because of our strong bilateral relationship with Malaysia but, more importantly in this context, because we have first hand experience of negotiating Free Trade Agreements with Malaysia, and we are convinced Malaysia shares our vision of ensuring that TPP is a comprehensive, high quality agreement which will set ambitious benchmarks for further trade and economic integration in the Asia Pacific region.

To be specific, New Zealand has recently concluded two high quality FTAs with Malaysia. The first was a regional agreement negotiated between Australia, New Zealand, and the ten countries of ASEAN. This Agreement, which entered into force on 1 January this year, will remove tariffs of 99% of New Zealand's current goods exports over 12 years.

And we have followed this up with a bilateral FTA with Malaysia, which came into force in August this year and has accelerated the removal of trade barriers by five years so 99.5% of New Zealand's goods exports to Malaysia will be duty free in just seven years from today. We also made great progress in a number of other areas, including

• Malaysia agreed to facilitate trade through guaranteed 48 hour customs clearance and self declaration of origin for New Zealand exports.
• We secured improved services access in sectors of key commercial interest, including in education, environmental, management consulting and veterinary services;
• We secured a more predictable and transparent investment climate for New Zealand's investments in Malaysia, supported with robust investor state arbitration procedures.

These are not small things for exporters and investors they're big things. They make our exporters more competitive; our goods move quicker through Malaysian ports; our services exporters have preferential access in key sectors; and our investors have a more predictable environment.

The Malaysia FTA is a good deal for our exporters and we know that US investors and exporters would want access to similar terms. Through TPP, this is possible and not just with Malaysia. There's significant new markets like Vietnam, which has 85 million consumers; as well as the other TPP countries spanning the Asia Pacific.

TPP Expansion

And of course, ultimately, TPP is not about the existing membership. Commissioners will remember that this Agreement started out as a vision driven by Chile, Singapore and New Zealand. Brunei joined before those "P3" negotiations were completed; and we've since seen the US, Australia, Peru, Vietnam and now Malaysia join our ranks. We are a group of countries committed to a common vision negotiating a high standard, ambitious trade agreement that will set new benchmarks for trade and economic integration in Asia.
That's not rhetoric. This is real. I am still a committed multilateralist, but TPP is a different sort of deal. When I was Director General of the World Trade Organisation, we were of necessity looking for lowest common denominator outcomes. That is, our negotiations sought out what was possible between 150 very different economies, all at different levels of development, and with strong domestic political sensitivities in certain sectors.

TPP is different. This is about the highest common denominator. We are all serious players with real experience negotiating high quality trade agreements. We are striving to make this different to set new standards in the region, with the view to other countries joining on as and when they are ready to meet these standards.

We're seeing strong interest across the region. It's wonderful to welcome Malaysia to our ranks. And we're seeing interest from others including mega economies like Japan which is very gratifying. In fact in recent weeks, Japan's government has announced a dramatic shift in policy on FTAs and signalled strong interest in the TPP negotiation. Prime Minister Kan, as APEC host, went so far as to participate as an observer in Sunday's meeting of TPP Leaders in Yokohama. The implications of these developments for TPP's future potential will be plain enough to the Commission.
As I said, we have to be sure those countries which join the negotiations are committed to the high standards which existing TPP members share. There are ways to manage future members, including the possibility that the current members conclude the negotiations, and then move straight into negotiating a second wave with a broader group of countries.

Summary

Thank you for the opportunity to make a submission on the behalf of the New Zealand Government. We do see TPP as one of the most exciting initiatives which we've been involved with for many years. It is ground breaking; we're delighted to welcome Malaysia to the negotiations; and our expectation is that when you consider the probable economic effects of Malaysia's participation in TPP, you will find they bring many positives.

 

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