Explainer: Why NZ can't afford to mess with China – New Zealand Herald

China and New Zealand have enjoyed decades of mutual benefits.
The global powerhouse and New Zealand signed a Free Trade Agreement in 2008 and since then have phased in provisions to ease trade between the two countries.
China is now New Zealand’s largest trading partner, followed by Australia. Suffice to say it’s a relationship New Zealand can’t afford to lose.
Fallout from the Government taking the United States stance on the Huawei debate and now reports of people not wanting to come to New Zealand as a result are threatening the country’s long-standing friendly relationship.


Exports of dairy products, increasing tourist numbers and foreign students have been of significant benefit to New Zealand in the past decade, and dozens of businesses, including New Zealand’s largest company, such as Fonterra, rely heavily on trade from China.
READ MORE: • NZ/China relationship: ‘We have a big problem’
New Zealand exports of all goods and services to China were worth $16.6 billion in the year ended September 2018, Stats NZ said. Sales of major export products of dairy produce, logs and wood and meat have increased year on year over the past three years.

Travel is New Zealand’s largest export to China and spending by Chinese visitors contributed $1.6b to the economy last year.
About 448,000 Chinese nationals visited Aotearoa last year, according to the latest international travel figures, up from around 100,000 a decade ago. Approximately 132,000 Kiwis visited China last year.
Nick Siu, director of consultancy firm The Agency 88 which specialises in Asian markets, said he was surprised at the Government’s seemingly lack of effort to reconcile tensions given China is the country’s most important trade partner.

The relationship between New Zealand and China was “incredibly important”, Siu said, not only because of the huge volumes of trade and tourism but because New Zealand was home to around 260,000 people who identify ethnically as Chinese.
Fall out from diplomatic tensions could stall hit tourist numbers to New Zealand and therefore the wider economy, he said.


“Chinese are big spenders. Only six per cent of Chinese even have passports so there’s a huge opportunity and benefit for New Zealand to stay friendly to ride that wave of growth as Chinese start to move away from inbound tourism,” he said.
“Presently, New Zealand and Australia is the seventh most desirable region to travel [among Chinese] and the second non-Asian country.
“They spend 2:1 times more than Americans do so when they’re coming they’re not just walking around – they are spending money that’s pumping money around the local economy through the local shops, through the local services, through buying local.”

Nick Siu, director of the Agency 88. Photo / Supplied
Contrary to China’s significance to New Zealand, the country is a very small trading partner from China’s perspective, Siu said.
Siu said a lack of recent visitation between the countries’ elite signalled the relationship between the countries was strained. He believes the Government needs to reach out to make amends.
“I find it extremely surprising that they haven’t,” he said.
“Keeping a relationship with anybody, let alone your biggest trade partner, one would think a simple visit would be on the cards and a high priority.”
University of Auckland senior lecturer of international relations, Stephen Noakes, said Chinese authorities would be disappointed at how the Government managed fallout from the Huawei debate but said the impact could be “much worse”.
“The relationship between New Zealand and China has long been compared to say US and China or Canada and China [but] much friendlier. There are more back channels, society- to-society connections, and I don’t see recent events as up-ending those a whole lot.”

NZ trade deal with Japan makes US dairy exporters jittery – New Zealand Herald

New Zealand’s first trade agreement with Japan continues to rattle our dairy export rival the US, with a new internal report forecasting “critical” losses in the billions of dollars to competitors if the US doesn’t forge a trade treaty of its own with Japan.
The US Dairy Export Council last month sounded the alarm about the Comprehensive and Progressive Trade Agreement for Trans-Pacific Partnership (CPTPP) to which New Zealand and Japan are signatories.
The council has followed that up with the release of an economic impact study on the potential fallout on the US dairy export industry from the CPTPP, which came into effect on December 30, and a Japan-EU Economic Partnership Agreement (JEEPA) which has just taken effect.
The report by Tokyo-based Meros Consulting said US dairy competitors could seize US$1.3 billion (NZ$1.9b) in sales from the American industry in the next 10 years, climbing to US$5.4b (NZ$7.8b) once the two trade agreements are fully implemented over 21 years.


New Zealand and Australia are Japan’s two largest dairy suppliers.
Japan is the fourth largest dairy market for the US, with annual sales of about US$291 million, accounting for 5 per cent of total US dairy exports, almost half of it cheese.
The Meros report said all the major dairy countries exporting to Japan, except the US, are included in one of the two new trade agreements.
US President Trump withdrew from Trans-Pacific Partnership trade talks, the precursor to CPTPP, in 2017.
The report says New Zealand and Australia have “limited capacity to increase their supply” to Japan, the second biggest importer of cheese in the world after the UK. As a result Japan had looked to the US and the EU for extra supply, it said.
“Japan’s cheese imports are expected to show a 1.6-fold expansion over the next 10 years under CPTPP/JEEPA. If the US had the same market access as its competitors, US share could grow from 13 per cent in 2017 to 24 per cent in 2027, and US cheese export value to Japan could show a 3.3-fold expansion.

“However …. the CPTPP and JEEPA will put the US at significant disadvantage against other dairy suppliers and the US will lose critical market share if the US remains without a comparable agreement with Japan,” said the report.
New Zealand is the eighth biggest milk producer in the world. Japan is its fifth largest dairy export market with an annual value of about $450m.


Responding to the report, the US Dairy Export Council and the US National Milk Producers Federation said: “These agreements give our competition a significant economic advantage that will be enable them to increase their market share in Japan….”
The report underscored the need for the Trump administration and US congress to secure a strong trade treaty with Japan, they said.
Last month the council said dairy competitors including New Zealand were “aggressively” pursuing new trade deals in key US export markets.
The CPTPP was signed by 11 Asia-Pacific countries, which collectively were the destination for 30 per cent of New Zealand export goods (NZ$16.7b) last year.
Six, including New Zealand, Australia, Canada and Japan have ratified it, allowing it to come into force on December 30.
The Government says the agreement has the potential to deliver about NZ$222m of tariff savings a year once fully in force.
Tariffs will be eliminated on all New Zealand’s exports to CPTPP economies with the exception of beef to Japan and a number of dairy products into Japan, Canada and Mexico, where access is improved through partial tariff reductions and duty-free quotas.