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Review finds fundamental flaws in TPPA economic analysis

Review finds fundamental flaws in TPPA economic benefits analysis

A Tailrisk Economics review of the MFAT assessment of the TPPA economic benefits found that there are fundamental flaws in the modelling of key inputs.

“Eighty-five present of the estimated annual economic benefits of $2.7 billion by 2030 come from reductions in non-tariff barriers and trade facilitation. But the assumptions that went into the modelling are so absurd that the results should be scrapped” said Ian Harrison, Principal of Tailrisk Economics.

• The goods non-tariff barrier model identified countries such as Gabon, Kenya and Albania as having very low non-tariff barriers while New Zealand is one of the worst performers.

• New Zealand is rated as having the third highest non-tariff protection of agriculture in the TPPA group with an effective protection rate of 23%.

• The trade facilitation benefit of $374 million a year are based on a reduction in custom clearance times of just 10 hours. Much of the benefit appears to be due to a reduction in the cost of importing oil where importers are assumed to face an interest rate of 511%.

• The model used to calculate services trade barriers puts the effective rate of protection on New Zealand financial services at 70 percent, when most financial services are already provided by foreign owned companies.

“The benefits of $624 million a year from tariff reductions and market access look too high given the limited reduction in the protection of key agricultural markets.” said Harrison.

“More work needs to be done in this area, but in the interim total benefits of $135 million per year, or about .04 percent of GDP, would be a more realistic assessment of the value of the TPPA to New Zealand. This needs to be balanced against the costs.”


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