Encouraging noises from China

By FRAN O'SULLIVAN

Chinese Vice-Commerce Minister Ma Xiuhong was effusive about her "very fruitful" visit to New Zealand.

In an interview with the Herald, Madam Ma gave a strong indication that New Zealand is now set on the path towards a free-trade deal with China.

The first step is to conclude a bilateral trade and economic co-operation framework which Trade Negotiations Minister Jim Sutton says "provides a ready-made toolbox for resolving any issues that come along".

Madam Ma confirmed the two countries would then decide on a "negotiated basis" whether to have a feasibility study on a full-blown free trade deal, which "personally speaking I am very optimistic about".

She singled out three important factors in New Zealand's favour.

First, the mandate given to negotiators by Chinese President Hu Jintao during his meeting with Prime Minister Helen Clark in New Zealand last October where "the two leaders reached a consensus to accelerate negotiations";

Secondly, New Zealand's decision to back China's bid for membership of the World Trade Organisation - the "first Western nation to sign a China accession agreement".

Thirdly, the bilateral relationship was very good. Both countries shared common ground on their approach to the multilateral trading system.

These factors - combined with the recognition that New Zealand, unlike other nations, had never questioned China's status as a "market economy" - have lifted negotiations to fast-track mode.

Madam Ma opens talks in Sydney tomorrow on a proposed Australian free-trade deal.

Prime Minister John Howard set Australia down this path some 18 months ahead of New Zealand and was able to secure a framework last year.

But the gap is quickly being closed. Officials expect New Zealand's framework deal to be finalised by mid-June - upping the negotiating speed to three times the pace of the Australian talks.

Much of this acceleration is due to Madam Ma's no-nonsense approach.

A skilled player in the management of several of China's most important economic relationships, Madam Ma deftly used the Hu mandate during the Wellington talks - stressing they were being held under "special significance" of a presidential blessing - and by meeting's end was able to announce "we have taken a very big stride in the direction to implement the consensus of the leaders in our visit".

This skilled deference to authority is common among senior Chinese officials.

But the reality is that while China considers its relationship with New Zealand an important one, it by no means presents the level of complexity of its major relationships such as that with the United States.

Madam Ma - who manages the US trading relationship for China - suggested difficulties which arose in the relationship last year, after American claims the valuation of China's currency was damaging its export sector, had been over-played.

Latest data showed China's US$25 billion ($36.6 billion) trade surplus for 2003 was 25 per cent down on the previous year.

China was in the process of implementing its WTO commitments and lowering tariffs.

The Chinese economy was forecast to be growing at between 8.5 per cent and 9 per cent ("at the time I left China the official figure had not come out") and did not show signs of over-heating.

If China can maintain this strong growth record it will inevitably become the global economic driver for the 21st century - giving strong first-mover advantages to countries such as New Zealand and Australia if free-trade deals can ultimately be finalised.

The Australian framework - signed by President Hu and Prime Minister Howard last October - is distinguished by its emphasis on the energy and mineral resources sectors. New Zealand's deal will frame-up cooperation across a number of sectors, particularly agriculture.

Ministry of Foreign Affairs & Trade deputy-secretary Richard Grant - who headed the New Zealand officials' negotiating team - points to two broad opportunities on the agricultural front.

"There is expanding demand, which they are quite happy for New Zealand to fill to the best of its potential," said Mr Grant. "Then there is the broader domestic economic issue within China about how to bring their agriculture up in productivity terms."

"You then get into the provision of services and expertise."

Mr Grant's perspective was supported by Chinese ambassador Chen Mingming.

"I talked to her [Ma] about the possible impact of the eventual closer economic relationship between our two countries on China's agricultural sector," said Mr Chen. "She said China is so huge and China's market is big enough to absorb the impact of any possible rise of imports to China and the possible impact on its farming community."

New Zealand's sustainable forestry practices and resource management practices are also considered a plus by rapidly developing China.

The ministry will consult the NZ China Trade Association and its long-time chairman Vic Percival, and, the newly formed NZ Chinese Business Chamber headed by Jesse Nguy. Mr Grant will lead an officials team to Beijing late next month to begin negotiations.

There are also suggestions that New Zealand and China may combine efforts to increase agricultural liberalisation during the current WTO round.

For Madam Ma, the successful New Zealand visit represents another feather in the cap of one of China's most powerful female officials.

Says Mr Sutton: "We want to overcome the disadvantage of our small size which naturally puts us further down people's priorities - if one was to look across the scope of the 21st century, I would say the top priority is China."