New Horizons to explore with China

Kiwi businesses can look forward to expanding horizons with China, thanks to the current process of improving the bilateral FTA. The Government has approved a negotiating mandate which should give greater weight to New Zealand negotiating efforts in “zimao xieding shengji”, or the FTA Upgrade.

This is a turbulent period for trade. Continuing efforts to open up markets are facing some tough challenges, including a popular backlash against globalisation and worrying signs of rising protectionism. The case for further liberalisation is in fact stronger than ever, on the back of an extended period shaky global growth and in light of the brave new world we find ourselves in, of multi-country global value chains, expanding services trade, competing FTAs and the global digital transformation.   In essence, models of business and trade have not stood still – and nor should trade agreements.

New Zealand was famously the first developed country to strike a trade deal with China in 2008, and the FTA has led to a quadrupling of bilateral trade since then. However the economic environment has moved on.

The agreement to proceed with negotiations to upgrade the China-NZ FTA, confirmed during the visit to New Zealand of Premier Li Keqiang in March, is accordingly timely.  The newly-approved negotiating mandate for the Upgrade reflects the joint goal of achieving NZ$30 billion of two-way trade by 2020, building on the current tally of $24 billion. While the numbers sound a little like ‘Monopoly money’, in fact the exponential trade growth since the FTA was signed suggest that these big numbers, while clearly aspirational, are realistic. Two preliminary scoping negotiating rounds have been held, with the next due to take place by year’s end. The MFAT negotiating team has indicated that it would welcome further input from business and other stakeholders (via China.FTA@mfat.govt.nz).

In terms of specific interests, top of the list for New Zealand will be improved dairy access (the industry would love to see an end to the additional ‘safeguards’ tariffs) as well as better opportunities for other primary exports. Non-tariff barriers are the bane of modern trade, and New Zealand wants to tackle such value-eroding measures in partnership with China.   Strengthening services trade will be important too – China is a key partner for both tourism and education exports. Reflecting the development of the ‘digital economy’, the mandate also seeks to develop new approaches to enhance e-commerce and other kinds of digital trade.

I was fortunate enough to visit China at the end of August as part of an Asia New Zealand Foundation Track II visit.   It was clear from our discussions that China remains a strong advocate for globalisation – but also that China is focused on the Belt and Road Initiative – a model which emphasies infrastructure investment and other kinds of connectivity, rather than trade per se. While Belt and Road offers some exciting shared opportunities, it remains strongly in New Zealand interests also to see robust and future-proofed trade architecture in our region. China is the world’s largest trading nation, but domestic consumption is a much more significant driver of its growth than trade; China’s ambitious engagement in regional trade discussions should not be taken for granted. In that light, it is excellent that both sides are pressing ahead with the FTA upgrade, alongside the Regional Comprehensive Economic Partnership trade agreement and exploring new ideas in APEC and the APEC Business Advisory Council.

This blog was prepared by Stephanie Honey, Associate Director of the New Zealand International Business Forum.   Stephanie travelled to China as part of a Track II Asia New Zealand Foundation delegation, with the kind support of NZIBF and the New Zealand China Council.