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The government is telling exporters they need to diversify but for many the lack of tariffs when exporting in to China make it too attractive to want to look elsewhere. National correspondent Lucy Craymer looks at where New Zealand has Free Trade Agreements and where there are potential opportunities.
What we have:
Signed in 2008, and upgraded earlier this year – although the latter hasn’t yet been signed off by the two governments – this is the free trade agreement (FTA) that gets much of the airtime in New Zealand. It was the first FTA China signed with a developed country and gave us a head start on exporting our agricultural goods there.
By 2018, tariffs had been eliminated on roughly 97 per cent of the goods that New Zealand sent to China and improved access to Chinese markets for New Zealand service providers. It also saw faster and easier visa access for people wanting to visit China and red tape for exporters was reduced.
This has all seen goods exports with China quadruple from 2008 levels, when the FTA was signed.
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The upgrade will offer some New Zealand goods – such as seafood – faster access to Chinese markets and reduce tariffs for paper and wood products going into China.
Australia is New Zealand’s only official ally. It’s also New Zealand’s closest trading partner.
And the Kiwi-Oz economic and trading relationship is recognised as one of the closest, broadest and most mutually compatible in the world, according to the Ministry of Foreign Affairs and Trade.
The two countries have committed to a Single Economic Market that makes it easier for companies to work in either market and lowers costs for them to do so.
Australia is our second largest trading partner as goods and services flow across the ditch.
Signed in 2000 – and put into force in 2001 – this FTA wins the award for one of the most swiftly concluded, taking less than a year to negotiate. This boosted trade between the two countries, with Singapore now New Zealand’s largest trading partner in South East Asia.
An upgrade came into force in 2020. This allows New Zealanders to stay three times as long in the city without needing a visa, along with increased rights for businesses to send staff there and a streamlining of customs and simplifying of border requirements.
Other FTAs in Asia
New Zealand has a number of other agreements with countries or cities in the region including Hong Kong, Malaysia, Korea and Thailand. It is also part of a trade agreement that covers the Association of Southeast Asia Nations (ASEAN) – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand, Vietnam and the Philippines – as well as Australia. ASEAN is New Zealand’s fifth largest trading partner and is seen as having huge potential for New Zealand business and investment due to the cumulative size of all the countries’ populations and gross domestic product (GDP). An upgraded ASEAN-NZ-Australia agreement is currently being negotiated.
The intriguingly named PACER-Plus agreement between New Zealand, Australia and a number of Pacific Islands established a common set of trading rules, which will make it easier for businesses to trade throughout the region. It reduces tariffs, makes it easier to determine what qualifies as Pacific Island product and for exporters to get their products into New Zealand and Australia.
Comprehensive and Progressive Trans-Pacific Partnership
It involves Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The controversial agreement gives New Zealand better market access to the signatories of the agreement and reduces tariffs on products, and it allows better access to NZ, for countries who also signed on. Prior to this New Zealand did not have FTAs with four of the signatories: Japan, Canada, Mexico and Peru.
This partnership replaced the failed Trans-Pacific Partnership Agreement, which was concluded but never ratified after the US withdrew.
Coming soon… maybe:
Regional Comprehensive Economic Partnership
The Regional Comprehensive Economic Partnership is a trade agreement between 15 economies in the Asia-Pacific region that are home to almost a third of the world’s population and take over half of New Zealand’s exports. It was signed in 2020 and will come into effect once all the countries’ governments have passed it into law. According to the government it should provide an increase to New Zealand’s GDP of around $2 billion annually.
The two countries are currently in accelerated negotiations to reach an agreement, following Australia and the UK coming to one earlier this year. New Zealand’s trade minister Damien O’Connor says that it should be reached by August this year. This agreement has been touted as eliminating some tariffs and creating meaningful commercial access from day one. The UK is currently the country’s sixth largest trading partner and over a 15-year period it is estimated an agreement would boost exports by 40 per cent.
The EU and NZ has to-date racked up 11 rounds of negotiations (most recently in July) in an effort to get an FTA signed between the two parties. In June, O’Connor visited Paris and Brussels to boost political momentum. There is no time frame for when this might be agreed upon. A report prepared by the EU before negotiations started estimated an agreement could see NZ exports to the region increase by 10.5-22.2 per cent.
Negotiations continue between New Zealand and the Latin American regional group made up of Chile, Colombia, Mexico and Peru. The Ministry of Foreign Affairs and Trade says, although trade with the Alliance is currently modest, New Zealand sees considerable scope to expand. The hope from the agreement is to establish free trade with Colombia and further reduce barriers that impact exports to Chile, Mexico and Peru as some sectors, particularly agriculture, are highly protected in the Pacific Alliance.
World Trade Organisation E-Commerce Agreement
New Zealand, together with over 80 World Trade Organisation members, confirmed intentions in January 2019 to launch negotiations on trade-related aspects of e-commerce. New Zealand is involved because it believes that despite unprecedented growth in e-commerce, the development of international trade rules has not kept pace. The ability to move data between jurisdictions is also increasingly crucial to businesses involved in international trade and is an inevitable feature of the modern economy.
On the back burner:
The Trump administration was on the cusp of starting formal trade talks with New Zealand on a long-awaited free trade agreement in 2020– until the pandemic and two elections intervened, according to the former US ambassador to New Zealand, Scott Brown. Those talks would likely have resulted in a digital services free trade agreement with the world’s largest economy, potentially worth hundreds of millions of dollars to both countries.
Gulf Cooperation Council
Agreed in principle in 2009, this FTA has languished without ratification for an inordinately long time. This has not been helped by Qatar falling out with its Middle Eastern neighbours. It would, however, be hugely beneficial for New Zealand given the region’s growing wealth and lack of farming resources.
Negotiations were suspended in 2014 following Russia’s actions regarding Ukraine and Crimea. Talk that they were going to restart in 2018 were put on ice after the poisoning of a former Russian military officer and double agent for the British intelligence. However, the three countries do provide a big opportunity for New Zealand given the country’s demand for dairy products.
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