While talks to upgrade the 2008 free-trade agreement with China continue it is understood negotiations for the early removal of safeguards protecting Chinese dairy farmers from surges in imported competition from NZ have hit a brick wall.
The NZ dairy industry has long argued the measures are ill-matched to the massive increase in demand from Chinese consumers for imported dairy products since the deal was negotiated and should be removed before they expire in 2022 and 2024.
The low volumes at which the safeguards kick in mean just a quarter of NZ’s annual dairy exports to China get the tariff reductions originally negotiated in the deal.
Progress has been a struggle since China was dragged to the table in the middle of last year for talks to try to update the agreement.
The Labour-led Government’s hard-line stance on foreign investment and immigration – both seen as potential bargaining chips in the talks – has made the chances of a breakthrough even more remote.
Adding to the suspicion the talks on dairy have run their course is the refusal of the Chinese trade minister to meet his NZ counterpart David Parker when he visits China for the first time as trade minister later this week.
Parker said he had told the Chinese government he was willing to travel to Beijing after attending an import expo in Shanghai but was told his counterpart would not be available for a meeting.
Trade-watchers last week were divided on the significance of the snub with some saying it possibly reflects the extraordinary number of foreign dignitaries attending the Shanghai expo and likely to be vying for the Chinese minister’s time as well as more immediate and pressing priorities with trade tensions with America on the rise.
The snub was interpreted more darkly by others who saw it as a reflection on the state of the negotiations to upgrade the free-trade deal and the dairy safeguards in particular.
National’s trade spokesman and former trade minister Todd McClay said it is notable China invited NZ to sit in on G20 meetings held there two years ago but now NZ cannot even get a meeting with its trade minister.
“It raises questions about the amount of effort put into the relationship with China over the past 12 months.
“The livelihoods of NZ exporters depend greatly on this Government having a positive trade relationship with China.
“He (Parker) and his officials should do everything possible to secure a meeting.”
Parker said he expects to meet his counterpart at a meeting of APEC trade ministers this month and cautioned against viewing the snub as a negative reflection on the upgrade negotiations.
Talks between officials are ongoing but he was reluctant to go into more detail.
Asked what hope he could offer NZ dairy farmers continuing to be whacked with pre-FTA tariffs of 10% despite a free-trade deal being in place Parker pointed to Australia’s more recent deal with China.
That deal in 2015 saw Australia gaining a temporary tariff advantage over NZ exports by virtue of more generous trigger volumes for safeguards well in excess of their previous milk powder exports to China.
However, that advantage ends between 2022 and 2024 as NZ’s safeguards expire.
Asked whether he was suggesting the Government believes it has the best deal it can possibly get and might now sit it out and wait for the safeguards to run their course as originally agreed Parker was evasive.
“I am not saying anything.”
One source said Parker’s comments suggest a difficult balancing act for the Government.
If it pushes China too hard for concessions Beijing could respond with more generous safeguard volumes equal to the Australians but with no expiration dates for the safeguards that are also a feature of that deal and which would leave NZ dairy farmers worse off in the long run.
