World first for NZ in China trade pledge

By FRAN O'SULLIVAN, assistant editor

New Zealand is on track to become the first Western nation to strike a free-trade deal with China after the Government told Beijing it recognised its "market economy" status.

Negotiations on a deal that will greatly improve access for New Zealand agricultural exporters to the vast Chinese market are expected to begin early next year.

Unlike most other countries, New Zealand has never questioned China's status as a market economy.

But formal recognition gives China a bargaining chip in its campaign to wind back aggressive anti-dumping protocols it accepted when it joined the World Trade Organisation.

Helen Clark gave the Government's assurance in a private meeting with visiting Communist official He Quoqiang last week.

The Prime Minister is reported to have told Mr He that she wanted New Zealand to be the first Western nation to gain a free-trade deal with China.

Mr He, chief of the Chinese Communist Party's organisation department and a Politiburo member, was in New Zealand as head of a 19-strong mission studying civil service management.

It is understood New Zealand Embassy officials also conveyed the decision to China's Ministry of Commerce in Beijing late last week.

Trade between China and New Zealand has been growing at an extraordinary rate. The Chinese offer to negotiate a free-trade deal was made during joint negotiations in Beijing last month on the first step towards such a deal - a trade and economic framework to be signed at officials' level by June.

During the Beijing talks, the Chinese side asked New Zealand to recognise China's status as a market economy as a condition for discussions on other issues.

Ministry of Foreign Affairs and Trade official Tony Browne, who headed the New Zealand side, would not comment yesterday.

But Chinese Ambassador Chen Mingming said: "If everything goes well this could be the first free trade agreement between China and a developed country."

China has also been aggressively campaigning for recognition as a market economy from Australia, which is making a feasibility study on a trade deal.

Helen Clark will brief Australian Prime Minister John Howard on the Government's decision at their annual meeting in Canberra today.

Suggestions have recently been floated in Wellington that New Zealand and Australia might join forces and negotiate a joint deal with China. But this is unlikely to happen unless Australia accepts China's market economy request.

Visiting Chinese Commerce Vice-Minister Ma Xiuhong told the Herald this year that China recognised New Zealand's position was different to that of Australia.

"We have to appreciate that the Government of New Zealand and also the trading regime and legislative system of New Zealand has never had discriminatory measures in terms of the formulation of trade policy and the implementation of trade policies," she said.

Another factor in New Zealand's favour is the strong stance Helen Clark took on the Iraq war which Chinese Foreign Minister Li Zhaoxing said won her an admirer in President Hu Jintao. The parameters for the New Zealand negotiations have yet to be set.

Wellington sources suggest New Zealand's main aim is to gain as wide an access as possible for dairy, meat and agricultural products to a market of 1.3 billion people.

China is expected to want New Zealand to lower tariffs on clothing.

Many visiting officials have made it clear that China feels disadvantaged by the terms it signed to join the World Trade Organisation.