Todd McClay: Words matter — and so does trade

Todd McClay.

Opinion

New Zealand's economic relationship with China has grown since the NZ-China Free Trade Agreement (FTA) was signed in 2008, almost as quickly as the mutual respect that has developed between our two nations.

That the two-way trade is nearing $27 billion and is responsible for thousands of Kiwi jobs speaks volumes for the ongoing importance we must place on this relationship.

Trade flows remain remarkably balanced for two countries whose economies are of such different size. This is not by chance, but a direct result of successive governments, officials and particularly Foreign Affairs and Trade Ministers regularly visiting China, to secure opportunities for Kiwi exporters. It's a valuable relationship we must nurture and maintain. To not do so would be to the detriment of our relevance in Asia, our economy, and to the livelihoods of New Zealanders.

We share a considerable number of firsts with China. It was impressed on me just how important this is during my many visits as Trade Minister. The first to agree China's membership of the WTO, first to recognise China as a market economy, the first country to conclude a Free Trade Agreement, the first developed nation to become a member of the Asian Infrastructure Investment Bank — and now the first to launch an FTA upgrade.

We must strive to add two more firsts to this list — the first to successfully conclude an upgrade of an FTA, and a first visit to China by our Foreign Minister — on behalf of the Coalition Government.

The FTA upgrade launch was not always certain, and nor is its successful conclusion. A number of significant challenges were worked through prior to my meeting with then Minister of Commerce, Gao Hucheng at Apec in Peru in 2016.

Many hours of work were put in before our announcement that negotiations could commence.

The mutual respect and trust that had been earned by successive New Zealand Trade Ministers in no small part laid the foundations for this announcement. It's important that the new Government puts aside any bias and continues to build on this trust if we are to achieve all we need to in the upgrade.

That China is large and we are small puts us at a disadvantage — that we are fair-minded and respectful proponents of a rules based trading system assists us greatly. As a parliamentary colleague often says "words have meaning". This is particularly true when Ministers speak of our international relationships. In fact when it comes to trade, "words have consequence".

The FTA upgrade has the potential to push our economic relationship to a new level.

It will help us break the ceiling on the $30b two-way trade goal set by Prime Minister John Key and President Xi Jinping 2014. It can ensure New Zealand exporters remain competitive against those who seek to replace us in the Chinese marketplace. It must offer us privilege and advantage over those who are yet to achieve the same trade status.

More than that, it can become another first that helps keep a small trading nation relevant to the world's second largest economy.

So what's up for grabs? On our side we must achieve certainty around market access and further tariff liberalisation. Though much was achieved in the original FTA, in a number of areas Australia now has a better deal, particularly in dairy. This must be addressed.

Of growing importance are clear rules and procedures to deal with non-tariff barriers.

NTBs are a great frustration for business, with all countries we sell to. The upgrade allows us to achieve a win for New Zealand producers in the Chinese market and add real value to our Chinese trade.

We must also deliver a clear and concise framework to enhance e-commerce. The China FTA was concluded before the sheer might of e-commerce was contemplated. Good rules and an enabling environment will mean every Kiwi can share in the benefits of free trade through the internet.

China can be expected to push for better access for investment and labour. The revised TPP has doubled the OIO investment threshold from $100m to $200m for China under a most favoured nation clause, but this has already been banked. Given the importance of China to the economy you can expect this will be a hot topic for negotiation.

So too will be access for temporary labour. It is a demand they have made of others and it is likely to be a demand they will make of us.

The stakes are high, there's much to gain. Words do matter, but don't they always?

Todd McClay is National Party Foreign Affairs and Trade Spokesman