Gateway to China

By FRAN O'SULLIVAN

Tomorrow's China-New Zealand free trade summit "Gateway to China" will focus on the opportunities and dangers the proposed FTA presents.

Unlike Australia where business has been openly divided on the merits of a China FTA, New Zealand has so far presented a relatively united front. NZ Inc basically favours a deal.

But some sectors will inevitably be disadvantaged - particularly those manufacturing clothing, textiles and footwear which enjoy limited tariff protection.

The balancing act comes in teasing out the critical issues for business, but at the same time continuing to demonstrate NZ Inc's wish to capitalise on the 'first-mover' status earned when Prime Minister Helen Clark recognised China as a "market economy".

Clark's courageous step has since been followed by a number of other nations.

As Chinese Commerce Minister Bo Xilai told the Herald this year, "by offering us a very small favour you have got in turn a huge market. In the opinion of the Chinese people this time, New Zealand proved to be a gold-medal winner ... we would like to clinch the deal as soon as possible."

If the conference is to be judged a success it must demonstrate NZ Inc is prepared to grab this strategic opportunity and will not shy away from grappling with the difficult trade-offs which will occur once negotiations start early next year.

But no-one expects the Chinese to be other than tough negotiators once formal talks begin in the New Year.

China has just posted its first agricultural trade deficit: A staggering $US3.73 billion for the first six months of 2004.

Bo predicts New Zealand farmers are well-placed to gain from helping feed China's growing middle-class. But he tempers that advice with the warning that a backlash may occur if "sensitive" sectors like agriculture face too much competition too soon. On the manufacturing front, a number of New Zealand companies have already shifted production to China's Eastern sea border to take advantage of lower wage costs.

Technological developments may make many of these low-cost jobs redundant over time. But as Japanese strategist Kenichi Ohmae warns, China has a big advantage over other nations: An inexhaustible supply of cheap labour which will fuel growth for many years yet.

Services are frequently overlooked as a business opportunity.

China's financial and legal systems are still evolving to grapple with the reality of operating as a true market economy. As with agriculture, New Zealand needs to get a firm foothold established before China develops sufficient technical prowess to become largely self-sufficient.

China is East Asia's growth engine.

In less than 20 years it has evolved from an isolated, centrally planned communist state into a fast-growing economy - on track to be the world's second largest economy by 2030. China is New Zealand's fourth largest trading partner. Recent statistics show two-way merchandise trade totalled $4.14 billion in the year ended June 2003.

In time, China is predicted to surpass the United States' place as our second largest trading partner. There are geo-strategic issues flowing from that which will need to be skilfully managed at Government level.

But Clark has signalled her Government intends to "get serious" about Asia. A China FTA deal will underscore New Zealand's growing significance in the region. A top-flight raft of political, business, and expert talent has been mustered for tomorrow's event.

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