China Business: Time for an upgrade of China FTA

Todd McClay (right) and Chinese Commerce Minister Gao Hucheng at recent bilateral talks. Photo / Ministry of Commerce, China

There’s more to Free Trade Agreements than simply reducing tariffs — they must also break down technical barriers, says Todd McClay.

Though trade will always be an important part of why we continue to build a strong relationship with China, our "strategic partnership" has grown in ways our negotiators could not have predicted.

In Beijing last month, the countries' two leaders mandated ministers to further consider opportunities to upgrade our China New Zealand Free Trade Agreement (FTA), which was signed eight years ago.

We will soon meet at the Apec Trade Ministers meeting in Peru to consider this challenge. It is imperative we look towards the future. What opportunities are there to take our relationship to a new level, and how can the significance of the many "firsts" that China and New Zealand share help us to be more ambitious in trade and co-operation?

Though our FTA negotiating agenda often grabs public attention, just as important is the work that we do to implement these trade deals once concluded. FTAs only deliver economic benefit if our businesses take advantage of the opportunities they provide. As Minister of Trade, ensuring that New Zealanders maximise the benefits from these agreements is a priority.

More than half of our goods exports now go to FTA partner markets. Once the Trans-Pacific Partnership comes into force, this figure will rise to 72 per cent. An FTA with the European Union will increase this to around 83 per cent. That puts us in a very good position - we have scored big wins in knocking over tariffs at the border.

Take Korea, for example: When the FTA came into affect late last year, it resulted in immediate duty-free access for around 48 per cent of our exports to our sixth largest export destination. Over time this will increase to almost 98 per cent. In the world of trade negotiations it is hard to beat an outcome like that.

FTAs are no longer just about tariff liberalisation, however. Increasingly they include provisions on co-operation, the environment, labour and investment and on ways to help our small and medium sized businesses benefit from trade.

Importantly, they must be about reducing technical barriers that might unfairly restrict trade. After all, it doesn't matter what a tariff rate is, if you can't get your goods to market because of bureaucratic processes or avoidable delays in processing approvals, then the opportunity presented by an FTA is lost.

The Government is committed to working to address Non-Tariff Barriers where they are unjustified, whether they apply to goods, services or investment. Some can be justified, and we need to remember that our economy depends on that in order to protect ourselves from pests and diseases or to ensure we can protect public health and the environment. But more work must be done on Non-Tariff Barriers to ensure that our businesses have every opportunity to buy and sell more with China.

Providing clear and practical information to exporters remains important. Navigating what opportunities might be available can be confusing, given that we now have 10 FTAs with some markets covered by multiple agreements.

It's for this reason that we have developed a great online tool for our goods exporters. The Tariff Finder not only shows the FTA preferential tariff, it also sets out the requirements for accessing these, such as the relevant rules of origin and documentation requirements. The Tariff Finder also allows a comparison to be made between FTAs, including markets where New Zealand has more than one FTA (such as Malaysia, Singapore and Thailand), so that business can choose the best result for them.

We have now had almost eight years' experience of a China FTA - so it is time to upgrade it.

Our consideration must be broad to cover new issues such as e-commerce as well as additional services sectors, but also improve the quality of the current commitments in the FTA such as reducing the impact of the safeguards on our dairy exports. This will ensure our businesses remain competitive with exporters from other countries.

• Todd McClay is the NZ Minister of Trade and Minister for State-Owned Enterprises