NZ-China FTA upgrade negotiations conclude
Prime Minister Jacinda Ardern and Minister for Trade and Export Growth David Parker have announced the conclusion of negotiations to upgrade New Zealand’s existing free trade agreement with China.
“This ensures our upgraded free trade agreement will remain the best that China has with any country,” Jacinda Ardern said.
She was speaking at the East Asia Summit in Thailand following her bilateral meeting with China’s Premier, Li Keqiang.
“It reflects the importance both countries place on our relationship and builds on the significant mutual benefits both countries have enjoyed as a result of our excellent existing FTA,” Jacinda Ardern said.
Key outcomes of the upgrade include:
- New rules that will make exporting to China easier and reduce compliance costs for New Zealand exports by millions of dollars each year. This includes, for example, faster border release of fresh food products, and other products that may have transited through other countries en route to China.
- The introduction of environmental considerations - the most ambitious environment chapter and the highest level of commitment that China has agreed in any FTA. It includes commitments to promote environment protection and ensure that environmental standards are not used for trade protectionist purposes.
- The upgrade will also mean that 99% of New Zealand’s $3b wood and paper trade to China will have preferential access, with tariff elimination over a 10 year implementation period on 12 additional wood and paper products worth NZ$36 million in trade to China.
“New Zealand was the first developed country to sign a free trade agreement with China, in 2008, but China’s free trade agreements have evolved since then,” David Parker said.
“This is why we entered into upgrade negotiations: to ensure our agreement is modern and deepens our relationship further, and to ensure that New Zealand’s exporters have a deal as good as, if not better than, their competitors,” David Parker said.
In dairy, existing conditions have been maintained, with all safeguard tariffs to be eliminated within just over two years for most products, and four years for milk powder.
“This means that by January 2024, New Zealand will have the best access to China for dairy products of any country,” Jacinda Ardern said.
“Protections in the existing agreement that are important to New Zealanders such as New Zealand’s rules on overseas investment and the Treaty of Waitangi exception remain secure,” Jacinda Ardern said.
The outcome is the result of nearly three years of negotiations. Next steps include legal verification of the draft text, with the signing and release of the text expected in early 2020. China is New Zealand’s largest trading partner, with two-way trade recently exceeding $32 billion dollars.
NB: MFAT will be releasing a joint NZ-China media statement on its website.
Why are there no changes to dairy access?
In just over two years for most products, and four years for milk powder, all tariffs on New Zealand dairy exports to China will be eliminated under the existing terms of the 2008 FTA. By January 2024, New Zealand will have the best access to China for dairy products of any country.
What about market access for wood and paper?
The existing FTA already provides duty-free access for over 98% of New Zealand’s total goods exports to China once fully implemented. This includes the best forestry sector tariff treatment into China for any country.
The FTA upgrade provides further market access improvements on a number of New Zealand wood and paper products.
Through the FTA upgrade, New Zealand has secured tariff elimination, over a 10 year implementation period, on 12 additional wood and paper products worth NZ$36 million in trade to China.
These improvements will mean New Zealand will have preferential access for 99% of New Zealand’s $3 billion wood and paper trade to China.
The agreement also provides additional transparency on the treatment for forestry products under forward looking commitments in the existing FTA.
Since the existing FTA was concluded, China has reduced or eliminated tariffs on 48 wood and paper tariff lines for New Zealand products as a result of forward-looking commitments on forestry products that are part of the existing FTA. This ensures New Zealand will continue to have the best tariff access for wood and paper into China.
How does the upgrade help New Zealand goods exporters?
New Zealand exporters will benefit from new rules that make it easier to export to China. China has agreed that approved exporters can self-declare that their goods are New Zealand goods under the FTA, as a further option to certification by other organisations. This change will give exporters additional choice, reduce compliance costs and save our exporters several million dollars each year.
New Zealand exporters will also no longer have to apply for additional certificates when their goods transit through another country on the way to China. This resolves an issue that exporters have been concerned about for many years.
The upgrade includes a new commitment to expedite customs clearance to six hours for perishable goods (such as fresh seafood, including rock lobster and salmon), which will help New Zealand exporters of fresh high value food products that need to get to market quickly.
The Upgrade will broaden customs rulings provisions; and make complying with labelling requirements, easier for our exporters. We have also agreed a side-letter on alternatives to animal testing for cosmetics.
There is also provision to improve current mechanisms for cooperation and dialogue, particularly on non-tariff barriers impacting trade.
What improvements are there for New Zealand’s services sector?
The upgraded agreement will improve New Zealand and China’s commitments on access to each other’s services markets. Key developments include new and expanded market access commitments for New Zealand in service sectors of commercial interest to New Zealand such as environmental, audio-visual, ground handling and specialty air services.
The upgrade also protects our exporters’ future competitive position by allowing them to automatically benefit should China make new commitments to other countries in specific service sectors, including education - a key sector for New Zealand.
What new chapters have been added?
New Chapters on Electronic Commerce, Environment and Trade, Competition Policy and Government Procurement have been added reflecting advances in trade rules and business practices over the past decade. These chapters provide avenues for enhanced cooperation in these areas.
What does the Environment and Trade Chapter include?
A new environment chapter has been added to the upgraded FTA. It is the most ambitious environment chapter and the highest level of commitment that China has agreed in any FTA. It includes commitments to promote environment protection and that environmental standards are not used for trade protectionist purposes
It builds upon and complements the existing Environment Cooperation Agreement that was negotiated alongside the existing FTA.
What outcomes have been agreed on movement of natural persons?
Some adjustments will be made to the visa allocations for “iconic Chinese occupations” in the Movement of Natural Persons chapter of the existing FTA. The allocations will be increased for Chinese Tour Guides (from 100 to 200 places) and Mandarin Teaching Aides (from 150 to 300 places) by redistributing from other less used visa categories. There will be no change to the overall visa cap of 800.
These changes will ensure that the visa allocations are targeted to areas where New Zealand stakeholders have strong demand for suitably qualified staff. Applicants will still need to satisfy the conditions and criteria in the FTA to be able to quality for a visa under these categories.
In addition, the Chinese Tour Guide category in the existing FTA will be broadened to “Chinese Tourism Specialist”. New eligibility criteria will be introduced that are designed to make it easier for New Zealand businesses to employ suitably qualified staff through this visa category. These changes will better reflect the skills needs of our tourism sector and help New Zealand meet the expectations of our second-largest tourism market.
Is the government’s ability to regulate protected?
Yes. The government’s right to regulate for legitimate public policy purposes continues to be duly protected as is our exception for the Treaty of Waitangi which enables the government to take measures it considers necessary to fulfil its obligations to Māori.
Are there any changes to investment rules?
There is no change to New Zealand’s investment settings as a result of the upgrade negotiations. However, the screening levels for China have changed since the original China FTA was signed as a result of the implementation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
China sought confirmation of this in the upgrade negotiations and we agreed to reflect this in a side letter.