Who Benefits Most From TPPA Tariff Reductions?

Tariffs exist to protect local enterprises from perceived unfair competition from overseas competitors. Tariffs are a two-edged sword. Tariffs may mean less access to markets for exporters, higher prices, and less choice for consumers, but they also may mean better quality goods and more jobs for locals, with better pay and working conditions.

The Transpacific Partnership views all tariffs as bad. The TPPA encourages signatory countries to do away with tariffs. For our government it has been one of the agreement’s biggest selling points. New Zealand jumped the gun and did away with most of our tariffs in the 1980s and 90s. Most other countries did not follow suit.

Under the TPP, tariffs will not be reduced nearly as quickly and comprehensively as the government has touted, though. For example, the meat deal with Japan will take at least 15 years to get tariffs from 39% to 9%. Even then, Japan retains the right to manage the quantity of imported meat it allows into the country and to impose much higher tariffs if that is exceeded.

We are told $259 million a year will be saved when tariffs are eventually lifted. But who will benefit most from these savings? Consumers in the countries we export to, or New Zealand producers?

It is hard to see how New Zealand producers will gain much extra income from tariffs being removed. That would require retail prices for our exported goods to remain the same as they are now, which our exporters argue makes it too hard for New Zealand products to compete with local products. It would also require the large corporations that manage most of our exports to hand the money saved on to the actual producers instead of using it to increase their profit margins.

Arguably, New Zealand exporters might be able to increase their market share if tariffs are removed and retail prices are more competitive. However, in the case of the Japanese meat deal, New Zealand will be competing for market share with other major meat producers, such as the US and Canada, and consumers who prefer to buy local because they trust local producers or want to support their local economy or care about environmental issues such food miles.

In the cold light of day, potential gains for New Zealand from tariff reductions seem very small and highly speculative compared to the amount New Zealanders have to lose by signing the TransPacific Partnership.

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