Regional Integration A New Zealand Perspective
Countries have therefore adopted a method of making treaties or trade agreements which ensures close working ties. These are essential treaties that have seen New Zealand reap big from the partnerships. The trade agreements are vital to New Zealand as they provide ready markets for the variety of products including dairy products. For instance, the agreements work through reduction or elimination of tariffs and enhancing free movement of people across member states borders. Another vital trade deal is that of TPPA which involves 12 member states aimed at forming a single trading partnership. A significant challenge that requires special attention includes identification and selection of a trading deal that will work. For instance, through engagement with CER and China free trade agreement, New Zealand has seen significant benefits which have made it a powerful business hub.
For example, through regional cooperation by signing economic deals new Zealand has been able to promote business for its citizens by ensuring tariffs, quotas, and restriction that hinder business success in other countries have all been eliminated or reduced by partners states. This is a significant milestone for local companies as they get an avenue for operating in international markets hence raising their standards. Further, through sighing of agreements, there is a free movement of citizens from partner countries thus tackling business problems and employment issues. The idea behind developing the CER was to adapt to the fast-changing global economic environment and willingness between Australia and New Zealand to form a transparent bilateral system of trade. Through this the two countries aimed at achieving a healthy relationship through abiding by this agreement and also developing solid economic ties that would enhance free trade and expansion of businesses among the states.
Besides, the deal aimed at eliminating the existing trade barriers through a regular and progressive manner to bring about fair competition (Nixon, p. Benefits to New Zealand from Free trade The relation with China is important, and New Zealand has even a more prominent opportunity of advancing its trading success. This is because; China has a huge population of about 1. For instance, in 2013, about 73% of merchandise exported by New Zealand came from the agricultural sector-5% higher than compared to 2013. In the 2013 estimates, about 45% came from dairy, crops, meat, seeds, and wool. The elimination of tariffs and trading restrictions has proved to bear positive results to New Zealand as the farming sector in the count has grown by 40 percent since 1987 (Sandrey, p.
Under the free trade treaty, New Zealand companies in China had to get assistance I efforts to raise their financial profile, and also the free trade supported the widening of trade policies that gave New Zealand powerful policy interests. The agreement is also critical to New Zealand as it serves as an opening towards deepening trade relations with Asian countries. Education is also an essential service as it promotes quality training to produce ideal and best talents to operate production organizations for successful businesses (Ministry of Commerce, p. Free movement of people from New Zealand to China is an added advantage to expanding job market and also reduced time to get clearance for goods entering China. For example, through free trade agreement products from New Zealand coming China will get cleared within 48 hours upon arrival (Sandrey, p.
New Zealand also has a significant policy that safeguards its markets from any unfair trade imports that may come from China. In the investment area, New Zealand also stands to gain much through the establishment of investment protection and national treatment provisions. Via use of trans-Tasman travels deals, citizens from Australia and New Zealand have the opportunity to work and visit each other's nation without experiencing any restriction. This move is a significant gain for New Zealand and Australia. New Zealand, however, stands to gain as an estimated 389,000 to 521,200 of its citizens live in Australia and only 60,000 to 63,000 of Australian's live in New Zealand. This move has helped New Zealand in resolving the employment issues as citizens can cross to Australia to work and do business.
The existence of a single aviation market was established for a mutual benefit, competitiveness, and growth between the two states. In this year, New Zealand exported crude oil worth $1. 8 billion across the world where $1. 7 billion went to Australia. Australia has also turned out to be New Zealand's second biggest trade destination behind China due to the CER deal for food and beverages exports. In 2012, New Zealand exported food and beverage goods worth $2. It is a loss to New Zealand as some essential products that used to trade with China before the agreements such as paper products, and processed wood will be left out and which accounts for about 4% of present-day New Zealand exports to China. There are still some established quotas for some products such as wool and its products exported to China.
These quotas are unfavorable to New Zealand expectations of free trade. Elimination of imports tariff for Chinese goods is a dangerous move and which may result in the influx of Chinese products in New Zealand hence bringing competing demands and a disadvantage to local firms producing similar products. There is also a bilateral mechanism to safeguard trade where China has the authority of imposing extra duties to the New Zealand goods in case the exports are found to cause injuries to Chinese industry (Ministry of Commerce, p. Such moves affect the New Zealand society that has adopted a stable market in Australia. However, amid the few challenges New Zealand continues to dominate the exports market of Australia (Nixon, p. How CER and NZ FTA Impacted On New Zealand (a).
How CER Impacted On New Zealand Under the CER agreement, there is an improvement in the manner in which business is conducted between Australia and New Zealand. Significant milestones are being achieved from the power of trade which has helped in raising the economic positions and living standards of the people of New Zealand. This move exerts a lot of pressure on the local producers who have to observe quality but does not get the value of their products. Nonetheless, even exporters are finding it hard to operate as some critical products such as dairy goods is losing market in Australia as their dairy sector starts to experience positive growth. (b). How NZ FTA Impacted On New Zealand Significant achievements have been acquired from the Free trade deal between New Zealand and China.
Critical benefits and growth go to both the locals and investors and more significant part of the government. New Zealand was also offered assistance aimed at strengthening its companies. This would help upgrade the standards of local businesses to international standards hence bringing about profitability to all. Another vital aspect that stands to benefit all includes the environmental conservation aspects. This will ensure that New Zealand gains from the program, a move that will help the majority of its local farmer's and residents. To get maximum benefits to all New Zealand needs to upgrade all others sectors and more to the tourism, film industry, and other technology-based industries. 379 liters of milk annually. The main dairy export product is powder milk which accounted for about 42% of revenues in 2013.
Other exported dairy products included cheese 12%, skim and whole powder at 56%, casein 12%, butter 16% and other dairy products at 4%. Dairy industry contributes an estimated 7. 8 billion dollars to the country's GDP which comes from dairy farming and processing. Figure 1: New Zealand Dairy Products Exports to China New Zealand's dairy sector is comprised of varying subunits which emanate from local levels. For instance, there are milk collecting bays that get milk directly from farmers to the small companies and the medium companies for processing. The traditional areas that are known for massive milk production in the country include Taranaki, Waikato, Northland, Southland, Westland, Horowhenua, and Manawatu. Fonterra is the most prominent milk processing company in the nation and processes about 94. 8% of all the milk produced in dairy farms.
Therefore, due to quality issues, the smaller companies have begun gaining positively from trading with bigger nations though they have not yet acquired significant momentum (Muirhead, p. (b). How CER Impacted On Dairy industry New Zealand exports substantial amounts of dairy products to Australia which are estimated to be $800 million under the CER deal. Among the most sought-after products in the Australian markets include butter $144 million, infant powder at $370 million and cheese at $627 million. This is smooth trade favored by the CER deal. The small dairy companies have a more prominent problem of debt which makes their trading success with CER and free trade problematic. For instance, dairy debt for small farmers stands at 32 billion dollars which are owned by about 10% of dairy farmers.
This kind of debt indicates that some small dairy farmers are highly exposed to more significant risks if in any case the milk prices substantially decline. However, with the CER deal dairy companies should take the opportunity to vigorous market their products in Australia to clear the remaining debts and get profits from the agreement (Muirhead, p. Figure 2: debt earnings by New Zealand dairy industry Overall, New Zealand dairy sector is going through a successful period through continued expansion in exports earning in the past decade as a result of CER deal. The dairy farm is owned by about 114 farms as significant shareholders that are close to the company. Tatua is an active dairy company and one that manufactures dairy food and dairy ingredients (Tatua, p.
It is ideal due to its core values that are anchored on a collaborative approach with their customers in developing products of great importance. The company is known for its record high payouts to farmers which is attributed to value addition in their products, high financial performance and the small area that it serves. The company has an estimated 37000 dairy cows that produce about 200 million of liters of fresh milk. This group of shareholders together with the 114 farms plays an important role in driving the company in the right direction. The rest are workers in the lower levels who are focused and energetic about making the speculated target. There is a strong working culture in Tatua where development and growth together with an enjoyable workplace environment are provided.
Employees are provided with hands-on training which makes things to happen in the right manner. Shareholders and employees work hand in hand to deliver the required quality of their dairy products. The stakeholders assist in developing policies and quality standards which helps the company to get aces to every market globally. Procedures and restrictions of CER deals help Tatua management in understanding the tariffs, quotas and critical international guidelines that are required for ease of doing business. The success of Tatua is a historical journey but one that was well organized from the start. The main aim of the company is to protect the stakeholders' investment by making their lives better and sustainable. The company is developed on simplicity guided by a team that has similar vision, purpose, and values which are critical to attracting, developing and retaining employees and new shareholders.
The idea of forming TPPA started in 2005, and an agreement about its formation reached in 2012 though some issues remain contentious to date. Countries such as New Zealand, Brunei, Japan, Chile, Australia, Peru, Malaysia, Singapore, Mexico, Canada, Vietnam and the United States are involved (TPP, p. The benefits of TPPA is to ensure there are deep economic relations among member states owing to the diverse members which will ultimately open up the markets for goods, close links promotions and boost to investment across several regulatory and economic policies. By joining these trading partners, New Zealand stands to gain and could increase its GDP by about 2 billion dollars by 2025. Exporters from New Zealand will be the most beneficiaries of the agreement due to reduced compliance costs and tariffs, and at the same time, there are more opportunities to do business overseas.
The collapse of the deal may worsen the CER ties and affect their future partnership. Further, opposition to the TPPA deal has already formed where citizens from New Zealand protested on the streets. To many, the deal is seen as a way of United States to extract products and sell its goods at the expense of other member countries. This is because US holds all the decisions regarding the TPPA and can make or destroy it anytime. Opposition against TPPA observes that there is a clause that gives multinational corporations power to sue states that violate the policies such as reducing company's profits. Also, there will be far worse environmental degradation as a result due to increased pressure by member countries to supply goods of a certain quantity and quality which will mean growing inputs on the already overused land to meet the requirements (Coates, p.
On the other hand, there will be surmountable benefits that will come from being a TPPA member. For instance, the deal will offer an alternative market owing to the already saturated Chinese and Australian markets. The move will also ensure there is adequate space for getting more citizens employment through involvement in export business. Further, there are the environmental program and human rights policies that TPPA will be providing to the member countries to enhance sustainable production. To Tatua there are no significant risks in any way as they stand to gain. However, as mentioned earlier, rushing to trade with TPPA may bring irreversible losses to a company due to unstable markets. On the other hand, the markets are vast and therefore proper avenues for Tatua to market its products (TPP, p.
To mitigate these risks, it will be critical for Tatua to identify significant trading partner from this vast pool of partners to establish a lasting business. Further, the management of Tatua must be well informed to address changes in a strategic and rapid manner to avoid pitfalls that may affect the organization. UK, p. The threats can be mitigated by ensuring there are strict systems of governance which enhance transparency and freedom to all arms of government. Tatua can efficiently work in both countries due to their political stabilities and can either consider Peru which is a democratic system or Vietnam's communist systems of government. Economic factors Economic risks that affect businesses in Peru include informality of trade which is caused by informal or unregulated enterprises.
For instance, it is estimated that 91% of agribusiness and fishing operations are all informal and 10% of manufacturing industry is also casual. UK, p. 6) Aspects of corruption, inequality, and crimes are reported in both countries, but Vietnam shows to have better security as compared to Peru which presents an excellent platform for Tatua to do business. Technological factors Technological risks associated with doing business in Vietnam include lack of a sufficient system to safeguard intellectual property and also a presence of rapid growth in counterfeiting and piracy. However, there are benefits of improved data security and other provisions which can help Tatua operations in Vietnam. In Peru, the risks of doing business are associated with issues of cyber crimes which results in the hacking of important systems and making businesses operations difficult.
Environmental factors Peru has a risk of big rains that affect the operations of the business. For instance, in 2017, there was coastal El Nino which caused one of the worst floodings in the northern coast. The floods affected more than one million people. The poor state of preparedness aggravated the risk by the national authorities and poor reconstruction. Disasters present in central Vietnam are significant risks to business operations as they have caused high-level protests (GOV. Trade agreements help in eliminating oppressive tariffs, quotas and trade restrictions across partner starts 3. Domestic companies such as Tatua are the primary beneficiaries of free trade agreements 4. Establishment of TPPA will have both benefits and adverse effects to New Zealand existing trade deals with China and Australia 5.
Critical analysis through PESTLE shows that though Vietnam and Peru and essential trading partners it is important to trade with Peru owing to its vast population made up of middle income and great port that serves Asia and Europe. Recommendations New Zealand should embrace TPPA deal and specifically select Peru as a partner country. This will ensure reduced operational costs that will ensure profitability on the side of Tatua. The critical focus should also be given to the legal aspects. It is interesting to note that Peru and New Zealand are growing economies hence have almost similar laws and regulations. Therefore, it will be vital for Tatua to trade with Peru owing to the excellent working environment between the two countries.
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