The agreement with China, signed in 2008, has proved the most economically significant. By June 2012 NZ’s total exports to China had tripled from $2.1 billion to $6.1b. Last year China became NZ’s biggest export market and in the year to the end of February receipts burgeoned by 54% to $10.9b. Dairy products increased 75% to almost $5b and China accounted for 44% of milk powder, butter, and cheese exports.
The Government aims to further expand dairy market access opportunities in each of six free trade negotiations at various stages of development. Depending on the outcome of negotiations the Ministry of Foreign Affairs and Trade said benefits could be significant, given the level of tariffs and quota restrictions in many markets.
The Trans-Pacific Partnership (TPP) includes the prosperous United States and Japanese markets, but 16 countries, mostly Asian, are involved in the Regional Comprehensive Economic Partnership (RCEP) negotiations. Other negotiations are with Korea, Russia-Belarus-Kazakhstan and India. Negotiations with the Gulf Co-operation Council (GCC) have been concluded but the agreement has yet to be signed.
Dairy exports are a priority in every case, a ministry spokesman said. Three of NZ’s top 10 export destinations for dairy products are included in the markets embraced by the negotiations.
Top of the list is the US, the second-largest export destination for NZ’s exports of dairy products, about $761m worth annually. Japan is the third-largest, with about $590m worth annually and the GCC accounts for $989m. That group includes the United Arab Emirates, the sixth largest destination for NZ’s dairy exports products, valued at $486m.
The total value of NZ’s annual dairy exports to the markets involved in the negotiations, excluding countries with which agreements already are in force, such as Australia, is $3b, accounting for about 25% of total NZ goods exports to those markets.
But negotiations on dairy products are generally among the most sensitive, and nothing is different in the current negotiations, the ministry says.
Dairy exports are sensitive for key TPP negotiating partners, particularly Japan, Canada, Mexico and the US, Korea, Russia, Belarus and Kazakhstan, and India. It’s sensitive, too, for several parties to the RECP.
The TPP nevertheless aims to achieve comprehensive tariff elimination, including those on dairy products, and NZ’s consistent position in all its free trade agreements has been to press for comprehensive outcomes for all products of key trade interest, the spokesman said.
“This remains our focus in the negotiations currently underway.”
Here’s how things are shaping up:
* The TPP aims to create a regional free trade agreement among 12 Asia Pacific countries – Australia, Brunei Darussalam, Chile, Japan, Malaysia, Peru, Singapore, the US, Vietnam, Mexico, Canada and NZ. The agreement would open up trade in goods and services, boost investment flows and promote closer links across a range of economic policy and regulatory issues.
About half of all global trade and more than 70% of NZ’s trade and investment flows through the region covered by the negotiations.
The Key Government’s objective remains to conclude an agreement as soon as possible based on goals agreed by the leaders of the negotiating countries in 2011 and the “landing zones” that ministers have identified across many issues in recent months, the ministry spokesman said.
The last round was in February, but more work is needed to align market-access packages with the leaders’ objective of comprehensive, duty-free access to each other’s goods markets and to resolve several complex issues, such as intellectual property.
The 12 TPP economies represent more than US$27 trillion in GDP and include five of NZ’s top 10 trading partners– Australia, US, Japan, Singapore and Malaysia. A free trade agreement with the US, the world’s largest economy, has been among NZ’s top trade policy goals for several years.
Japan, Peru, Canada and Mexico are the only other TPP negotiating partners with which NZ does not already have agreements.
* The RCEP negotiations involve the 10 members of ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) and the six countries with which ASEAN already has free trade agreements (Australia, China, India, Japan, Korea and NZ). The partnership countries have a total population of more than 3b people and account for 58% of NZ’s goods exports. In 2012 they had a collective gross domestic product of around $US21 trillion.
The negotiations were launched in November 2012, four rounds have been completed, and the parties aim to complete them next year.
An agreement will cover trade in goods, trade in services, investment, economic and technical co-operation, intellectual property, competition, dispute settlement “and other issues to be identified during the course of negotiations”.
In the past five years, NZ’s trade with ASEAN has grown at a rate greater than with any other of our major trading partners except China. The ASEAN counties account for one in five of NZ’s dairy export dollars.
* The NZ-Korea Free Trade Agreement negotiations were launched in 2009. The fifth round took place in February.
The pace of negotiations has quickened and officials said good progress had been made in recent months. They aim to conclude negotiations this year to have an agreement take effect next year.
Korea is NZ's fifth-largest bilateral trading partner. In the year to February exports were valued at $1.6b and imports at $2b.The elimination of tariffs on agricultural products remains a challenge, although NZ does not compete with sensitive Korean production.
NZ provides only about 3% of Korea’s total agricultural imports, is counter-seasonal, doesn’t export fresh milk to Korea, and produces grass-fed beef. An independent joint study into the benefits and feasibility of a free trade agreement in 2007 found the two economies were among the most complementary in the Asia-Pacific region and an agreement would benefit both countries.
* The NZ-Russia-Belarus-Kazakhstan Free Trade Agreement negotiations were launched in November 2010. Negotiations were close to conclusion when the Government announced it was suspending them in protest at Russian actions in Ukraine.
NZ’s trade with Russia was relatively modest, officials said, but the relationship had strong growth potential. The negotiations have covered a wide range of trade-related issues, similar to other agreements.
* The NZ-India Free Trade Agreement negotiations were launched in January 2010. Nine rounds have been completed, the most recent in July last year. A further round may take place later this year, subject to scheduling.
India is NZ's 15th-largest bilateral trading partner and the 12th largest export market, generating receipts of $687m in the year to February. But these have surged from $366m five years ago, a measure of India's emerging economic power. Economic forecasters have predicted India will be world’s third-largest economy world by 2025.
Coal and log exports have led the increase in trade with India in recent years. Dairy products have become significant trade items but India’s tariffs on agricultural goods average 34.4%.
* The NZ-GCC Free Trade Agreement was concluded in October 2011 and NZ hopes it will be brought into effect within the next year.
Officials must complete a legal verification process before the agreement is put before ministers for signing. Details of the agreement will be made public when it is signed.
Bilateral trade with the council countries (Bahrain, Oman, Kuwait, Saudi Arabia, the United Arab Emirates and Qatar) was worth $3.85b at December last year. The group now ranks as our seventh largest trading partner.
Colombia coming to the table?
The European Union is one of two sets of free trade negotiations at the feeling-out stage. The other involves the South American country of Colombia.
Colombia’s President Juan Manuel Santos and New Zealand Prime Minister John Key announced a year ago they wanted to begin work on a free trade agreement between the two countries.
Visiting Columbia in March, Primary Industries Minister Nathan Guy said an agreement would benefit both countries “and we look forward to commencing negotiations when Colombia is ready”.
Colombia has a population of just over 45 million people but is among NZ’s smaller trading partners.
