Potential Gains to New Zealand From CPTPP Membership

Abstract

New Zealand is a signatory to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) consisting of 11 countries. NZ does not have any bilateral trade agreement with three member countries viz., Canada, Japan, and Mexico which account for 73% of CPTPP’s GDP. Presently, NZ accounts for less than 1% of the merchandise imports of these countries. This paper investigates whether CPTPP membership would enable NZ to increase its exports to these member countries. In other words, does CPTPP membership enhance NZ’s Trade Intensity with the selected member countries? An analysis of the Trade Intensity Indices show that the value of trade with Canada, and Mexico is less than optimal, and with Japan it has been on the decline which can be attributed to the fact that these countries mostly import high value added goods such as capital goods whereas, NZ mostly exports primary goods such as animals. A further analysis of NZ’s Revealed Comparative Advantage reveals that NZ’s comparative advantage is mostly concentrated in primary products. As a consequence, the scope for NZ to enhance its exports to the selected member countries is limited in the post CPTPP era, and any gains arising out of the agreement would be mostly in the form of tariff reductions, and relaxation of non-tariff barriers. The contribution of this paper is about highlighting NZ’s product-wise Revealed Comparative Advantage in relation to the selected member countries, which reveals that NZ has the potential to export Intermediate and Consumer goods, in addition to the Primary goods.