China trade upgrade a win despite modest gains

An upgraded free trade deal with China may not contain all that New Zealand politicians and officials had hoped for - but that progress has been made in the current global environment is a win for the Government

After months of speculation about a deteriorating relationship with one of the world’s superpowers, the news of a successful end to trade talks may have come as a relief to the Government - not that David Parker saw it that way.

“Relief? Not really relief, I think it’s celebration really,” the Trade and Export Growth Minister told Newsroom of the agreement in substance on an upgraded China-New Zealand FTA.

As revealed by Newsroom last week, two and a half years of negotiations have finally resulted in a deal that both sides are happy with. Predictably, there are modest wins for market access. Ardern trumpeted the fact that 99 percent of New Zealand’s wood and paper trade to China would have preferential access, but 98 percent of our trade already enjoyed that status under the original FTA.

Nevertheless, the gradual elimination of tariffs on 12 additional wood and paper exports worth $36 million a year is not to be sniffed at.

The tariff safeguards on dairy exports remain untouched, which will disappoint the dairy sector but is the result of a necessary compromise of short-term pain for long-term gain.

Australia’s 2015 trade deal with China contains lower but permanent safeguard thresholds, while New Zealand’s more stringent restrictions will lift entirely by 2024.

Industry groups like DCANZ had accepted the longer-term superiority of New Zealand’s arrangement but warned of a growing disadvantage with Australian exporters until then.

With little leverage to get the best of both worlds, the more cautious route is, on balance, probably the best.

Non-tariff barrier wins

The changes made to non-tariff barriers are less easily quantifiable than tariff cuts, but should not be underestimated.

A reduction in compliance measures and an avenue for certain exporters to “self-declare” that their goods qualify for preferential access under the FTA should save both time and money, while an expedited clearance process for perishable goods like fresh seafood will reduce the risk of high-value food rotting on the docks due to an unexpected hold-up.

Of course, China will still be able to slow imports to a crawl when it wants to make a point - as was the case with Australian coal this year and numerous other nations in the past.

But in a business-as-usual environment, a more consistent and streamlined process for Kiwi exporters will provide some welcome stability.

Some of the new chapters in the FTA will also make for fascinating reading - well, relatively speaking - with a section on e-commerce making bilateral progress in an area where the World Trade Organisation has failed to find consensus.

A chapter on “competition policy”, which traditionally deals with anti-competitive practices and abuse of a dominant market position, will sit uneasily against (so far rejected) allegations of steel-dumping by Chinese importers into New Zealand.

Ardern and Parker reserved the most attention for an environmental chapter, which was described as “the most ambitious environment chapter and the highest level of commitment that China has agreed [to] in any FTA”.

New Zealand has made some concessions of its own in visa access, broadening and amending the criteria for some “iconic Chinese occupations” - although with no change to the overall cap.

Of course, the devil will be in the detail, and with the signing and release of the text not expected until early 2020, there is still sufficient scope for things to go wrong.

Todd McClay's criticism of the China outcome doesn't reflect the fact his party would almost certainly not have won a better deal. Photo: Lynn Grieveson

But the very fact that China has agreed to improved terms with New Zealand in a generally shaky trading environment, despite little meaningful incentive to do so, is a victory for Ardern and the Government.

The churlish suggestion of National’s Todd McClay that the Government deserved “a three out of 10” for trade does not reflect the fact that his party almost certainly would not have secured a markedly better deal.

New Zealand’s leverage in the initial FTA negotiations came from its status as the first developed country to sign a deal with China, a PR win for a country moving away from its “hide and bide” approach to global affairs.

There is no such symbolism on offer now, and the surrounding political climate has grown far more complex with foreign interference allegations, the mass detention of Uighur Muslims in Xinjiang, and territorial spats in the South China Sea.

Just last week, New Zealand joined 23 other countries in condemning China’s treatment of the Uighurs.

That the Government can make its objections clear and still agree to a new deal, without resorting to the economic myopia which at times characterised its predecessor’s view of the bilateral relationship, is a good thing.

Attention can now move to new prizes like a trade deal with the European Union, a post-Brexit United Kingdom and - just maybe - the United States.

None of those discussions will be easy, while broader concerns about the fate of the WTO and consequences for the global trading system are still bubbling in the background.

But with one political headache out of the way, politicians and officials alike will head into Christmas much happier.

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