KEY POINTS:
One of New Zealand's biggest manufacturing companies sees little benefit in the Free Trade Agreement with China.
Fisher & Paykel Appliances said a five-year phased elimination of tariffs on Chinese whiteware coming to New Zealand would severely threaten its domestic business, which makes up a fifth of its
income.
Under the FTA signed yesterday, tariffs on Chinese whiteware, which currently incur up to seven per cent in tariff duties, would be phased out by 2013.
"People in the Government don't seem to think that that's much of a hardship, but when you've got a business that really only returns an EBIT level of six to seven per cent, that's a huge impost on the business," said chief executive John Bongard.
He said Chinese whiteware brands such as Haier already come in cheaply, and competing manufacturers which get their products made in China, such as Bosch, stand to gain from the tariff reduction.
The Chinese market has no value for them as manufacturers there already have the market cornered.
Apart from some niche areas, he could not see positives in the deal for many manufacturers.
"There will be winners and there will be losers. We just have to be a loser with this one, whereas with [the Closer Economic Relations with Australia] we were a winner because we did a free trade deal with a like economy with a similar cost-base. We can compete under those circumstances, but we cannot compete with a third world country."
Bongard said the industry will have to adapt, as his company had by moving some production to Thailand.
But the industry body, the Employers and Manufacturers Association, remains positive on the FTA. Manufacturing division manager Bruce Goldsworthy said: "I sort of wonder at times, what would our businesses be saying if we had been given the opportunity of signing a free trade arrangement with potentially the largest single trading block in the fastest growing market in the world, and we'd said 'no thanks'?"
Goldsworthy said for local manufacturers, movements in exchange rates were more critical than tariff reductions on imported goods.
"New Zealand is heading towards becoming a free trading nation ... Even recognising the differences in the economies, like the costs, we're not necessarily getting like for like but we are getting an opportunity of getting merchandise into that market with a margin of preference over our other competitors and that has got to be a plus.
"At the end of day, I guess we've got to look at what is in the greater good for the whole country, and if we can export our dairy products and our food into that market in much bigger licks than we are now, that's actually in the greater good long term because it's a much bigger share of our total export receipts."
"Now that doesn't help the man who's still making washing machines - I understand that - but I'm not sure that the FTA on its own would have changed that anyway."
THE DEAL FORMANUFACTURING
EXPORTING TO CHINA
* Tariffs on all non-agricultural goods to China will be phased out by 2013, with most duty free by 2012. Examples of current tariffs:
- fridge-freezer units (tariff duties between 9 and 30 per cent)
- air conditioners (tariffs of up to 20 per cent)
- carpets (tariffs up to 14 per cent)
* The only exceptions are milking machines, which will have the tariff phased out over nine years, and certain wood and paper products, which account for around 4 per cent of New Zealand's current exports to China. Zero tariff on logs and sawn timber - representing around 80 per cent of New Zealand's wood exports to China - remain under the FTA.
* Before the FTA, China's average tariff on industrial goods was higher than New Zealand's - 9.5 per cent compared with an average New Zealand tariff of 4.4 per cent.
IMPORTS FROM CHINA
* Tariffs on all products of Chinese origin will be eliminated, with phase-out programmes for import-sensitive manufacturing sectors such as textiles, clothing, footwear and carpets.
* Tariffs on most textile, apparel, footwear and carpet products (which incur the highest tariff duties of 7.5 to 15 per cent) will be phased to zero by 2016. Tariffs on the most heavily traded items in the area of clothing and footwear, such as cotton dresses and sports footwear, will be phased out by 2016. Less traded items, such as suits and carpet, will be phased out by 2014.
* All other products (including steel, whiteware, plastics and furniture) will be phased out by 2013, with most eliminated by 2012.
Source: MFAT
