China’s entry to the World Trade Organisation - which could take place as soon as the end of this year - would deliver tangible benefits to New Zealand exporters, Trade Negotiations Minister Jim Sutton said today.

Mr Sutton told members of the New Zealand-China Trade Association at lunchtime that the results of a study into the benefits to New Zealand from China?s commitment to reduce tariffs once it enters the WTO showed big potential gains.

?To measure the impact of China?s accession on New Zealand, we?ve started by looking at New Zealand?s current trade profile. Chinese tariff cuts on these products, once fully phased in over five years, will save New Zealand exporters of non-wool products $ 33 million per year.?

The biggest gains to New Zealand, based on current trade, would be in dairy ($21.8 million), timber (paper, wood products $2.5 million), fish ($2.1 million) and methanol ($2.1 million).

The range of tariff commitments negotiated by China?s trading partners, from which New Zealand will benefit, mean that exporters stand to gain in sectors as diverse as aluminium products, rock lobster, plastics, antibiotics, medicaments and perfumes.

This assessment does not include benefits for the wool industry, which depend in part on ongoing market access negotiations. Nor does it include the effect of tariff reductions which allow new trade to commence.

?China?s entry to the WTO will mean more than just tariff cuts?, Mr Sutton said.

?It will lock in China?s transition to a rules-based economy, give New Zealand the ability to negotiate market access on the basis of rules rather than influence, and strengthen the World Trade Organisation itself.

And as a small trading nation, that is in all our interests."

ENDS

Speech Notes 25 August 2000

China Trade Association
12 noon, Stamford Plaza Hotel, Auckland

Ladies and Gentlemen: It?s a pleasure for me to be here with you today ? and to welcome back to New Zealand my good friend and colleague Phil Goff.

My own visit to China in March confirmed for me both the exciting potential that exists for New Zealand in the Chinese market and, at the same time, some of the challenges that are faced by New Zealand exporters and investors there.

I have no doubt that China is set to become, in time, the world's leading scientific and industrial nation.

I am also convinced that, because our economies are essentially complementary, New Zealand has a role to play in China's future as a supplier of high quality goods, services and technology.

And so I welcome the diversity of business interested reflected in this audience today.

As recently as five years ago, New Zealand was still shaking off an image as a ?single commodity exporter? to China.

The trade relationship has diversified rapidly since.

Today wool comprises only about 18 percent of New Zealand exports to China and milkpowder ? our second largest export - only 13 percent.

It's true that wool has been affected by China's highly restrictive approach to quota management ? something I have experienced first hand in some tough negotiations with my Chinese counterpart.

More positively New Zealand is now the leading source of imported dairy products in China.

The good news is that exports of wool, dairy, plus meat, forestry, methanol, horticulture and seafood continue to provide a strong primary sector base to our export mix with China.

And the even better news is that from this base exports are expanding to include niche high tech exports in electronics, communications and telecoms.

The services sector is developing particularly rapidly.

The number of Chinese students in New Zealand has increased six-fold since 1996 reaching in excess of 4,000 students this year.

That amounts to considerable foreign exchange earnings as each student is estimated to spend not less than US$10,000 per year. That is good news for the regions as well as the main centres who receive these students.

Last month the government hosted a visiting Chinese Vice Minister of Education, which reinforced to us the importance China places on high quality education and care for their students.

Last year tourist numbers exceeded 20 000 for the first time, with 27 500 visitors in the year to April 2000. My government will be looking to expand the existing ?Approved Destination Status? arrangements beyond Beijing, Shanghai and Guangzhou [Gwarng-joe] to ensure sustained growth in this sector.

When I was in Beijing earlier this year I was happy to lend my support to the efforts of Tower Insurance to establish a representative office. I was even more pleased when approval was given by the Chinese authorities, opening the way for Tower to begin to plan a strategy to access the huge Chinese market for insurance services.

I see these services sectors as key future growth areas in our trade relationship, supplementing steady expansion in our traditional primary sector and newer technology exports.

But this will depend on more than just the Government?s ability to open up new markets and keep them open. New Zealand service providers have the key role in ensuring the capacity, quality and coordination required to exploit these opportunities.

My visit to China also made me aware of the breadth of our economic interests in China.

This includes not only trade in goods and services but also a number of joint ventures and investments by New Zealand companies in meat processing, CNG technology, brewing and educational institutions to name just a few.

We are often told that China is not one but many different markets. For most New Zealand companies the focus is on the developed coastal cities. Yet further inland too a diverse spread of New Zealand companies are active - in agritech, animal husbandry, agricultural and environmental consultancy, food processing, forestry, energy and technology.

Several factors have driven the diversification of New Zealand-China trade - including increased awareness of the market among New Zealand companies, facilitated for example by the excellent series of China business seminars organised by Asia 2000 earlier this month.

But a key factor has been the commitment of the Chinese government to gradual trade liberalisation and the development of a more rules-based economy.

This commitment is reflected in China?s 14-year quest to join the World Trade Organisation. We expect that China should be in a position to join the WTO by the end of the year - and we expect that there will be some hard negotiation for New Zealand in that time as we work with China on its commitments on tariff quota administration for wool.

What will China?s accession mean for New Zealand?s economic interests in China?

To answer this question, we?ve started by looking at New Zealand?s current trade profile. Chinese tariff cuts on these products, once fully phased in over five years, will save New Zealand exporters of non-wool products $ 33 million per year.

The biggest gains to New Zealand, based on current trade, would be in dairy ($21.8 million), timber (paper, wood products $2.5 million), fish ($2.1 million) and methanol ($2.1 million).

The breadth of the tariff commitments negotiated by China?s other trading partners, from which New Zealand will benefit, mean that exporters stand to gain in sectors as diverse as aluminium products, rock lobster, plastics, antibiotics, medicaments and perfumes.

Taking a conservative approach, we have not included benefits for the wool industry which are less clear because of our ongoing market access negotiations. Nor have we included the effect of tariff reductions which allow new trade to commence, or allow existing trade through informal channels to be normalised.

More fundamentally, accession will impose the full range of WTO disciplines on China. This will:

· restrain China from erecting non-tariff barriers and technical barriers to trade · make its sanitary and phytosanitary regime more science-based · open up services sectors including insurance and telecommunications · and open up retail and distribution networks to foreign investors. And it will maintain the pace of change in China?s economy. Change to which New Zealand will need to adapt, as traditional state-owned heavy industry retreats, new sectors - telecommunications, financial services - open up, and China?s urban ?middle class? expands.

WTO membership for China will not be a panacea - New Zealand continues to face market access problems with existing WTO Members, and I expect that I and my officials will have to continue pressing New Zealand?s case with our Chinese counterparts for some years yet.

But accession will lock in China?s reforms - the continuing opening up of the economy, and the slow movement away from a system based on personal connections to a modern rules-based economy. And that can only help New Zealand.

I welcome the immediate positive impact of tariff reductions. But it is the long-term changes in China?s economy that will ultimately do more to shape New Zealand?s future economic interests in China.

For a small player like New Zealand, the ability to negotiate market access on the basis of rules rather than influence is critical.

And as New Zealand trade with China increasingly takes place on a normal, regular basis, the New Zealand government will be well placed to intervene over trade barriers.

The World Trade Organisation itself will be strengthened by China?s membership. And on some issues, if China continues to maintain some if its longstanding commitments - for example, the renunciation of export subsidies in agriculture - New Zealand potentially stands to gain a powerful ally.

I do not believe that China?s membership of the WTO will change the fundamentals of New Zealand?s economic interests in China. Nor will it change my job.

But it will lock in China?s transition to a rules-based economy, put the New Zealand government on an equal footing with our more powerful competitors in resolving access issues, and strengthen the World Trade Organisation itself.

And that is in all our interests.

Thank you for your attention and I look forward to answering any questions you may have.

Office of Hon Jim Sutton

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