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Goff: NZ and China - Building Relationships

Hon Phil Goff
Minister of Trade

30 November 2006

Speech Notes

New Zealand and China – Building Relationships For Growth
Opening Address, China Business Forum, Hyatt Regency, Auckland

Nimen Hao.
Welcome to the China Business Forum.
I hope that the presentations and workshops today inform you of the opportunities that exist for business in China and assist you to take advantage of them.

This century has been labelled as “China’s Century”.

Of its 1.3 billion people, more than 100 million are now classified as affluent and another 350 million as having increasing real disposable income.

China’s economy is currently worth US$2.3 trillion and continuing to grow at a rate of 10 percent per annum.

It is on track within 20 years to surpass the United States as the world’s largest economy. It is a huge market and getting bigger.

The impact of China’s growth on New Zealand’s economy is already obvious. Our two-way trade is valued at over NZ$6.1 billion.

It’s our fourth largest trading partner. Over the past decade, our merchandise exports to China have roughly tripled to over $1.5 billion. It has grown faster than any other of our markets.
We earn over $1 billion from services exports, mainly through education and tourism but also in niche markets such as engineering and other services.

China’s emergence as a regional and global power is changing the nature of regional and global business and politics.

I have just got back from leading New Zealand’s largest ever trade mission overseas, to Shanghai and Beijing. We flew into Shanghai on Air New Zealand’s inaugural flight and the first direct air link between China and New Zealand. All of the participants I have spoken to thought that it was time well spent. Those for whom China was a new experience were staggered at the growth, size, prosperity, sophistication and opportunities, which metropolitan China presents.
They came away enthused.

While the market in China presents enormous opportunities, we cannot simply sit back and wait for these to fall into our laps.

To win the benefits which are on offer requires effort, skill, knowledge and understanding of the market, and determination.

And it requires increased activity from both government agencies and the private sector.

The Government does not export, the private sector does.

Our success in exporting relies on the quality, cost competitiveness and marketing of the goods and services you produce and the innovation and creativity that you put into these products.

But the Government can facilitate your efforts, by building the wider relationship within which trading takes place. It can remove obstacles to trade by negotiating a free trade agreement. It can through New Zealand Trade and Enterprise advise and help build the capability of New Zealand companies and sectors.

I want to touch briefly on each of these areas. At both a country and a company level, successful trading initiatives rely on building a relationship, which is more than just a business one.

New Zealand is working at building a comprehensive relationship at a political, cultural and people to people level.

We have made good progress on that. The frequency of high-level visits between our two countries has been remarkable. We have access and profile in China beyond what a country of our size would normally achieve.

There are numerous sister city relationships.

Cultural diplomacy has grown with Natural History New Zealand working with CCTV to produce five one-hour documentaries on New Zealand, which have been shown on China TV over the last month to an audience, which will reach into the hundreds of millions.

Our New Zealand Chinese community has established important business relationships between the two countries and the Kiwi Expatriates Abroad organization in China has grown rapidly and is ready to give advice to New Zealanders wanting to know more about the market.

In removing obstacles to trade, the current free trade negotiations are the centerpiece of our efforts.

Talks will enter the tenth round in January and the goal on both sides is to complete the negotiations by April 2008.

We are the first developed country to have entered into such negotiations with China.

Our level of ambition for a strong agreement started at a much higher point than China’s. However, Premier Wen Jia Bao’s comment during his April visit to New Zealand that the agreement should be comprehensive, high quality, balanced and of mutual benefit has been a useful reference point in the negotiations.

We want complete elimination of tariffs on all goods of trading interest, though for sensitive products these will likely be phased out over a number of years. We’ve made good progress overall though dairy is still an issue for China.

On services, investment and government procurement, we would prefer so called Most Favoured Nation status which allows each side to benefit from any advances made by the other side in subsequent negotiations.

However, China is reluctant to make concessions here and negotiations will likely centre on areas of key interest to both sides rather than an across the board MFN.

There are still hard yards ahead, but good will and a genuine desire on both sides for an outcome will, I believe, help us to reach an agreement.

Depending on the ambition reflected in that agreement, New Zealand exports are estimated to increase by between $260 and $400 million each year over 20 years above the level of growth which would otherwise have occurred. Tariff savings to New Zealand exporters will be over $100 million.

Just as importantly, an outcome will achieve a higher and more positive profile for New Zealand that will strengthen our trading and overall relationship with China quite significantly.

A free trade agreement will open the door more widely for New Zealand exporters.

But realizing the full potential of the agreement depends on your capability and preparedness to go through the door.

As part of Export Year 2007, a number of changes in business tax, compliance costs and regulation and assistance to business are under consideration.

We will be looking to strengthen the role of New Zealand Trade and Enterprise, especially in key Asian markets.

And our decision to quadruple the size of the New Zealand pavilion for Expo 2010 in Shanghai, the prime location we have secured in the Expo and the anticipated 14 million visitors that will go through our pavilion will create a unique marketing opportunity for us.

Success, however, depends on your focus on developing capability in China, understanding the business culture and regulatory environment, learning the language or having a reliable partner who does, and developing relationships with government agencies and with Chinese companies.

The seminar today is designed to help you with these and other things.
The opportunities are there.

The potential rewards are great.

But success and rewards are not automatic. They will reflect the quality of your product or service and how well you understand and can create a niche for yourself in the market.

Best wishes for a successful conference and for your future success in what will likely become New Zealand’s most important market in the 21st century.



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