Thursday, October 2, 2008

New Zealand China Free Trade Begins Oct 1 2008

The New Zealand-China Free Trade Agreement (FTA) entered into force on 1 October 2008.

China is New Zealand's 4th largest export market, purchasing just over NZ$2 billion by value and taking some 5.3 percent of NZ's total exports. Imports from China amount to NZ$4.8 billion or some 13.1 percent of total NZ imports. On a merchanise trade basis, New Zealand's deficit with China is running at about $2.8 billion.

New Zealand exports of services to China are also important: China is the largest provider of international students studying in New Zealand at the high school, English language school, and university levels, while tourists from China are the 4th largest group of tourists visiting New Zealand.

The Free Trade Agreement signed in April this year, cuts the tariffs on 35 percent of NZ exports entering China to zero after 1 October. Within 5 years, two-thirds of NZ exports will enter China free of tariffs.

New Zealand's exports to China are expected to increase by $225-350 million per year above the pre-FTA baseline level.

On the day the FTA entered into effect, The NZ Trade Minister, Phil Goff, said that new investment and trade opportunities are opening up but that New Zealand businesses will need to be able to effectively manage their global supply chain by being "fully prepared to work within conditions that differ greatly from our own and to understand China’s business culture". He pointed to the current problems faced by New Zealand's Fonterra in ensuring its joint venture investment in Sanlu Group in China was run to high quality control standards to avoid contaminated milk products damaging Chinese consumers.

The FTA is the first signed by China that is linked to associated agreements for consultation and cooperation on labour and environmental standards in the bilateral trade.

Critics of the FTA have pointed to the danger of increased imported competition as well as the effect of increased Chinese foreign investment in New Zealand's domestic market. Moreover, the Green Party and others have been critical of unsustainable logging and other environmental practices in China. They have also argued that freer trade under the FTA will only add to human rights abuses in China.

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