Dialogue: China's Great Wall worth climbing

The country's acceptance into the WTO holds great promise for New Zealand exporters as crucial tariffs and quotas are to be slashed, writes STUART MARSHALL.

If the entire population of China jumped in the air at the same time, it would send the world off its orbit, crashing into the sun.

Dig a hole deep enough, reputedly from anywhere in the world, and according to your grandmother you will end up in China.

And - if it's something which you really do not want to do - you wouldn't contemplate it for all the tea in China.

Which implies there must be an awful lot - but actually there isn't.

Many things are said about China. Most are baseless and full of the sorts of fantasy that tend to accompany those mysterious nations that chose to close their borders, economy and culture decades ago.

Generally, most consumers' perception of China is that it makes all the cheap plastic stuff that falls apart a day after Christmas, or it's the generic name of cooking that is usually from a country miles away from China.

For businesses, China represents the last frontier for trade.

An economy, from New Zealand's perspective, of endless opportunity and frequent frustration.

On December 11, China became the 143rd member of the World Trade Organisation.

Taiwan, to officially be known as Chinese Taipei, will be the 144th member.

This is truly a momentous occasion in the economic history of the world.

It poses for the Chinese the potential for a huge attack on their culture, bureaucracy and ways.

To New Zealand, like every other trading nation, it raises the potential for enormous gains.

A small tangent is required here, to describe China in more sensible terms.

For sure China is big. Perhaps not as big nor as populous as the jumping story suggests, but as an economy it is to be respected.

China ranks officially as the sixth largest economy in the world.

If the black market could be counted, it would rocket up the list.

China's economy is roughly about 26 times the size of New Zealand's.

A healthy rate of growth has been maintained in the past years, despite the global troubles that have caused the United States economy to struggle.

The growth is such that China's GDP grows in a year by the equivalent of two New Zealand economies.

The latest retail sales data shows its consumption activity grew by 10.1 per cent last month compared with November last year.

The amount of retail sales made in the month was almost the same size as the entire New Zealand economy.

As the accompanying graph details, New Zealand's trade with China has been on the rise for years.

The trend line shows a slow start to export expansion, but a doubling of export trade in the past decade.

In actual terms, our principal exports to China have increased 48 per cent in the past year.

So not only is the Chinese economy large, but it is growing. Now with the WTO membership, so its accessibility is also growing.

The benefits, which the Ministry of Foreign Affairs and Trade has assessed for New Zealand of China's WTO accession, fall into three categories.

Tariff reduction

Using simple static analysis of our existing export volumes, the reduction in non-wool tariff rates that China must now implement will provide an additional $48.8 million to New Zealand exporters.

Wool is our largest export earner into China, and the current tariff rate is 15.0 per cent.

As a result of negotiations for New Zealand wool tariffs, the rate will be just 1.0 per cent.

Dairy products make up the second largest non-wool exports to China, but the tariff on this is so high, at 23.2 per cent, that the reduction to 10.1 per cent will produce the largest gain in tariff reduction, worth $21.9 million.

Across New Zealand's exports, the average tariff rate is 13.5 per cent.

After full implementation of the WTO rules, the average tariff rate will be 6.4 per cent. These new tariff rates are bound in law, but that does not mean they are fixed forever.

Better access for services

In this category, the focus of the gains is the guarantees that the WTO membership provides.

Before membership, many of the services we could have provided to China were restricted not by law, but by the flexible administration of random rules.

This is the pleasant way of describing the situation where a Kiwi provider rolls up to the border and the guard rejects entry based on the lack of a SN153 form. When asked what that is, he replies: "You can buy one from my colleague here".

Whenever New Zealand tries to figure out its own niche market in the global world of information services, education pops up as the obvious under-utilised resource.

The WTO membership requires the guarantees of access that allow Chinese students freer ability to travel to New Zealand for education. Or it will even allow New Zealand education facilities to site themselves in China.

New Zealand consultancy, including financial services, will be tolerated and may even be encouraged in time.

One of the major benefits in the services areas will be in tourism.

Chinese tourists will be able to use New Zealand travel agent services, and Chinese will be better able to travel overseas.

WTO disciplines

The access issue which all exporters have faced will be alleviated by the disciplines that the WTO demands.

These include a non-discrimination principle, where no differentiation can be made between domestics and foreigners.

This comes back to tariffs and quotas, and here the advantage to New Zealanders is the complete transparency of all rates, and the goods and services to which they apply.

As well, the disciplines will include rules to which China must adhere.

These include the protection of intellectual property rights, and clarity of all agricultural and industrial standards and practices.



T HE admission of China to the WTO comes with few exceptions or transition periods.

The progress of all the rules throughout the nation will not come smoothly, nor without aggravation.

There will be differences across provinces and potentially, between Government organisations.

But there is a commitment from this market socialist nation to enact its own glasnost.

As many prominent New Zealand companies have found in the past years, China is a lot of trouble to crack, and the Great Wall a high hurdle.

Its membership of the World Trade Organisation is a relief, but it is not a bonanza. Yet.

The combination of the increased access, freedom and the strength and size of the Chinese economy means that the estimates of New Zealand's gains to be made could be underestimated.

The Ministry of Foreign Affairs and Trade, and the plethora of local Government agencies are all prepared to assist exporters of all sorts to take best advantage.

For further information, see The Ministry of Foreign Affairs and Trade

* Stuart Marshall is an economist with Bancorp Treasury Services.