All Roads Lead to China?

Posted by Pete Smith
31 March 2017

Chinese Premier Li Keqiang’s NZ visit has confirmed a Free Trade Agreement upgrade between New Zealand and China.

Chinese Premier Li Keqiang’s NZ visit has confirmed a Free Trade Agreement upgrade between New Zealand and China which will begin at the end of April.

Bill English wants to get rid of safeguards on trading thresholds for dairy exporters like Fonterra who get hit with higher tariffs once exports exceed a certain level while China wants to establish a sophisticated agreement that acts as a template and pathway to be adopted with other countries.

Given this is China’s first formal upgrade of an existing FTA it is understandable they want to establish the ongoing fundamentals for trade but what exactly are they and what does it mean for New Zealand exporters?

The first contentious issue raised via the media was the revelation that China had signed a Memorandum of Understanding with the Northern District Council to provide infrastructure for road and rail into the region.

This wasn’t known to the government so immediately it echoed the ‘one belt’ modern manifestation of the old silk route network strategy which reared its head in a similar fashion in Australia a couple of years back. In this case things became a lot more advanced when the Northern Territory state authority sold or granted port access without central Government knowledge or approval.

In ancient times the Silk Road route connected the east and west into and through the Asian continent primarily for the lucrative silk trade and two years ago the similar one belt strategy began to link South East Asia with similar maritime and land transport infrastructure all the way down to Singapore for more beneficial Chinese trade.

The confusion around the Northern District Council MOU and interpretation of what China is actually trying to achieve in the longer term through a possible FTA upgrade was immediately pounced on by Winston Peters who asked why the Chinese saw value in road and rail infrastructure up north while our government didn’t.

There was also the reference to cheap Chinese interest rates being initially used as a lure and to exert influence followed by the threat of Chinese labour and contractors being bought in at the expense of the local workforce among other things.

Interestingly enough China says it will create 11 million new urban jobs this year but that won’t keep pace with a government estimate of 15 million new workers entering the market.

Stephen Jacobi, executive director of the NZ China council, said in New Zealand the one belt, one road initiative was likely to focus on "software" such as trade regulation and facilitation, rather than "hardware" such as improved roads or airports.

We will no doubt see.

One thing is for sure nothing comes for free so attention to detail, understanding and showing resolve in retention of our best interests is key with what will be tough negations when upgrade talks begin in three weeks’ time.

Some key NZ China initiatives announced to date:

  • • Access to China for chilled meat from 10 New Zealand meat processors, initially on a six-month trial with a view to later expanding trade

  • • A climate change action plan, to enable closer cooperation as both countries transition to lower carbon economies

  • • Mutual recognition of trusted exporters, which will facilitate faster border clearance times for the recognised New Zealand exporters who already account for nearly half of New Zealand’s $9.4 billion of goods exports to China

  • • An increase in the number of direct flights possible between China and New Zealand, from 49 to 59 under the Air Services Agreement

  • • Frameworks to explore new economic opportunities, including on China’s Belt and Road Initiative, aimed at closer cooperation on regional infrastructure projects, and e-commerce, a growing platform that allows New Zealand companies to sell directly to Chinese consumers

  • • Enhanced cooperation in a number of areas including agriculture, sustainable fisheries, in the South Pacific, environmental issues, education and training, international development, health research, and intellectual property

  • • Agreement to strengthen cooperation on judicial and law enforcement issues, to jointly fight corruption and transnational crime

 

Chinese Premier Li Keqiang

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