How free is New Zealand trade?
The government tells exporters they need to diversify, but for many, the lack of tariffs when exporting to China makes it too attractive to want to look elsewhere. National correspondent Lucy Craymer examines where New Zealand has free trade agreements and where there are potential opportunities.
What we have:
Signed in 2008, and updated earlier this year – although the latter has yet to be signed by the two governments – it’s the Free Trade Agreement (FTA) that gets a big chunk of airtime in New Zealand. It was the first FTA that China signed with a developed country and gave us a head start on exporting our agricultural products there.
By 2018, tariffs had been removed on around 97% of the goods New Zealand sent to China and improved access to Chinese markets for New Zealand service providers. the band for exporters has been reduced.
All of this saw merchandise exports with China quadruple from 2008 levels when the FTA was signed.
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The upgrade will give some New Zealand products – such as seafood – faster access to Chinese markets and reduce tariffs for paper and wood products entering China.
Australia is New Zealand’s only official ally. It is also New Zealand’s closest trading partner.
And the economic and trade relationship between Kiwi-Oz is recognized as one of the closest, widest and most compatible in the world, according to the Department of Foreign Affairs and Trade.
Both countries are committed to a single economic market that makes it easier for businesses to work in either market and cuts costs for them.
Australia is our second largest trading partner as goods and services crossing the divide.
Signed in 2000 – and implemented in 2001 – this FTA won the award for one of the fastest concluded, with less than a year of negotiation. This has boosted trade between the two countries, with Singapore now New Zealand’s largest trading partner in Southeast Asia.
An upgrade went into effect in 2020. This allows New Zealanders to stay three times as long in the city without needing a visa, as well as increased rights for companies to send staff there and a streamlining of staff. customs and simplification of border requirements.
Other FTAs in Asia
New Zealand has a number of other agreements with countries or cities in the region, including Hong Kong, Malaysia, Korea and Thailand. It is also part of a trade agreement that covers the Association of Southeast Asian Nations (ASEAN) – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand, Vietnam and the Philippines – as well as Australia. ASEAN is New Zealand’s fifth largest trading partner and is considered to have enormous potential for New Zealand business and investment due to the combined size of the population and gross domestic product (GDP) of all country. An improved ASEAN-NZ-Australia agreement is currently under negotiation.
The intriguingly named PACER-Plus agreement between New Zealand, Australia and a number of Pacific Islands has established a common set of trade rules, which will make it easier for businesses to trade across the region. It lowers tariffs, makes it easier to determine what qualifies as Pacific Island product, and allows exporters to move their products to New Zealand and Australia.
Comprehensive and Progressive Trans-Pacific Partnership
It involves Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The controversial agreement gives New Zealand better market access for signatories to the agreement and reduces tariffs on products, and it allows better access to New Zealand, for countries that have also signed on. Prior to that, New Zealand did not have an FTA with four of the signatories: Japan, Canada, Mexico and Peru.
This partnership replaced the failed Trans-Pacific Partnership Agreement, which was concluded but was never ratified after the US withdrawal.
Soon maybe :
Comprehensive regional economic partnership
The Regional Comprehensive Economic Partnership is a trade agreement between 15 economies in the Asia-Pacific region that are home to nearly a third of the world’s population and absorb more than half of New Zealand’s exports. It was signed in 2020 and will come into force once all the governments of the countries have enacted it. According to the government, this is expected to increase New Zealand’s GDP by around $ 2 billion per year.
The two countries are currently in fast-track negotiations to reach an agreement, after Australia and the United Kingdom who reached one earlier this year. New Zealand Trade Minister Damien O’Connor has said it is expected to be reached by August this year. This deal has been touted as eliminating some tariffs and creating meaningful trade access from day one. The UK is currently the country’s sixth largest trading partner and over a 15-year period it is estimated that a deal would increase exports by 40%.
The EU and New Zealand have so far accumulated 11 rounds of negotiations (most recently in July) with the aim of signing an FTA between the two parties. In June, O’Connor traveled to Paris and Brussels to boost political momentum. There is no time frame for when this could be agreed. A report prepared by the EU before negotiations began estimated that a deal could see New Zealand’s exports to the region increase by 10.5 to 22.2 percent.
Negotiations continue between New Zealand and the Latin American regional group of Chile, Colombia, Mexico and Peru. The Department of Foreign Affairs and Trade said that although trade with the Alliance is currently modest, New Zealand sees considerable opportunity to expand. The hope of the agreement is to establish free trade with Colombia and further reduce the obstacles that affect exports to Chile, Mexico and Peru, as some sectors, especially agriculture, are highly protected in the Pacific Alliance.
World Trade Organization Electronic Commerce Agreement
New Zealand, with more than 80 members of the World Trade Organization, confirmed in January 2019 its intention to launch negotiations on trade-related aspects of e-commerce. New Zealand is involved because it believes that despite unprecedented growth in e-commerce, the development of international trade rules has not kept pace. The ability to move data between jurisdictions is also increasingly crucial for businesses involved in international trade and is an inevitable feature of the modern economy.
Back burner :
The Trump administration was set to start formal trade talks with New Zealand on a long-awaited free trade deal in 2020 – until the pandemic broke and two elections hit, the former said United States Ambassador to New Zealand Scott Brown. Those talks would likely have resulted in a digital services free trade deal with the world’s largest economy, potentially worth hundreds of millions of dollars to the two countries.
Gulf Cooperation Council
Agreed in principle in 2009, this FTA languished without ratification for an exceedingly long period. This has not been helped by Qatar’s falling out with its neighbors in the Middle East. This would however be extremely beneficial for New Zealand given the growing wealth of the region and the lack of agricultural resources.
Negotiations were suspended in 2014 following Russia’s actions regarding Ukraine and Crimea. Comments that they would restart in 2018 were put on ice after a former Russian military officer and British secret service double agent was poisoned. However, all three countries provide a great opportunity for New Zealand given the country’s demand for dairy products.
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