Talks bring HK deal step closer

New Zealand and Hong Kong are a step closer to forging a free trade deal that could be worth hundreds of millions of dollars a year in extra trade and investment after another round of negotiations in Wellington.

However, any agreement remains months away, as negotiating teams from both sides home in on delicate technical trade and investment details crucial for a closer economic partnership.

"We're nearer the end than the beginning of the whole process, but there are still some important issues to be considered," a senior trade source said.

"There are a number of areas where agreement has more or less been reached, but the talks are now getting down to a high level of technical detail."

It is understood that work remains in agreeing on preferential rules for importing and exporting services and on setting a framework for "rules of origin" determining whether goods are made in New Zealand or made in Hong Kong.

This is particularly important amid political and business fears that a Hong Kong deal without robust rules of origin could leave New Zealand open to cheap imports from China.

Hong Kong and its 6.8 million people are part of China but designated as a special administrative region.

The latest three days of talks, which ended last Friday, were the fifth round of formal negotiations since New Zealand and Kong Kong agreed last April to work towards a closer economic partnership.

A similar deal signed with Singapore in 2000 required up to seven formal rounds.

New Zealand's 12-strong team of negotiators reports on progress to Trade Negotiations Minister Jim Sutton this week, before another round of talks scheduled for next month.

Business, Maori and environmental groups will also be consulted as negotiations move forward.

A free trade agreement with Hong Kong would be New Zealand's third - after the Singapore deal and the long-standing closer economic relations pact with Australia - and it could be the precursor to more bilateral deals.

The Government is also chasing free trade talks with the United States, although the Alliance and the Greens remain strongly opposed for fear that any agreement would jeopardise New Zealand jobs.

They are expected to oppose the Hong Kong deal, as they did the Singapore agreement.

However, with both Labour and National firmly in the free trade camp, political support for the deal is more or less assured.

Hong Kong is New Zealand's seventh biggest export market, buying $772 million of exports in 2000 - mainly fish, milk powder, industrial machinery and leather goods.

New Zealand imports from Hong Kong were a relatively small $171 million.

The two economies are seen as complementary: New Zealand relies heavily on commodity exports, and Hong Kong's economy is dominated by manufactured exports and services.

Hong Kong is tariff-free for all imports, so there would be no immediate commercial gains for New Zealand exporters.

But the Government argues that a free-trade deal would secure the tariff-free environment long-term and encourage Hong Kong and other Asian investors to boost productive investment in New Zealand.

In setting up formal negotiations last year, the Government said it also aimed to boost bilateral trade flows with Hong Kong and create new jobs in New Zealand.

- NZPA