On November 15, leaders and ministers from 15 countries, including New Zealand, signed the Regional Comprehensive Economic Partnership (RCEP) free trade agreement. Apart from New Zealand, the other 14 countries are Australia, China, Japan, South Korea, plus the 10 countries that make-up the Association of South East Asian Nations (ASEAN). These are Brunei-Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Viet Nam.
Together these 14 countries account for $36.6 billion or 61.1 percent of New Zealand’s merchandise exports in 2019. The largest export destinations being of course, China with 28 percent, Australia with 15 percent, and Japan with six percent. The remaining 11 countries therefore represent just 13 percent of New Zealand’s merchandise exports.
It should be noted that the agreement will not come into force until 60 days after six countries from the 10 within ASEAN, and three of the five non-ASEAN countries ratify it. In addition, New Zealand currently has the following free trade agreements in place with countries that are part of the RCEP:
- Australia–New Zealand Closer Economic Relations Trade Agreement (signed in 1983)
- New Zealand-Singapore Closer Economic Partnership (signed in 2001, and upgraded in 2019)
- New Zealand-Thailand Closer Economic Partnership (signed in 2005)
- New Zealand – China Free Trade Agreement (signed in 2008)
- ASEAN–Australia–New Zealand Free Trade Area Agreement (signed in 2010)
- New Zealand-South Korea Free Trade Agreement (signed in 2014)
- Trans-Pacific Partnership Agreement (TPP) (signed in 2016).
With New Zealand already having free trade agreements in place with all RCEP member countries, it does mean that the RCEP agreement will not provide New Zealand exporters with any additional tariff barrier reductions that are often normally part of a free trade agreement, with only the exception of Indonesia. While New Zealand has a free trade agreement with Indonesia as part of the ASEAN-Australia-New Zealand Free Trade Area agreement, the RCEP agreement provides a New Zealand exporters with lower tariff barriers into Indonesia then had been agreed in the previous FTA.
Therefore, it has to be asked, if New Zealand is not getting widespread lower tariff barriers for our exports, then what is in the deal for New Zealand, apart from improving our ties with these other countries.
So what does RCEP provide New Zealand?
As already mentioned, because New Zealand already has free trade agreements in place with the other 14 countries within the partnership, the main gains for New Zealand are:
- Simplification of trade rules, with all 15 countries agreeing on a standard set of rules. This will reduce compliance costs, reduce the time for goods to clear customs, and enhance predictability for New Zealand goods and services exporters, as well as reduce non-tariff barriers to entry for New Zealand goods and services
- Tariff reductions on some food and manufactured items exported into Indonesia
- Improved access for investments and some protections for New Zealand investors.
Overall the largest gain for New Zealand from this free trade agreement is the lower compliance costs from exporting to any of the other countries within the agreement, especially for those exporters wanting to export to multiple countries. This will have the dual benefit of enabling exporters to increase their earnings from their exports to these countries, as well as encouraging smaller exporters previously daunted by the previously complex rules to begin exporting to the other countries within the RCEP agreement.
The question that the signing of the RCEP agreement raises for me is, and this is a question we should be asking regardless of RCEP is, are New Zealanders happy for New Zealand to simply be a food and log producer for the rest of the world? Or do we want New Zealand to be something else? With New Zealand signing up RCEP, it does potentially lock New Zealand further into our dependence on primary products, as our exports.
As of June 2020, New Zealand’s top merchandise exports included dairy products, meat products, logs, horticulture products, and fish.