Primary sector groups see bonuses in improved trade deal with China

Trade with China has quadrupled since 2008, much of it dairy products.

Trade with China has quadrupled since 2008, much of it dairy products.

Exporters have welcomed news that New Zealand and China are to upgrade the free trade agreement between the two.

The "big three" - dairy, meat and forestry - have all said New Zealand stands to gain from a revamp and full implementation of the 2008 FTA, which itself was instrumental in making China one of the country's leading trade partners.

In eight years since the FTA was signed, trade has quadrupled to reach $9.2 billion.

Prime Minister John Key and Chinese President Xi Jinping have given out positive signals over trade between New Zealand ...

Prime Minister John Key and Chinese President Xi Jinping have given out positive signals over trade between New Zealand and China, which could lead to an upgraded free trade agreement.

Dairy Companies Association of New Zealand chairman Malcolm Bailey said he had recently attended the Apec meeting in Peru and had been impressed by the "positive" attitude of Chinese President Xi Jinping towards trade.

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"It was clear that China is prepared to take the lead on developing trade; he gave a real commitment," Bailey said.

Since 2008 trade with China had increased to a significant degree, now penalising some products. New Zealand exported $2.77b of dairy products to China in 2015. While some tonnages of milk powder are allowed in tariff-free, once they reach a certain "safeguard" level, tariffs are immediately applied.

The trigger point for whole milk powder, New Zealand's biggest dairy export to China, is in January, right at the beginning of the export season.

Bailey said that, while the FTA was a high level one, tariffs on dairy products would not be completely eliminated until 2024. Fewer than a quarter of the dairy products that China imports from New Zealand receive tariff reductions.   

The rapid expansion of Chinese consumer demand for dairy products was not anticipated when the agreement was originally negotiated. New Zealand exporters were now disadvantaged compared to Australian, because Australia had just recently negotiated its  FTA with China.

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Fonterra chairman John Wilson said the upgrade of the FTA provided an opportunity to strengthen the already strong dairy relationship between New Zealand and China.

He described Fonterra as "the leading premium imported dairy provider in the foodservices sector in China".

The forestry industry said it hoped an overhaul of the FTA would open trade doors for more timber exports to China, and more employment in New Zealand.

New Zealand Wood Council chairman Brian Stanley said forest products were New Zealand's second most important export to China, at $1.8b a year. New Zealand negotiators would be looking at current non-tariff barriers for New Zealand timber exports to China.

"The Chinese timber industry has all sorts of government assistance against imports, and even when we are competing against other exporters there, such as the US and Canada, the Chinese regulations are stacked against us.  We'd also want more transparency in their phytosanitary rules."

Stanley said the New Zealand industry would like to see the China FTA result in more production and work for processors in New Zealand.

"At the moment China takes more than two-thirds of our log exports, but it lags behind the United States, Australia and Japan for importing processed timber from New Zealand, such as sawn timber, panels and paper."

Meat Industry Association chief executive Tim Ritchie said no tariffs applied to meat exports to China, but his industry would like to see the removal of technical barriers and some speeding up of processes that facilitated trade.

The latter included a revamp of the meat protocol to allow chilled meat exports and semi-processed casings.

One of the reasons for slow progress was that the Chinese were putting a "tremendous focus" on food safety which was paramount.

New Zealand meat exports to China were worth $1.55b in 2015.

Federated Farmers president Dr William Rolleston said the review would be good for the economy.

"One of the keys to the success of this agreement has been the determination by our negotiators to focus on non-tariff trade barriers, which can often be as costly as tariffs."

The first round of negotiation on a renewed FTA would start in the first half of next year.

 - Stuff

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