Gold medal from a friend on high

Assistant editor FRAN O'SULLIVAN talks free trade with China's Commerce Minister




Bo Xilai, the Chinese Commerce Minister - and in the judgment of some a man destined for the premier's suite - has been quick to use New Zealand's recognition of China as a "market economy" in negotiations with bigger countries.

Since Prime Minister Helen Clark made her April 14 announcement, Singapore and Malaysia have followed suit.

Even the European Union and the United States, which dispute China's market status, have started investigations into its economic transformation.

But the US will not be quick to follow New Zealand's path. It is election year, and protectionist drums are beating.

Bo is quick to defuse any lingering concerns in New Zealand that it might have played a big card too soon in its quest for a free-trade deal with China.

"Put it this way," says Bo in his first "one-on-one" interview with a Western journalist since becoming Commerce Minister, "by offering us a very small favour you have got in turn a huge market.

"We would like to clinch the deal as soon as possible."

Bo uses Olympic Games imagery to make his point.

"Of course all the participants due to their excellency need to be admired.

"But only the first three will be offered medals. And in the opinion of the Chinese people this time, New Zealand proved to be a gold-medal winner. Congratulations."

Last Friday Bo signed a preliminary agreement in Auckland with Trade Negotiations Minister Jim Sutton.

The set-piece affair was marked by outbursts of applause from officials, business people and the Prime Minister as Bo recorded China's thanks for the Government's move with a string of superlatives - "visionary", "courageous", "wonderful".

He was still expressing these sentiments when we met at Auckland's Sheraton hotel two days later: "We very much treasure and appreciate the approach you have demonstrated in terms of recognising China as a market economy."

Officials are now working on a joint feasibility study, to be completed by November so Chinese President Hu Jintao and Clark can use the Apec leaders' meeting to start formal negotiations.

In the pre-deal politicking, much has been made of the benefits to both parties from a free-trade deal.

China can use its "market economy" recognition to open other lucrative markets for its exporting companies; New Zealand can gain wider access for agricultural products to a market of 1.3 billion people.

But Bo makes clear it will not be plain sailing, despite the complementary nature of the two economies.

"China is a big farming nation with a population of 1.3 billion and out of them 770 million living in the rural areas," he says.

"So the average rate of productivity in the agricultural sector in my country is extremely low.

"That is why when we are conducting trade exchanges with other strong farming nations we will be under pressure, particularly from the perspective of the domestic producers of agriculture products."

Bo cites New Zealand's highly competitive agricultural products, its "world renowned" sheep and its status as a global dairy leader.

"In the Western part of China we have people involved in sheep raising as well, so their productivity may be only about one-twentieth or even one-thirtieth of those in New Zealand.

"I believe the sheep - as well as the fur produced by the sheep from this country - are not only good in terms of quality but also very competitive in terms of price.

"So the import of those types of products will constitute a very fierce competition to our domestic producers involved in the same animal husbandry industry."

Bo says it would be difficult for Chinese producers to transfer to other industries.

But he says China would adopt a positive attitude towards accelerated negotiation and co-operation on a free-trade agreement.

Herald inquiries suggest the Chinese Ministry of Agriculture is concerned about the effects more liberalised agricultural trade will have in areas such as Inner Mongolia, Xinjiang and Heilongjiang.

But the Commerce Minister indicated considerable work would be done to ensure any required changes were phased in to offset any harmful effects.

And he says there is no way the trade and economic framework he signed with Sutton could be applied for other "big and strong" farming nations "because the durability of China is limited".

"We are still confronted with a lot of difficulties and worries," he says. "There are several hundred million farmers living in extremely difficult conditions in China ... Their production methods are not advanced at all and their production capacity is not that strong."

Adopting free trade in agriculture products would be a "heavy blow".

"So that would be something very difficult for the Chinese Government to bear and stand at this current stage.

"But since New Zealand has demonstrated such a friendship to us in terms of recognising China as a market economy we have been very positive towards the free- trade agreement between us and New Zealand."

Bo says China must continue its step-by-step approach to liberalising trade.

"It is our responsibility to ensure that all the 1.3 billion people in China have got enough to eat and have a job to do."

Any free-trade deal creates winners and losers.

In New Zealand, the Council of Trade Unions wants a Government assurance that tariff protection for textiles, clothing and footwear will be maintained until 2010. "Important principles and protections are not sacrificed for some holy grail of improved agricultural access to China," it said.

Bo says the deal would open New Zealand's door to more Chinese textiles and light industrial products.

"And these products are good in quality and reasonable in price, which will help lower the cost of your livelihood."

Some domestic producers might feel competitive pressure, but he believed most New Zealanders would recognise that the Government's pact with China had improved access to "good-quality and reasonable-cost Chinese products".

New Zealand had already benefited from its "early bird" move to promote China's accession to the World Trade Organisation through access to greater quota.


But the big tariff reductions China is making in return for its World Trade Organisation membership had imposed huge pressure on its farmers as the threshold for access of agricultural products was lowered.


"But the determination of the Chinese Government in getting its own economy integrated into the big family of the world one is firm, and so is our determination and resolve to further open wider to the outside world," he says.

"That is why eventually the Chinese Government came to the grave decision of WTO accession and consequently we have made our own dedication and contribution to the global trading generally."


Bo is not well-known in New Zealand. He has been in the commerce role only since February, when China moved to replace the ailing Lu Fuyuan.

A rising star in a Communist Party desperate for new blood, Bo is considered likely to go far in spite of his pedigree as a "taizi". Many of his fellow "taizi" - the sons and daughters of party officials - have faced criticisms of nepotism.

There has been speculation that family connections with former president Jiang Zemin helped bring about his promotion from governor of Liaoning province to the Commerce Ministry.

But the son of Bo Yibo, a former Politburo member and revolutionary who joined Chairman Mao Zedong in founding the communist state in 1949, had already earned his stripes through his transformation of Dalian into "China's Singapore" while he was mayor of the port city in China's north-east

He was elected Liaoning's governor in January last year.

During his time as mayor of Dalian, Bo's globe-trotting sales pitches combined with environmentally focused polices produced growth of around 15 per cent a year in the rust belt city and earned him a United Nations Habitat Award in 1999.

Bo's legendary savviness is immediately apparent, as is the sparkling exuberance that marked him as a "heart-throb" to one Asian weekly.

During Friday's signing ceremony he broke into perfect English to explain his feelings about being named as Commerce Minister.

"'It is a high-pressure job, since China develops too fast ... too many friends in the world.

"I have to negotiate everything from morning to night ... But I am enjoying quite a lot of it."

Last month, he accompanied Chinese Vice-Premier Wu Yi to Washington ("She is an iron lady, very popular, very strong") for annual trade talks.

They "never over-emphasised the agreement that New Zealand concluded with us" but did push China's hope that the United States would also grant recognition.

"It is fair to say the talks between Vice-Premier Wu and her US colleagues proceeded in a harmonious atmosphere, during which we have shown mutual respects to each other, and relatively speaking the results prove to be satisfactory to both.

"When it comes to market economy status with China, the US side has agreed to establish with us a working group which will look into this matter aiming at accelerating the settlement of this matter."

Breaking into laughter, Bo says: "Of course we have received a similar response which is active from Australian side."

As Commerce Minister, his focus is to ensure China carries out its commitments and takes a positive role in the WTO, adopts a positive attitude to the acceleration of the Doha development round and "positively presses ahead" with bilateral, multilateral and regional co-operation.

He also says - without naming the US - that China is willing to take into full consideration specific concerns by some foreign partners and try to resolve the trade deficit with some.

"For example, for those Asean nations in economic difficulty with trade deficits with us, we are ready to offer more preference as well as help and assistance.

"That is why we have put into place a zero tariff arrangement for the fruit trade between China and Thailand.

"In the case of very friendly nations with China - like New Zealand - we don't mind that much whether we have trade deficits."