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Backgrounder: NZ/Thai Closer Economic Partnership

Backgrounder: New Zealand/Thailand Closer Economic Partnership Agreement and associated Arrangements on Labour and Environment

Closer links with a key South East Asian Nation

A Closer Economic Partnership (CEP) with Thailand puts New Zealand’s relationship with this key South East Asian nation on to a new footing. Thailand has long been an important regional trading partner for New Zealand, with total merchandise trade worth $900 million in 2003 and well-established tourism and education links. The CEP establishes a future-orientated economic partnership between our two countries founded on increased economic interchange and cooperation. It is much more than just an agreement on trade.

Thailand is rapidly expanding its free trade links with other countries, is an influential member of the Association of South East Asian Nations (ASEAN) and is becoming a pivotal regional business hub. New Zealand and Australia are working with all ASEAN members towards establishing a free trade area. New Zealand’s bilateral CEP Agreement with Thailand, alongside its CEP with Singapore, will serve as a useful building block in this exercise. Consideration will need to be given to how bilateral agreements mesh in with a possible future ASEAN/New Zealand/Australia FTA, but a CEP with Thailand will deliver faster benefits for New Zealand.

Opportunities for New Zealand

A free trade deal with Thailand will open up significant opportunities in the Thai market. Thailand has some of the highest trade barriers in the region. New Zealand exports currently attract NZ$33 million in tariff payments in Thailand annually. The average tariff is 9 percent but tariffs of 50 percent on beef and up to 40 percent on fruit severely hinder access to the market of 64 million consumers. Even for manufactured goods, there are tariff barriers of 30-60 percent that restrict and in some cases prohibit exports to Thailand.

The CEP will secure preferential market access options for New Zealand. Exporters already in the Thai market will have the opportunity to build up their business in Thailand, while those for whom Thai tariffs have been prohibitively high will progressively be able to establish themselves in the Thai market.

In addition, the CEP will include mechanisms for addressing non-tariff barriers such as technical standards and conformance requirements.


Level playing field with Thailand’s other FTA partners

This agreement is not occurring in a vacuum. Thailand has been actively negotiating FTAs with other countries and New Zealand faced the risk of being progressively disadvantaged in the Thai market. Thailand has already concluded a comprehensive FTA with Australia (implementation is scheduled for 1 January 2005) and an “early harvest” agreement with China to eliminate tariffs on horticultural products. It is also negotiating FTAs with the US, Japan and others. Our CEP creates a level playing field with Australia in the Thai market. Further, New Zealand negotiators pushed for and achieved parity with the Thailand/China agreement for some of our priority export items.

Handling of sensitive products

In order for Thailand to agree to comprehensive coverage of all goods in the Agreement, the CEP provides Thailand with adjustment periods of 10 to 20 years for its more sensitive products. During this time tariffs and quotas will be progressively liberalised. These periods are the same as in Australia’s FTA with Thailand, as are the broad special agricultural safeguard provisions which Thailand also required for some of its sensitive products. A number of dairy products, beef, beef offal and processed frozen potatoes will also be subject to the special agricultural safeguard mechanism, which limits the volume of imports that can benefit from tariff reductions under the CEP each year. New Zealand secured the most favourable possible treatment of these products under the special agricultural safeguard mechanism.

On New Zealand’s side, an adjustment period of 10 years will be provided for the textiles, clothing, footwear and carpet sector before the final phase-out of tariffs on imports from Thailand by 2015. This is the same as in the Thailand/Australia FTA.

Anticipated impact on imports from Thailand

Because New Zealand already has a relatively open market (and is due to lower tariffs unilaterally through to 2009), the impact of the CEP on domestic sectors is expected to be minimal.

Sixty-five percent of imports from Thailand already enter New Zealand duty free. The average tariff on the remainder of imports from Thailand is 1.5 percent. Under the agreement, remaining tariffs on imports from Thailand will be removed in four main groups – some on implementation of the Agreement, some by 2008, some by 2010, and the remainder (for the textiles, clothing, footwear and carpet sector) by 2015.

Thailand currently accounts for just over one percent of total New Zealand imports of textiles, clothing and footwear, and this sector makes up just 2.4 percent of New Zealand’s total imports from Thailand.

Coverage of services and temporary employment issues

The CEP takes some steps towards easing the restrictions Thailand currently maintains on temporary entry of foreign business people. Thailand has undertaken to provide New Zealand business people with the same key enhancements as those accorded to Australian business people in respect of work permits and visas.

The CEP does not however contain at this stage a full services component. Given constraints on Thailand’s ability to offer substantive commitments on services liberalisation in areas of interest to New Zealand, Thailand and New Zealand have agreed to begin negotiations on the liberalisation of services trade within three years after the CEP enters into force. In the meantime, New Zealand has not scheduled any services commitments.

New Zealand has responded positively to a clear Thai priority by agreeing to provide access for the temporary employment of Thai chefs in New Zealand without labour market testing, provided they have a bona fide job offer and hold a Thai national skills standard certificate for Thai cooking. New Zealand will also explore the scope for recognising the qualifications of traditional Thai massage therapists with a view to facilitating their entry to New Zealand for temporary employment.

Parallel arrangements on Labour and Environment
In line with the Government’s Frameworks on Integrating Labour and Environment Standards in Trade Agreements, New Zealand has concluded parallel arrangements with Thailand on labour and environment issues. These include a political commitment not to weaken or derogate from labour or environment laws or standards to gain an unfair trade advantage, or use them for protectionist purposes. Mechanisms are established for ongoing cooperation and dialogue, and for addressing any issues that may arise in these fields. The New Zealand government envisages working closely with unions in the implementation of these Arrangements.

ENDS

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