- Why This Is Important
- Possible ASEAN FTA
- Results from Thai Trade Deal Study
- Kiwis Keen on Asian Contacts
Important NZ/Asia Free Trade Announcements
April saw some potentially very important trade announcements for NZ*:
- China and NZ are to start formally working towards an FTA (Free Trade Agreement);
- ASEAN (Association of South East Asian Nations) has proposed launching free trade talks with Australia and NZ by the end of the year; and
- results of a joint NZ/Thailand study on the benefits of negotiating a Closer Economic Partnership agreement (CEP), between the two countries, were released.
*We'll update you in future Rural Bulletins about public consultation, how negotiations are progressing, and other issues likely to be of interest.
NZ and China have agreed on a formal Trade and Economic Co-operation Framework. Negotiations for the Framework were originally announced when Chinese President Hu Jintao visited NZ last October. A key element of the Framework is agreement that NZ and China will begin an FTA negotiation next year.
The agreement to begin negotiations on an FTA will be formalised when the Trade and Economic Cooperation Framework (TECF) is signed in June. Once the Framework is signed, NZ will start work on a detailed feasibility study, which will include an extensive programme of public consultation with relevant industry sectors. NZ's negotiating position will not be developed until the study and consultation process is completed.
Why This Is Important
At it stands currently, the agreement so far is only an agreement to talk. But it is the first such agreement China has reached with any country. Many commentators believe that an FTA with China (giving NZ preferential access to China's economy) would unlock significant trade and investment potential. NZ's major exports are among China's major imports (forest products, dairy and meat). China is the world's fastest growing major economy, currently growing at around 9.1 percent per year. China is our fourth largest trading partner, taking $1.38 billion of goods and over $1 billion of services.
Our agriculture sector in particular may benefit from a possible FTA with China. China's middle class is now estimated to be more than 100 million people and growing - which could fuel the demand for NZ dairy and agricultural products. There may also be gains to manufacturing sectors and the services sector.
Examples where we currently face significant tariffs are:
- milk powder: even when China has fully put in place its WTO commitments, the tariff could be up to 10 percent;
- wool: out-of-quota exports face duties of 38 percent;
- meat: tariffs may reach 15 percent;
- forestry: although China has low tariffs on "rough" wood, with the bound rate resting at 1 percent, intermediate wood products (for example, veneer, fibreboard and plywood) incur higher tariff charges; and
- kiwifruit exports may incur tariffs of up to 20 percent.
Removal of these and other tariffs would make up a large proportion of the potential gains to NZ in the agriculture sector. Regulatory and other non-tariff measures also exist in many sectors, and by addressing these through an FTA, it is possible that the transaction costs of doing business in China would be reduced.
Possible ASEAN FTA
A few days after the China/NZ FDTA announcement, there came another potentially important announcement. ASEAN economic ministers meeting recently in Singapore recommended that their leaders invite the NZ and Australian Prime Ministers to their annual meeting in Laos in November to start free trade negotiations. The recommendation offers the prospect of improved access to a combined market of 500 million people with a gross domestic product of $US737 billion ($NZ1.18 trillion). NZ exports to ASEAN nations totalled $2.2 billion last year.
In recent years, ASEAN countries* have extended their trade and economic links with China, Japan, the Republic of Korea and India. NZ has a strong interest in being part of the important economic structures emerging in East Asia. NZ has a Closer Economic Partnership with Singapore and negotiations are underway with Thailand this year (see below).
Our exporters do not face many major barriers to goods trade with the region but an FTA would potentially open new opportunities for growth in our services and investment sectors, as well as in educational and technological exchanges.
*Note: ASEAN was set up in 1967 to accelerate economic growth, social progress and cultural development. Its members are Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei Darussalam, Vietnam, Laos, Myanmar and Cambodia. You can find out more about ASEAN at http://www.aseansec.org/home.htm.
Results from Thai Trade Deal Study
According to a joint study conducted by the Thai and NZ Governments, much improved access for NZ's exports to Thailand is expected following the negotiation of a Closer Economic Partnership agreement (CEP) between the two countries. In November 2003, the Prime Ministers of NZ and Thailand agreed that the negotiation of a trade-liberalising CEP should follow preparation of a joint study.
The study highlights benefits for both Thailand and NZ in entering into the trade partnership. The report said that the two economies are largely complementary with primary products dominating NZ exports in exchange for mostly machinery and manufactured imports from Thailand.
Two-way goods trade between NZ and Thailand was worth more than NZ$800 million in 2003:
Thailand exports to NZ (in 2003)
- Worth US$335 million
- Thailand's 38th largest overseas market
- Key products include vehicles and manufactured items
- 60,000 NZ tourists visited Thailand.
NZ Exports to Thailand (in 2003
- Valued at US$211 million
- NZ's 14th largest export market
- Dairy products and other agricultural products were the main export items
- 19,000 Thais visited NZ
- 3,400 Thai students studied in NZ in 2002.
NZ exports to Thailand face a range of tariff and non-tariff barriers that currently restrict trading opportunities. The reduction of tariffs and the removal of other trade barriers through a CEP are expected to benefit NZ exporters of both agricultural and manufactured products. For example, dairy exports currently face tariffs of between 18 and 30 percent plus quota restrictions; with horticulture (up to 40 percent), meat (30 to 50 percent), and manufactured exports (up to 20 percent) also currently attracting high tariffs.
Note: A copy of the joint study can be downloaded from the Ministry of Foreign Affairs and Trade website at www.mfat.govt.nz.
Kiwis Keen on Asian ContactsNZers remain positive about their Asian contacts, according to research carried out for Asia 2000 in early March. The research is the sixth study in a long term series carried out for Asia 2000 since 1997. The results of the latest study were consistent with the generally positive perceptions recorded in studies over the past seven years. Although many indicators were slightly off their 2002 peak, NZers were more positive about every aspect of Asian involvement in NZ than they were in 1997. NZers still regard the Asian region as the most important to the country's future and continue to hold very positive views of Asian trade and tourism. Negative views on Asian migration have declined significantly since the studies commenced in 1997. Over one third of NZ's foreign trade is with Asian countries and Asian visitors account for one third of all tourism revenues. Asian students account for 80 percent of international education sector revenues, estimated at $2.2 billion in 2003. More than 6 percent of NZ residents in the 2001 census were of Asian origin. Summary of Long Term Trends
The report can be downloaded as a PDF file from the Asia 2000 website at www.asia2000.org.nz/about/programmes/research/tracking_study_no6.shtml. |
Contact for Enquiries
The Ministry of Agriculture and Forestry
Pastoral House
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PO Box 2526, Wellington
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Fax: +64 4 894 0720
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