Free trade triumvirate next coup for NZ
New Zealand Herald | Oct 26, 2011
Free trade triumvirate next coup for NZ
By Fran O’Sullivan
New Zealand is set to complete its free trade triumvirate with Greater China when it adds Chinese Taipei to this country’s earlier deals with Beijing and Hong Kong.
Realpolitik dictated that last night’s news that talks were being explored came via a joint statement from the Taipei-based NZ Commerce and Industry Office, and the Taipei Economic and Cultural Office in Wellington, rather than a direct statement by Trade Minister Tim Groser.
The joint statement essentially indicated that the feasibility of an "economic co-operation agreement" between New Zealand and Chinese Taipei (Taiwan) would be explored by both sides. A decision would then be made on whether to take the next step towards formal negotiations.
Nevertheless Groser was delighted that New Zealand had initiated the first step that could lead in a year or so to this country "being the first economy in the world, other than China itself, of course, to join the three points in the Chinese economic triangle together".
There has obviously been a fair degree of orchestration leading up to the announcement. New Zealand and Taiwan do not have formal diplomatic relations.
This is the upshot of the "One China" policy that the New Zealand Government agreed to adopt in 1972 when it recognised the People’s Republic of China as China’s sole legal government.
But both sides have since maintained strong economic and cultural ties via the two business organisations and within multilateral organisations that recognise the Taiwan "economy" such as the World Trade Organisation and Apec.
Groser says the complicated agreed negotiating process was a "smart solution to a complicated scenario".
The two economies were highly complementary and he believed it most unlikely that the two non-government offices would reach any other conclusion but to recommend to their respective authorities to agree to them negotiating an economic co-operation agreement.
"It is my strong expectation from the detailed consultations that have preceded this initiative that an ECA will involve comprehensive liberalisation of all items of trade interest to both economies.
"The authorities in Taipei know that New Zealand governments do not enter into agreements that exclude key items of trade interest to New Zealand, no matter how sensitive they may be. We fully understand the need to handle sensitivities and we are always reasonable on transition pathways."
It is an obvious point that this step would not be taking place without Beijing’s tacit approval.
The prospect of free trade talks between Wellington and Taipei were mooted in 2003-04 but New Zealand’s FTA talks with China took precedence. In Taiwan’s case it received a clear message from Beijing that it should first look to normalise its own trading relationship with China before notching up other external deals.
Since then, China and Taiwan have completed their own Economic Co-operation Framework Agreement (ECFA), opened direct air and shipping links across the Taiwan Strait and deepened people-to-people links. Three million mainland Chinese tourists have visited the island of Taiwan since July 2008.
As Groser points out, economic integration has been accelerated within the Greater China triumvirate: 40 per cent of the exports originating in Chinese Taipei now go to the mainland and to Hong Kong - way ahead of the United States which used to be their dominant export market.
Some 16 per cent of Taiwan’s imports come from the Chinese mainland. The mainland’s imports from Chinese Taipei have reached US$84 billion, an increase of 27 per cent.
It is understood that Groser has canvassed the prospect in talks with various Chinese ministers at Davos and elsewhere. Beijing is also said to have concerns that unless Taiwan sets about liberalising its tariff-heavy structure (including for agriculture) it will lose out to more progressive rivals like South Korea whose manufacturers are rapidly cementing strong positions in global supply chains.
A relatively quick pace is being set for the New Zealand/Taiwan initiative.
The two business offices are due to report back on their respective feasibility studies by November 25 - one day before the general election. A joint study is then expected to be commissioned which will explore the benefits to both sides and the key areas.
But - unlike the Trans Pacific Economic Partnership (TPP) talks where leaked US Government texts were yesterday causing renewed speculation that big "pharmas" want to muscle in on New Zealand’s Pharmac - both National and Labour are expected to be on the same page where Taiwan is concerned.
A decision on whether or not to proceed is being left to the next Government.
Groser briefed Labour leader Phil Goff and shadow trade minister Maryan Street on the announcement during Labour weekend.
As could be expected, Goff - a former Trade and Foreign Affairs Minister in the last Labour Government - is on song with the Chinese Taipei proposal.
It continues the path-breaking work Goff did in bringing the China New Zealand bilateral free trade deal to conclusion in April 2008, and the subsequent closer economic partnership the National Government inked with Hong Kong in March 2010; Hong Kong’s first such deal with a foreign Government.
Maryan Street saw it as building on the positive benefits for New Zealand from the FTA with China.
Street made the point that New Zealand adhered to the One China policy. Labour was "very supportive" of the move towards a potential deal being explored in a "cautious and exploratory" way.
Unlike its negotiations with China and Hong Kong, New Zealand does not enjoy first-mover advantage with Taiwan.
Singapore opened negotiations with Chinese Taipei last year. But progress has since been rather desultory. Taiwan’s Foreign Minister Timothy Yang said last month that pressure from Beijing was not a obstacle to the deal.
Both sides were actively engaged in talks but a negotiating timetable had yet to be set. Yang said it could take two to six years to complete.
Taiwan’s President Ma Ying-jeou is also vulnerable. Ma was elected in a landslide in 2008 but faces strong opposition to gain a second presidential term in January’s election.
At issue is whether his push to build stronger relations with Beijing has undermined the island’s sovereignty as an independent nation.
But it would seem unlikely the clock can be put back.
TALKING TAIWAN
– New Zealand’s 8th largest goods export market.
– NZ exported $897 million (December 2010 year).
– Prime exports: Milk powders, frozen beef, butter, fresh fruit, sheep meat, cheese.
– NZ imported $732 million goods from Taiwan in 2010.
– Main imports: Petroleum, stainless steel, bicycles, computers, and telephone equipment.
