International Trade between Australia and New Zealand

This report outlines the status of international trade between Australia and New Zealand (NZ). Objectives of trade agreements, benefits and disadvantages of CER and FTA, wealth from CER and FTA, dairy industry perspective, TPPA effect, and recommendations are discussed.

Running Head: International trade 1
International trade

International trade 2
Executive summary:
Relations between the Australia and New Zealand are also called as Trans-Tasman relations, as
both the countries shared great history, standards, organizations, personal relationships, healthy
rivalry with each other. All these things make their relations more strong and close. They work
together in almost every area of the government which also includes issues related to trade,
economy, defense and foreign policy.
Almost 2.5 million short term stays are made by the citizens of both the countries across the
Tasman each year, and both the countries have large number of population of other country.
However, cultures of both the countries are completely different, but still there ancient bonds,
domestic ties, and friendships helped each other to make their relations more strong.
Australia and New Zealand work closely with each other on different issues such as policy
related to foreign matters, security, trade, etc. and it also involve international institutions such as
the United Nations and World Trade Organization. They also cooperate on aid and development
works in the Pacific and South East Asia regions. Economic relations of the countries are
recognized by the Australia and New Zealand Closer Economic Relations (CER). CER is the
most effective free trade agreement across the globe. They have also dedicated to a process
known as Single Economic Market (SEM) agenda, as this process is designed for the purpose of
creating a seamless trans-Tasman business environment.
This report outlines the status of international trade between Australia and New Zealand (NZ).
New Zealand enters into number of free trade agreements, one of these agreements is the long
standing Closer Economic Relationships (CER) agreement with Australia and other trade
agreement is the NZ China Free Trade. Recently, NZ has been agreed on Trans Pacific

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Partnership Agreement (TPPA) and this agreement is going to be ratified by 12 signatory
governments.
Contents
Executive summary:....................................................................................................................................2
Introduction:...............................................................................................................................................4
Discussion:...................................................................................................................................................6
Objectives of trade agreements:.............................................................................................................6
CER:.....................................................................................................................................................6
New Zealand–China Free Trade Agreement:.......................................................................................8
Benefits from treaty:...................................................................................................................................9
CER:.........................................................................................................................................................9
FTA:........................................................................................................................................................12
Disadvantages of treaty:............................................................................................................................13
CER:.......................................................................................................................................................14
FTA:........................................................................................................................................................15

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Wealth from CER and FTA:........................................................................................................................15
NZ Perspective:......................................................................................................................................15
CER:...................................................................................................................................................16
NZCFTA:.............................................................................................................................................17
Dairy industry perspective:....................................................................................................................18
Tatua perspective:.................................................................................................................................20
TPPA Effect:...............................................................................................................................................21
Tatua Perspective:.................................................................................................................................23
Conclusion:................................................................................................................................................23
Recommendations:....................................................................................................................................24
References:................................................................................................................................................25
Introduction:
New Zealand is a trade dependent economy which is completely different from export markets,
as this country provides maximum support to the free and open trade. This country got the one of
the biggest open market economies in the world (NZ foreign affairs & trade, n.d.).

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The Trans-Pacific Partnership (TPP) is an agreement which is secretive and ensures
multinational trade. TPP mainly exposed to spread the preventive intellectual property (IP) laws
across the globe. In other words, TPP is an agreement which mainly helps in liberalizing the
trade between the 12 Pacific-rim countries. These countries are New Zealand, Australia, Brunei
Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, Singapore, the United States and
Viet Nam (NZ foreign affairs & trade, nd.).
This agreement is signed on February 2016 and it is ratified in May 2017 by the New Zealand
which is also the depository for the TPP. It must be noted that this agreement is also ratified by
Japan. However, this agreement cannot be enforced till the time it is ratified by other four
countries which also includes United States. Notification is send by the US that it does not intend
to become the party of TPP (BBC, 2013).
After the withdrawal of US, ministers of other 11 countries confirm the importance of the TPP in
context of economic and strategic approach. Negotiations related to this agreement are concluded
on 23rd January 2018 on the Comprehensive and Progressive Agreement for Trans-Pacific
Partnership (CPTPP).
CPTPP is the agreement which is based on the Trans Pacific Partnership (TPP), and this
agreement is signed in February 2016 but never enforced because of the withdrawal of the US.
This new agreement includes different elements of TPP that were negotiated as part of TPP butt
there are some important differences (Electronic Frontier Foundation, n.d.).
Partnership with other countries provide large number of opportunities for New Zealand, and this
agreement help the NZ to expand their activities in new destinations of exports in context of their
business. This agreement also help by creating the jobs and result in better standard of living for

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all the citizens of NZ. At same time, it protects the right of government to regulate in the public
interest and the unique status of the Treaty of Waitangi (NZ foreign affairs & trade, nd.).
This report is written for the Board of the Dairy Company Tatua, and it mainly reviews the
existing trade agreements and also the impact of TPP on the existing markets. Structure of this
report includes different sections which answer different questions such as objectives of the CER
& New Zealand China free trade agreements, benefits of these agreements to the society of NZ,
disadvantages of these agreements to the society of NZ, how these agreements create wealth for
different people, and impact of TPP on CER and New Zealand China Free Trade Agreement.
This report also includes recommendations. Lastly, paper is concluded with brief conclusion.
Discussion:
Objectives of trade agreements:
This section of the report defines the objectives of two different free trade agreements from NZ’s
perspective:
CER:
The Australia – New Zealand Closer Economic Relations Trade Agreement is also referred as
ANZCERTA or the CER Agreement, and this agreement is the most important bilateral free
trade agreement. Generally, this agreement involves all the goods related to trans-Tasman as it
also includes agricultural products and it is the first agreement which includes free trade in
context of services. The main objective of this agreement is the creation of a World Trade
Organization which consist Free Trade Area encompassing Australia and New Zealand.

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Following are the main objectives of CER agreement and these objectives are stated in Article 1
of the Treaty (DFAT, 1997):
 It helps in strengthen the trade relations exist between Australia and NZ.
 CER also ensure the development of relations between Australia and NZ in context of
economy, and this can be done through mutually expansion of free trade in both
countries.
 Trade barriers are eliminated by CER between both the countries in such manner which is
both progressive and gradual, and this is done on the basis of accurate time table with
minimum level of disruption.
 It also develops the trade between New Zealand and Australia on the basis of the fair
competition conditions (NZ Foreign Affairs & Trade, n.d.).
This agreement is gone under three general reviews that are:
 It increase the attainment of free trade in goods meeting under the CER rules of origin,
for the purpose of eliminating restrictions related to tariffs and quantitative on trade by
1990.
 It also increases the scope of agreement for the purpose of including trade in services.
Additionally, different elements of CER agreement from number of years have been amended
and refined (NZ, n.d.).

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New Zealand–China Free Trade Agreement:
New Zealand–China Free Trade Agreement is also referred as FTA and this agreement is signed
in Beijing in April 2008 by NZ and China. Both the countries also concluded an Environment
Cooperation Agreement (ECA) and a Memorandum of Understanding on Labour Cooperation
(MOU). All these agreements are enforced on 1st October 2008(NZ Foreign Affairs & Trade,
n.d.). Objectives of this agreement are stated below:
 FTA ensures liberalization in the trade related to goods, and for this purpose it removes
over time of tariffs by 96% related to traded goods and this amount is equal to annual
duty which saves almost amount of $115.5 million on the basis of current trade.
 FTA also state the rules which determines the quality of goods in context of tariff cuts,
and it also state the instructions to hostage the unfair trade or unexpected issues related to
imported goods.
 FTA also covers provisions related to services, as it benefits the service sectors of New
Zealand because they expand their commitments in education and environmental
services.
 NZ also get the benefit from the provision which provides facility related to business
travel for citizens of China and it also provides access to skilled workers from China in
specific field only.
 NZ also get the benefit in context of investments, as they get enhanced protection for
investments made in China. This provision also ensures the competency of NZ investors
in comparison of investors from other countries. NZ investors get access to bind the third

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parties in arbitration proceeding if any breach is made by the government officials of
China.
 FTA also makes efforts for improving the environment of business and also provides new
opportunities for the business. This agreement also state the provisions related to the
customs and cooperation, sanitary and phytosanitary measures, technical barriers to trade
and intellectual property and it state the design for reducing the barriers. It also
establishes the outline for collaboration to increase the benefit of the FTA. The main
purpose is to make strong cooperative relationship and new opportunities of business for
both the countries.
 FTA also contain the Mutual Recognition Agreement on Electrical and Electronic
Equipment (EEEMRA), as this agreement facilitate the conformity assessments of large
proportion of electrical and electronic products traded between the two countries.
 This agreement also establishes the mechanism for dispute settlement and also contains
the protection for domestic regulatory and policy-making flexibility of both the countries.
 Both the countries also signed binding Environment Cooperation Agreement and a
binding Memorandum of Understanding related to Labor Cooperation.
Benefits from treaty:
Both the agreements provide various new benefits to the NZ Society and some of these benefits
are stated below:
CER:
CER provides various benefits to the society of NZ, as it reduces the compliance cost and also
improves the certainty for NZ investors by establishing the preferential marketing access and it

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also provides threshold for investments in specific business assets. This protocol eases the
productive foreign investment in business Assets in both Australia and NZ. This protocol does
not alter the existing regime of screening in context of sensitive lad and fishing quota (mfat,
n.d.).
For the purpose of facilitate the NZ investors to make investment in business assets of Australia,
CER set threshold at A$ 1.004 billion. This is the same threshold from which investors of US get
benefit under AUSFTA. Therefore, it can be said that only investment which represents
substantial interest in Australian businesses is worth A$ 1.004 billion and above require approval
from the Australia’s Foreign Investment Review Board (FIRB).
As per the data, only few investments from NZ investors in non-sensitive business assets
required approval as per this new threshold. Investors of Australia also seek to invest in the
business assets of NZ and get benefit from the increased threshold. Only investments in which
investors from both the countries buying 25% or more of a business and either that share is more
than NZ$477 million, or the assets of the target investment are more than NZ$477 million need
approval by the Overseas Investment Office (OIO). It must be noted that increased thresholds
related to investments applied in case of important business assets only, but screening regime in
context of sensitive land and fishing quota is not changed and applicable to Australian investors.
However, if investors want to invest in specific business assets including sensitive land and/or
fishing quota, then it is necessary that investment meets the required criteria for all of those
categories of investment which required consent.
Threshold limits of both the countries are indexed annually on 1st January for the purpose of
grossing domestic product, and these thresholds also ensured that they maintain their size in

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context of each economy. These thresholds were approved by the Prime Ministers of both the
countries in the meeting held on 2009. The Australian threshold limit is similar to the threshold
available to US investors under AUSFTA. Threshold of NZ is almost half in comparison of
threshold set by Australia, and it reflects the differences in the size of the two parties’ economies.
Additionally, CER also provides other benefits to the investors of NZ:
 Investors of NZ get benefit of national treatment in Australia, which means they treated
in similar way as the Australian investors treated.
 NZ investors and their investments in Australia will get no less favorable treatment in
comparison of investors from any third country with whom Australia may be enter into
any agreement in future. In other words, NZ get the benefit of most favored nations.
 NZ investors and investments made by them in Australia does not fall under the rules
which required investors to achieve the limit of compulsory exports, domestic content or
technology transfer agents (Siddique & Chaterzee, 2002).
NZ also get some other benefits also, and these benefits are listed below:
 Application related to QIA screening regime for foreign investments also involve the
sensitive land and fishing quota.
 CER also preserve the space for government for the purpose of legitimately regulate
some specific situations, such as balance of payment crises or for providing protection to
the human, animal or plant life or health.
 Exchange of letters in context of reservation of Australia on non-confirming measures at
the regional level of government. Revised schedules are provided by Australia with the

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protocol which incorporates all regional measures which are non-conforming and this
provide the benefit of transparency to the NZ investors.
 CER negative list schedules related to reservation provide high level of transparency to
the NZ investors by listing only those sectors of the economy in which one or more core
obligation does not applied.
Additionally, protocol provides important strategic and political benefits for NZ investors. It also
shows the commitment of NZ to the bilateral relationship with Australia and it also maintains the
position of CER as the most comprehensive trade agreement in the world. However, this protocol
also serves as example for any future treaties and reflects the quality which can be reached in
case of high level of ambition and integration are already present in the relationship.
FTA:
NZ get various benefits from the removal of the over time of tariffs on 96% of NZ’s current
exports to China, and this amount is equal to an annual duty saving of NZ$115.5 million based
on current trade. Following are the advantages of FTA get by the NZ society:
 FTA eliminates the tariffs on over NZ$200 million which is worth of exports done by
NZ.
 FTA also eliminated China’s tariffs of NZ$621 million related to current exports for the
first five years, and this includes infant milk formula, casein, frozen fish, frozen fish
fillets, methanol, animal fats & oils, apples and wine.
 FTA also eliminated China’s tariffs of NZ$77 million related to current exports for the
first nine years, and this includes beef and sheep meat, edible offals, sheepskins and
kiwifruit.

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 FTA also creates special country-specific tariff quota for the wool of NZ, and this quota
provides the benefit of initial duty free entry of almost 75% of average annual exports in
the 2004–2006 period.
 By the end of the phase of tariff, tariffs on all but $80 million related to current trade will
be eliminated.
NZ also get benefit from the expansion made by China in service sector which also includes
services related to education and environment. It must be noted that NZ goods entered in China
are required to be released within 48 hours of arrival and exporters may apply for advance
rulings.
FTA also recognizes the rights of NZ under the WTO for the purpose of taking actions against
unfairly traded imports from china and also contains prohibition against subsidies on export. NZ
also get benefit in context of area of investment, as they get more protection in form of national
treatment and also the position of ‘Most Favoured Nation’ (MFN) non-discrimination provision
for the purpose of ensuring that investors of NZ remain more competitive in comparison of
investors of other countries.
NZ investors get access to bind the third parties in arbitration proceeding if any breach is made
by the government officials of China. As well there are some provisions which facilitate the
communication between the two countries on the matters of investment (Mfat, n.d.).
Disadvantages of treaty:
This section of the report states the disadvantages faced by NZ society in context of both the
agreements.

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CER:
Higher threshold for the investors of Australia stated in the protocol require the OIA to monitor
the Australian investors utilizing the higher threshold for the purpose of ensuring that they do
qualify as Australian investors. OIO also monitors the activities of foreign investments for the
purpose of ensuring that investors from foreign countries complied with their obligations under
the OIA. It is assumed that this monitoring will be able to enforce the application related to
Australian investor related for higher threshold in effective manner. On periodic basis, OIA
review the effectiveness of its monitoring systems.
Future evaluations will also include the considerations of the effectiveness of monitoring of
investor compliance in context of higher thresholds available to investors of Australia. Some risk
is also there that investments made in Australia falling between the thresholds of falling between
the NZ$100 million and NZ$477 million, might be eliminated by the OIA and will be proceed in
such manner as they did not require approval of OIA. However, it cannot be assumed as
important risk because in last 25 years not even single application of Australian investor in NZ
business assets is declined.
Therefore, it can be said because of CER NZ is not able to extend the category of investments
which require prior approval from authorized institutions such as sensitive land, significant
business assets and fishing quota. However, government also retains the flexibility in context of
type of tests which are applied on these types of investments and also allowed the flexibility for
future policy.

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FTA:
FTA states a special safeguard mechanism and also a requirement of mid-term interview for
particular products of dairy which are considered sensitive by the China. However, impact of
these mechanisms is limited because it applies only if activated and for limited period of time.
It must be noted that, liberalization in tariff is not applied for specific processed wool and paper
products, and these products are almost equal to 4% of NZ’s current exports to China. China also
maintained the WTO tariff quota rate for a range of primary products. However, these products
are not exported by NZ to China. FTA also provide country-specific tariff quota (CSTQ) in
context of wool and wool tops exported to china. Initial stage of quota equals to almost 75% of
NZ’s current exports, and this is not as much as NZ wanted. Elimination of tariff by NZ’s on the
import of china ensures effects of adjustments for import competing sectors.
The FTA provides number of protections for the purpose of reducing these effects. Mechanism
in context of bilateral safeguard is introduced by the FTA and under this mechanism China is
allowed to impose additional duties on the products of the NZ if exports are causing serious
injury to the Chinese industry.
Wealth from CER and FTA:
NZ Perspective:
Both CER and FTA provide new opportunities to the New Zealand, and they also make the
relationship between the respective countries strong. Both the agreements provide framework
which ensures economic and social benefits for the New Zealand. NZ witnessed significant

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growth in the economy and this growth is the result of further liberalization of trade, mitigation
of tariffs, elimination of trade barriers, etc (Productivity, n.d.).
CER:
This agreement accompanied with other protocols, treaties, and arrangements result in further
liberalization of trade between the two countries. In 1992, protocol related to trade in services
was signed and in 1996 single aviation market was established. In 2009 it provides commitment
to Single Economic Market agenda for the purpose of promoting mutual growth, competitiveness
and prosperity. These together with other achievements in different areas provide number of
benefits to the NZ, and some of these benefits are stated below:
 NZ is the trade dependent country, and economy growth of this country directly depends
on the international trade and foreign investments. As per the data of NZ statistics, almost
10.6 % increase is witnessed in the Trans-Tasman trade of goods on annual basis. Exports
of NZ to Australia are NZ$9.1 billion which is equal to almost 17.5% of total exports.
FDI of Australia in NZ is almost 70% in 2014 that is almost NZ$53 billion. Presently,
total of bilateral trade between the two countries is above AUD16 billion.
 NZ also get various benefits occurred from increase in trade, investments, and from
elimination of transaction cost and this happen because of the harmonization of standards
and profession qualifications, reduction in cost related to industry, less regulatory
barriers. It also provides the benefit of fair competition because of the minimizing market
distortions in trade in goods and more legal certainty.
 The Trans-Tasman mutual recognition Arrangement also allowed the free movement of
goods and it provides benefit of cheaper and specialized workers. This agreement also

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creates new job opportunities and provides new goods and services at low cost (Acuity,
2017).
NZCFTA:
After CER, New Zealand signed biggest trade agreement with the China and this agreement is
referred as FTA. FTA also provides different economic benefits to the NZ. Following are some
economic benefits to NZ:
 FTA is the big achievement for NZ as it promoted idea of trade liberalization. It puts the
NZ in advance position in comparison of other developed countries (Export.gov, 2017).
 NZ influence related to regional integration discussions will be increased as both China
and NZ are active members of Asia Pacific Economic Cooperation (APEC) and the East
Asia Summit (EAS) (Barber, 2014).
Additionally, FTA provide major economic benefit to the service industry of NZ, as services
include very low share of NZ exports to China that is almost 13% only, but this share is
increased by 83% in last five years. Two-way trade related to services is currently dominated by
tourism and education. However, rage of services in exports is diversified in nature. Recently,
education industry is considered as largest service export on part of NZ to China.
From last few years, short term visitors from China have been rapidly grown, and for NZ china
become the fastest growing visitors market. From 2000-2014, almost 250000 visitors from China
had arrived. It is estimated by NZ that this number reach almost 1million by 2020. In comparison
of other countries, Chinese visitors spend more amount of money at their visits that is almost
$4000 per person. Therefore, it can be said that service sector also get different benefits from
FTA (Look me after, 2015; The treasury, n.d.).

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Dairy industry perspective:
Dairy industry of NZ is considered as primary beneficiary of FTA that it accounts almost
NZD2.8 billion of the exports in the year 2012, and this growth is followed by the wood industry
that is almost NZD1.2 billion and meat industry that is NZD412 million. There are number of
ways, through which this fact is considered that primary industry will be the future source of NZ
economy. However, this industry also face various issues also which cause great damage to the
industry and organizations (Wheeler, 2014).
From last five years, various thresholds for tariff began to fall and it creates difficulties for some
NZ exporters. Dairy sector of NZ face various crises and this cause damage to the reputation of
NZ Inc. brand in the eyes of Chinese authorities and customers. Strategy of NZ related to China
is not appropriate because it always cause different issues, and fails to utilize all the benefits of
FTA. Rebuilding of trust must be primary objective of NZ, but things do not seem like this.
Failure of officials of NZ in understanding the new Chinese customs certification documents
resulted in detainment of 30000 tons meat that is almost equal to NZD100 million’s in the
northern port of Dalian during the year 2013.this type of incident also happens with the milk
products in similar year.
This requirement of rebuilding the trust also extends into the sensitive area of food safety. In
January, there is DCD contamination in milk manufactured by Fonterra. However, DCD
contamination is considered as Alarm and the botulism scare seriously dented the NZ Inc. brand
and because of all this retailers of China is not interested in selling NZ dairy products because
customers demand more safe products from other exporters (NZIER, 2017).

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It is difficult to determine the damage caused to NZ brand, but one thing is clear that NZ milk
has lost its image in front of the Chinese customers. It is the time to rebuild this trust on the basis
of safety standard of NZ because one child policy in China makes the Chinese parents more
sensitive about their children’s food safety. This fact is actually problematic for the dairy
producers of NZ, especially for the small dairy companies because milk products have profitable
and big market in China. There is terrible record of Chinese dairy products after the scandal of
2008 under which almost 13 infants died as a result of the melamine infection in the formula, and
dairy products of other exporters capture big and good market in China (Dcanz. N.d.).
After considering the above facts, it can be said that dairy exporters of NZ witnessed significant
growth in the Chinese market, but because of inability of the products and government officials
there is great loss of reputation. Strategy of NZ is not that much capable as it take all the benefits
of FTA. Therefore, there is clear to need to make amendments in the strategy (Lee, n.d.).
On the other hand, CER also provides various benefits to the dairy industry of NZ because this
agreement also ensures free flow of trade in Australia. CER ensures low tariff, elimination of
trade barriers, trade liberalization, etc. however, Australian dairy farmers are not ready to get
involved with the NZ through the CER agreement, because of the fear that they are not able to
compete with them (Mbie, 2017).
On the basis of this fact, Government of Australia provides unequivocal commitment to the dairy
industry:
 Consultations and discussions are arranged between the industry and the government
before signing any agreement related to dairy industry in context of CER with the New
Zealand.

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 No arrangements will be signed with the New Zealand in such way which results in the
damage to the domestic market of the Australia for dairy products.
 The Australian dairy industry will not be disadvantaged by unfair competition from New
Zealand (Department of foreign affairs Canberra, n.d.).
These issues arise because of the different culture and different nature of the dairy industries of
both the countries. Australian dairy producers find it difficult to compete with the dairy
producers of NZ because of the evolutionary track of the industries of both the countries.
Australia is not as homogeneous, and the NZ is split geographically and face issues related to
Federal and state relationships. It must be noted that Australian Dairy Corporation (ADC) is a
regulatory body and this body witnessed changes considerably over the 1970s and 1980s. Before
that this country is producer dominated because of which both NZ and ADC adopt similar view
related to any issue, but still there are some big differences between the two (Massey, n.d.).
Tatua perspective:
After analyzing the agreement signed by New Zealand with Australia that is Closer Economic
Relations (CER) and with the China that is New Zealand China Free Trade Agreement, it can be
said that these agreements directly affect the operations and business strategies of Tatua. It
becomes necessary for the company to review all these trade agreements before expanding their
business and take any other actions related to export. It must be noted that, there is one more
agreement that is TPPA which also affects the operations of the company because this agreement
has direct impact on the existing markets and it finds new opportunities for the company.
Tatua can consider different markets of TPP members to expand their business and must frame
accurate plan to enter into these markets. FTA and CER already opened the door of Australian

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market and Chinese market for Tatua. All these agreements provide various benefits to the
company be liberalizing the trade, reduce tariff, low cost of transportation, elimination of trade
barriers, etc.
NZ signed different free trade agreements with different countries and all these agreements
increase the capacity of NZ in primary industries. Dairy industry of NZ get various benefits from
these trade agreements and these benefits are already stated in above sections. Contribution of
this industry is big in the economy of the country.
Tatua Co-operative Dairy Company is an export oriented company, and this company exports
almost 94% of products to other countries that is more than 60 companies across the globe.
Because of vast expansion of business in other countries, it is necessary for organization
understand the impact of trade agreements and how they can capture the market (Ciggi, 2014).
TPPA Effect:
The former Prime Minister was very serious in context of trade agreements, and because of this
government of NZ entered into different trade agreements with different countries such as CER,
FTA, and now TPPA. It takes long time to sign the FTA because of the complex issues under
the FTA. However, after the introduction of TPPA, provisions and measures of both the
agreements that are FTA and CER come into question. It also put some positive impacts also as
it opens the trade door of those markets which are not yet covered by the FTA and CER.
TPPA does not meet all the expectations especially in dairy sector but it improved the market
access in some specific sectors and provide new opportunities of trade. In other sectors such as

International trade 22
beef market in Japan, NZ stands on the same position as other exporters who signed FTA. Even
dairy market access is improved in comparison of previous situation. In any situation, results of
TPP are greater as it provide best benefits of exports such as elimination of tariff by 93% on NZ
exports which amount to saving of $259 million each year (Jacobi, 2016; Meadows, 2016).
This type of benefits also effect in other ways such as it saves the cost of the company which
ultimately reflects in low cost to the consumers. Negotiators of NZ would secure the deal without
requiring the major adjustments in context of NZ. This achievement is really big for small
economies because they offer very little to the biggest partners of trading. Therefore, it can be
said that TPPA has great impact on FTA, because FTA deliver benefits from the first day of
enforcement but its shows with the time. However, TPPA accelerates the growth from the
beginning and this growth is reflected at initial stage. FTA gives rise to an extra ordinary
increase of market in two forms as it reduce the tariff and remove the barriers but TPPA only
ensures increased threshold which seems less effective in comparison of FTA. However, it must
be noted that similar situation happen with CER also.
On the basis of numbers, TPP is considered as big achievement because in this new set of rules
applied to 36% of the GDP of the world which also includes first and third largest economies and
812 million peoples. It also affects almost 40% of New Zealand goods exports, 47% of New
Zealand’s services exports and 75% of New Zealand’s foreign direct investment. It covers almost
$28 billion amount of trade of NZ. In other words, TPPA also deliver the measures of FTA with
other five partners with which NZ does not have any agreements (Jacobi, 2015).

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Tatua Perspective:
From the point of view of Tatua, it can be said that TPPA does not have very much effect on the
dairy sector. However, this deal is considered as inadequate for the dairy industry of NZ. Terms
of dairy trade in this agreement are not beneficial for NZ, and it is not possible to sign the TPPA
if such measures are not amended. TPPA only provides the 2% benefit to NZ economy each year
and contribution of dairy industry is less (Hutching, 2015; New China, 2015).
Negotiators of NZ are failed to get the similar market access for the dairy sector as they did for
other primary markets and this factor breaks down the hope of dairy industry players, and leave
them to expect any better deal in the future.
PESTEL for the dairy industry is stated below:
 Political- government policies and threshold limits.
 Economic- this aspect is affected from the purchasing power of the users.
 Social- obesity in context of milk and other dairy products.
 Technological-infant formula used by exporters and how they preserve these products.
 Environment- heat factors and temperature control for dairy products.
 Legal- dairy manufacturers must comply with the measures of trade agreements.
Conclusion:
After considering the above facts, it can be said that free trade agreements like CER and FTA
with China or multilateral one like TPP provide number of benefits to the involved countries.
Partnership with other countries provide large number of opportunities for New Zealand, and this
agreement help the NZ to expand their activities in new destinations of exports in context of their

International trade 24
business. This agreement also help by creating the jobs and result in better standard of living for
all the citizens of NZ. At same time, it protects the right of government to regulate in the public
interest and the unique status of the Treaty of Waitangi.
However, it can be said that all these agreements provide different benefits to the NZ and iits
traders.
Recommendations:
On the basis of above analysis and assessment, following recommendations are stated for the
tatua and dairy industry:
Dairy industry:
Dairy producers of NZ continually face the issue related to tariff on the maximum number of
dairy products which are imported in the markets which are highly protected. It is recommended
to DCANZ to analyze the TPP deal in proper manner for dairy products for the purpose of
ensuring effective discussion with the government for the purpose of eliminating distortion from
the global markets in near future.
Integration of trade also contributes in the enhancement of living standard for maximum
population by providing new jobs and opportunities. It is recommended to the dairy industry to
set a link between industry benefit and social responsibility while framing their business
strategies in the new markets and specially in the countries like Vietnam, china ,etc. because
these countries have high level of social issues.
Tatua:

International trade 25
It is recommended to the company to analyze this report and present it in its upcoming Board
Management meeting and consider below stated phases:
 Company must identify the opportunities in new markets by using different tools such as
SWOT, cost and benefit analysis and stakeholder analysis. As these tools help the
company to understand the target market in better way and prioritize the segments of
different market.
 For the purpose of capturing the target markets it is necessary to develop strategy at every
level that is at corporate level for ensuring competitive advantage, etc.
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