NZ set to sign long-delayed China FTA upgrade

After years of delay and fears of the worst, New Zealand will soon sign off on an FTA upgrade with China - but will it deliver what exporters want? Sam Sachdeva reports.

New Zealand and China have finally reached agreement on an upgraded free trade deal between the two nations, with an official announcement expected within weeks.

However, the upgraded FTA is unlikely to deliver all that exporters had hoped for, with National calling on the Government to ramp up its trade talks with the European Union and United States as a result.

In 2008, New Zealand became the first developed nation to enter into a free trade agreement with China, with goods exports to the Asian superpower having quadrupled since the deal entered into force.

Negotiations on an upgrade first began in 2016, with the eighth - and last publicly-confirmed - round of negotiations held in Beijing in August.

The likelihood of a successful outcome has at points seemed uncertain under the current coalition, with Jacinda Ardern and Winston Peters leading a harder-edged approach to the relationship following allegations of foreign interference by China and human rights abuses in Xinjiang.

Early last year, National leader Simon Bridges claimed Peters had put the FTA upgrade at risk "by openly questioning New Zealand's relationship with what is our largest trading partner".

Bilateral ties appear to have been reinvigorated since then, with Ardern visiting China for the first time in April. Newsroom understands the trade talks have finally come to a conclusion both sides can live with.

Trade officials are believed to have wrapped up outstanding aspects of the deal in the last month, with politicians now left to put pen to paper in a signing ceremony.

That may take place as soon as this weekend when Ardern heads to the East Asia Summit in Bangkok on Sunday, which Chinese Premier Li Keqiang is also expected to attend.

Another opportunity would come during a visit to China by Trade and Export Growth Minister David Parker, which is tipped to take place next week. However, Chile's decision to cancel the Apec summit in mid-November has deprived Ardern of a traditional platform for trade-related announcements (the United States and China are themselves looking for an alternative venue to sign an interim trade agreement).

National's trade spokesman Todd McClay says the Government must redouble its efforts to secure FTAs with the European Union and the United States in the event its FTA upgrade with China is below expectations. Photo: Lynn Grieveson.

While a conclusion to talks will be welcomed, any gains from the upgrade are set to be modest, with the greatest wins believed to be made in the area of tariffs on wood and paper exports.

Forestry products are New Zealand's second-largest source of exports to China, making up just under a fifth of the $18.95 billion in overall goods and services exports for 2019.

While the lack of movement on dairy access may seem a disappointment, New Zealand officials had earlier signalled that any superficial improvements could in fact prove counterproductive in the longer-term.

Speaking to Parliament's foreign affairs committee in December last year, MFAT's deputy secretary for trade and economic issues Vangelis Vitalis warned that an attempt to match Australia's larger quotas into the Chinese market would be coupled with permanent restrictions, as opposed to the "free and unrestricted access" that Kiwi exporters would enjoy after our safeguards were lifted by 2024.

“The trade-off we had to think about was short-term benefit in terms of an increased volume into the Chinese market but a long-term restraint on our trade, and on that trade-off we’ve concluded that in fact it would be better to go for the free and unrestricted tariff trade after the expiry of our safeguards,” Vitalis told MPs at the time.

National trade spokesman Todd McClay told Newsroom it was important that progress appeared to have been made, but he hoped the Government had "gone to extraordinary lengths" to secure the best deal possible.

A disappointing upgrade would make it even more important for New Zealand to secure a high-quality trade deal with the European Union as soon as possible, McClay said.

"That's a must-do, and a must-do in the next six months or we'll miss a window."

The cancellation of the Apec summit also provided an opportunity for Ardern to "get on a plane to Washington" and double down on efforts for an FTA with the US.

"She would have our full support, and we wouldn't play the sort of games that we had to deal with when we were in government," McClay said.

A spokesman for David Parker declined to comment on the status of upgrade talks with China and whether a signing ceremony would soon take place.

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