Smith Strikes Historic Trade Deal With China

International Trade Minister Lockwood Smith has struck a historic trade deal in Beijing which has secured the future of New Zealand's wool exports to China, our largest market for wool.

The deal, concluded late yesterday with his Chinese counterpart Madam Wu Yi, means guaranteed access for wool along with substantial tariff reductions, Dr Smith said.

"The Chinese have agreed to accept increasing quantities of wool over the next seven years at a very low tariff -- only one per cent.

"I am confident the outcome provides the wool industry with important future opportunities in the Chinese market. It provides security of access, allowing the industry to make long-term plans," Dr Smith said.

The agreement means New Zealand is the first country in the world to conclude World Trade Organisation-related negotiations with China. Beijing is in the process of joining the WTO and this involves negotiating bilateral trade agreements with existing WTO members.

Getting better access for wool was New Zealand's number one priority in the talks. Wool exports to China had fallen from $311 million worth in the year to June 1995 to $216 million in the 12 months till June this year.

Now China has agreed with New Zealand that it will take up to 220,000 tonnes of wool fibre exports from around the world at the one per cent tariff rate.

The tonnage will rise to 287,000 tonnes over seven years.

Although no formal quota arrangements have existed previously, the new quota levels are way above the tonnages Chinese has been importing. Therefore, the new quotas allow plenty of room for an expansion of exports, plus security of access. The official tariff rates on wool fibre last year were up to 10 per cent.

The deal also sets a global quota of 60,000 tonnes for wool tops, rising to 80,000 tonnes over seven years. The tariff is three per cent compared to tariffs of up to 15 per cent previously.

The China-New Zealand wool deal is part of a broad bilateral package on a range of goods and services negotiated between the two countries.

"The final deal also features tariff cuts for all goods exported from New Zealand and secures improved access to the Chinese market for New Zealand services providers, including the education sector," Dr Smith said.

The agreement has received wide publicity in China, with the main evening news bulletin -- watched by several hundred million people -- featuring a lengthy item.

Full ratification of the deal will take place when China joins the WTO.

But the tariff reductions on wool will apply immediately and both quotas will be applied from January 1, 1998, regardless of the date of China's WTO accession.