Trade groups have welcomed the upgrade of New Zealand's trade pact with China as significant and a way of tackling a number of technical barriers that make life difficult for exporters.

New Zealand and China announced at the APEC leaders' summit in the Peruvian capital Lima that they have agreed to renegotiate the historic free-trade agreement between the two countries.

Top of the list in the negotiations will be the so-called 'dairy safeguards' - quotas that limit the amount of New Zealand dairy produce that can go into China duty-free.

At present, the annual duty-free quota disappears within days in January, with all remaining product facing tariffs in the Chinese market.


"But it's much broader than that. It will include forestry and a range of other products," said Prime Minister John Key.

New Zealand's trade relationship with China has nearly tripled over the past decade, with two-way trade rising from $8.2 billion in the year ended June 2007 - the year before the Free Trade Agreement was signed - to $23b in the June 2016 year.

Annual exports to China have quadrupled and annual imports from China have doubled since the June 2007 year.

China is New Zealand's second-largest trading partner for exports and third-largest for imports. In the year ended June 2016, 17 per cent of our goods and services exports went to China and 16 per cent of our goods and services imports came from there.

Export New Zealand said the FTA is a good one, but since it was negotiated, China and New Zealand had negotiated other agreements.

The negotiation on the upgrade offered the opportunity to ensure that the China-New Zealand FTA remained as up-to-date as possible and one of the highest standard agreements ever negotiated.

"While the existing FTA has largely removed tariff barriers between China and New Zealand, areas that could be improved include dairy volumes, chilled meat exports, processed wood products and agreements for horticultural access," said ExportNZ executive director Catherine Beard.

"The other focus is a number of technical barriers and trade and services barriers that still cause difficulties for New Zealand exporters. Likewise, since the original FTA was signed, e-commerce has grown in importance for bilateral trade. It is important that the regulations around e-commerce facilitate the expansion of this trade," she said.


The New Zealand China Council said other countries such as Australia had done their own trade agreements with China, which meant that over time they would enjoy increasingly better market access.

"These negotiations give us the opportunity to future-proof our own FTA and address the remaining technical barriers that still exist on each side," said the council's executive director Stephen Jacobi.

These negotiations give us the opportunity to future-proof our own FTA and address the remaining technical barriers that still exist on each side.

ASB chief economist Nick Tuffley said the "most favoured nation" clause in the New Zealand-China FTA meant the countries were obliged to match or improve on deals subsequently done with other countries.

The clause applied to reasonably narrow service businesses, construction, engineering, computer-related industries and tourism.

While the financial gains could be around margins for New Zealand anything that made trade easier was welcome.

Tuffley said it was a sign that while there were doubts about the Trans Pacific Partnership following the election of Donald Trump, there was still an appetite to make progress in other trade deals.

A three-paragraph joint statement from the Chinese and New Zealand governments includes specific commitment to "work towards the swift conclusion of the RCEP negotiations", a reference to the Regional Comprehensive Economic Partnership proposed first by the ASEAN south-east Asian grouping and now led by China.

The deal is seen as an alternative to the TPP. Although it would not be as comprehensive and excludes the US, it would deliver a so far elusive trade agreement with India.
"I don't think it would require RCEP to be completed for the FTA upgrade to happen," Key said.

"They are two separate events, but we do think there is a real possibility of RCEP being completed, and if it does, it's a good thing because it brings in India."

Trade Minister Todd McClay, also at APEC, confirmed that China had not raised concerns about anti-dumping action by New Zealand against Chinese steel imports.
- additional reporting BusinessDesk

Growing relationship
• NZ's trade with China has nearly tripled over the past decade
• Two-way trade has risen from $8.2 billion in the year ended 2007 to $23b in 2016 year.
• NZ's top goods exports are milk powder, untreated logs and meat (beef and lamb).
• Top services exports were travel, education travel, and transportation services.
• Top goods imports from China are clothing, cellphones and computers.
• Top services imports are other business services, other personal travel and transportation services