NZ-China Free Trade Agreement upgrade coming into effect in April

New Zealand's Trade Minister last week met with his Chinese counterpart to agree that an upgrade to our Free Trade Agreement (FTA) with China will come into effect in April. 

Damien O'Connor says the upgrade, signed in January 2021 but which has now been ratified by both countries, is a "significant step" and will assist with New Zealand's economic recovery from COVID-19. 

"Our trade agenda has very good momentum, with our primary industry exports forecast to hit a record $50 billion this year alone," he said in a statement on Tuesday.

"Goods and services exports between China and New Zealand reached $20.1 billion in the year ending June 2021. New Zealand businesses will benefit from up-to-date rules underpinning our trade. This Upgrade modernises the original 2008 New Zealand-China FTA to ensure it remains fit for purpose."

O'Connor met virtually with Chinese Minister of Commerce Wang Wentao last week and the pair agreed the upgrade would come into force on April 7. 

Among the key outcomes of the upgrade is the elimination of tariffs on 12 wood and paper products over a ten-year period. Once fully implemented, that means 99 percent of Aotearoa's $4 billion wood and paper trade to China will receive tariff-free access. 

Exporting to China will also be easier, with reduced compliance costs. This includes faster border release of fresh food products and other products that have transitioned through other countries en route to China. 

The upgrade also introduces new environmental considerations. It's said to be the most ambitious environment chapter and highest-level commitment China has agreed to in any FTA.

"Separately, from 1 January 2022, most New Zealand dairy products to China are entitled to duty-free access for the first time as a result of ongoing implementation of the existing FTA," O'Connor said. 

"This will directly benefit many of New Zealand’s rural exporters to China, and is expected to result in additional savings of $180 million per annum at current export volumes."

O'Connor and Wang.
O'Connor and Wang. Photo credit: Getty Images.

China is New Zealand's largest trading partner, but Foreign Affairs Minister Nanaia Mahuta last year raised "the value of diversity" to New Zealand's long-term economic resilience. 

That came as New Zealand was accused of not being as vocal about human rights abuses in China as other Five Eyes partners because it didn't want to cause issues for the trading relationship.

"It is prudent not to put all eggs into a single basket," Mahuta said in a speech last April. "The New Zealand Government will continue to work with business to pursue a range of trade opportunities."

New Zealand last year concluded FTA negotiations with the United Kingdom and negotiations are ongoing with the EU.

"In January the Regional Comprehensive Economic Partnership (RCEP) entered into force. And then of course, we have PACER Plus, which entered into force at the end of 2020," O'Connor said.

Prime Minister Jacinda Ardern will lead trade delegations to Asia, Europe, Australia and the United States this year. Her trip to the US in May will see Ardern undertake trade engagement on the West Coast, focused on the high-technology export sectors.

Despite criticism New Zealand has bitten its tongue on China's abuses, including against the Uighur population in Xinjiang and in Hong Kong, Aotearoa has put out a number of statements condemning Chinese authorities' actions. That includes as recently as last week, when New Zealand joined the Media Freedom Coalition in raising concern about the suppression of freedom of speech in Hong Kong. 

In May last year, New Zealand decided it would be party to a trade dispute between Australia and China over significant tariffs Beijing has imposed on imports of barley from Australia.

O'Connor told Newshub at the time that New Zealand was "participating in this dispute as a third party because it raises systemic issues of importance to the effective functioning of the multilateral rules-based trading system". 

"New Zealand upholds international rules and norms, so ensuring international trade rules are fairly applied by others is important to us and our exporters," the minister said.