Open for business in land of promise

New Zealand industries are likely to gain a big chunk of the vast and growing Chinese market, writes SIMON LOUISSON.

The fulfilment of China's 15-year quest to join the World Trade Organisation should give another boost to New Zealand's booming primary sector.

The door also has been opened further for service sectors such as insurance companies and value-added exporters such as manufacturers of engineered wood.

As important as the tariff cuts will be China's adherence to WTO agreements on non-tariff barriers, intellectual property and plant and animal health rules.

World trade ministers meeting in Doha admitted China to the 140-member global club on Saturday, opening a potential market of 1.3 billion people.

China's economy is the world's sixth largest and has been one of the few to maintain a healthy growth rate this year.

Lesser, but significant, benefits will come from Taiwan's accession to the WTO a day later.

China is already a booming market for New Zealand exports, growing 48 per cent in the year to March 2001 to $971 million. That makes it our sixth-biggest market, taking 3.2 per cent of exports. China's economy is expanding at around 8 per cent a year.

The Ministry of Foreign Affairs and Trade estimates exporters will directly gain $48.8 million after full implementation of China's WTO commitments, expected by 2005. Of this, $28.2 million will be in the agricultural sector and $20.6 million in the industrial sector.

The ministry estimates wool exporters have benefited by $20.4 million from a reduction in tariffs three years ago. New Zealand negotiated lower tariffs with China in 1997 and these automatically came into effect with China's entry to the WTO.

The ministry also expects New Zealand exporters to gain from the effects of trade liberalisation as the Chinese economy expands.

The big direct winner is likely to be the dairy industry. Dairy exports to China are now $190 million and were already expected to grow significantly.

"It's certainly one of the major growth prospects for the dairy industry," said Neville Martin, a spokesman for the soon-to-be-defunct Dairy Board.

"The board had taken a long-term view that China would be one of the powerhouse economies in the new century. The expectation is the Chinese market will grow ... if not exponentially, it will grow sharply across the next five years.

"The adoption of China into the WTO will significantly boost trade and help that growth."

Tariffs on milk powders will drop from 25 per cent to 10 per cent in 2005, those on skim milk will drop immediately from 25 per cent to 15 per cent and on wholemilk powder from 25 per cent to 20 per cent. Tariffs on skim milk and wholemilk powder will drop to 10 per cent in 2005.

Butter tariffs will drop from 44 per cent to 36.7 per cent immediately and then to 10 per cent in 2005, and tariffs on cheese will drop from 45 per cent to 36 per cent immediately and then to 15 per cent by 2005.

Most dairy exports are in milk powders, but there is plenty of potential, with the Chinese Government running a milk-in-schools programme boosting awareness of dairy products.

Tariffs for New Zealand's second-biggest industry of exports to China, forest products, are already negligible. Most of the $170 million exports are logs and wood pulp. However, the industry expects exports for laminated woods, paper, newsprint and other processed products to increase substantially.

"It's something we have been getting ready for for some time now," said James Griffiths, chief executive of the NZ Forest Industry Council.

Tariffs on value-added products will fall to between 15 per cent and 20 per cent from between 35 per cent and 40 per cent.

As well, China has a commitment to international standards. New Zealand has had problems with wooden building products being accepted for housing and construction and the WTO framework gives New Zealand a chance to change that.

"It opens up whole new product markets for us," said Mr Griffiths.

He said China's huge and growing population and rising living standards were a big attraction for exporters. Forest products demand was outstripping China's ability to supply.

Meat New Zealand chief executive Neil Taylor believes China's entry to the WTO will have enormous repercussions for Asia. As the region increased in wealth, there would be spin-offs for the meat industry as China's people moved from eating grain, to white meats, and then to red meats.

New Zealand meat exports to China in the year to September totalled $41.2 million, of which $37 million was lamb. The rest was mutton, beef and some goat.

"China is already a valuable market for New Zealand meat, and I look forward to the time when it becomes significantly more important," said Mr Taylor.

China has agreed to reduce the 45 per cent tariffs on beef and sheepmeats to 25 per cent and 20 per cent respectively.

Mr Taylor said it would be great if New Zealand beef producers could reduce dependence on the North American market.

Wool Board policy manager Roger Buchanan said wool tariffs had dropped from between 10 per cent and 15 per cent three years ago to between 1 per cent and 3 per cent.

It was unlikely to have any direct effect on the volume of wool traded, because the tariffs were already low.

But China's accession to the WTO would impose disciplines on its quota system and give more certainty to the trade.

- NZPA