Trade Update - June
Date Added: 12 Jun 2013 from BusinessNZ
FTA Negotiation With Colombia Not yet Happening
When Prime Minister Key met with Colombian President Santos in March he was somewhat surprised to be told that Colombia would be willing to begin an FTA negotiation with New Zealand whenever New Zealand is willing to start negotiations. Given that New Zealand had already given careful consideration to the possibility, and is keen, it seemed a fairly straightforward exercise to launch this negotiation. Indeed Minister Groser who visited Colombia in late May was expected to announce that negotiations had been launched.
The fact that this did not happen is significant. It appears that President Santos got ahead of himself and his Government is still not ready to launch a negotiation with New Zealand. Colombia has just negotiated a FTA with the EU and dairy imports proved somewhat controversial in that negotiation. It seems that the Colombian Government may be wanting to wait a while before re-igniting the flames of that controversy.
Colombia is keen to negotiate a FTA with New Zealand as it will help demonstrate it is serious about looking to the Asia Pacific. Colombia wants to join APEC and wants to join the TPP. A FTA with New Zealand is seen as part of the strategy to achieve these goals.
New Zealand sees market opportunity in Colombia. It is the third biggest economy in Latin America – after Brazil and Mexico. But it has FTAs with many of New Zealand’s competitors. This means that New Zealand exporters find it difficult to compete in this market. A FTA would level the playing field.
New Zealand also seems interested in joining the Pacific Alliance. This is a free trade agreement linking Chile, Peru, Colombia and Mexico. To join, New Zealand is supposed to have FTAs with all the existing members. TPP will hopefully allow New Zealand to tick most of that box, but Colombia would be the exception. This increases the strategic importance of a bilateral FTA with Colombia.
The latest round of TPP negotiations made good progress but not enough to allow this negotiation to be finalised, as some US politicians hope, by October. And with Japan about to enter the negotiation this suggests that negotiations are going to stretch until at least the end of December, and probably into 2014.
Interestingly noises from China about TPP have become more positive in recent weeks. China was never officially negative on TPP, but last week the Chinese Ministry of Commerce announced that China was formally studying the possibility of joining TPP.
Long term, this development is very positive but short term it could be a major complication to the conclusion of TPP. We will watch this development closely.