Who most stands to win from our first FTA with Mexico

Who most stands to win from our first FTA with Mexico

25 September 2019

Mark Sinclair / New Zealand’s Ambassador to Mexico

From Mexico City, New Zealand’s Ambassador to Mexico, Mark Sinclair, explains the outcomes of the CPTPP in for New Zealand businesses in Mexico and Peru.

Latin America has a similar population to ASEAN, with a much higher GDP, but our trade and investment relationship is much more limited. There are opportunities here that we haven’t so far been successful in tapping.

Before CPTPP came into force, tariffs on the goods New Zealand typically exports was around 20 percent. Most of those (apart from dairy) go to zero over a period of 0-10 years, with many of the new opportunities concentrated in the food and beverage sector.

In the case of dairy products of most commercial importance, most of the new access is in the form of tariff quotas. As a result, we expect to see some branded New Zealand dairy products on Mexican supermarket shelves from 2020, potentially anchoring a wider New Zealand food and beverage offering.

The quantities allowed are modest but commercially interesting and will increase annually over the next 10 years, but we're up against unrestricted and subsidized competition from the United States, along with constrained but subsidized competition from Europe.

Mexico’s also already a superpower in terms of horticultural production and export. So we’re talking about potential niche opportunities rather than transformational change.

Having said that, around 20 percent of the market could be characterised as aspirational consumers. In Mexico, a country of almost 130 million people, that’s potentially a market the size of Australia we can target for our premium products and services, and New Zealand has a positive, trusted image.

Mexico’s population is relatively young, so population growth alone will drive growth significantly in the years ahead -- it’s projected that Mexico will be a G7 country by 2050.

Mexico is also very well-positioned strategically, being deeply integrated into North American supply chains. However, Mexicans are constantly trying to diversify their trade and investment links, and New Zealand is attractive both for our business environment and for our success in developing trade links with the big Asian economies.

What is the CPTPP

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a free trade agreement negotiated by 11 countries in the Asia-Pacific region, including New Zealand, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, Singapore, and Viet Nam. It came into force for an initial group of countries, including Mexico and New Zealand, on 30 December 2018.

The economies included in the CPTPP account for 30 percent of New Zealand’s goods exports (NZ$15 billion) and 31 percent of our services exports (NZ$6.8 billion) annually, and include countries with which New Zealand has not previously had a free trade agreement, such as Mexico, Canada, Peru and Japan.

Gaining preferential access for the first time will open up new export destinations for both small and larger businesses, and serve as a platform to support the integration of New Zealand business into regional supply chains, and provide greater certainty to traders and investors in CPTPP markets.

How to access CPTPP preferential tariffs for your goods

The CPTPP uses the international Harmonized System (HS) to classify commodities, attributing six-digit codes to 5200 product categories. CPTPP countries break these categories down even further, to generate an eight or nine-digit code.

You can use MFAT’s Tariff Finder to discover your HS Code and the tariffs that apply, both now and over the coming years, under the CPTPP.

(If you need expert technical help to find which line your product comes under, contact NZTE.)

MFAT can advise you about when tariff cuts take effect, how to claim preferential access and answer further questions.

Find CPTPP Rules of Origin guidance from NZ Customs.