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China and New Zealand are open and dynamic market economies that depend on international trade for stimulating economic growth. Strong global connections and improved access to markets are fundamental to the economic strategies of both countries. With this in mind, the Governments of China and New Zealand pursue active trade policy agendas and are leaders in regional trade and economic liberalisation and facilitation initiatives.
In October 2003 Chinese President Hu Jintao and Prime Minister Helen Clark of New Zealand agreed to negotiate a Trade and Economic Cooperation Framework. The Framework was signed by Chinese Minister of Commerce Bo Xilai and New Zealand Minister for Trade Negotiations Jim Sutton on 28 May 2004. In this framework the two countries agreed to undertake a joint feasibility study on a bilateral Free Trade Agreement (FTA) negotiation and to enter into negotiations in early 2005.
This study:
China
New Zealand is China's 31st
largest overseas market.
New Zealand
China is New Zealand's
fourth largest overseas market.
China
Chinese exports to New
Zealand were worth US$800 million.
New Zealand
New Zealand
exports to China were worth US$850 million.
China
Key export products include
textiles, clothing, footwear, electronic goods and other manufactured
products.
New Zealand
Key export products include dairy and
other agricultural products
China
More than 43,000 New Zealand
tourists visited China
New Zealand
Around 66,000 Chinese
tourists visited New Zealand. More than 50,000 Chinese students studied in
New Zealand.
China and New Zealand have a longstanding and healthy bilateral relationship. New Zealand has been an active partner in China's development. An FTA will signal a significant step forward, reflecting the maturity of the relationship.
An FTA between China and New Zealand will also underpin the two countries leading role in multilateral and regional trade initiatives and enhance their longstanding cooperation in the WTO and APEC contexts. In the pursuit of trade liberalisation, the most important vehicle for both countries is the multilateral process through the WTO. Bilateral FTAs can however bring forward the benefits from international trade liberalisation, help add momentum to the global process, and offer wider benefits. It is therefore important that a China - New Zealand FTA contributes to regional and multilateral trade liberalisation efforts. China and New Zealand will need to take into account the compatibility of architecture and provisions with other agreements in the region, and in particular those to which they are party, while also exploring innovative approaches which can serve as examples of good practice.
Comprehensive and reciprocal elimination of trade barriers under bilateral FTAs allows people in both countries to benefit from increased competition, lower prices, and a greater variety of goods and services. Given the complementary nature of the two economies an FTA between China and New Zealand is expected to lead to an increase in bilateral trade in many areas.
Economic modelling undertaken as part of this study
suggests positive GDP, trade and welfare gains for both economies flowing
from the negotiation of an FTA. Ten years after the completion of an
FTA the modelling shows that China's real GDP, real consumption and total
output level will go up by 0.07, 0.17 and 0.07 percent respectively, while
New Zealand's real GDP, real consumption and total output level would
increase by 0.25, 0.55 and 0.25 percent respectively. Chinese
exports to New Zealand are expected to grow by 10.9 percent in the first
year after an FTA is implemented.
New Zealand exports to China
are expected to grow by 39 percent in the same year. Most gains
would be achieved through the removal of tariffs and unnecessary
non-tariff measures (NTMs). Gains would be expected across all
sectors for both China and New Zealand - including in the agriculture and
non-durable manufacturing areas.
Chinese and New Zealand businesses are cooperating at a range of levels in both markets. Greater economic interaction under an FTA should promote mutually beneficial business partnerships involving transfer of technology and skills, sharing of ideas, and improvements in business practice, all of which will enhance both countries' competitiveness in the global market place. Already, since an FTA was mooted, there has been a significant increase in New Zealand investor interest in China.
A recent international trend in trade policy development is increasing awareness of the linkages between sustainable development and trade. This has been reflected in international forums and agreements such as Agenda 21, the World Summit for Sustainable Development and associated Johannesburg Plan of Action, the WTO Committee on Trade and the Environment, and the International Labour Organisation. An FTA provides an opportunity to demonstrate both countries' commitment to sound sustainable development policies, taking into account social, environmental, cultural and economic circumstances in each country. China and New Zealand are parties to a range of multilateral agreements in these areas, and are interested in exploring how an FTA or other bilateral processes might be able to strengthen bilateral cooperation on sustainable development issues, and contribute to the development of appropriate global approaches. A range of possible examples is covered in this study. Both China and New Zealand oppose the use of standards in the sustainable development area as a form of economic protectionism.
This study has demonstrated that significant complementarities exist between the Chinese and New Zealand economies and that an FTA would benefit the people and economies of both countries. To secure these benefits and build on the long and warm relationships between the two countries, this study recommends that negotiations on an FTA between China and New Zealand covering goods, services and investment should commence as soon as possible.
