New Zealand's preferential trading arrangements : implications for the New Zealand dairy industry : a thesis presented in partial fulfilment of the requirements for the degree of Master of Applied Economics at the School of Economics and Finance, Massey University, Palmerston North, New Zealand

Abstract

Since the mid 1980’s when New Zealand liberalised its agricultural sector, the dairy industry has become a significant and growing contributor to the prosperity of the economy. Today, the dairy industry earns around a quarter of the total value of New Zealand’s merchandise exports, and directly accounts for 2.8 percent of GDP (New Zealand Institute of Economic Research, 2010). The international trade of dairy products however remains heavily distorted due to the continued protectionist policies of many countries. The Doha round of the WTO multilateral trade liberalisation efforts, of which New Zealand is a strong supporter, have stalled and continue to face numerous impasses. Consequently, New Zealand has begun pursuing a complementary approach of establishing bilateral and regional preferential trade agreements with key trading partners. The aim of this study is to conduct a quantitative analysis of the economic impact of the existing and proposed preferential trade agreements on the New Zealand dairy industry. Two quantitative techniques are used for this purpose. An ex post gravity model finds mixed results for the effect of New Zealand’s existing preferential trade agreements on its dairy exports, but data issues hamper the conclusions that can be drawn. An ex ante computable general equilibrium model, known as GTAP, examines the proposed PTAs that New Zealand currently has under negotiation and indicates a largely positive effect of those agreements on the New Zealand dairy industry.