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New Zealand Dairy Industry Backs Plan To Upgrade NZ-China Free Trade Agreement

New Zealand Prime Minister John Key on Monday announced the launch of negotiations to upgrade the New Zealand-China Free Trade Agreement (FTA), an announcement that drew support from the New Zealand dairy industry.

The announcement followed a meeting Monday morning with New Zealand Trade Minister Todd McClay and Chinese Commerce Minister Gao Hucheng at the APEC Summit in Lima, Peru.

The negotiations will look to improve or enhance the broad range of areas already covered by the FTA.

This gives either party the ability to raise issues of importance to them, and includes technical barriers to trade, customs procedures, cooperation and trade facilitation, rules of origin, services, and environmental cooperation.

A first round of negotiations will be held in the first half of 2017.

Dairy Companies Association of New Zealand (DCANZ) welcomed the announcement, noting that the New Zealand-China FTA has supported the development of dairy trade and dairy-related investment between New Zealand and China over the last eight years.

“DCANZ’s priority is for more comprehensive coverage of trade during the period of transition to full tariff elimination for dairy products in 2024, in recognition of strong Chinese import demand,” said Malcolm Bailey, DCANZ chairman.

The FTA features a complete elimination of all import tariffs on all dairy products in 2024. However, DCANZ said, current transition arrangements mean less than a quarter of the dairy products that China is importing from New Zealand are receiving tariff reductions.

DCANZ said the rapid expansion of Chinese consumer demand for dairy products was not anticipated when the agreement was originally negotiated.

“Extending the coverage of tariff preferences will reduce tariff-related costs for Chinese consumers. It will also ensure that New Zealand exporters do not end up at a tariff disadvantage to Australian exporters as we transition towards tariff elimination,” Bailey said.

The Australia-China FTA does not feature the same quantitative limits on tariff preferences for butter and skim milk powder, DCANZ noted.

“The upgrade of the FTA provides an opportunity to strengthen the already strong dairy relationship between New Zealand and China,” commented John Wilson, Fonterra’s chairman. “We are committed to continuing to build our business in China and the FTA will remain the key platform for that growth.”
Fonterra has developed an integrated business strategy in China that encompasses farms, ingredient products, foodservice and consumer brands including Anchor, Anlene and Anmum.

China is New Zealand’s largest dairy export market with NZ$2.7 billion worth of trade in 2015. China is New Zealand’s leading export market for whole milk powder, skim milk and buttermilk powder, and butter, anhydrous milkfat and cream products.

“It has been eight years since our FTA with China came into force and it has exceeded all expectations. It has an enviable record and showcases to the world the importance of trade liberalization,” Key said.

“The upgrade will be an opportunity to deepen and broaden our comprehensive strategic partnership,” Key continued. “It will ensure that our FTA continues to drive our relationship forward and takes into account the FTAs that China has negotiated with other trading partners since 2008.”

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