KEY POINTS:
At the best of times, free trade negotiations are far from straightforward. When the party across the table is China, a country with a long-established protectionist instinct and a reputation for troublesome business practices, agreement is bound to be elusive. Duly, New Zealand officials have been embroiled in round after round with their Chinese counterparts since 2004, when it was first suggested this country could become the first Western nation to secure a free trade pact. The agreement signed yesterday in Beijing's Great Hall of the People represents the fulfilment of their work, the efforts of Prime Minister Helen Clark and Trade Minister Phil Goff, and the backing of National MPs, who recognised that the importance of this deal transcended political differences.
Any such agreement must be judged on a gains-concessions equation and its comprehensiveness. On that basis, the initial details are heartening. Most of China's tariff cuts occur much more quickly than might have been expected. Fully two-thirds of this country's exports to China will be tariff-free within five years. At the moment, they typically swell Beijing's coffers at a rate of 10 to 20 per cent. As expected, dairy-product tariffs will be phased out over a longer period, a nod towards Beijing's concerns about Chinese farmers' vulnerability. But by 2019, all New Zealand agricultural exports and manufactured goods, except for wood and paper products that are subject to World Trade Organisation rules, will be tariff-free.
China's trade gains are far less substantial. All New Zealand tariffs will be gone by 2016. However, with the exception of the clothing and footwear industries, in particular, most are gone or on the way out already. What China was seeking was international credibility and, somewhat late in the piece, greater access for Chinese workers to New Zealand. This introduced a fraught element to the negotiations. If not astutely handled, it could have led to New Zealand becoming a quasi-laboratory for the unrestricted entry of skilled workers.
That fear has been erased. The deal allows only 1800 Chinese workers to be here at any one time, and no more than 100 in any sector. They will each be in New Zealand for up to three years to cover specific Chinese skills, such as Mandarin language teaching, as well as answering skill shortages in the likes of nursing. The pact also includes a memorandum of labour, which is designed to address the treatment of the Chinese workers.
The corporate world has, of course, greeted the agreement with open arms. It must now cement the gains provided by New Zealand's first-mover advantage and favoured-nation status. A stronger hint that a suitable balance has been struck is evident in the Council of Trade Unions' cautious welcome. Inevitably, it has concerns about the New Zealand manufacturing workforce, but it also recognises that the deal could mean more jobs as businesses exporting to China grow. In reality, it will for the likes of footwear manufacturers merely accelerate the process of exploiting niche opportunities.
Studies have predicted New Zealand trade returns with China could increase by up to $350 million in addition to the tariff savings of $100 million. As the Prime Minister says, it could be more if business takes the opportunity. For some, this will involve stepping into an unfamiliar and somewhat daunting world. There is not the comfort of dealing with, say, the United States or Europe. The potential rewards are huge, however, both for individual companies and for the country. New Zealand officialdom has pioneered a path into the world's fastest-growing economy. It is now up to business to show a similar diligence and determination.
