Primary exporters' China hopes high

By LIAM DANN

Primary-sector exporters hope a free-trade deal with China will offer benefits far beyond a simple reduction in tariffs.

For most of New Zealand's big exporters China is one of the newest and fastest-growing markets.

After Wednesday's announcement of a framework for trade talks there is optimism that, whatever the details of the final agreement, it will create a unique relationship with China giving New Zealand a competitive edge on its agricultural rivals.

Fonterra chairman Henry van der Heyden said he was confident dairy products would be included in any trade deal - unlike Australia's trade agreement with the United States, which largely excluded key agricultural products.

There was already huge demand for Fonterra products in China, he said. Fonterra's trade with China - worth $300 million annually - has been growing about 20 per cent a year for the past five years.

A trade deal should hopefully increase the momentum of that growth, van der Heyden said.

Tariffs on dairy exports were about 10 to 15 per cent depending on the product. Ideally those would start to come off under the terms of any free-trade deal, he said.

"More important is the big picture and the commitment they [China] are giving that they are starting to open up," he said.

Meat & Wool New Zealand general manager for trade and marketing Anne Berryman said a free-trade agreement would give New Zealand a competitive advantage in the race to develop beef and lamb markets in China.

Most of New Zealand's good-quality beef already goes to North Asian markets such as Taiwan, Korea and Japan.

There is an expectation in the global meat trade that China's consumption will follow similar growth patterns to places like Taiwan as per capita income grows.

China was a fast-growing market off a low base, Berryman said.

Last year New Zealand meat exports to China last year were worth around $130 million. They attracted tariffs of about 15 per cent.

China is the single biggest market for New Zealand wool. Last year exports were worth $150 million.

Tariffs on raw wool have dropped to just 1 per cent in the past decade because of the massive demand from China's textile industry. But tariffs on processed wool products outside quota can be as high as 38 per cent.

The industry is optimistic that a trade deal will help to open up that segment of the market.

New Zealand Forest Industries Council chairman Devon McLean hoped the free-trade agreement could help to stem tariff escalation on processed wood products.

China is happy to take unprocessed logs with little or no tariff but tariffs rise dramatically the more the wood has been processed.

In the year to December the Chinese market was worth $245 million to wood exporters.

McLean said there was potential to dramatically increase exports with the aid of a trade deal.

One big non-tariff barrier that a free-trade deal might help with was a prejudice against pinus radiata in the Chinese building industry.