NZ and Malaysia sign free trade agreement

Prime Minister John Key has welcomed the signing of a new trade deal with Malaysia as a significant step in relations with Southeast Asia.

In Kuala Lumpur last night, Trade Minister Tim Groser signed New Zealand's seventh free trade agreement . The deal builds on the Australia-New Zealand free trade agreement signed with Association of Southeast Asian Nations members this year.

The new agreement will see the phase-out of almost all tariffs between the two nations from next year. Kiwi exporters will get improved market access in agriculture, dairy, manufactured goods and services such as education, environment, management consulting and veterinary services.

Kiwifruit exports, which have doubled over the past three years, will be duty-free from next year, along with dairy products such as butter, cheese and milk powder.

Manufactured goods, such as whiteware, currently face tariffs of 50 per cent. These will be eliminated by 2016, providing a new market for companies like Fisher & Paykel.

The new agreement is expected to boost the number of foreign fee-paying students to New Zealand, with Malaysia already the third-largest market. About 15,000 Malaysians have received their tertiary education in New Zealand.

Malaysia's tough rules for foreign investment have also been relaxed. Officials believe the agreement is worth about $10 million a year to exporters, although this is expected to grow as trade increases.

In a first for Malaysia, negotiators have agreed to include environmental and labour-law co-operation – clauses that New Zealand insists on in free trade agreements.

However, because of religious sensitivities, wine exporters lose out.

Malaysia has refused to include any alcohol-related products under the deal, although the wine trade is worth only about $1.5 million a year.

Mr Key said the agreement was another step in forging better trade and other links with Southeast Asia.

"From New Zealand's point of view, this is a fast-growing market – it's a billion-dollar market that has expanded by 80 per cent in the last four or five years," he said in Kuala Lumpur yesterday.

Mr Key said Southeast Asia was a region of dramatic economic growth and presented huge opportunities for New Zealand.

Mr Key also met Malaysian Prime Minister Najib Razak yesterday. He was due to attend a state dinner in his honour before flying to Japan today.