Free Trade Agreement between New Zealand and China gets an upgrade

TK Wang

Introduction

In today’s Epic news! 

New Zealand has signed a new (ish) trade deal with China. New-ish because it’s really an upgrade to the initial FTA signed in 2008. That one was looking a little rusty and got a fresh coat.

There is plenty to be excited about, particularly for exporters, but not everyone is stoked on the deal and its broader implications. 

So, what’s actually in this upgrade to the Free Trade Agreement between New Zealand and China? Let’s take a closer look.


An Overview

While not exactly groundbreaking, the deal is being labelled as a much needed upgrade. As Trade Minister Damian O’Connor said in a statement:


“It will bring the agreement up to date for at least another 10 years.”


If 2020 taught us anything, it’s that the world can change in an instant. The new deal is an acknowledgement that the FTA needs to change with the times, and shows governments are paying attention to how the global economic landscape is evolving.

As one of NZ’s most important trade partners, the initial FTA signed in 2008 has in many ways shaped New Zealand’s export landscape. The upgrade seeks to build on the benefits both countries have reaped from that initial deal. Ultimately, from New Zealand’s perspective it’s about giving our high-quality products better, and faster access to the lucrative Chinese market.

Export

The upgraded FTA has largely focused on further reducing compliance costs, simplifying documentation requirements, and taking steps to help streamline the export process. In an effort to improve certainty and security, perishable goods will now be subject to a speedy six-hour clearance time at the Chinese border. Good news for an industry that had a very rough 2020.

Tariff-ic news 

With the upgrade, 99% of New Zealand’s $3 billion paper and wood trade will become tariff free. Of the $6.6 billion in wood products exported around the world from New Zealand, almost 50% end up in China (wood you believe it?.. sorry). 

Duties will be removed on an additional 12 wood and paper products, which is set to give the NZ economy a boost of somewhere in the region of $36 million. 

Services 

2020 was a big year for the service industry, and this section of the economy hasn’t been left out of the upgrade. Service industries like education, real estate services, airport operation services, and environmental services will benefit from a much needed expansion of market access.

Environment 

One of the more interesting inclusions was a small nod to the impending environmental calamity facing humanity. Both New Zealand and China have agreed that environmental standards won’t be lowered to achieve a trade or investment advantage. 


Many will say it’s nothing more than symbolic, a meaningless virtue signal to appease New Zealand and it’s ‘Clean and Green’ brand, but at the very least the environment is increasingly being included in the conversation.

Cooperation in the time of global disruption.

2020 was a rough year for many exporters and importers. A global pandemic, crumbling cohesion between certain ‘superpowers’, uncertainty around Britain's exit from the EU, and a significant squeeze on shipping (which we talked about here), made 2020 a year many would rather forget. 

In the age of Covid, the upgrade to the New Zealand China Free Trade Agreement is perhaps as symbolic as it is functional, as China attempts to show global cohesion is in everyone’s interest. 

The signing also comes just one day after Chinese President Xi Jinping spoke at the World Economic Forum, and encouraged other countries to set aside their ideological differences and take steps to increase openness. Oh Xi, you big softy.

From New Zealand’s perspective, Trade Minister Damian O’Connor said in a statement.


"This upgraded agreement comes at a time of considerable global economic disruption... The upgraded free trade agreement is part of the government's Trade Recovery Strategy, in response to the economic shock of Covid-19."

A little awkward with the Aussies

The deal comes just over a month after negotiations between Australia and China ended in verbal fisty cuffs. Trade Minister O’Connor didn’t help matters, going full back-rub by saying Australia "should follow us and show respect to China''. Critics labeled it ‘Dumb diplomacy’ which sums it up pretty well.

National Party foreign affairs spokesman Jerry Brownlee chimed in, suggesting O’Connor should "... take his own advice and stick to his knitting.”

Some have suggested that the upgraded deal with New Zealand is another way for China to put pressure on Australia to return to the negotiating table. If so, it appears O’Conner unwittingly trumpeted China’s cause.

Conclusion

So, there you have it. While it’s not a groundbreaking new deal by any means, it can be seen as a symbolic renewal of our economic and political vows with China. What it means in the wider context of diplomacy is anyone’s guess, but for now at least, exporters have something to cheer about.

As always, if you’re looking for some advice on anything sourcing related, get in touch! We’d love to hear from you. 

TK


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