Hidden hooks emerge in China FTA

The Independent | Friday, 11 July 2008

Hidden hooks emerge in China FTA

By NICK SMITH

New Zealand’s free-trade agreement with China contains hidden hooks that could seriously damage the country’s tourism, building and manufacturing industries.

Tourism Holdings, Fletcher Building, unions and economists say the free-trade agreement (FTA) threatens the $18 billion tourism industry and poses a huge challenge to New Zealand’s construction industry.

The manufacturing sector has health and safety fears about an influx of Chinese workers, while Fonterra says the agreement, which is supposed to progressively allow access to the Chinese market, actually provides an opt-out clause.

China can present a case Fonterra poses a danger to its dairy industry, the third biggest in the world, allowing it to delay tariff reductions for up to one year.

The FTA allows China to bring 200 tour guides a year to New Zealand, which will dramatically exacerbate the problem of "backstreet’’ operations that gouge Asian visitors and are responsible for a decline in Korean and Japanese tourists, said Tourism Holdings chief executive Trevor Hall.

"The industry would be devastated,’’ Hall said.

Tourism New Zealand spokeswoman Cass Carter said the government had reached agreement with China which ensured its operators were "qualified’’ and "knew the product’’.

But Hall said the government doesn’t enforce existing tourism rules and allowing 200 guides a year would see an increase in "illegal practices’’.

"We’ve got some serious issues out there the Korean market has declined, the Japanese market is moving backwards and we’re in love with the Chinese market, which is a great market but we’re not looking after it and I imagine that’ll go into decline as well.

"It is concerning. Nothing I’m hearing about the FTA is going to fix the basic problem.’’

Roger Bowden, economics and finance professor at Victoria University, said allowing 200 guides a year to operate in the country could edge out local tourism companies.

"They’ll have the whole operation planned from China and the New Zealand dollar content will probably be quite minimal.

"It’s not as if tourism, under these circumstances, is going to be a whole lot of benefit to New Zealanders.’’

Bowden, who broadly supports the FTA because of the economic benefit to New Zealand, also predicts the Chinese will be "very interested in taking over domestic construction’’.

"They’ve built huge expertise in infrastructure,’’ he said. "They can build a 32km sea bridge, the second longest bridge in the world, really huge gas pipe lines, the Shanghai to Beijing fast-track railway and, of course, all the incessant motorway construction.’’

Fletcher Construction chief executive Mark Binns said the FTA allows China to bring in skilled workers fitter welders, structural engineers, design engineers, fitter turners, electricians, plumbers for three years without a visa.

"Will they come in and compete for projects? They may well do,’’ Binns said. "I wouldn’t underestimate the Chinese at all. I don’t underestimate their ability to build.’’

Bowden adds: "I think Fletcher Challenge is, for the first time, going to face some real challenges on this.’’

The FTA also liberalises capital flows between the two countries and, Bowden said, "the Chinese have built up a huge lake of domestic liquidity.

"We’re going to get a lot more interest from Chinese banks, initially to support the infrastructure, tourism ventures and the like. They will offer the complete package financing as well as construction.’’

But Binns said Fletcher already faces international competition from Australia’s Leighton and John Holland while domestic rivals Mainzeal and Hawkins were no slugs either.

Binns said the Chinese modus operandi was to use masses of cheap labour.

In New Zealand they would have to pay local rates and comply with health and safety regulations, which would erode the competitiveness of Chinese construction companies, he said.

Engineering Printing and Manufacturing Union national secretary Andrew Little said there was concern among manufacturers about the number of skilled workers the FTA allows into New Zealand.

Manufacturers are particularly aggrieved at the two-paced erosion of tariffs, which last longer in China than they do in New Zealand, Little said.

His sector is worried about the ability of employers and unions to verify and authenticate the qualifications of temporary Chinese workers.

"If they’re working alongside any migrant labourer, they want to be sure they are the equivalent standard and status,’’ he said. "I think that’s something the Ministry of Foreign Affairs and Trade needs to do some serious work on.’’

A Fonterra spokeswoman said although China had an opt-out clause, it is limited to milk powders and "presents only a very small risk’’.

"Chinese dairy imports from New Zealand make up around 2% of China’s entire dairy consumption,’’ she said. "It’s unlikely that case could or would be made for New Zealand imports damaging the Chinese dairy industry.’’

Little said China is a powerhouse economy. "Do we want to be part of it or not? Many people say yes, we need to be in there. We have something they want, which is dairy and food but the risks need to be mitigated as much as possible and the agreement goes some way to doing that,’’ he said.

"As for the future of manufacturing; the FTA hasn’t made the risks any greater.’

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source: Stuff