insight

NZ-China Free Trade Agreement Upgrade

29 January 2021

The Free Trade Agreement Upgrade (FTA Upgrade) signed with China earlier this week (26 January 2021) offers some significant improvements on the original FTA, entered into 12 years ago.

Improved goods and services market access for New Zealand

The FTA Upgrade delivers improved access for New Zealand industries, including the wood and dairy sectors:

  • tariff-free entry for about 99% of New Zealand’s nearly NZ$3b wood and paper trade to China, and phased tariff elimination on additional wood and paper products worth NZ$35m, and
  • all New Zealand dairy exports to China to be tariff-free by 2024.

It also offers improved market access for New Zealand businesses wanting to provide services in China, including those related to the environment, airport operations, audio visual, real estate, advertising, and education.

Reductions in other barriers

Simplified documentation requirements (such as an option for approved exporters to self-declare the origin of their goods) and new dedicated contacts for New Zealand businesses at key ports will make exporting to China easier.

There is now an expectation that New Zealand’s perishable goods (like seafood) at the Chinese border will be released within six hours.

New areas of cooperation

Business practices have changed significantly since the signing of the New Zealand and China FTA in 2008. To reflect these changes and to further facilitate trade, new chapters have been added on competition policy, e-commerce, government procurement and environment and trade.

The Environment and Trade Chapter includes commitments to ensure that trade and environment policies are mutually supportive, environmental measures are not weakened to promote trade and investment, and that environmental standards are not used for trade protectionist purposes.

Our comment

The New Zealand-China FTA has served New Zealand well. China is now New Zealand’s largest trading partner with two-way trade (exports and imports of goods and services) between the two countries quadrupling over the life of the agreement from NZ$8b to over NZ$32b.  

With nearly 35% of the Chinese population (around 480 million consumers) expected to be middle-income or high-income by 2030, this FTA Upgrade should underpin significant demand for New Zealand exports in years to come. It will also play a key role in New Zealand’s Trade Recovery Strategy by helping New Zealand seize new opportunities for exports and investment in China.

Next steps

Before the FTA Upgrade comes into force in New Zealand it needs to be approved by Parliament. Given the benefits of the deal to New Zealand, we would expect Parliament to move quickly.

Our thanks to Danae Wheeler for writing this Brief Counsel.