Analyzing Trade: CER, FTA & TPPA Impact on Tatua Dairy Company

This report analyzes the international trade relationships of New Zealand, focusing on the Closer Economic Relations (CER) agreement with Australia, the New Zealand-China Free Trade Agreement (FTA), and the potential impact of the Trans-Pacific Partnership Agreement (TPPA) on Tatua Dairy Company. It discusses the objectives, benefits, and disadvantages of the CER and FTA agreements, examining their influence on New Zealand's society and wealth creation. The report also explores the dairy industry's perspective, particularly Tatua's, and concludes with recommendations for navigating the evolving trade landscape. It covers the objectives of trade agreements, benefits from treaties, disadvantages of treaties, wealth from CER and FTA, NZ perspective, dairy industry perspective, Tatua perspective and TPPA effect.

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.