Thursday, March 28, 2024

PM to China to kick-start FTA renegotiation

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Prime Minister John Key is planning an official visit to Beijing in April amid mounting evidence the Chinese bureaucracy is less enthusiastic about renegotiating key terms of the China-New Zealand free trade agreement than the Chinese political leadership.
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At the heart of New Zealand’s ambitions was the removal of special safeguards that apply to exports to China of New Zealand agricultural products, but which do not apply to Australian exports under the year-old Australia-China FTA.

Under most-favoured-nation clauses in the NZ-China agreement, both countries were entitled to improve the terms of the agreement to the standards applied to subsequent agreements with other nations.

Key remained confident the FTA could be renegotiated while acknowledging there could be sticking points at the official level.

“We are confident, as confident as we can be,” he said.

However, soundings by AgriHQ Pulse confirm the issue is sensitive, with New Zealand negotiators fearing pushing too hard through political and diplomatic channels could backfire if Chinese officialdom feels unduly pressured.

While claiming no direct knowledge of the state of negotiations, Beijing-based NZ businessman David Mahon, principal of consultancy Mahon China, said China’s early warmth towards NZ as a trading partner was being challenged by the growth in its trading relationships with other developed economies.

“I don’t think there’s the need on the Chinese side to do a great deal as there was 10 years ago,” Mahon said.  “Then, there was a political motive for China to secure a free trade agreement with a developed country. Now it has many FTAs with developed countries.

“It’s not going to be easy for NZ to take this much further and improve the terms. China’s need is different now.

“We had our place in the sun, but companies were not as able to do as much with it as the NZ Government would have liked. Many tried, but China is not an easy place to do business.”

Australia’s FTA allows tariff elimination on dairy products within 11 years and does not impose special safeguards of the kind faced by NZ dairy exports, which attract tariffs once quota limits are reached.

The same applies for other agricultural products. Wool quotas, for example, have been filled in every year since the NZ-China FTA was signed in 2008 and on the dairy front, tariffs have been imposed progressively earlier each year as milk powder imports from New Zealand have skyrocketed.

While Beijing was reportedly stung by the ministerial rejection of the Overseas Investment Office’s recommendation to allow Shanghai Pengxin to buy the central North Island Lochinver station property from Stevenson Group last year, sources close to the negotiations suggest this is not a major factor in Chinese reluctance to expedite the FTA upgrade.

Among issues likely to be affecting official sentiment are the rush of dairy imports from other countries, including Australia and the EU, at the same time as the Chinese domestic dairy industry starts to gather strength under highly co-ordinated direction from Beijing.

Local port authorities were also believed to be complaining at the loss of customs revenues occasioned by the dismantling of traditional trade barriers.

Key was expected to continue on to India after the China visit, where FTA negotiations have stalled indefinitely amid signs New Delhi was more interested in technology transfer for economic modernisation than in trade liberalisation.

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