Editorial: Let's not rush into labour deal

When China's premier Wen Jiabao was here in April he put all the prestige of his position behind the effort to conclude a free trade agreement with New Zealand. He and Helen Clark agreed to step up the negotiations to reach an agreement within a year or two. It will be done, he said.

So it may have come as a surprise to the New Zealand side at the latest negotiations in Auckland this week that China wants to broaden agreement beyond goods and services to include labour, or at least skilled labour. China appears to envisage temporary entry rights but not much detail of the proposal has been made public. It was mentioned by China's Commerce Minister, Bo Xilai, in an interview with Fran O'Sullivan for the Herald, and confirmed by Trade Minister Phil Goff who said the subject was "sensitive".

Mr Goff said New Zealand would want major concessions on trade in return for greater access for Chinese workers and he would, of course, want to protect the domestic labour force and safeguard its conditions.

It is dismaying to discover such a radical new dimension to trade agreements being tabled at this comparatively late hour. Initially it seems to have been China's preference that the agreement be restricted to goods trade but New Zealand ensured that access for services and investment are also on the agenda and talks have been proceeding on that basis for some time.

Last month New Zealand's lead negotiator, David Walker, warned that the talks were getting "closer to the crunch issues in a number of areas" and the task was getting tougher. It did not sound as tough as Australia where divisions were apparent in the governing coalition over the protection of its automotive and clothing industries in the agreement Australia is hoping to make with the People's Republic. But perhaps the less we aim to protect, the more China is emboldened to push our negotiations into uncharted water.

This country has long been something of a pioneer in dealings with China, a record noted by Premier Wen while here. New Zealand was the first developed country to start negotiating a free trade agreement with China, he said, just as it had been the first Western nation to support China's application to join the World Trade Organisation and, 34 years ago, the first to establish diplomatic relations with the communist regime.

There are pitfalls as well as benefits in pioneering, and the path we take can be hard for others to avoid. We have shortages, particularly in the construction industry, that China might quickly fill. But we must be wary of being the testing ground for unrestricted temporary entry of skilled and mobile people. Before agreeing even to have labour on the table of trade negotiations, New Zealand needs to consider carefully whether it is making economic liberalisation more difficult for all concerned.

China has a vast population whose need of work and rising incomes has already pulled much of the world's manufacturing away from mature economies and sometimes with little regard for the laws of patent and intellectual property generally. At the same time, China, like most East Asian economies, has maintained fixed exchange rates that usually undervalue its currency and encourage its firms to export with an arguably unfair advantage. Until China can be persuaded to correct these basic trade distortions, it cannot expect developed countries to open their labour markets to it.

In the long run, of course, China is right; the logic of global integration argues for the freer movement of people as well as goods. It may be up to us to ensure the first step is taken carefully.