Kiwi cousins creaming it in China
While the Australian and Chinese governments have recently held the 19th round of negotiations for free trade agreement, our brethren across the Tasman have had one up and running since 2008. The Kiwi dairy industry, among others, is creaming it. How did the New Zealand government get it so right?
Let’s face it, New Zealand is a nation of firsts: first place in the world to give women the vote, to introduce the eight-hour working day, to set foot on the Antarctic, to climb Mt Everest, to elect a trans-gender member of parliament… The list goes on.
The Land of the Long White Cloud, as its known in Maori, has a tiny population with a flexible export-oriented economy that clearly punches above its weight. New Zealand wines are on shelves all over the world, its wool is woven by the finest Italian textile manufacturers and its movies are international blockbusters.
This is attributable as much to cracking entrepreneurial skills, such as spotting a niche opportunity and exploiting it, as it is to the forward-thinking policy positions of successive governments that have facilitated the business end of export.
Recognising and responding to its geographic situation, New Zealand now has a host of Asia-centric free trade agreements with such countries as Thailand, Singapore, Malaysia and of course China.
The wingnuts and bolts
The NZ-China FTA includes a raft of agreements focused on four main areas: goods, services, intellectual property and investments.
For goods, the FTA eliminated tariffs on 96% of New Zealand’s exports to China – the result being a saving to exporters of about $100 million annually.
The FTA aims to reduce barriers to trade in services that will help New Zealand companies conduct business in China in areas such as tourism, education, construction and transport.
The intellectual property chapter of the FTA covers rights in areas such as copyright, trademarks and patents. It contains mechanisms to promote cooperation and consultations between New Zealand and China on these issues, with each agreeing to enter into consultations at the request of the other to resolve any such issue that arises.
The FTA contains measures to encourage and promote the flow of investment between New Zealand and China, and to increase the security of investments in each country. This means that both countries have agreed to treat investors and investments of the other country at least as well as they treat their own investors.
The importance of the NZ-China FTA is best illustrated by some simple numbers from Statistics New Zealand, that nation’s official number crunchers, about dairy product exports. The value of exports in this sector increased from NZ$2.5 billion in 1992 to NZ$11.4 billion in 2012 – and don’t forget the global financial crisis in the middle. In the same period, China moved from being New Zealand’s 31st destination for dairy products to being number one – with annual exports to China increasing from $12.8 million to $2.6 billion over the 20 years. Holy cow!
The good news is that Australian exports to China are booming too, although most of it comes out of the ground. So, short of moving to New Zealand (and that’s not absurd as it sounds), what does this all have to do with small and medium-sized Australian exporters?
Well, an FTA just makes things easier on all levels by providing a more certain environment in which to do business, a framework within which to operate. When you know the boundaries of trade, it’s easier to perform better and make a success of it.
While the negotiations for such an agreement are complex, you can help push the government in the right direction by writing to your member of parliament and lending your support to export organisations that lobby the government.