With today’s challenging and unsettled political landscape, it would be easy to presume the worst from a global trade perspective. Happily, however, the advent of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is providing a welcome and positive contrast.
With a combined GDP of NZ$16.7 trillion between them1, the 11 member countries of the agreement, including New Zealand (NZ), represent a healthy slice of the overall global economy. No surprises then that, as it unfolds, the CPTPP promises to deliver significant financial benefits to those involved.
Yet interestingly, this ground-breaking agreement is also having a positive effect on the political economy of global trade as a whole. And with a worldwide network spanning more than 65 countries, HSBC is perfectly poised to help NZ companies that are looking to capitalise.
“We’re a natural choice for Kiwi businesses with ambitions to expand their business internationally,” says Jarron Boulter, Head of Global Liquidity and Cash Management at HSBC New Zealand. “Our global presence enables us to have a consistent approach to service delivery and seamlessly connected banking platforms, making it easy for companies to conduct cross-border business.”
“Liquidity is tightening in the market, so our corporate clients are forced to think outside the box to reduce costs. One solution we offer is turning expensive international transactions into cheaper local transactions, known as Global Disbursements,” adds Boulter. “Therefore, it makes no difference whether you’re doing business in Australia, Malaysia, Germany or elsewhere - ideal for the new trade era.”
So what and who exactly does the CPTPP involve? In simple terms, it’s a progressive free trade agreement that removes most duties upfront and tackles non-tariff barriers like regulatory impediments and customs administration.
The CPTPP has been in effect for six of its members – namely New Zealand, Australia, Canada, Mexico, Japan and Singapore – since 30 December 2018, with Vietnam joining the fray in January 2019 and more to follow. And as at June 2019, total two-way trade between members stood at NZ$50.58 billion, up from $NZ44.49 billion in 2017 – an increase of 13.7%.2
A promising start, then. But what about some of the big names missing from the list so far, like the US, the UK and China? How is New Zealand looking to bring these financial heavyweights into the mix? In all cases, the signs here are favourable too.
For example, the NZ government recently announced it had concluded a deal to upgrade its free trade agreement with China. In negotiation for several years, the upgraded agreement is set to make exporting to China easier than ever before and reduce compliance costs for NZ exports by millions of dollars each year.3
As for the US, New Zealand left the recent East Asia Summit with a positive pathway towards a future trade deal.4 And even with the looming uncertainty of Brexit, the UK and NZ have signed the Mutual Recognition Agreement to secure trade once the former leaves the EU.5
Perhaps unsurprisingly, the CPTPP has also motivated other nations in the Asia-Pacific region to embrace the push for free trade. Some, such as Thailand, Taiwan and South Korea have even expressed an interest in joining the CPTPP. Indeed, the agreement was specifically designed with a view to accommodating new members, as long as they meet certain provisions.
The CPTPP has also motivated RCEP members to push forward with finalising their pan-Asian deal, as well as looking to bring other countries further into the fold.
All trends signal that the CPTPP would seem to herald the arrival of a more liberal, market-oriented blueprint for international trade.
Indeed, despite the ongoing uncertainty, a recent HSBC poll of over 9,000 companies in 35 countries and territories revealed that over 80% remained confident about their international trade prospects. 79% of respondents also said that, despite protectionism being on the rise, they expected their international sales to increase over the next 12 months.6
All of which may just prove the CPTPP to be the start of a brave new world for free trade everywhere. And as a local NZ bank with a truly global perspective, HSBC is fully geared up to enable New Zealand businesses to break down borders - wherever those borders may be.
To find out more about how we can help you break down borders in global trade, click the button below.
This document was prepared by The Hongkong and Shanghai Banking Corporation Limited, incorporated in the Hong Kong SAR, acting through its New Zealand branch ("HSBC" or "we").
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