QUESTION
CURRENT ECONOMIC ISSUES
Apply economic concepts to real world issues. See website http://www.mfat.govt.nz/downloads/trade-agreement/transpacific/main-agreement.pdf to find the text of original Trans-Pacific Strategic Economic Partnership Agreement. You will do research on background to the text. You will then write a report covering specific aspects of free trade agreements (FTA’s) that are listed on next page as your report would be assessed against these requirements.
The general topic of your assignment is that of economic integration. Regional Trading Agreements lie at the core of economic integration. One such agreement is the Trans-Pacific Strategic Economic Partnership Agreement between Brunei, Chile New Zealand and Singapore (also known as P4) that came into force in 2006. Currently, the prospect of the United States (as well as Australia, Peru, Malaysia, and Vietnam) joining the trading bloc is creating some excitement among existing members. The fourth round of Trans Pacific Strategic Economic Partnership negotiations concluded in Auckland in December 2010 and many recent updates are available on MFAT website.
A useful starting point to gather background literature on the topic would be the MFAT website on trade agreement at:
http://www.mfat.govt.nz/Trade-and-Economic-Relations/2-Trade-Relationships-and-Agreements/index.php
From this webpage, you can read other documents like “A Basic Guide to Free Trade Agreements” and “New Zealand’s Approach to Free Trade Agreements.” A comprehensive seventy-five page document on Trans-Pacific Strategic Economic Partnership Agreement can be downloaded from:
www.mfat.govt.nz/downloads/trade-agreement/transpacific/trans-pacificbooklet.pdf
The attached text and those at MFAT website should only be used as a starting point for your submission. What is important is that you incorporate relevant concepts and ideas. In other words, your submission should reflect your ability to apply economic principles. You may wish to use real world trade/financial data to support your position.
SEE PAGE 2 NOW
Assessment of your work will be based on the following criteria:
- APA referencing format
- Ability to answer the four specific points/questions stated below
- Analytical ability. This includes ability to connect your answers to the course
Content.
- Ability to search and summarise existing literature on the topic
- Appropriate use of supplementary data or information
- Use of graphs, if appropriate
- Clarity of writing style
- Demonstration of a thorough understanding of issues surrounding RTA’s
Your submission should address the following points:
- How would the proposed economic partnership agreement increase the value of NZ’s exports and/or overseas earnings? You should include potential direct trade effects as well as non-trade effects from such an agreement.
What are the possible advantages (or disadvantages) to ONE specific New Zealand business sector from the proposed economic partnership agreement? Suggest modification(s) to the proposed agreement to augment possible advantages (or mitigate possible disadvantages) to your stated New Zealand business sector.
LENGTH
Six typed pages (1.5-spaced) is the absolute maximum, excluding appendices and data. For referencing , follow APA format.
Useful web references
WTO’s Regional Trade Agreements (RTA’s) Gateway:
http://www.wto.org/english/tratop_e/region_e/region_e.htm
SOLUTION
Introduction to Trade Agreement
Trade agreements have been the highlight of the world economy in the last decade or so with countries going in for the agreements with a country or group of countries in order to take advantage of the regional differences that exists in the region. The trade agreements can be between two nations or group of nations came together to exploit the conditions in their territory and thus create opportunities. The trade agreements are governed by certain rules and regulations based on the conditions that are of priority and advatageous for both the countries or set of countries.
Almost all the free trade agreements have been successful as it results in breaking the boundaries and take advantage of the growth in the markets.(Williams,2012) The ngotiation is the most important part of the trade agreement as it brings in the clarity in the usefulness, underlining factor behind the agreement and the purpose for which the agreement has come into existence.
Trade agreements has enabled the transfer of goods with relaxation in tariffs and duties that are otherwise implied. Thereby resulting in the supply of goods at very reasonable cost and thus market come into existence with no borders. Trade agreements has resulted in increased income and unemployment in the regions which otherwise lacked opportunities.
The trade agreements basically include the components like, removal of taxes and duties, products that will be part of the agreement, role of the government, movement of goods and clearly establishes the rules and regulations governing all the parties in the agreement. There are specific consideration that may be given to the nations of the agreement in order to provide security and thus enable the growth in the region and thus the trade area.
As a matter of fact the free trade agreements have been very succesful in boosting the investments, generate positives and thus caught the eye of investors at a time when the investments in the markets by itself has been onsidered risky. The trading has been in the major factor for the trade agreements. The free trade agreement between the south east asian nations called ASEAN has been one of the most successful free trade agreements. It has resulted in the integration of the region having huge potential. The nations such as Singapore and Thailand have entered into a lot of free trade agreements with nations such asAsutralia and United States as this region had a lot of potential which otherise could not have been created had the trade agreement was not there. Thus in a way the trade agreements has resulted in development of markets. This ha enabled the regions such as South East Asia become the investors hub.
Impact of trade Agreement to Newzealand
The trade agreement eneterd into by Newzaeland has been with the nations that include Brunei, Chile and Singapore. This has been a very strategic move by Newzealand as this agreement included the countries from South Eat Asia and the South America (Williams, 2012). These regions have been identified by the stroingest of the nations of the world and thus the free trade agreements with these nations will provide Newzealand with the new investment opportunities.
Newzealand has been one of the developed nations of the world. Thus this trade agreement has been beneficial for all the nations as it has resulted in the investments from Newzealnad and thus created more jobs and better income in the region. These nations have strength of their own and thus ha been xploited very well by Newzealand.
Newzealand being an open economy ha fewer barriers to international players in the market. Thus as a reult of this trade agreement the countries like Singapore and Chile have been provided with an opportunity to enter the Newzealand market.
Thus thi trade agreement has established the perfect balance between the developing nations of the grwoing market of the world and one of the developed nation of the world. Such agreements are successful as it results in conditions that are acceptable and beneficial for all the nations part of the trade agreement. The Trans Pacific partnership has been so successful that it has caught eye of the other nations of the world such as United States and Australia that are having strong prensence in the world market.
The trade agreement has been very important in opening up of the market such as Chile which have not been developed. Thus with the coming of this agreements for example, the dairy export from Newzealand which had reduced has been boosted due to removal to duty on the export of goods to Chile and Brunei.
Thus this trade agreement has been very successful as it has been framed with a view to remove technical barriers, protect intellectual property rights competition policy and the transparency in the system. It can be said that the trade agreement is well framed and thus has been very successful with clear guidelines.
Impact on Dairy Industry
Newzealand has been one of the largest producer of dairy products across the world. Newzeland has also entered into around eight trade agreements. Of these five of them have been having conditions so as to boost the trade of the dairy products and thus provide boost to this industry of the country. The dairy industry has been very important from the point of view of Newzealand and thus requires major policy consideration.
This trade agreement has been specifically very important to Newzealand as it has made it possible for Newzealand to enter the market that has huge potential and the market has been huge to establish their presence in the market and thus use the opportunities in the market
However the inclusion of the dairy industry to the trans pacific partnership and with nations like United States becoming part of the agreement have established the fact that Newzealand has been the largest producer in the world and also the largest exporter of the dairy products. Thus they have the competitive advantage and expertise over the production and supply of the dairy goods. This is thus not creating the enironment for free trade rather creating monopoly in the region of Newzealand in the dairy industry. Thus it is now being argued whether the dairy products should be excluded from the products that are part of the free trade agreement of the trans pacific partnership(Williams, 2012). However the point that i in favor of newzealand is that the agreement is placed in such a way that the countries are able to trade those product that they specialize in there by resulting in the trade surplus and thus growth of trade. Thus it ha been argued that Newzealand should be allowed to have dairy products in gthe free trade agreements. This is in line with the objective of duty free low cost and high quality products in the market.
The reports have also been prepared which state that the advantage that Newzealand has been able to create as a result of low cost of production of dairy products should be allowed to export also as this was one of the basis for Newzealand to enter into trade agreements.
Newzeland has been able to create such advantageous position in the dairy market by creating economies to scle, providing subsidies and putting in place the logistics to enable the trade of the dairy products. With such huge teps being taken Newzealand has been able to create environmen that has made it possible to become dairy product surplu. Such efforts should thus be encouraged and the global trade under free trade agreements thus should not be discouraged.
This opposition to the exclusion of dairy products from free trade agreements have raised questions on the working of this arrangement and thus has put pressure on the governments to take necessary steps to protect the industry as it may reult in losing position in potential markets and thus thereby resulting in loss of trade for the country.
Modifications
Newzealand should look for ways in which the amendments are made in order to ensure that the dairy products remain part of the trans pacific partnership apart from recieving huge criticism of creating the situation of monopoly in the market. (Vaughan,2010)
Thus in order to achieve this the support bfrom the other nations should be garnered that have been benefited from this arrangement which has resulted in high quality products being traded at low cost for the consumers as a result of reduced tariff resulting from the duty free claues that have been the underlining factor of the trade agreement.(Dadush,2012) Chiule is one of the examples of the this wherein the export of dairy products to Chile has been made posible as a result of this trade agreement.
New zealand being one of the major partner in the trade agreement should exercise the power and thus pass the resiolution against elimination of the core product of the member countries. This will also assit other countries as it will support the free trade of the products of their country.
Conclusion
It can be concluded that trade agreements have enabled the transfer of goods with relaxation in tariffs and duties that are otherwise implied. Thereby resulting in the supply of goods at very reasonable cost and thus market come into existence with no borders. However there are specific consideration that may be given to the nations of the agreement in order to provide security and thus enable the growth in the region and thus the trade area.
this trade agreement has been beneficial for all the nations as it has resulted in the investments from Newzealnad and thus created more jobs and better income in the region as the trade agreement has been very important in opening up of the market such as Chile which have not been developed. Thus with the coming of this agreements for example, the dairy export from Newzealand which had reduced has been boosted due to removal to duty on the export of goods to Chile and Brunei. (Alessi,2012)
However Newzaeland will have to deal with this situation of concerns beinf raised on the free trade of dairy products very strategically. The trans pacific agreement howver is proper and well organised agreement giving complete details on the dispute resolution and thus these guidelines will have to be followed for the issues being raised. (Aggarwal,2008)
In the current scenario it may be looked upon as the creation of monopoly in the market, the countries that are part of this agreement thus take steps to tackle the monopoly in such a way that it is not in a position to exploit the market rather than creating environment that is not positive for the deveklopment of the industry. This situation ths calls for the efforts from the country sitting in a position where there can be solutions being generated that are in favor of the industry.
References:
Williams, B. R. (2012). Trans-Pacific Partnership (TPP) Countries: Comparative Trade and Economic Analysis. Retrieved from http://www.fas.org/sgp/crs/row/R42344.pdf
Fergusson, Vaughn (2010). The Trans-Pacific Partnership Agreement. Retrieved from http://fpc.state.gov/documents/organization/145583.pdf
Christopher Alessi. (2012). The Eurozone in Crisis.
Uri Dadush. (2012). Paradigm Lost: The Euro in Crisis. Available: http://carnegieendowment.org/files/Paradigm_Lost.pdf.
Aggarwal, Vanita, and Deepashree Aggarwal. Macroeconomics theory and Policy.. DElhi: Pearson , 2008. Print.
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