Business keen on China talks

By BRIAN FALLOW

Business groups have welcomed the prospect of free-trade talks beginning in earnest with China next year.

"At its heart it is about more opportunities and jobs for all of us," said Trade Liberalisation Network executive director Suse Reynolds.

Fonterra relishes the prospect of further gains in what is already its fourth-largest export market, worth more than $300 million last season.

Federated Farmers president Tom Lambie said there was a long way to go before a deal was concluded. "But any progress towards wider access to a market of 1.3 billion has to be good."

China is New Zealand's fourth-largest trading partner. In the year ended February we imported $2.9 billion-worth of goods from it, 8.8 per cent up on the year before, while exports were worth $1.4 billion, down 4 per cent on the year before.

With the conclusion of a framework agreement, to be formally signed in June, work will now begin on a detailed study of the costs and benefits of an agreement, and consultations with business and other affected parties undertaken.

Trade Minister Jim Sutton said a "back of the cigarette packet" calculation suggested the benefits would run into hundreds of millions of dollars.

"I invite business and other parties to make their views known, either to the ministry [of Foreign Affairs and Trade] or my office, about what barriers there are now and what areas they would like work done in," Sutton said.

The Government believes the main gains are likely to be in agriculture, especially the dairy, horticulture and processed foods sectors.

Even when China has fully implemented its World Trade Organisation commitments, the tariff on milk powder would be up to 10 per cent.

Kiwifruit can encounter tariffs of up to 20 per cent.

Out-of-quota tariffs on wool are 38 per cent and meat tariffs can reach 15 per cent.

And while China has negligible tariffs on "rough" wood, value-added products like veneers, fibreboards and plywood face higher barriers.

There may also be gains for manufacturers in areas like whiteware and carpets.

On the import side, Sutton said the textiles, clothing and footwear (TCF) sector was vulnerable to the strength of Chinese producers. But a tariff reduction programme is already in place.

Reynolds said the writing had been on the wall for the TCF sector for several years.

"As it is, Chinese imports have become 40 per cent cheaper in the past two years just because of the exchange rate."

Sutton said as well as merchandise trade, services and investment would benefit from an agreement with one of the world's largest and fastest-growing economies.

Free-trade talks with Hong Kong have been stalled for 18 months, ironically because of rules of origin - concerns that it would be impossible to tell whether goods claiming Hong Kong origin were not in fact finally processed in China.

A comprehensive trade agreement with China could help resolve this problem, Sutton said.