The New Zealand – China FTA

Background

A free trade agreement is a trade treaty between two or more countries. A free trade agreement is usually designed to reduce or completely remove tariffs between the participating nations.

The New Zealand – China Free Trade Agreement (theFTA)is a bilateral free trade agreement signed by the People’s Republic of China and New Zealand in April 2008. It is New Zealand’s largest trade deal since the 1983 Closer Economic Relations agreement with Australia. The FTA will be phased in gradually over 12 years, fully coming into force in 2019.

On 19 November 2004, Helen Clark, the Prime Minister of New Zealand and President of the People’s Republic of China, Hu Jintao, announced the commencement of negotiations towards an FTA at the APEC Leaders meeting in Santiago, Chile. The FTA was signed on the 7th of April 2008 in Beijing by New Zealand’s Minister of Trade, Phil Goff, and the Chinese Minister of Commerce, Chen Deming, at the Great Hall of the People in Beijing.

The FTA

The FTA comprises 18 Chapters, 214 Articles, 14 Annexes and 2 Implementing Arrangements, aims to remove barriers to trade between two nations. Key provisions of the FTA include:

Trade in Goods:

Tariffs on exports between the two countries will be reduced gradually. Under the FTA, tariffs on 63.3% of China exports to New Zealand are to be eliminated on 1 October 2008 and all China exports to New Zealand would be tariff free by 1 January 2016. Tariffs on 24.3% of New Zealand exports to China are to be removed from the date of the FTA’s come into force and 97.2% of New Zealand exports to China would be tariff free by 2019.

Trade in Services:

One of the objectives of the FTA is to facilitate expansion of trade in services between the two nations on a mutually advantageous basis, under conditions of transparency and progressive liberalization.
Barriers to trade in services, including rules and requirements, applying only to foreign companies, designed to give Chinese companies a competitive advantage will be reduced. Similarly, the requirement for foreign companies to employ a certain percentage of locals or to enter into a joint venture with a local company will be relaxed under the FTA. This will help both China and New Zealand companies conduct business in each other countries to enjoy most-favored-nation treatment relating to services. These services fall into the areas such as tourism, education, construction and transport.

Temporary entry and employment:

The FTA’s aim is to make it easier for New Zealand and Chinese nationals to enter each other’s country to engage in short term stay for purpose of supply of services. It establishes transparent criteria and streamlined procedures for temporary entry and temporary employment entry for Chinese nationals.

The FTA includes a commitment from the New Zealand government for a total of 800 skilled Chinese workers to enter New Zealand for temporary employment. These include employment as traditional Chinese medicine practitioners, Chinese chefs, Mandarin teaching aides, martial arts coaches and Chinese tour guides.
Further, a maximum of 1000 skilled Chinese workers at any one time shall be granted employment visas for up to three years, in certain specified occupations where New Zealand has a skills shortage.

Investment

In the area of investment, the FTA provides enhanced protection for investments and provisions to ensure that New Zealand investors in China remain competitive with investors from other countries. Both countries have also agreed to extend to each other most-favored-nation treatment for investment purposes. Systematic arrangements relating to customs procedures, sanitary and phytosanitary procedures, technical barriers to trade, and intellectual property would be established to improve the business environment of both countries and to enhance the existing cooperative relationship.

The FTA provides a mechanism for the compulsory settlement of disputes between foreign investors and the country in which the investment is made. If a dispute cannot be settled within six months through consultation and negotiation, and unless the parties to the dispute agree otherwise, the investor is able to submit the issue to conciliation or arbitration by the International Centre for the Settlement of Investment Disputes (ICSID) or arbitration under the rules of the United Nations Commission on International Trade Law (UNCITRAL).

Influence

New Zealand and China exporters stand to make significant gains from preferential access to each others’ markets under the FTA. Over the next 20 years, the FTA is expected to raise New Zealand exports to China by 20-39 percent and be worth an extra $260 to 400 million a year to New Zealand.

With the rapid development of business relationships between the two nations under the FTA, more New Zealand companies are exploring business opportunities in China. New Zealand Central (NZC), which is designed to build connections, brand visibility and capability to grow businesses in China, has been set up. NZC, located in central Shanghai, offers New Zealand companies an ideal short term location for all New Zealand business needs in China.

Please note that the above information is intended to provide general information only. The contents contained in this article do not constitute legal advice and should not be relied on as such. For legal advice please contact our professional team at Forest Harrison.