Three cheers for China! As much of the world appears to be turning its back on openness, The Economist recently reported that the use of the word “quanqiuhua (全球化) globalisation – is on the rise in official speeches. Meanwhile New Zealand and China are about to commence the first round of negotiations towards “Zimao Xieding shengji” or FTA upgrade.
New Zealand’s FTA with China – the first for a developed economy – has served us well since entry into force in 2008. Much of the astonishing trade growth in that period has been due to significant increases in exports of traditional commodities – milk powder, logs and lamb. But more and more kiwi companies are now targeting China, often through new channels such as e-commerce, and other parties including our Aussie mates have negotiated their own FTAs. So, our FTA needs to be brought up to date.
The agreement to upgrade the FTA was reached last November, but the recent visit of Premier Li Keqiang was the occasion for the two governments to announce the start of negotiations. High level political support and momentum are always vital, but, as the devil in the detail comes to the fore, this is unlikely to prove an easy ride.
New Zealand exporters have a long wish-list. An end to dairy safeguards – the increased tariffs that spring back once trade reaches a certain volume, and which mean that New Zealand gains the full benefit of the FTA for just a few weeks a year. Better pathways to access for avocados, blueberries, apricots, onions and capsicums and more secure access for kiwifruit, pipfruit and persimmons. Elimination of tariffs on wood and paper products, which was not achieved in the FTA. More even application of import certification requirements in Chinese ports, including for transshipped goods. Access for chilled meat – a big breakthrough – was dealt with during the Chinese Premier’s visit.
What the Chinese might want is less clear. New Zealand has already signed up for co-operation under the “Belt and Road” initiative. But what about an increase in the investment thresholds applying under the Overseas Investment Act? China will receive this anyway once the Trans Pacific Partnership (TPP) enters into force due to the “most favoured nation” clause in the existing FTA. Better pathways for its own products through New Zealand’s understandably complex biosecurity arrangements? Understandings around immigration?
This is the substance of the negotiation which is to get underway on 25 April. Because this upgrade will set the terms of the trade relationship for the decade to come, negotiators on both sides will need to think about how business might develop in the future. Getting the settings right about e-commerce, services and digital trade will need to be included.
But the bigger picture is also important. Zimao xieding shengji will also demonstrate that China and New Zealand can walk the talk when it comes to openness and trade.
This post was prepared by Stephen Jacobi, NZIBF Executive Director.