Clark beckons exporters to opened door

Helen Clark and John Howard in Vientiane. Picture / Reuters

Prime Minister Helen Clark is cock-a-hoop over the string of free trade deals her Government is forging with Asia.

Clark's biggest challenge is getting the business community to take advantage of the new opportunities. "Otherwise, we are going to be opening doors at the policy level and no one walks through them," she said from Vientiane yesterday.

Business community reaction to the news that New Zealand will join Australia in opening free trade negotiations with Asean (the Association of South East Asian Nations) is extremely positive - even from manufacturing groups that worry they will be undercut by another wave of cheap Asian imports.

But the fact remains that New Zealand has far too few companies taking the export plunge.

The Ministry of Foreign Affairs and Trade has set up an intergovernmental taskforce to try to get exporters up to speed with new possibilities from the deals with China (now under negotiation) and Thailand (announced on Tuesday), and the upcoming Asean one.

Deputy secretary Derek Leask and Martin Harvey, who is lead negotiator for the NZ-Australia-Asean deal, will describe the future regional trade framework to senior business people in Auckland today.

Clark ensured that differences with Australian Prime Minister John Howard over the worth of signing an Asean non-aggression pact did not prove a deal-breaker.

The Thai deal provides a useful indicator to what may go on the table in the upcoming Asean negotiations. Among key issues:

* The phasing out of tariffs will not be finished until 2025 - five years later than the ambitious Bogor goals set by Apec. "It's fair to say it sets a benchmark," says Clark. She qualifies this by saying there is a possibility "we can do better" in the Asean deal.

* Rules of origin: The Thai deal earned praise from Business New Zealand for shifting from a prescriptive "percentage" regime for determining which New Zealand manufactured goods would qualify for entry to Thailand. The agreed definition says the goods coming into either country must have been "substantially transformed" in the exporting country, removing discrimination against manufacturers sourcing components globally.

* Labour exports: Thai traditional massage therapists and chefs will bypass normal immigration procedures under that deal. Clark admits the controversial issue was "definitely on people's lips" in Vientiane. But it is so far not on the formal negotiating agenda for the Asean talks.

* Sweatshops and environmental hazards: The Thai deal sidestepped obvious issues but Council of Trade Unions president Ross Wilson says human rights are ignored in some Asean nations like Myanmar. While a dispute process has been set up, "it still falls far short of an enforceable and meaningful process to address breaches of core labour conventions such as the use of child labour, forced labour, discrimination and suppression of union rights".

Manufacturing:

Benefits quick and large

The benefits to local manufacturers from the Thai free trade deal will be early and obvious, says the Employers and Manufacturers Association (Northern).

Advocacy services manager Bruce Goldsworthy said gains would be evident from the July implementation date with reduced tariffs on exports and the introduction of multi-entry business visas and work permits for people doing business in Thailand.

"There's a whole bunch of [trade deals] in the wind at the moment and this is the first one through."

He said the timing would see New Zealand aligned with the free-trade agreement Thailand and Australia already had.

"Perhaps the single disappointment is that it has had to follow the long tariff and quota phase-out periods for agricultural products adopted for the Thailand-Australia free trade arrangement," he said.

Goldsworthy did not expect the deal to have a negative impact on the local manufacturing industry.

"Ninety-five per cent of all imports come into New Zealand duty free now and people are coping okay."

Fisher & Paykel Healthcare chief executive Mike Daniell said Thailand was a small market for the company's medical equipment and he did not yet know what the benefits of the deal would be.

Forestry:

Opportunities in panels and plywood

Forestry companies are keen to capitalise on the free trade deal with Thailand.

They hope to increase the $30 million of exports that go there, particularly as tariffs on panels and plywood drop.

"This announcement brings us one step closer to the end goal, a comprehensive free trade agreement with Asean member countries," said Stephen Jacobi, chief executive of the New Zealand Forest Industries Council.

"Thailand is a medium-level market for us. We don't see it as a standout."

The other markets of interest to forestry companies were Malaysia, the Philippines, Indonesia and Vietnam, he said.

About 47 per cent of the sector's exports to Thailand was sawn timber, 25 per cent was pulp, 17 per cent paper or paper products and 6 per cent logs.

"Thailand's large and growing furniture export industry could provide significant opportunities for exporters of higher grade timbers, joinery and furniture components," said Jacobi.

A Carter Holt Harvey spokesman welcomed the trade deal, saying his company regarded Thailand as a long-term market.

The high dollar and freight rates had to be overcome before the market could be developed.

Thailand pulp and paper customers were sensitive to price and exporters of sawn timber had to compete with concrete and steel.

Dairy:

Deal delivers an edge over the Aussies

Fonterra chairman Henry van der Heyden is chipper about the spin-offs for dairy in the New Zealand-Thai deal - and so he should be. New Zealand's negotiators have managed to score dairy exporters (just Fonterra for now) a slight edge over their Australian competitors on the export of whole milk powder into the growing Thai market.

Thailand is an important market for Fonterra, generating more than $200 million in sales last season. But it looked like being disrupted when Australia forged a free trade deal ahead of New Zealand.

Van der Heyden said: "It's important because it will re-establish a level playing field with Australia."

Tariffs will be immediately eliminated on New Zealand infant milk formula, casein and lactose, and tariffs on yoghurt, buttermilk, milk protein concentrate and butterfat will go by 2009. Whole milk powder tariffs drop from 18 per cent to 15 per cent on July 1 next year for a significant volume of product - giving Fonterra "significant headroom" before they snap back to 18 per cent.

Horticulture:

Sweet news for growers

Some of the highest tariffs facing New Zealand's horticulture industry will be eliminated when the Thai free trade deal comes into effect in July.

Tariffs as high as 40 per cent will be wiped from sweet potatoes, carrots, frozen peas, apples, cherries, kiwifruit and persimmons.

Thailand is one of New Zealand's smallest markets for fruit and vegetable exports, worth about $13 million annually.

Vegfed and Fruitgrowers Federation chief executive Peter Silcock said the deal would put this country back on an equal footing with the Chinese growers.

"We have been at a significant disadvantage against Chinese product since October last year when China and Thailand signed a trade agreement removing all tariffs on most fruit and vegetable products."

This had cut horticulture exports to Thailand by $5 million.

"Thailand was one of our largest markets for carrots, buying $2 million a year. Since the Chinese/Thai agreement was signed, volumes have dropped from 2500 tonnes to less than 500 tonnes," he said.

Kiwifruit exporter Global Fresh New Zealand marketing manager Tony Sinkovich said kiwifruit exports to Thailand had nearly doubled from 67 tonnes to 120 tonnes during the past year despite the tariff, equal to US$2.13 ($2.96) a tray.