Rt Hon Helen Clark Prime Minister

Address at the Inaugural China Trade Awards

Hyatt Hotel Auckland

7.20 pm

Wednesday 8 December 2004

Thank you for the invitation to attend this function tonight in recognition of the achievements of New Zealand companies trading with China. I remember the announcement being made about the establishment of these China Trade Awards during the visit of Chinese President Hu Jintao in October last year, and it is a pleasure to be here for the inaugural presentation.

President Hu’s visit so early in his term of office to New Zealand was an important indication of the importance China attaches to its relationships in our part of the world. The visit also enabled New Zealand to put in place the building blocks for moving to more open trade arrangements with China.

Two weeks ago, I met with President Hu again in Santiago, where we launched the negotiations for a free trade agreement between New Zealand and China. The first round of negotiations is taking place in Beijing this week.

An FTA with China would open up significantly more opportunities for New Zealand companies. So, it is timely now to recognise the hard work and effort many New Zealand companies have already put into the Chinese market, and the successes many are achieving. The China Trade Association is to be congratulated for taking the initiative to make these awards at this time, and I look forward to hearing more about those of you who are making your mark in this dynamic market.

Clearly New Zealand’s relationship with China is one of our most important foreign relationships. China is a permanent member of the United Nations Security Council; a new and significant member of the WTO; a major player in APEC; New Zealand’s fourth largest trading partner; and a major source of migrants, students and tourists. China’s importance to us and to the world can only increase in the future.

New Zealand has a close working relationship with China in the WTO. China appreciates that New Zealand was the first WTO member to finalise a bilateral accession negotiation with China. We believe it is important to have China working inside the rules-based international trading system. Being able to negotiate on the basis of rules rather than economic might is critical for a small country like New Zealand.

China's WTO membership now guarantees access to the valuable Chinese market under predictable, transparent, and enforceable rules. As a major agricultural producer itself, China is also potentially one of our strongest allies in the Doha Round in having trade-distorting domestic and export subsidies around the world eliminated.

In the last eighteen months New Zealand has hosted visits from five of China’s most senior leaders. A number of New Zealand ministers have visited China in the same period – the Ministers of Foreign Affairs and Trade; Education; Research, Science, and Technology; and Health; and Parliament’s Speaker led a delegation of MPs to China. Jim Sutton has been the most frequent visitor in recent years – indeed, he has led five trade missions to China in the last four years.

Most visitors from China think of New Zealand as a beautiful country. I believe they also now appreciate that New Zealand has world leading research institutes, advanced technology and innovation in our industries, and world class companies.

The growth in our trading relationship with China has been particularly marked in recent years. In the year ended June 2001, China was our sixth largest export market. Now it is our fourth largest, and the rate of growth of our exports there far exceeds that for our other major markets.

Since 1999 our exports of forestry products to China have quadrupled. Now China is our fifth largest market for forestry exports. President Hu’s announcement during his visit last year that China had decided to open its market wider to New Zealand forestry products by including pinus radiata in China’s building code will open up further opportunities for New Zealand companies.

Last year China was our fourth largest market for dairy exports in volume terms, predominantly for whole milk and skim milk powder.

China is also our third largest market for lamb, and China has long been and remains our largest export market for wool.

China is, of course, also a major source of imports into New Zealand. Chinese products are widely available and New Zealand consumers have benefited from their competitive pricing. Indeed with the appreciation of the New Zealand dollar over the past two years, the price of Chinese goods in our market is estimated to have dropped by forty per cent.

The Joint Feasibility Study into an FTA with China concluded that it would benefit the people and economies of both countries. It shows that a wide range of barriers presently constrain bilateral trade, and that removal of them would lead to an expansion of trade in goods and services and an increase in investment flows.

In the case of China the major benefits would be in the domestic economy, resulting from efficiency gains. New Zealand’s major gains would be in trade in goods. It is estimated that our exports to China would grow by between $260 and $400 million a year, over and above the level which would be expected without the removal of trade barriers.

The study acknowledges concerns in New Zealand and China about the potential negative impacts of an FTA for farmers, producers and manufacturers in both our countries. It concludes that the negative impacts would not be substantial and should be manageable, but emphasises the need to take those concerns into account during the negotiations.

One very clear message conveyed to officials by New Zealand business during the feasibility study phase was that the playing field between China and New Zealand is not a level one.

Chinese tariff levels are much higher than New Zealand’s. On average we pay around fourteen per cent duties on our exports to China. Non-tariff policies such as import licensing, customs evaluation, pre-shipment inspection, technical regulations, and sanitary and phytosanitary measures, can have an even more significant effect on trade. These have been highlighted in the study. Since becoming a WTO member China has increasingly accepted international norms for its technical and quarantine standards and inspection regimes. But there is still a long way to go before all Chinese standards and practices conform to international best practice.

The study identifies a number of difficulties New Zealand companies face accessing the Chinese market, such as fumigation requirements for logs; foreign flagged ships appearing to face higher handling charges than Chinese flagged vessels; and discrimination by China’s VAT system. Some operate at the border, and many operate behind the border. Intellectual property protection seems to be a problem across the board.

The negotiations for the FTA will be challenging. But it is understood that at the highest political levels China wants an outcome, and knows that New Zealand requires that outcome to be of a high standard.

The study has been a useful start to the FTA process. It produces a good snapshot of the challenges before us in the negotiation, and of the likely impacts of an agreement between China and New Zealand. It has drawn heavily on input from New Zealand exporters, importers and manufacturers. Many of you are here tonight. I thank you on behalf of the government for the valuable support you provided to officials during the feasibility study process.

I invite you to continue interacting with officials during the negotiations. It will be important for the government to get feedback on any problems business is experiencing, or is aware of, in import/export trade or in investment relations. Officials will also want to approach business for views on specific issues, such as rules of origin and intellectual property.

We are mindful too that opportunities for New Zealand business go well beyond the immediate tariff and market access advantages we hope to get from the negotiations themselves. As the study shows, between a quarter and one third of the overall gains to the New Zealand economy will come from strengthening our connections with China, such as through science linkages as China becomes a growing contributor to world science. Our economy as a whole should look to gain in terms of ideas, knowledge, and technology. The negotiations will need to take account of all these issues.

The study also identifies sustainable development issues as relevant to the FTA negotiations. Specific reference is made in the study in this context to health and safety issues and to environmental sustainability, and outcomes are expected in these areas.

We also need to look beyond the FTA and consider what further opportunities could arise from the closer trade and economic relationship we are developing with China – whether they are in the Chinese market itself or in third country markets. A New Zealand produce grower, for example, could see benefits in a partnership in China to lengthen the growing season.

It is very important that business is aware of the opportunities which will arise from an FTA with China and is ready to take advantage of them. The Ministry of Foreign Affairs and Trade is working with relevant government agencies to develop a comprehensive strategy for China which takes account of the developing economic relationship.

For the strategy to be fully effective, and for New Zealand to maximise its opportunities from an FTA, we need strong public sector–private sector co-operation, and our country needs many keen entrepreneurs.

May I congratulate all those receiving awards tonight. And I thank all those involved in trade with China for the contribution you are making, both to New Zealand’s growth and development, and to the substantial warm relationship which New Zealand is developing with China.

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