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A new era in the trade and economic relationship between New Zealand Thailand will be realised with the ratification of a Closer Economic Partnership (CEP) Agreement negotiated between the two countries. It is scheduled to come into force on 1 July 2005.
The Agreement was negotiated over six months in the second half of 2004, following preparation of a Joint Study by Thailand and New Zealand. The Prime Ministers of New Zealand and Thailand announced the conclusion of negotiations on 30 November 2004, just over a year after their decision to launch a Closer Economic Partnership between the two countries.
The national interest analysis assesses the Agreement from the perspective of its impact on New Zealand and New Zealanders; it does not seek to address the impact on Thailand. The Joint Study established that both countries anticipated mutual benefits from a CEP.
The value for New Zealand in a CEP with Thailand lies in:
New Zealand and Thailand are complementary economies. Thailand exports predominantly manufactured goods to New Zealand, while New Zealand specialises in exporting agriculture-based goods and some niche manufactured items. Bilateral merchandise trade exceeded NZ$1 billion in 2004.
Thailand maintains some of the highest trade barriers in the South East Asia region. By removing all these barriers over time and many of them immediately, the CEP will open up significant opportunities for New Zealand to develop the trading relationship with Thailand to its full potential.
The negotiation produced a comprehensive agreement covering all goods. The New Zealand/Thailand CEP will serve as a building block for the Free Trade Agreement under negotiation between the Association of South East Asian Nations (ASEAN), Australia and New Zealand and will help maintain momentum towards multilateral trade liberalisation through the World Trade Organisation (WTO).
Key potential gains include:
The adjustment effects arising from reciprocal removal of New Zealand’s tariffs on imports from Thailand under the CEP are expected to be very muted, especially considering that 65% of imports from Thailand already enter duty free. Moreover, the adjustment process for the more sensitive sectors will be gradual and supported by existing assistance measures linked to the government’s 2006-2009 tariff reduction programme. The provision relating to temporary employment for Thai chefs is not expected to displace New Zealand workers.
Key new obligations for New Zealand under the CEP include:
Obligations in a number of other areas of the Agreement, such as transparency requirements and treatment of investments, are fully consistent with existing New Zealand practice. New Zealand’s ability to regulate for national policy objectives is explicitly recognised. The overseas investment screening regime will continue to apply to relevant Thai investments. The CEP Agreement does not prevent New Zealand from taking measures it deems necessary to fulfil its obligations to Maori or to support creative arts of national value.
Economic effects: The CEP is assessed to make a modest but positive contribution to New Zealand’s economic growth prospects over time, both through static gains from reciprocal trade liberalisation and dynamic productivity gains derived largely from improvements in the regulatory environment. As New Zealand and Thailand are both internationally competitive suppliers across most bilaterally traded goods, the gains should not be undermined through trade diversion effects.
The CEP can be expected to appreciably improve opportunities for New Zealand sectors who export significant volumes to Thailand and/or face high tariffs. Among the sectors with the greatest potential to benefit are dairy, horticulture, and manufacturing.
Social effects: The CEP is not expected to have any discernible negative social effects on New Zealanders. Tariff removal on imports from Thailand is unlikely to have any significant impact on employment. Overall effects on employment are more likely to be net positive. The access granted for specialist Thai chefs to work temporarily in New Zealand is not expected to displace New Zealand workers. New Zealand’s social legislative and regulatory frameworks will not be affected by the CEP. The Arrangement on Labour reaffirms New Zealand and Thailand’s commitment to sound labour policies and practices.
Cultural effects: The CEP includes safeguards which will ensure that there are no adverse effects on New Zealand cultural values, including Maori interests.
Environmental effects: New Zealand has sufficiently robust environmental laws, policies, regulations and practices in place to manage any potential negative impacts. The CEP may also produce some positive environmental outcomes for New Zealand. The CEP itself and the Environment Arrangement both support the aim of harmonising objectives for trade and the environment.
The direct financial implications for the New Zealand government of the CEP relate to declining tariff revenue (NZ$6 million was collected on imports from Thailand in 2004), minor one-off costs to government agencies of implementing the CEP, and the ongoing costs of complying with the CEP and associated Arrangements (estimated at $280,000 pa for the next few years).
It is anticipated that the Agreement will be amended following the conclusion of negotiations on liberalisation of trade in services and government procurement, and in light of further liberalisation in the area of trade in goods and investment.
A small number of legislative and regulatory amendments are required to align New Zealand’s domestic legal regime with rights and obligations created under the CEP Agreement, in particular in respect of tariffs, rules of origin and bilateral transitional safeguards.
In New Zealand, the study, preparation and negotiating phases involved extensive inter-agency collaboration and consultation with non-government stakeholders. Input was received through submissions, meetings, and email correspondence. A communication programme kept stakeholders informed of progress and provided opportunities for input.
