The New Zealand – China FTA

1. The New Zealand – China FTA China FTA Taskforce Ministry of Foreign Affairs and Trade ftc@mfat.govt.nz

2. WHY AN FTA WITH CHINA? • China is NZ’s fourth largest export market and source of imports. Bilateral trade topped NZ$5 billion in 2004 (an increase of over 20% on 2003 trade). • China’s importance will continue to grow over the coming years, building on its recent impressive growth (9% in 2003 - although speed wobbles are possible along the way). In Purchasing Power Parity terms, China is the world’s second largest economy (an estimated GDP of US$6 trillion in 2002).

3. WHY AN FTA WITH CHINA? • To open up new opportunities for New Zealand businesses from the elimination of tariff, non-tariff and other burdensome regulatory barriers • Not only in agriculture – there are opportunities for fishing, forestry and manufacturing sectors. • To secure greater access to China’s vast services market (China is already New Zealand’s largest market for education exports). • China is also an increasignly important source of investment, and of collaboration in areas of science and technology.

4. WHY AN FTA WITH CHINA? 2. To keep NZ in the game – and defend our existing markets • Other countries are are lining up to enter preferential deals with China (e.g. Australia, Chile, ASEAN, South Africa). Arrangements are already in place with Hong Kong and Macau. • In a number of sectors (e.g. milk powder, wool, wood pulp, education) China is already NZ’s largest international market – this could be at risk if other competitors gain preferential access at the expense of NZ exporters.

5. BACKGROUND TO THE PROCESS • Trade and Economic Cooperation Framework (May 2004) - contains agreement to undertake a joint feasibility study, with any negotiations on an FTA to begin in early 2005. • Joint Feasibility Study – completed and released in November 2004, confirming benefits to both countries from an FTA.

6. JOINT FEASIBILITY STUDY • Objectives and purpose: • To assess the impact of the removal and reduction of existing barriers. • To identify possible cooperation measures to promote trade and investment liberalisation and facilitation. • To make recommendations on the scope of a bilateral FTA in order to facilitate the commencement of such negotiations.

7. JOINT FEASIBILITY STUDY • Study conclusions and recommendations • An FTA would benefit the people and economies of both countries. • Significant complementarities exist between the NZ and Chinese economies. This should lead to an increase in bilateral trade in many areas. • Economic modelling confirms the positive impact an FTA would have on the GDP, welfare and exports of both countries.

8. JOINT FEASIBILITY STUDY • Study conclusions and recommendations • Covered areas of goods, services, investment, capacity building, customs facilitation, e-commerce, intellectual property, SPS, SME cooperation, technical regulations and standards, temporary entry/mobility of business people, trade and investment promotion, sustainable development (labour and environmental issues), competition policy and government procurement. • Identifies that a number of areas may face challenges in adjusting to the new environment and recommends that these should be taken into account in negotiations.

9. JOINT FEASIBILITY STUDY • Study conclusions and recommendations • An FTA would underpin and complement cooperation and progress in APEC and the WTO. • Any FTA must be fully consistent with WTO rules. • Recommends that negotiations, covering goods (including tariff and non-tariff barriers), services and investment, should commence as soon as possible.

10. ECONOMIC MODELLING • The Centre for International Economics (CIE, Australia) and NZIER (New Zealand) were commissioned to undertake economic analysis of a New Zealand-China FTA • APG-Cubed, a dynamic, forward-looking, model was used to assess the effects of an FTA over time

11. RESULTS • An FTA would deliver net benefits to both economies • A comprehensive New Zealand-China FTA (over a twenty year period) would result in: • Growth in New Zealand’s real GDP of over US$1.9 billion • An increase in New Zealand’s welfare of US$2.3 billion • Expansion in New Zealand’s exports to China of between US$180-$280 million per year

12. FTA = AN INCREASE IN NZ’S GDP An FTA will add over US$1.9 billion to NZ (real) GDP Gains in all areas, including from the removal of tariffs and non-tariff barriers

13. ONGOING ANALYSIS • Aside from the Joint Study, we are conducting our own ongoing analysis and investigations into the issues relevant to the FTA. This work will help inform NZ’s negotiating position. • As part of this analysis, we will be hoping to continue regular meetings with businesses and organisations.

14. NEGOTIATIONS • Announcement of negotiations by the Prime Minister and President Hu Jintao at the APEC leaders meeting in Chile on 19 November • The first round of negotiations took place on 6-7 December • General discussion on process issues • Further exchange of information • The second round took place in Beijing over 28 February – 2 March • Continued information exchange • Further exploration of trading interests

15. NEGOTIATIONS • The third round will take place in New Zealand over 9-11 May • This will include more detailed exchanges across the full range of issues • Further rounds are scheduled for 2005 – we have spaced these over the year to ensure adequate time is available for consultation.

16. NZ NEGOTIATING POSITION • NZ’s negotiating position is still under development • Seek to maximise benefits while minimising any domestic adjustment impacts • We want to work closely with business to deliver appropriate strategies • We appreciate the efforts of all parties who have prepared submissions or submitted non-tariff barrier surveys • There is still time to feed in your views

17. NZ NEGOTIATING POSITION • Any negotiation will be undertaken in the context of existing policy: • A tariff phase down between now and 2010 already in place. • Work is already underway on minimising adjustment impacts of this tariff phase down on some industry sectors. • Other FTA or CEP negotiations have been completed (Thailand) or are underway (P3, ASEAN and Malaysia). • A possible outcome from WTO negotiations.

18. NZ NEGOTIATING POSITION • Any negotiation will be undertaken in the context of existing policy: • Government policy requires comprehensive coverage. • Government has a policy of seeking recognition of its obligations under the Treaty of Waitangi. • Likewise there is a policy of seeking good outcomes on environment and labour. • These policies will clearly apply to any FTA negotiation with China.

19. WHAT’S IN IT FOR RETAILERS • Enhanced growth • Increased trade in goods • Choice • Price competitiveness • Standards and conformance • Services and investment

20. WHAT YOU CAN DO TO HELP MOST • Give us feedback • Inform us of all the problems that you face in selling to, or investing in, the Chinese market. • We also want your views on the impacts liberalising tariffs on imports from China would have on your industry or company. • In this context views on timeframe and phasing periods would be of great assistance to us.

21. OUR JOB • To identify all barriers • Assess the opportunities and impacts of an FTA with China • Develop a negotiating strategy which seeks to maximise the benefits for New Zealand… and minimise any potential domestic adjustment impacts. • We are serious about working with industry and other stakeholders to achieve this outcome.

22. CONTACT US China FTA Taskforce Ministry of Foreign Affairs and Trade David Walker, Lead Negotiator Brad Burgess, Coordinator ftc@mfat.govt.nz