KEY POINTS:
Manufacturers are unlikely to rush to set up in China as a result of the free trade agreement, but the deal could see overseas firms reinvest in New Zealand operations, industry leaders say.
Bruce Goldsworthy, manufacturing division manager for the Employers and Manufacturers Association, said the agreement was,
on its own, unlikely to drive firms to China.
"The fact that we've got a free trade agreement will give New Zealand companies some additional recognition if they are looking at establishing something in China. If there's been a diktat from the Chinese Government which filters down to the various local governments where consents and approvals may be given, there may be either a fast track or a better facilitated introduction to the market.
"But I don't believe there will be companies suddenly looking to relocate because of the FTA."
The reverse, however, where an overseas firm sets up or reinvests in its existing New Zealand operations, could occur.
"If there's an operation in New Zealand that is owned by an overseas company, and they are looking at New Zealand as a base for exporting, there could well be some inclination or an incentive even for an overseas-based board to say that rather than close the New Zealand operation down, we'll keep it there on the basis that it may give us an opportunity of preferred access into China."
Australian companies, in particular, might look to re-establish themselves in New Zealand.
"It's a window of opportunity that will remain open to us exclusively initially, and then we might have to share it with one or two others as things evolve."
Canterbury Manufacturers' Association chief executive John Walley said: "If your business model is driving you to produce in a low-cost country, then you really don't have very much choice. That criticises wider policy settings rather than trade agreements ... I'm really talking about those settings which drive the exchange rate on speculation rather than on trade balance."
The prospect of overseas firms setting up here was unlikely, given the cost attractiveness of China. But existing operations might be encouraged to grow as a result, he said.
The agreement was important for manufacturers because of the access it gave to New Zealand-made products.
"In the past it's been very difficult to get things into China because of the absence of any sort of mutual recognition. And that's quite a significant feature of this agreement. If you can't get in, the tariff doesn't matter."
Rick Fala, CEO of bathroom fittings manufacturer Methven, said he was looking into how the agreement affected his company, which manufactures its premium-end products locally but has components and commodity-type products made in China.
"We've only used China at this stage as our suppliers to help us further our export ambitions in other countries like the UK, Australia and more recently the US."
But the agreement now has the company assessing opportunities to sell its premium products in China.
DEAL FOR MANUFACTURERS
* Tariffs ranging from 9 to 30 per cent on all non-agricultural manufactured goods to China will be phased out by 2013. Most will be duty-free by 2012.
* Tariffs on all products of Chinese origin will be eliminated. Import-sensitive manufacturing sectors such as textiles, clothing, footwear and carpets, which currently incur the highest tariffs, will be phased out by 2016. All other products, such as whiteware and plastics, will be phased out by 2013.
* Before the FTA, China's average tariff on industrial goods was 9.5 per cent compared to an average New Zealand tariff of 4.4 per cent.
