How is New Zealand looking to expand its FTA with China?

Legislation | | MIC Customs Solutions |

New Zealand is looking to become the first country to upgrade a free trade agreement with China, with a number of key objectives in the two countries' sights.

Officials from New Zealand and China are coming together to discuss a potential expansion of their existing free trade agreement (FTA) that could potentially deliver a range of benefits for businesses in both countries.

From April 25th to 27th, New Zealand negotiators travelled to Beijing to conduct preliminary talks over a proposed upgrade to the historic NZ-China FTA that has been in place since 2008. Having been the first developed nation to enter into a free trade pact with China, it is now looking to become the first to meaningfully upgrade the arrangement.

This initial round of talks will act as a scoping exercise, allowing ministers to develop a timetable of how the negotiations will proceed in earnest over the coming months. However, both nations are committed to ensuring that the discussions culminate in a new deal that delivers substantial economic gains.

The existing deal

Following the commencement of negotiations in 2004, the original NZ-China FTA was signed in the Chinese capital in April 2008, before coming into effect in October of the same year. It ensured that all but a select number of products sold between New Zealand and China can be traded tariff-free, while providing better market access and guarantees for businesses in both countries and leading to greater cooperation in the areas of customs, sanitary and phytosanitary measures, and intellectual property.

The abolition of tariffs resulted in NZ$115.5 million (€73.09 million) in annual savings to New Zealand exporters at the time of signing, with this figure having risen substantially as trade has increased as a direct result of the FTA. Indeed, goods exports to China have quadrupled since the FTA entered into force, meaning China is now New Zealand's second-largest trading partner, with two-way trade tripling to over NZ$22 billion in 2016.

China has also become New Zealand's ninth-largest source of foreign direct investment, with the trade pact recognized as the highest-level bilateral FTA between China and a developed country. It is hoped that the upgraded deal will build upon the strength of this established relationship.

Key objectives for the upgraded deal

The governments of China and New Zealand agreed in November 2016 that there would be scope to improve upon the existing FTA, with the stated goal being to further free up trade for goods and services exporters and enhance areas already covered by the agreement, including technical barriers to trade, customs procedures, cooperation and trade facilitation, rules of origin and services.

Moreover, both countries will be able to address newer areas not included in the 2008 pact, such as competition policy and electronic commerce, while raising other issues of importance to them. One of the key issues will be a potential move to raise New Zealand's dairy safeguards, as the terms of the current FTA means the country's dairy industry faces tariffs once a volume threshold is met - an annual limit that is currently typically reached midway through January, such has been the growth of trade.

China, meanwhile, is seeking New Zealand's support in its Belt and Road Initiative, which will see the Asian superpower spending trillions on trade-related infrastructure projects across the region, working in close cooperation with local partners.

Other issues that will be discussed as part of the negotiations include the establishment of a system of mutual recognition of trusted exporters, which will facilitate faster border clearance times for accredited New Zealand exporters who already account for nearly half of the country's $9.4 billion of goods exports to China. Additionally, the country will seek access to China for chilled meat from local meat processors, initially on a six-month trial, with a view to later expanding this scheme.

As yet, no fixed timescale has been set for the conclusion of the new-look FTA, but swift progress is seen as desirable, as New Zealand's prime minister Bill English said the upgrade will play an important role in assisting progress towards a government target of reaching NZ$30 billion in two-way trade between the nations by 2020.

He added that the commencement of talks "also confirms the commitment of both countries to open trade and economic growth".