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NZ US Council: address to TPP Stakeholder Forum, Chicago,

REMARKS TO TPP STAKEHOLDER FORUM,
CHICAGO, 10 SEPTEMBER 2011

STEPHEN JACOBI
EXECUTIVE DIRECTOR
NZ US COUNCIL

A NEW ZEALAND BUSINESS VISION FOR TPP

It’s a pleasure to be in Chicago and to have this opportunity to address this Forum about the potential of the Trans Pacific Partnership to transform the way business is done in the Asia Pacific region.

I do so from the perspective of the NZ US Council, a non-partisan organization funded by both business and government in New Zealand and aimed primarily at strengthening New Zealand’s relationship with the United States.

I also speak on behalf of the NZ International Business Forum which brings together the leaders of New Zealand’s largest internationally oriented companies and leading business organizations.

The New Zealand companies and organizations I represent are all united in their belief that TPP, if successfully concluded, will bring benefits to the New Zealand economy, New Zealand citizens and New Zealand workers.

We realize of course that others including some in this room remain to be convinced.

Our intention in speaking today is to participate alongside other stakeholders in the important public debate about TPP.

Because TPP has the potential to go much deeper in the domestic economy than other more traditional trade agreements we agree that this public debate needs to take place.

TPP of course is about more than New Zealand and the United States.

TPP is all about the power of a big idea.

That idea is to create a freer, more coherent, seamless economic space in the region.

This morning I’d like to spend a moment considering why this is important for business not just from New Zealand but from all nine parties and potentially others in the APEC region.

The context

Any sensible discussion about TPP needs to start with the advent of the global supply chain.

Today global supply chains reach local farmers in Viet Nam, pharmaceutical researchers in Singapore, artisans in Peru, technology companies in the United States, motor vehicle manufacturers in Japan and farmers and foresters in New Zealand.

They link demand to supply the world over.

New technologies, new modes of transportation, multi-country manufacturing, agricultural innovation, and the emergence of new services all rely upon expanding global supply chains.

This is how business today is transacted. This is how businesses meet customer demands.

But if business and the global economy today rely on global supply chains, global production, and global consumption, our trade agreements are not keeping pace.

Many trade agreements focus on the old agenda of market access and less on the new agenda of market integration.

That is not to say the old issues are not important – they are, and they need to be addressed, so that we can move forward to the next stage of business development.

TPP will help shape this progress.

TPP will need to finish the old agenda of market access and achieve comprehensive liberalization over a reasonable timeframe.

TPP will also need a strong market integration agenda focused especially on services, investment, behind the border issues and regulatory coherence and co-operation.

If it is to be successful TPP will need to help businesses meet the needs of our customers by making it easier to do business and reduce costs.

If we can get this right, then the implications of TPP would be significant for business in all TPP member economies.

Ease of doing business

Making it easier to do business requires serious attention to issues that impact on business operations and affect the cost and time in which business can be done.

This requires attention to the laws, regulations and institutional arrangements that shape daily economic activity.

Those of us in business don’t need a survey to tell us how difficult things can be but the research does point to a number of chokepoints that can be targeted.

“Doing Business 2011” is the 8th in a series of annual reports by the World Bank that compares business regulations in 183 countries.

This annual survey is a valuable guide to the relative performance of countries in improving the environment for business and entrepreneurship.

Regulations affecting ten areas in the life of a business are analysed in the report.

A fundamental premise of the World Bank report is that economic activity requires good rules:

• rules that establish and clarify property rights and reduce the cost of resolving disputes;
• rules that increase the predictability of economic interactions
• rules that provide contractual partners with certainty and protection against abuse.

From a business viewpoint the objective should be rules that are efficient, accessible to all and simple in their implementation.

There is a clear link between the quality of business regulation and economic growth.

That’s why in 2009 APEC launched the “Ease of Doing Business Action Plan” with the goal of making it 25% cheaper, faster and easier for small and medium-size companies to do business in the region by 2015.

Given all the work that has been done in recent years to improving the APEC business environment one would think the region would be leading the way in this area.

In fact the World Bank Study reveals a rather mixed picture across the region and even among TPP members.

TPP members feature pretty highly in terms of starting a business, ease of getting credit, ease of protecting investors but less spectacularly in terms of ease of trading across borders and ease of enforcing contracts.

APEC’s goal of a 25% improvement in 5 areas is all well and good but until now attempts to incorporate ease of doing business measures into trade agreements have only been partially successful.

In recent years all the APEC economies have been negotiating free trade agreements mostly on a one-to-one basis.

New Zealand has been an enthusiastic participant in this process.

What we see today across the region is a patch-work of agreements which present a confusing picture for businesses operating in multiple locations across the region – a noodle bowl of truly epic proportions !

TPP provides an opportunity to untangle the noodles, to adopt a more rational framework, a common approach to addressing the main chokepoints and more coherence between regulations applied in the region.

To live up to its promise as a “high quality” agreement TPP needs to create an environment that provides ease of market access, low compliance costs, simplicity of rules and transparent regulation that provides certainty and security for business.

Joint statement

New Zealand business is not alone in supporting the concept of a seamless economic space in the Asia Pacific region.

Like-minded business organisations across the region have come together to articulate what they hope to see from the broad outlines of the agreement to be issued in November.

In particular we have highlighted that:

- TPP should be a high quality, comprehensive agreement with no product exclusions and flexible rules of origin

- TPP should aim to eliminate border restrictions on trade in goods and services, and investment, no later than 2020, the deadline set for free and open trade and investment in the Bogor goals

- TPP should address creatively new generation and behind the border issues aimed at eliminating chokepoints in the operation of regional supply and value chains including issues of interest to small and medium-sized business

- TPP should remain a living agreement open to accession by other economies from within the APEC region provided these economies share TPP’s ambitious vision and can demonstrate their ability to accede to an agreement with these characteristics.

A copy of our statement is available at the back of the room.

Conclusion

At the heart of business is the need to create value.

We do that by applying innovation to business processes which ultimately meet customers’ needs.

It is clear that too much value is lost when the cost and difficulty of doing business is too high.

There are many factors that contribute to the ease of doing business, many are tied up in domestic policies making this a complex and difficult area to deal with, even harder than tariffs and other border restrictions.

TPP is an ambitious undertaking, the level of public scrutiny very high, the prize in getting it right very big.

In TPP we can begin the work that is urgently needed to improve the operation of regional supply chains, to reduce costs across the region as a whole, and to create a more seamless economic space.

If TPP has this focus, it will be relevant to business, including SMEs, and deliver on its promise as a high quality agreement for the 21st century.

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