logo logo

Momentous trade deal signing tomorrow

Stuff, New Zealand

Momentous trade deal signing tomorrow

6 April 2008

New Zealand will sign up to its biggest bilateral trade deal in 25 years in a ceremony in Beijing tomorrow.

The trade agreement with China is described by diplomats as momentous and matching the CER deal with Australia signed a quarter of a century ago.

After taking full effect it is predicted to benefit New Zealand with a $225 million annual increase in trade and $120 million in tariff savings.

Once the fine print is revealed it is expected to show that most of the big gains for New Zealand will be phased in, with most tariffs on sensitive agricultural products not removed until 2020.

Trade Minister Phil Goff who was always aiming for full elimination of trade barriers said he is "reasonably pleased with the deal".

The average tariff on New Zealand’s $1.95 billion of exports to China is between 10 and 20 per cent.

The average for New Zealand’s crucial agricultural sector is 15 per cent with some facing 25 per cent price imposts which just end up in China’s bulging coffers.

In the future New Zealand exporters will be able to pocket that money or drop their prices to make their products more attractive to China’s growing consumer market.

The returns to China are much less and are predicted to be about $80 million a year on the $5.59 billion in goods it sends to New Zealand.

Officials predict the trade imbalance between the two countries will also close with NZ exports growing by up to 39 per cent over the next 20 years and China’s increasing by 11 per cent.

Most of New Zealand’s tariffs are on clothes and textiles and are being phased out anyway.

There will also be an increase in the number of Chinese who can work in New Zealand, but Mr Goff said he "never contemplated" the free flow of labour between the two countries and the Chinese were "pretty realistic" about the issue.

The deal for China is strong in symbolism and sends a powerful strategic message to the rest of the Western world.

New Zealand is the first developed country to sign a trade deal with China and it gives Beijing a response when other super-economies such as the United States complain about its heavily protected trade borders.

Critics of China’s political system and human rights records have already criticised New Zealand for signing the deal, coming as it does after riots and a clampdown in Tibet, and the build up to the Olympic Games.

Prime Minister Helen Clark has said the deal and human rights are not directly related.

New Zealand will continue to raise its concerns about China’s human rights record, but it would be counter-productive to cease trade with the world’s fastest growing economy.

Mr Goff will sign the deal with his counterpart Chen Deming under the gaze of Miss Clark and Premier Wen Jiabao in the Great Hall of the People on Monday afternoon New Zealand time.

Miss Clark is also accompanied by a large business delegation and diplomats hope the deal will raise New Zealand’s profile both in China and internationally and open up new opportunities for trade and investment.

The deal is described by diplomats as the most significant to be signed anywhere in the world this year.

China is currently New Zealand’s fourth largest trading partner, but at current rates of growth will be third in a few years time overtaking the United States.

Diplomatic and political ties have always been reasonably cordial and have warmed in recent years as China opened its borders, relaxed many restrictions on its people and memories of the massacre in Tiananmen Square fade.

One diplomat told NZPA that the trade agreement was: "the biggest step in the relationship since diplomatic relations were first established in 1972".

It will also be viewed with interest around the world because of China’s growing influence throughout the world.

New Zealand’s other major trading partners such as the United States, Europe and Japan have all constantly refused to enter into trade talks with New Zealand.

The deal was first mooted in 2003 and the formal talks took three years to complete.