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Can We Do A Deal With China?

The Independent, New Zealand

Can We Do A Deal With China?

18 March 2004

Gareth Vaughan

Dairy, meat and forestry exporters stand to gain the most if the
government cuts a free trade deal with China and its market of 1.3
billion people.

But a Chinese free trade deal offers little for small exporters, reckons
Bob Walters, CEO of Export New Zealand.

Daniel Silva, secretary of the Importers Institute, doubts the
government can pull it off.

The government is downplaying talk NZ could become the first Western
country to strike a free trade deal with China. Trade Negotiations
Minister Jim Sutton said such agreements take time and NZ’s not in a
race to be first.

But some exporters salivate at the possibility.

China’s the growth market of the future, said Peter Berg, president of
the Forest Owners Association.

Diverse product mix and significant growth potential makes China an
important market for the meat industry, said Caryll Shailer, CEO of the
Meat Industry Association.

For Fonterra, China represents $300 million a year, taking 100,000
tonnes of product. Chinese consumption of dairy products is rising 10% a

In 2003 China imported $1.37 billion worth of NZ goods, making it NZ’s
fourth biggest customer. China was also the fourth-largest source of
imports to NZ, valued at $2.85 billion.

In a speech last week, Sutton said the two governments’ effort to build
a framework for economic co-operation could lead to a free trade

"We do want to explore the costs and benefits of a trade agreement with
China," Sutton said.

If talks begin, the public will be consulted, he added.

While supporting the concept as a boon for Kiwi exporters and consumers,
Silva pointed to the government’s failure to strike a free trade deal
with Hong Kong. This indicates minuscule odds of succeeding with China,
he said.

Local clothing and shoe manufacturers worry a Hong Kong deal means goods
would come in duty-free from mainland China.

"What are the chances, then, that this government will manage to
convince its supporters in the trade unions and the Green anti-trade
activists that they should support free trade with China? None
whatsoever," Silva said.

Berg, meanwhile, hopes the government can do a deal. China was the fifth-biggest
timber export market, worth more than $302 million last year.

Log volumes to China rose about 70% each year for the past three years.

China’s also a major pulp and paper market.

For conservation reasons, China put restraints on harvesting its own
forests. It recently recognised radiata pine under its national building

"Those steps are all leading towards a very significant opportunity and,
if we can open the door a little wider, it would make a huge difference
to the NZ forest industry. No doubt about that whatsoever," Berg said.

China’s a key and growing market for lamb, fancy meats, beef cuts and
offal, Shailer said. It’s the fourth-largest sheep meat market by volume
and eighth-largest by value.

"We would view it as an important diversification market for companies
looking for alternatives to quota-controlled markets and there would be
substantial opportunity for expansion of all product types," she said.

But Walters doubts small exporters would benefit in a free trade deal
with China, aside from highly specialised exporters.

He added protecting intellectual property is a concern.

Council of Trade Unions (CTU) economist Peter Conway said although the
council recognises "huge" advantages in getting NZ exports into China,
doing a free trade deal presents problems.

These include obtaining anti-dumping provisions and keeping in place the
government’s recent tariff review.

Tariffs in textile, clothing and footwear - where 18,000 people are
employed - will drop from 17%-19% to about 10% by 2009.

The CTU also worries Chinese imports under a free trade agreement would
breach International Labour Organisation guidelines on labour rights and
child labour.

Green Party co-leader Rod Donald echoes these concerns.

"We’re talking about a country where political dissent is suppressed,
Tibet is denied sovereignty and where environmental concerns and workers’
rights are routinely ignored.

"How can NZ industries compete with sweatshops where workers are paid
only $1 an hour and where some nine million 10 to 14-year-olds are
employed?" Donald said in a press release.

A proposed China free trade deal came under fire from the other side of
the political spectrum, too.

"It is ironic that Helen Clark’s government invoked multi-lateralism as
a reason to oppose intervention against Saddam Hussein’s regime in Iraq,
and yet is prepared to engage in a unilateral act to recognise the
Communist regime of China as an open market economy," ACT foreign
affairs and trade spokesman Ken Shirley said.

National Party foreign affairs and trade spokesman Lockwood Smith said a
free trade deal with China makes sense and would clear the way for a
Hong Kong deal.