China trade deal excellent say Nats

By Brian Fallow

The free trade agreement with China, due to be signed next month, is an excellent deal, says National Party trade spokesman Tim Groser.

Mr Groser, a former senior trade negotiator, is among those who have been briefed confidentially on the agreement.

"Without going into specifics I can confirm it meets the tests of being a comprehensive and high-quality agreement and in our view is strategically vital."

Mr Groser was speaking yesterday, as the Labour-led Government came under fire for allegedly taking a softly, softly approach to China's crackdown on Tibetan protesters in order to protect the trade deal.

China is New Zealand's fourth largest export market and is second only to Australia as a source of imports. Trade is heavily in China's favour, by a ratio of nearly three to one.

Both countries are reducing their tariffs in any case.

New Zealand has been going down that track since the 1980s and some 95 per cent of imports by value already enter duty-free.

The highest remaining tariffs, in the clothing, footwear and carpets sector, will be reduced to 10 per cent by the middle of next year.

China, following its accession to the World Trade Organisation, is also cutting tariffs but the average level of tariff on agricultural imports is still over 15 per cent.

Other interested parties who have been briefed on the broad outline of the deal say that tariffs will be phased out on both sides over several years.

Progress on liberalising trade in services is more difficult - inherently so, Mr Groser says, as the barriers are embedded in countries' regulatory regimes.

The agreement is expected to break new ground not only in being the first between China and a developed country but also because it contains provisions on the movement of workers between the two countries.

The union movement is wary of that, preferring migration policy to be dealt with independently of trade agreements.

But Mr Groser said some of the talk about New Zealand wages being under-cut by a flood of Chinese workers would be revealed as groundless scaremongering when the details of the agreement were revealed. Others familiar with the agreement share that view.

For the manufacturing sector as a whole, competition from Chinese imports is already a reality. China's advantages in economies of scale and in labour costs dwarf any effect from what tariffs remain.

A greater degree of connectivity between the two economies may accelerate the process of relocation of manufacturing capacity there, but that has to be weighed against improved access to an enormous market.

Many of the barriers to access, however, are to be found behind the border. Non-tariff barriers relate to such things as licensing and standards, and to a legal system often perceived as unstable and capricious by Western standards.

The broader context of the agreement is that growth among developing countries, led by China, has accounted for a majority of the growth in the world economy in recent years.

The movement of large numbers of people into income brackets which allow them to consume more of the foods of affluence, such as meat and dairy products, directly or indirectly benefits our primary producers.

Mr Groser said he would not be surprised if China overtook Australia as New Zealand's largest export market within the next 20 years.

- NZ Herald

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