Speech to Luncheon for Vice President Xi Jinping
The Langham Hotel, Auckland, 12.30pm

Vice President Xi Jinping, Ministers, Ambassador Zhang, Business Leaders, Distinguished Guests.

On behalf of the New Zealand Government and senior New Zealand business leaders present here today, I am delighted to welcome Vice President Xi and his distinguished senior delegation to our country. I am also delighted to welcome the large and distinguished group of high level Chinese business people who have joined us. This is indeed an honoured occasion to have such a political and business delegation in New Zealand.

It is a measure of the importance New Zealand attaches to the relationship with China that, following the customary visit of every new NZ Prime Minister to meet his or her Australian counterpart, the NZ Prime Minister, the Hon John Key, went to China at the first possible opportunity for any formal bilateral visit. China is now the centrepiece of a coordinated series of Ministerial visits. I myself have been to China this year three times already and of course further high level visits this year are planned.

The occasion is made even more special because this event marks the opening of a seminar on the New Zealand-China Free Trade Agreement. There was a similar event held in Shanghai last month where I spoke alongside a Chinese Minister.

The FTA between our two countries is a success story. We are increasingly hearing that "the 21st century belongs to China" and what could be better than New Zealand being in a trade partnership with a country that will have – and indeed is already having – a major impact on our economic wellbeing and our future prosperity.

Many of you will be familiar with the “four firsts" which the Chinese government has credited to New Zealand. In 2001 New Zealand was the first country in the world to conclude bilateral negotiations with China, paving the way for its accession into the WTO; in 2004 we were the first country to recognise China as a market economy; in 2004 we were also the first developed country to enter into FTA negotiations with China, and in 2008 we were the first developed country to conclude and sign an FTA with China. In March this year, we signed a Closer Economic Partnership agreement with Hong Kong - something I have referred to as the "fifth first" as New Zealand is the only country to have a FTA with both China and Hong Kong.

I can assure you that the NZ-China FTA is a world-class, comprehensive Agreement. It covers trade in goods, services, and investment. By 2019, tariffs will be eliminated on 96% of New Zealand's exports to China.

The FTA has already seen three rounds of tariff reductions for both countries. The impact will continue as tariffs further reduce and are eliminated. Let me take a couple of examples to bring this to life for the New Zealanders here: China's tariff on New Zealand wine, originally set at 14%, was reduced to 5.6 % this year and will be zero in 2012. The duty on our kiwifruit was originally at 20%, is now 13.3%, and will be zero in 2016. These reductions not only increase returns to NZ growers but clearly provide those sectors with a competitive edge against other exporters to China.

In this way, the FTA provides a platform for our exporters to expand their presence in the Chinese market. It gives us a decisive head start in a competitive and tough market.

The increase – I repeat the increase - in New Zealand exports to China over the past year to April 2010 was some $NZ860 million – this is not far behind New Zealand's total exports to Indonesia. In some 12 months, we have virtually added another Indonesia to New Zealand’s export drive. This is during a period when we saw declines in exports to most of our major markets.

For the first time in our history, this year China overtook the United States and Japan to become New Zealand’s second largest trading partner, behind Australia. China has also become New Zealand’s second largest export market and our second largest source of imports.

And it’s not just been about dairy exports, significant as they are. New Zealand exported over NZ$1 billion worth of dairy products to China over the last year. But exports across a wide range of products have also grown strongly – such as wood, wool, kiwifruit and wine. While commodities still dominate our exports to China, processed foods, beverages and some niche manufactured goods have also performed well.

China has thus played a major role in sheltering New Zealand from the full impact of a global recession. I believe that more and more New Zealanders understand this and very much appreciate the contribution China is making to our own economy and society. What’s more, our largest trading partner, Australia, has also done as well as it has because of China and a strong and growing Australia, while posing challenges for NZ, is good for NZ.

In that sense, NZ benefits twice from China’s economic success and growing global importance. First, we benefit directly through our rapidly growing exports to China and second, because Australia is by far our largest export market, we benefit indirectly from Australia’s similar success in participating in the Chinese growth story.

The fact that I have visited China three times this year is, Mr Vice President, a simple reflection of China’s growing importance to New Zealanders. I have visited both in my capacity as Minister of Trade and as Minister of International Climate Change Negotiations, where I was grateful to receive an invitation to a small group of Climate Change Negotiations Ministers to an important conference in Beijing. I also had the privilege of meeting Premier Wen in the course of that visit. I should also say that I returned from China convinced that China is now putting in place a comprehensive suite of policies to tackle climate change, from new energy efficiency targets province by province through to huge reafforestation programmes designed to sequester greenhouse gases.

As Trade Minister, I opened our newest trade office, in Shenzhen, in southern China. Southern China is where China’s economic transformation first began, and is the birthplace of New Zealand’s earliest Chinese settlers who arrived in the 1800s.

There are many remarkable ‘China Stories’, but the story around Shenzhen must surely be one of the most remarkable. In 1979, Shenzhen was a small and impoverished fishing village of some 20,000 people. Today it is a city well over 10 million with a per capita income of US$13,500 which has grown at an annual average rate of some 15% over the past few years.

There is now also rapid growth of central and Western China which is ensuring a continuation of the progressive eradication of poverty in the World’s largest country.

I should add that we in New Zealand also celebrate the fact that there is also clear evidence of the same process well underway in that other great emerging developing country super-power, India. Some 28% of its population is still classified as living in extreme poverty, but crucially that percentage declines by about 1% every year.

Although we are a very small country, New Zealand companies have recognised this trend and are establishing businesses outside the Eastern Seaboard of China. I led a small team to Chengdu to support some New Zealand companies starting to establish themselves in this key city of West China.

My most recent visit was to lead a trade mission of senior business people seeking new markets in the food and beverage sector. I have no doubt that this will in due course lead to a phenomenal growth in our exports of these products. We are barely scratching the surface of the opportunities that exist here.

The FTA is not just about tariff cuts and export growth. It has put in place a new bilateral trade and economic framework for New Zealand and China. The structures put in place to manage the FTA also make it easier for our officials to discuss matters and resolve problems. It is through one such mechanism that New Zealand, for instance, has been able to work with China in the area of food safety.

I don't want to oversimplify the matter - an FTA is not a ‘silver bullet’ for all trading problems. Issues will still arise, but what it does provide us is access to the Chinese bureaucracy and an understanding of each other that we did not have before.

Most importantly, the FTA is a platform not only for our trade and economic relationship but for our broader bilateral relationship. It’s a relationship that has been described by you yourself, Mr Vice President, as a model relationship. We look forward to the closer ties that your visit will bring about, as well as that by Prime Minister John Key next month.

It gives me great pleasure to now invite to the podium our distinguished guest; ladies and gentlemen, the Vice President of the People’s Republic of China, Mr Xi Jinping.

ENDS

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