Here’s my summary of the key events overnight that affect New Zealand, with news the Trans Pacific Partnership Agreement (TPPA) has been done.
At least, at the heads-of-agreement stage. Over the next month, officials will work to build the final signable text of the Agreement.
It is a landmark event in for trade negotiations, covering 36% of world trade. The compromises to get all 12 countries over the line – and they are twelve quite disparate countries – have not been easy, and like any such deal, it rests on the compromises. It will be hard to sell however. Like any compromise, most people rank the ‘cost’ of what is conceded about four times the value of the ‘gains’ won. Fortunately diplomats don’t.
It seems to have won praise from worker groups and environmentalists. And New Zealand seems to have won significant access without giving up much at all. It retains all its Pharmac benefits, it avoids challenges to tobacco laws, and it gets wide ranging access for most exports – more limited for dairy however. We need to change very little of our tariff and quota systems.
The Americans have given up a lot on drugs, the Japanese a lot on cars.
The most trenchant opponents will be in the US. The Republican right (including Donald Trump) will lead the opposition in Congress, and big corporations (Ford was the first to complain followed by big pharma) will work to scuttle the deal. Similar opposing voices will be raised in other countries, no doubt including New Zealand. All countries will need to ratify the deal and that won’t start until the final text is announced. Debate will take time, but it has taken eight years to get to this point and in advance, a deal seemed unlikely. But now there is one, you wouldn’t bet against it being formally adopted. It is due to come into force in 2 years.
In other news, later today, the Reserve Bank of Australia will review its cash rate which is at 2%. No change is expected by the markets today
In New York, the UST 10yr yield benchmark rose today and is currently at 2.03%.
The US benchmark oil price continues to inch up, now just over US$46/barrel, Brent and just on US$49/barrel.
The gold price is holding at US$1,137/oz.
The New Zealand dollar has gained overnight. The TPPA will be one reason, and expectations of a strong dairy auction tomorrow another. It is currently at 64.9 US¢, at 91.7 AU¢, and 58 euro cents. The TWI-5 is at 69.7.
If you want to catch up with all the local changes on Friday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here »