Economic Analysis

No More than a Case of Beer? TPP Trade Liberalisation Benefits for New Zealand

Professor Tim Hazledine, University of Auckland Business School (2 December 2015).
[Extract] “…Even so, it took seven completed Rounds over nearly half a century to wrangle the cuts that would reduce tariffs to the low-single digit figures or less that are typical in at least the developed countries among the twelve who negotiated the TPPA. Why so protracted a process? Given that standard economic theory tells us that tariffs reduce the efficiency of a country’s economy by distorting the price signals that determine the appropriate allocation of scarce resources, why hadn’t the 23 original signatories to the First Geneva/Havana Round in 1948 (including NZ), quickly agreed to a simple formula whereby everyone would reduce all their tariffs by some percentage x per year until the goal of zero tariff protection was reached?

Why, indeed, did they have to even come to an agreement on trade liberalisation? If imposing tariffs on imports is – as per standard theory – akin to “shooting yourself in the foot”, why not just stay at home and cut tariffs by themselves?”