Trade agreement just the start - Clark

By Fran O'Sullivan with NZPA

BEIJING - New Zealand's landmark Free Trade Agreement with China is "just the beginning" of a relationship which offers both nations significant benefits, Prime Minister Helen Clark says.

Speaking after the signing ceremony in Beijing's Great Hall of the People, Miss Clark said it should not be treated simply as a clearing of tariff barriers.

"We should see it as a platform for growing the value of what we do in China," she told reporters tonight.

Tiananmen Square was draped in New Zealand and Chinese flags when Trade Minister Phil Goff put his name to the agreement, the first China has signed with a developed country.

Earlier, Miss Clark met Premier Wen Jiabao and she said he was also treating the agreement as a historical step in an ongoing relationship.

"The premier was as keen as we are to get on with implementation now and look for new areas to develop trade between us," she said.

The New Zealand business community lauded the agreement, saying it had the potential to become New Zealand's largest export destination.

"An enhanced trade relationship with the world's fastest growing economy is an outstanding achievement," said business New Zealand chief executive Phil O'Reilly.

New Zealand became the first Western country to sign such a deal with China.

The trade agreement was signed in Beijing and outlines an ambitious plan to boost trade between the countries.

About 35 per cent of New Zealand goods will become tariff free by October, with another 31 per cent tariff free by 2013. The bulk of the remainder will be tariff free by 2019.

"Our current position is that we are one of many potential customers buying Chinese goods," Mr O'Reilly said.

"Following the free trade agreement, the potential will exist for China to become our biggest customer." He said it was up to New Zealand businesses to capitalise on the deal by trading with China.

Business Roundtable chairman Rob McLeod said both New Zealand consumers and exporters would benefit from the deal.

Business and investment links would also be strengthened.

"Initial indications are that the agreement is comprehensive and largely free of the restrictions and exclusions of some FTAs.

"It suggests China could well be a force for multilateral trade liberalisation in the decades ahead."

The agreement was finalised at 3.30pm NZT, with the Chinese Premier praising New Zealand Prime Minister Helen Clark's "far sightedness" in closing the free trade agreement.

Wen Jiabao said three of the "four firsts" were achieved under Clark's leadership (NZ finalising a WTO agreement with China, recognising China as a market economy, being the first OECD country to open free trade negotiations with China, and signing the deal today) and "were achieved under your leadership," Wen said.

He said it was an historic day for NZ-China relations: "I congratulate you for that, it means you are a forerunner in your business and economic relationship with China."

Clark has challenged the New Zealand business community to "pick up the balls" and run hard to make the most of the free trade agreement.

The FTA is expected to be worth up to $350 million a year to New Zealand as the tariff reductions and market opening go into effect.

"I think it could be worth more provided our business community seize the opportunity," said Clark. "And from the government point of view our agencies are dedicated to supporting them do that."

Business people who arrived at the Great Hall of the People well in advance of Helen Clark's motorcade were fizzing.

China has agreed to a wide sweeping programme of tariff cuts on New Zealand exports with some taking effect later this year.

The deal will eventually result in the elimination of tariffs on 96 per cent of New Zealand's exports to China, but has immediate effects as well.

When the deal comes into force from October 1 those tariffs at or below 5 per cent on exports will be cut to zero.

This will cover more than $200 million worth of goods and means 35 per cent of trade with China will be tariff free from day one.

From there a staged programme of cuts will kick in and within five years China's tariffs on goods in the six to 20 per cent range will be eliminated.

This will mean another 31 per cent of total exports to China will be tariff free by 2013.

Dairy products will be phased out over a longer time frame, but by 2019 all but $80 million worth of current trade with China will be tariff free.

The deal also bestows "Favoured Nation Status" on New Zealand giving exporters easier access to markets and less stringent non-tariff barriers.

It also means that if another nation gets better terms in a trade deal with China, it will also apply to New Zealand.

Prime Minister Helen Clark said the deal was important not only for New Zealand, but the rest of the developed world.

"This is a big deal. There has not been a trade deal like this with China done by anyone before," Miss Clark said.

"It will create significant international interest particularly at this time of global market volatility when there needs to be confidence injected into the global economy. It is a good sign for everyone."

Studies predict New Zealand trade returns with China could increase by up to $350 million in addition to the tariff savings of more than $100 million

Miss Clark said it could be worth more provided business seized the opportunities on offer.

On its side of the deal New Zealand has pledged to continue to remove tariffs on Chinese goods and they will all removed by 2016.

The deal also allows up 1800 skilled Chinese workers to be in New Zealand at any one time.

This will cover specific Chinese skills such as Mandarin language teachers and Chinese chefs, as well as those who work is included on New Zealand's skills shortage list - such as nurses and plumbers.

Trade Minister Phil Goff said it was more of a modest gesture than the flood of immigrants predicted by some.

New Zealand is the first developed nation to sign a trade deal with China and it comes after a deal was first mooted in 2003 with talks beginning in 2005.

Miss Clark said China wanted to show the rest of the developed world that it want to do business and the deal would be seen as a template for other nations.

"This is a very important deal for New Zealand. It has broader strategic significance because other developed countries can see what China is willing to negotiate and that has always been at the forefront of our mind... we needed to make it a broad and comprehensive."

The average tariff on New Zealand's $1.95 billion of exports to China is currently between 10 and 20 per cent.

The average for New Zealand's crucial agricultural sector is 15 per cent with some facing 25 per cent price imposts which just end up in China's bulging coffers.

China is currently New Zealand's fourth largest trading partner, but at current rates of growth will be third in a few years time overtaking the United States.

New Zealand's other large trading partner such as the United States and Japan have always refused to enter into trade talks with New Zealand.

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