China-NZ FTA Holds Significant Strategic Importance

Summary

China and New Zealand signed a bilateral free trade agreement in Beijing on 7 April 2008, the first such agreement between China and a developed country. Under the agreement, New Zealand will eliminate tariffs on all imports from China by 1 January 2016, while China will eliminate tariffs on the vast majority of imports from New Zealand by 1 January 2019, with 24.3% of products enjoying zero tariffs from the date of entry into force. In services trade, New Zealand made commitments higher than WTO obligations in 16 sub-sectors across four major sectors (business, construction, education, environment), and China did likewise in 15 sub-sectors across four major sectors.

On labour mobility, New Zealand provides 800 work permits for five occupations including traditional Chinese medicine practitioners and Chinese chefs, and offers work opportunities for at least 1,000 Chinese workers in 20 occupations such as lathe operators and welders. New Zealand Prime Minister Helen Clark said the agreement set an example during difficult financial market times. Chinese Premier Wen Jiabao described it as mutually beneficial, comprehensive and high-quality.

The two economies are highly complementary, with New Zealand's strengths in agriculture and primary products and China's in manufacturing. The agreement is considered strategically significant and a model for others.

Commentary

For New Zealand small and medium-sized enterprise owners, the signing of the China-NZ FTA directly lowers tariff barriers for exports to China, especially giving a first-mover advantage to agricultural products such as dairy, meat and fruit. The zero-tariff roadmap opens the vast Chinese market for New Zealand products, though it should be noted that China's domestic livestock sector also faces competition; however, the original article indicates that the two countries' industries are complementary, limiting the impact. Services trade liberalisation brings new customer flows to education, tourism, construction and other services, and work permit quotas for occupations like traditional Chinese medicine and chefs facilitate skilled labour mobility.

However, SMEs should be wary of competition from Chinese exports, particularly in manufacturing. Furthermore, the agreement served as a template for later China-Australia negotiations, but Australia's stronger agricultural export capacity may squeeze New Zealand's market share. In the long term, New Zealand needs to leverage its 'four firsts' advantage to build brand loyalty, focus on Chinese consumer demand for safe, high-quality food, and actively use labour mobility provisions to attract Chinese skilled workers to alleviate local labour shortages.

Overall, the agreement offers New Zealand SMEs a historic opportunity for export facilitation and expanded market access, but they must also prepare for intensified international competition.

Keywords: China-NZ FTA, zero tariffs, New Zealand, China, trade liberalisation, dairy products, services trade, labour mobility, mutual benefit, model effect

Source: Sohu