Pat English: Oz taking rivalry all the way to China

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New Zealand exporters need to be on top of their game when Australia finalises its own FTA next year.

Air New Zealand scored a marketing coup by bringing actress Yao Chen - who has a huge fan base - to Queenstown to get married. Photo / Mark Mitchell
Air New Zealand scored a marketing coup by bringing actress Yao Chen - who has a huge fan base - to Queenstown to get married. Photo / Mark Mitchell

For more than five years New Zealand's free trade agreement with China has given the country a clear run.

As the first OECD member to sign a comprehensive bilateral FTA we've been viewed with some degree of envy by many exporting nations - none more so than our Australian cousins.

This year, 97 per cent of tariffs covering goods we export to China under the FTA have reduced to zero. And while some of our export product lines still face non-tariff disadvantages, exporters across the Tasman continue to pay most favourite nation (MFN) tariffs on the vast majority of their goods.

It's difficult to overestimate the value we get from such open access to China's growing domestic consumer market. To put things in perspective, China alone contributed more than half of our $9.5 billion increase in exports over the five years to 2012.

It has given a huge boost to some of our most capital-intensive primary industries. As of last year, more than 65 per cent of China's dairy imports, 10 per cent of its forestry imports and 6 per cent of its meat imports were coming directly from New Zealand.

But will the clear run continue?

At the Australia New Zealand Leadership Forum in Sydney last month, Australia and China seemed committed to finalising an FTA by 2015 at the latest, if not earlier.

This means that over the next four to five years, our considerable tariff advantage will gradually be eroded.

It's a development all New Zealand companies and sectors currently or intending to do business with China should be watching.

We need to make sure we're ready for the impact of a country with comparative products and services gaining equal access to the Chinese market.

From dairy to fruit to education - Australia is a world-class exporter. They've also got greater resources to invest in research and development specifically for the Chinese market.

Every New Zealand business engaged with China needs to be in a stronger position by the time Australia's agreement is completed and implemented.

At a practical level, this means hiring people with Chinese language ability and practical experience with the country including its market and customs and at the same time increasing the capability of existing management teams.

It also means developing more products and services customised for China, which are recognisable as brands from New Zealand.

We also need a sharper understanding of how domestic changes in China can impact our ability to grow exports. For example, our experience with the whey protein issues gave us a real appreciation of how profoundly government control of media, coupled with social media, is shaping Chinese public perception.

Air New Zealand has proven itself adept at leveraging the rise of social media in China. In November last year the company brought actress Yao Chen to Queenstown to get married. Chen has more than 45 million fans on Chinese social media site Weibo and her endorsement of Queenstown as a wedding and honeymoon destination was hugely impacting.

We're also gaining an appreciation of how sophisticated Chinese consumers are becoming, with some going to extraordinary lengths to trace imported products to their source to verify their authenticity.

Synlait CEO Dr John Penno has discussed the importance of "Tiger Mum" to New Zealand exporters. If Tiger Mum encounters a product claiming to originate from New Zealand, she will search multiple websites, looking at not just the New Zealand company site, but multiple retail sites to see who in New Zealand is selling the product. She will then ask Chinese friends who live in New Zealand to visit or call stores to see if your product is being sold in New Zealand.

The Tiger Mum isn't just looking for products and services that are from New Zealand, she's looking for premium products that are made and sold in New Zealand then adapted for and sold in markets such as China.

It's a whole new level of traceability around brand authenticity and integrity. Chinese consumers want to know people in the products' country of origin are also using those products. Improved traceability was one of the key recommendations of the report into the whey protein issue released last week.

As Australia progresses towards its FTA, the playing field will be gradually levelled for the first time in more than 5 years, reminding us that one of our closest friends and allies in times of crisis is also one of our greatest competitors when it comes to international trade.

Our friendly rivalry can be fierce on the sports field. Let's just hope the export story plays out more like the history of the All Blacks, not the Black Caps.

Pat English is executive director of the New Zealand China Council.

- NZ Herald

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