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P4 Economic Partnership Agreement - Key Outcomes 1


TRANS-PACIFIC STRATEGIC ECONOMIC PARTNERSHIP AGREEMENT (Trans-Pacific SEP)
BRUNEI DARUSSALAM /CHILE/NEW ZEALAND/SINGAPORE
KEY OUTCOMES
June 2005

SUMMARY

Strategic benefits

- This is New Zealand’s first agreement with a Latin American country.
- It is also the first free trade agreement between four individual countries spanning the Asia-Pacific region, with all four participants being APEC member economies.
- Besides improving market access, the agreement has a strong focus on strategic cooperation with a specific ‘Strategic Cooperation’ chapter.

Brunei Darussalam’s joining

- Brunei Darussalam will join the Trans-Pacific SEP as a founding member. It has, however, has been granted specific flexibilities - in light of its late entry to the negotiations and the small size of its economy – on services, government procurement and competition.

Entry into force

- The Agreement is expected to enter into force on 1 January 2006 subject to the Parties completing their respective domestic processes.

Relationship with the existing New Zealand/ Singapore CEP

- The existing New Zealand/Singapore Closer Economic Partnership Agreement (NZSCEP), which dates from 1 January 2001, will continue in force.
- New Zealand exporters and service suppliers will be able to take advantage of the provisions of either agreement.


TRADE IN GOODS: PRINCIPAL OUTCOMES FOR NEW ZEALAND

Overall outcomes


- The Agreement provides for comprehensive tariff elimination among all four countries. There are no quotas and only very limited use of special transitional safeguards.
- When tariff elimination is subject to phasing, there is also scope within the Agreement to accelerate tariff reductions in the future.

For New Zealand’s exports to Chile
- Currently all New Zealand exports pay a flat tariff rate of six percent. On entry into force of the Agreement, Chile will eliminate tariffs on almost 90% of imports from New Zealand. Key trade items that will benefit immediately include a range of agri-tech products (machinery, veterinary vaccines, timber preservatives) as well as seeds, coal and some dairy products.
- Remaining tariffs on New Zealand’s exports will be eliminated by 1 January 2017.
- The bulk of current trade that will still be subject to tariffs after entry into force of the agreement is a range of dairy products.
For New Zealand’s exports to Brunei Darussalam
- On entry into force, Brunei Darussalam will bind the current tariff-free access for 92% of imports from New Zealand.
- All remaining tariffs will be eliminated by 1 January 2015, except for a short list of products (alcohol, tobacco and firearms) that are exempted on moral, human health and security grounds.

For New Zealand’s exports to Singapore
- New Zealand’s exports to Singapore are already duty free under the existing New Zealand/Singapore Closer Economic Partnership.

Sector outcomes:

Dairy

Chile
- Chile’s tariff on infant milk formula, casein, lactose, protein concentrates, yoghurt, Parmesan and blue-vein cheeses will be eliminated on implementation. These represent 55% of New Zealand’s dairy exports to Chile.
- Tariffs on liquid milk will be eliminated by 2008.
- Tariffs on butter, milk powders and whey will be eliminated on 1 January 2017. For these products there will be a six-year grace period before linear cuts take place over the remaining six years with duties reaching zero in 2017.
- The dairy products facing the 12-year phase out will also be subject to a quantity-based special transitional safeguard mechanism. The safeguard cannot be applied during the first six-year grace period or after the product in question has become tariff free.
Brunei Darussalam
- Tariffs on all dairy exports are already zero.

Sector outcomes:

Manufactured goods

Chile
- Chile will immediately eliminate tariffs on 99% of imports of manufactured goods from New Zealand.
- Manufactured goods, with a strong emphasis on agri-tech items, account for 30% of current exports to Chile. Key products that will benefit from immediate elimination include: agricultural and horticultural machinery, chemical products such as timber preservatives, veterinary vaccines, navigational equipment and timber drying kilns.
Brunei Darussalam
- New Zealand currently exports a limited number of manufactured goods to Brunei Darussalam, 80% of which are already duty free. Brunei Darussalam will eliminate remaining tariffs on manufactured goods variously by 2010, 2012 and 2015.

Other sector outcomes:

Fruit and vegetables

Chile
- Chile will eliminate tariffs on 87% of fruit and vegetable products on entry into force of the agreement. Tariffs on remaining product lines will be eliminated by 1 January 2011.
Brunei Darussalam

- Tariffs on all of New Zealand’s horticultural exports to Brunei Darussalam are already zero.

Forestry products


Chile
- Chile will eliminate tariffs on all forestry imports on implementation.
Brunei Darussalam
- Brunei Darussalam will eliminate tariffs on all forestry imports by 2010.

Meat

Chile
- Chile will immediately eliminate tariffs on 80% of all meat and meat preparations. Tariffs on remaining products will be eliminated by 1 January 2008.
Brunei Darussalam
- All tariffs on meat and meat preparations are already zero.

Seafood exports

Chile
- Chile will eliminate all tariffs on seafood products on implementation.
Brunei Darussalam
- All tariffs on seafood products are already zero.

TRADE IN SERVICES: PRINCIPAL OUTCOMES FOR NEW ZEALAND


Services


- Under the SEP, it will be easier for New Zealand business people to operate in Chile, Singapore, and eventually Brunei Darussalam.
- Subject to specific reservations or exemptions in the services schedules the Agreement establishes the general obligations of ‘market access’ and ‘national treatment’. In sectors when they apply, these obligations will entitle New Zealand services suppliers access to the Chile and Singapore markets (without quotas), and an ability to operate in Chile and Singapore (and eventually Brunei Darussalam) on the same basis as domestic suppliers.
- The Agreement also includes a Most Favoured Nation Treatment (MFN) clause. This means that New Zealand service suppliers will automatically receive the benefit of any commitments Chile, Singapore (and eventually) Brunei Darussalam make in future FTAs that are more liberal than those in the SEP. This will prevent our competitive position from being eroded.
- The agreement uses a ‘negative list’ approach to scheduling services commitments. If a service sector is not included in the services schedules (or excluded by provisions in the Services or General Exceptions Chapters) then it is bound by the national treatment, market access and MFN obligations.
- Each partner’s schedule has two annexes. The first part sets out existing legislative measures that restrict the access of foreign-service suppliers, ie restrict market access and/or caveat national treatment.

Services continued…

- These reservations are subject to the MFN clause and also a so-called ‘ratchet clause’. The ratchet clause ensures New Zealand automatically receives the benefit of any future unilateral liberalisation of a measure listed in the first annex. The liberalisation becomes the new level of commitment in the agreement and cannot be taken away from New Zealand service suppliers – even if the measure is repealed or amended.
- The second part of the schedule lists sectors that are exempted from the national treatment, MFN and/or market access obligations. The ‘ratchet clause’ does not apply to any of these reservations. In these areas each government retains the full right to regulate in a restrictive or discriminatory way, as it deems necessary.
- There are also provisions to facilitate greater recognition of New Zealand’s qualifications and professional registration regimes. The four countries have agreed that priority will be given to enhancing the recognition of architects, accountants, engineers, geologists, geophysicists and planners.

For New Zealand service suppliers to Chile
- Chile’s schedule improves considerably on its ‘national treatment’ commitments in the World Trade Organisation (WTO).
- In particular, New Zealand service suppliers will now be able to operate in Chile on the same footing as domestic service suppliers (across modes 1,2,3 &4) in the following sectors:
1. second-language training, corporate, business, and industrial training and skill upgrading, which includes consulting services relating to technical support, advice, curriculum, and programme development in education;
2. all research and development sub-sectors (subject to some conditions on field research permits);
3. health services in the private sector;
4. wholesale, manufacturing and retail services;
5. services incidental to agriculture, hunting and forestry;
6. storage, transportation, refining and other incidental services in the mining and energy sectors;
7. aircraft repair and maintenance services, selling and marketing of air transport services and a range of non-transportation air services;
8. environmental consultancy services (‘commercial presence only’);
9. a number of sporting and recreational services.

Services continued….

- Chile made commitments in the GATS to treat foreign services suppliers the same as local suppliers (ie provide national treatment) for services relating to accounting, advertising, agriculture, computers, distribution, management consultancy, and veterinarians. Those GATS commitments only apply if the service supplier had a commercial presence (mode 3) in Chile. This agreement extends the national treatment commitment for all these services to cross border supply from New Zealand (mode 1) and consumption in New Zealand (mode 2).
- Chile’s market access obligations do not go beyond its current commitments under the WTO.
- Overall Chile’s ‘national treatment’ commitments are almost the same as those given to the United States in their recent FTA, except with respect to some business services.

For New Zealand service suppliers to Singapore
- New Zealand’s service suppliers will be able to use either the provisions under the Trans-Pacific SEP or the existing NZSCEP (which took a ‘positive list’ approach to listing services commitments).
- The Trans-Pacific agreement improves on the NZSCEP, with respect to national treatment, in relation to the following sectors; tax related services, contact lens practitioners, real estate, aircraft repair and maintenance services, selling and marketing of air transport services and a range of non-transportation air services.
- Overall New Zealand has achieved broad parity (on national treatment) with United States service providers into Singapore, as negotiated in the recent US/Singapore FTA.

For New Zealand Service Suppliers to Brunei Darussalam
- Under the agreed conditions for entry, Brunei Darussalam will have two years from entry into force of the Agreement to negotiate its services schedule. Until it has completed these negotiations Brunei Darussalam will not benefit from the commitments that Chile, New Zealand and Singapore have made in this area.

Temporary entry for business people

- In order to facilitate business opportunities under the services chapter, each Party has reaffirmed their commitments under the GATS agreement relating to the movement of business people.
- There is a commitment to review this chapter two years after entry into force of the Agreement.

Financial services

- There is a commitment to negotiate financial services within two years after entry into force of the Agreement.

Investment

- There is a commitment to negotiate investment within two years after entry into force of the Agreement. The Services chapter includes commitments on services delivered through a ‘commercial presence’ ie through an investment such as a representative office, branch or subsidiary.

GOVERNMENT PROCUREMENT PRINCIPAL OUTCOMES FOR NEW ZEALAND

Government procurement

- New Zealand businesses will be on a much firmer footing to compete for government procurement contacts, particularly in Chile as we already have enhanced access in Singapore under the NZSCEP.
- The Agreement applies to procurement by the entities listed in each Party’s schedules for contracts above NZD100,000 for most goods and services procurement, and NZD10 million for construction services. (There is a special exemption for Brunei Darussalam explained below).
- Above these thresholds, New Zealand businesses will be treated the same as domestic companies when tendering for government procurements by the entities listed in each party’s schedules.
- The partners have also committed to follow general procedures for open tendering that will improve transparency. These procedures are consistent with New Zealand’s government procurement guidelines.

For New Zealand companies interested in Chile

- New Zealand companies will be able to compete for government procurement contracts from the 20 core public sector departments (including their regional officies) in Chiles’s schedule on the same footing as domestic suppliers.
- There is one exception to this commitment for the provision of financial services procurement.

For New Zealand companies interested in Singapore
- Under this Agreement New Zealand companies will be able to compete for government procurement contracts from the 23 core public sector departments listed in Singapore’s schedule on the same footing as domestic companies.
- The list of departments committed by Singapore in this Agreement is narrower than in the NZSCEP, however, the national treatment and procedural commitments are stronger. New Zealand companies will be able to use the treatment under each agreement as relevant.

Government procurement
Continued…

For New Zealand companies interested in Brunei Darussalam
- Under the agreed conditions for entry, Brunei Darussalam will negotiate its Government Procurement schedule within two years of entry into force of the Agreement. Until it has negotiated its schedule, it will not benefit from the commitments the other parties have made in this area.
- Brunei Darussalam has also been granted a special threshold. On completion of its schedule the provisions of the government procurement chapter will apply to it only for tenders of goods and services above Brunei Darussalam $250,000.

NEW ZEALAND’S COMMITMENTS TO BRUNEI DARUSSALAM, CHILE & SINGAPORE

Goods

- New Zealand’s Market Access Schedule under the SEP is the same for Chile and Brunei Darussalam. The schedule improves Chile and Brunei Darussalam’s market access for products of export interest to them, while providing time for any resulting adjustment for our domestic textile, apparel, footwear and carpet sectors through tariff phase-out programs.
- New Zealand currently provides duty free access for 67% of imports from Chile and 99% from Brunei Darussalam.
- On implementation, New Zealand will eliminate tariffs on a further 29% of imports from Chile.
- A range of tariffs on products will be eliminated in 2008 and 2010. Those products in the 2008 category include, steel and iron, cosmetics, hair care and jewellery. Products in the 2010 category include, plasterboard and whiteware.
- The remaining tariffs, covering textile, apparel, footwear and carpet products, will be phased to zero by 2015. Together Chile and Brunei Darussalam account for less than one percent of New Zealand’s total imports in these sectors.

Services

- New Zealand has made some new commitments, in the area of national treatment, in a number of service sectors that go beyond our current WTO obligations including: services relating to business tax planning, collection agencies, computer repairs, credit reporting, energy distribution and mining, speciality design, telephone answering, and private sector health services provided by some professional groups eg dentists, pharmacists, nurses and chiropractors.
- These commitments will benefit Chilean service suppliers (and eventually Brunei Darussalam) more than those from Singapore who already enjoy most of these benefits under the existing NZSCEP.
- New Zealand’s market access commitments are limited to our current WTO GATS obligations.

Services continued…

- The provision, regulation and funding of core public services such as education, health, social welfare, and water have been explicitly excluded from the coverage of the Agreement.
- Reservations were also included to preserve regulatory flexibility in vital economic sectors such as agriculture, fisheries and maritime transport.
- New Zealand’s commitments under this Agreement are consistent with our current regulatory framework and service suppliers from Chile, Singapore (and eventually Brunei Darussalam) are still required to comply with all relevant licensing, contracting and labour requirements.
- New Zealand’s commitments require no change to legislative settings.

Temporary entry for business people

- New Zealand’s commitments are equivalent to those that we have made in the WTO GATS agreement under ‘Mode 4’ (movement of natural persons).

Government procurement

- New Zealand’s schedule contains the 35 core public service departments listed in New Zealand’s State Sector Act 1988 First Schedule plus New Zealand Defence and New Zealand Police, to which our current government procurement policy applies. The government procurement chapter does not apply to procurement by local government in New Zealand.
- New Zealand has also taken exemptions for certain types of procurement including: research and development; the construction or refurbishment of chanceries abroad; and public health, education and welfare.
OTHER PROVISIONS

Rules of origin

- Products must meet the rules of origin (ROO) criteria in order to qualify for preferential tariff treatment under the Agreement. The ROO are designed to facilitate exports and minimise compliance costs for exporters.
- For most of the market access schedule a specified change of tariff classification (CTC) rule will be used to determine origin. (In simple terms, the exported product must be classified differently from all the imported inputs (‘non-originating materials’) as a result of processes performed entirely in New Zealand.)
- Textile, apparel, footwear and carpet products must meet the change of tariff classification rule plus a 50% FOB regional value content (RVC) rule. This means that at least 50% of the final value of the exported product must have been added in the exporting country.
- For a number of chemical, plastic, foodstuff, furniture, motor vehicle and machinery products the trader may elect to apply either a CTC or RVC test. The RVC threshold on these products is 45%.

Rules of Origin continued…

- For a specified list of products (mostly machinery and appliances), only RVC rules will apply. These are products which have undergone intermediate processing (outward processing) in a non-Party prior to final manufacture in a Party. The RVC threshold on these products is 45%.
- New Zealand exporters to Singapore will be able to use the rules of origin under either this Agreement or NZSCEP.

Trade remedies

- Under the Agreement all Parties retain their existing WTO rights and obligations on anti-dumping and countervailing duties procedures and the use of global safeguard measures.
- For trade between New Zealand and Singapore under the New Zealand/Singapore CEP there is no recourse to safeguard action and there are modified anti-dumping provisions.

Sanitary and phytosanitary measures (SPS)

- The Agreement includes new mechanisms for encouraging the recognition of equivalence of SPS measures and regionalisation that will allow for more streamlined and speedy resolution of bilateral issues.

Technical barriers to trade (TBT)

- The Agreement establishes a framework for cooperation among regulators and the development of Mutual Recognition Agreements (MRAs) aimed at facilitating the removal of technical barriers to trade.
- The parties have agreed to focus their initial efforts on electrical safety and electro magnetic compatibility of electrical equipment; grading programs for the purposes of marketing beef; and shoe labelling. The first two priority work areas were requested by New Zealand in response to domestic consultation and are of interest with respect to exports to Chile.

Customs procedures

- The Agreement will facilitate the movement of goods among the SEP partners through enhanced provisions for cooperation, while ensuring Customs’ ability to provide effective and economical border protection.

Intellectual property

- The agreement reaffirms the Parties commitment to the WTO Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement with additional provisions on cooperation, information exchange and traditional knowledge.

Competition

- The Agreement promotes fair competition in line with the APEC principles of non-discrimination, comprehensiveness, transparency and accountability and encourages the development of a cooperation agreement among the parties.

Strategic cooperation

- The Agreement establishes a platform for mutually beneficial cooperation among the Parties, including a focus on innovation, research and development. Particular attention has been given to economic, scientific, technological, educational, cultural and primary industry cooperation.

E-commerce

- The Agreement encourages the use of e-commerce trade in a number of areas, such as government procurement.

Treaty of Waitangi

- As in the New Zealand/Singapore CEP and New Zealand/Thailand CEP, this Agreement contains a specific provision whereby New Zealand maintains its rights to take measures it deems necessary to accord more favourable treatment to Màori, including in fulfilment of its obligations under the Treaty of Waitangi.

Creative arts

- Similar to what was negotiated in the New Zealand/Singapore CEP, this Agreement will not preclude the Parties from taking measures necessary to protect national treasures or specific sites of historical or archaeological value or to support creative arts of national value.

Dispute settlement

- The Agreement includes a robust and transparent dispute settlement mechanism with provision for the establishment of an arbitral tribunal should consultations fail to settle the dispute.

Reviews

- Parties are committed to a general review of the Agreement two years after entry into force and every three years thereafter.

ENDS

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