Thursday 18 August 2016 02:38 PM
China's One Belt One Road may offer best avenue for NZ trade talks, academic says
By Tina Morrison
Aug. 18 (BusinessDesk) - New Zealand is unlikely to gain traction in its bid to upgrade its bilateral free-trade
agreement with China while Asia’s largest economy is focused on developing its broader One Belt One Road initiative, a
leading academic says.
Prime Minister John Key, Trade Minister Todd McClay and Primary Industries Minister Nathan Guy visited China in April to
push for a renegotiation of the country’s 2008 FTA after long-time trade rival Australia was seen as gaining an edge
with our largest trading partner from its recently inked agreement.
However New Zealand is unlikely to make much progress in the talks while China is focused on its OBOR strategy to
develop economic cooperation with countries along the historic land Silk Road from eastern China to western Europe, and
the maritime Silk Road via the sea, according to Professor Siah Hwee Ang, Victoria University of Wellington’s Bank of
New Zealand chair in Business in Asia.
“What New Zealand wants is a comprehensive free-trade agreement but what China wants is more like a relationship that
allows infrastructure to flourish,” he said. “It’s not their priority basically to spend more time just trying to
negotiate a comprehensive free-trade agreement with a very small trading partner.”
The Chinese government turned its focus to OBOR after the policy was announced by President Xi Jinping in 2013. That’s
moved China’s focus towards infrastructure development as a way to bolster trade. Asia alone is estimated to need US$8.2
trillion of infrastructure investment over the decade to 2020, Professor Ang says.
“There is limited proof to prove that free-trade agreements always increase trade,” he says. “If China continues signing
free-trade agreements and yet their imports and exports are down, that doesn’t make any sense. That only makes sense
because something else is actually not right, and that is not free-trade agreements.”
He says the policy is much larger than a free-trade agreement. While the much-touted but now stalled Trans-Pacific
Partnership involved 12 countries, 38 percent of global GDP, 40 percent of global trade and 11 percent of the world’s
population, OBOR includes at least 65 countries, 38 percent of global GDP and 64 percent of the world’s population.
“The spread of love is actually much bigger in OBOR’s case,” he said. Major construction projects to build ports in
Pakistan, Sri Lanka, Kazakhstan, Cambodia and Indonesia are already underway, as well as railway constructions linking
China to Laos, Thailand, Myanmar and Tajikistan.
Professor Ang says New Zealand should actively seek to join OBOR by gaining recognition for projects involving Chinese
infrastructure investment, and seeking to become a trade hub for the Pacific route of OBOR.
The Ministry of Foreign Affairs and Trade says China’s belt and road initiative is a significant, ambitious project that
will have major economic, commercial and financial implications for China and the countries within its scope.
“A more open and efficient international trading environment is certainly in New Zealand’s interests,” an MFAT spokesman
said.
Professor Ang says New Zealand companies need to be aware of the changes afoot which could have a ripple effect on our
trade flows, noting eight of New Zealand’s top 20 export markets are located along the OBOR and 10 of our top 20 export
markets have signed up for OBOR projects.
Improved infrastructure is likely to mean goods will be delivered to market quicker and cheaper, which could improve New
Zealand’s geographic remoteness, however it could also result in some trade displacement as competition increases with
countries along the OBOR route.
New Zealand will be best placed to progress its trade ambitions if it aligns itself with China’s aims, he says, noting
that Australia gained its trade agreement at about the same time it signed up to the Asian Infrastructure Investment
Bank, of which New Zealand is also a member.
“There’s a lot of ‘I give you something, you give me something,” he notes. “If we want to have what we want, we also
need to make sure we know what they want.”
For China, the approach is more along eastern lines of collaboration and networking to achieve mutual benefits over
time, compared with a more western approach of explicit formal agreements and contracts, he said.
(BusinessDesk)
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