China FTA and RCEP: ideal in the circumstances - Jacobi

Tuesday, 5 November 2019, 12:50 pm
Article: RNZ

New Zealand's free trade upgrade with China and RCEP are probably the best that could be expected considering global trends to protectionism, International Business Forum head Stephen Jacobi says.

Stephen Jacobi Photo: RNZ

The government yesterday announced two significant updates on trade deals: an update to New Zealand's free trade agreement with China, and a finalised text for the 15-nation RCEP agreement - but without key negotiating partner India.

The update of New Zealand and China's FTA ensures cheaper and faster export of NZ goods through China's borders, and preferential treatment for NZ paper and wood.

Forest Owners Association chief executive David Rhodes welcomed the deal, and said it was always meant to deliver benefits for timber exporters.

"Yes, I think this is putting us on a good footing, it's certainly going to be a benefit to our processing and let's face it China is as big a market as you get these days for forestry."

It also brings in the strongest environmental measures China has yet agreed to in any FTA.

The ideal deal in difficult times - Jacobi

However, the deal has been criticised for not removing dairy and milk powder tariffs - which are set to be removed by 2022 and 2025 respectively - earlier.

International Business Forum chief executive Stephen Jacobi told RNZ's Morning Report it was probably as good a deal as could be expected.

"Perhaps the gains from the FTA upgrade - because it excludes the dairy safeguards - aren't as great as we might have hoped, nevertheless there are a whole lot of valuable things that are included" - Stephen Jacobi duration 4:06
from Morning Report

"I'm not sure we've taken a 'sub-par' deal. Frankly, I think we've taken the deal that was on offer. It was always difficult right from the very beginning that we would have had the safeguards removed."

"And the FTA still exists as a framework to continue to build the relationship and I think that's pretty good news," he said.

He said the removal of the tariffs would have been a very significant development, but were always unlikely to be achieved and the chances were also lowered by China's trade war with the US pressuring the country towards protectionism and away from free trade.

"These are very difficult times globally for trade and China is not quite in the same space it once was when it comes to trade liberalisation."

"They're thinking more about global markets. When they did this deal, it was to demonstrate that they could negotiate - our market is of limited interest to them... I think China had very limited ambitions in this deal and that didn't help us."

NZ not afraid to criticise China - Hipkins

Filling in for New Zealand Prime Minister Jacinda Ardern for her weekly spot on RNZ's Morning Report, Education Minister Chris Hipkins said the upgraded deal would not mean New Zealand bowing to Chinese pressure on matters of foreign policy.

"The New Zealand-China partnership is very important but of course we have always gone into that partnership as an independent country with an independent foreign policy."

"There's no question that China is a very large economy in our part of the world, so of course our trade relationship with them is going to be very important" - Chris Hipkins duration 6:28
from Morning Report

Hong Kong's ongoing protests and western countries' rejection of Huawei's 5G technology are pressing global concerns for China politically.

At home, Massey University was criticised last month after staff tore down posters promoting democracy in Hong Kong, and Mr Hipkins said New Zealand was not afraid to make its position on such matters known.

Chris Hipkins Photo: RNZ / Dom Thomas

"Universities should be places for free speech. How they choose to respond and how they choose to react is a matter for them. But at a government level certainly our New Zealand government's not afraid to disagree from time to time, and we do."

"We've always been very clear when it comes to matters of principle New Zealand stands firm behind our principles, we're not afraid to criticise and to be criticised where necessary."

He said the move to negotiate more big free trade deals like the RCEP was partly aimed at diversifying New Zealand's trade - to avoid putting all the country's economic eggs in one basket.

"We want to continue to broaden our trade base - that's one of the reasons why we are going into RCEP and other agreements like that because we want to continue to grow our export markets, diversify our trade."

RCEP a strategic win - Jacobi

The Regional Comprehensive Economic Partnership - RCEP - brings together the 10-member Association of Southeast Asian Nations (ASEAN), China, Japan, South Korea, Australia and New Zealand.

The terms have now been agreed by the 15 nations including New Zealand but the deal has not yet been signed. The full details will only be publicly released once the deal is signed.

Even without India, the countries in the RCEP bloc account for nearly a third of global gross domestic product.

Its departure means RCEP - which include NZ and Australia, Japan, South Korea and the ASEAN countries of South East Asia - covers less than a third of the world's population instead of about half.

Mr Hipkins said there was always going to be a challenge with getting India on board, however.

"Particularly their relationship with ... China, and that was going to create some interesting challenges ... we've got real hope, I think, that we can make good progress on this."

Mr Jacobi said the commercial benefits for New Zealand were not likely to be large because New Zealand already has free trade deals with all the members - excepting India, which has pulled out.

"India not being part of it - at least right now - is a disappointment," he said.

However, he said it was important to ensure that any free trade with India would include the right concessions to New Zealand.

"Having an agreement with India but which excluded vast parts of our trade, particularly in agricultural products, wasn't going to be of much use either so I think the solution that's been reached - that India's got more time to think about this - is again the best we could have got."

He said the deal was not Chinese-led and even if India did not join, the strategic benefits were significant.

"I think this is where we have to see the value, this is a big political thing in Asia. Remember that some of those participants do not have deals with each other particularly in north Asia - China, Korea and Japan - they are now bound into a rule-making arrangement which is going to be good for New Zealand.

"I do think the strategic benefits of this deal are very significant ... at a time when protectionism is rising around the world, at least these 15 countries been able to reach consensus on the value of freer trade."

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