Free Trade Pact Between China and New Zealand

By China Watcher

In another sign of its growing economic might, China on Monday, 7 March 2008, cemented a Free-Trade Agreement with New Zealand after 3 years of tough negotiations comprising 15 rounds launched in 2004.

Playing catch-up with the US, China is trying very hard to persuade trading partners bilaterally to sign trade pact in order to boost trade in a win-win environment. The agreement with New Zealand is the first major comprehensive deal covering trade, services and investment with a developed country.

Under the agreement, New Zealand pledged to eliminate all tariffs on Chinese goods by 2016. It already imposes no tariffs on 95.5% of its imports, but the exceptions include such big Chinese exports as clothing, textiles and shoes. In addition, New Zealand will eliminate tariffs on 63.6% of Chinese-made goods immediately after the agreement takes effect Oct. 1, 2008. China will eliminate tariffs on 24.3% of New Zealand merchandise immediately upon implementation, with the proportion expanding to 97.2% by 2019. On the services side, about 1,800 Chinese will be allow to enter New Zealand each year to work in areas such as traditional Chinese medicine, language teaching and food service.

With the trade pact, New Zealand’s dairy goods will benefit more from the gradual phasing out of the tariff, putting pressure on another Oceanic nation, Australia to seriously consider a similar trade pact with China. Beijing surging demand for milk products is fueled by the growing middle class as a result of the high growth the country endured over the past 15 years.

According to Forbes, China currently slaps a 10% tariff on New Zealand milk powder, and processed dairy products such as butter, cheese and yogurt face levies topping 15%. On wool, Beijing imposes out-of-quota duties of 38%. Major New Zealand exporters in general face tariff barriers in China of between 10% and 20%. The deal will provide greater access to the huge Chinese market for New Zealand's services industry and address labor and environmental issues.

I believe China is also aware that New Zealand is one of the earliest OECD nations to endorse it as a market economy in which she has willingly agreed to forego the rights to launch trade complaints of a non-market economy nature (like allegations of manipulation of trade practices by the state authorities etc) at WTO courts.

New Zealand is also a country which is very clear in its decision when it comes to business and politics which remains separated and it has so far brushed aside any criticisms of China in handling the Tibetan crisis.

New Zealand is certainly a Tier 1 friendly nation in China eyes’.