CHINA FTA UPGRADE
The FTA upgrade is a really positive symbol of the strategic importance of trade between China and New Zealand, and that both countries highly value the trade relationship.
While on the surface it may appear there has been little change to tariff rates or quota-free allowances, what it does provide is an avenue to facilitate the movement of New Zealand goods into China, and access to high-level officials should challenges occur.
Part of the agreement is focused on reducing the time it takes goods to pass through to customs –highly important when trying to get fresh goods through highly congested ports.
Provision has been made for these types of goods to be cleared through customs within six hours. Forestry is one of the industries set to benefit from the upgrade of the trade agreement.
Under the new agreement, 99% of wood products will eventually be able to enter China without incurring a tariff; however, there
is a 10 year implementation period over which tariffs will gradually be removed.
The dairy industry is already nearing the end of scheduled time period when the safeguards are due to be removed on New Zealand product entering China.
At present tariff-free access applies to only approximately 22% of the milk powder exported to China, with the remainder incurring the 10% standard tariff that most other nations pay.
Similarly, New Zealand exports nearly 100,000t of butter and anhydrous milkfat (AMF) to China, but less than 20% of this enters China at the reduced tariff rate.
In 2024 all New Zealand dairy products will be tariff free. It was hoped this date could have been brought forward
in the new agreement but there was also a risk that the Chinese would extend it further.
To mitigate this risk this issue wasn’t brought to the table, which effectively locks in the 2024 date to fully eliminate tariffs on dairy products.
The UK officially left the EU just over a year ago, but it wasn’t until late last year that details of the new relationship were agreed. Under the new rules tariffs are basically identical across both the UK and the EU.
This – in theory – means goods should flow between the two regions as they have in the past. This means there has not been a significant disruption to the flow of sheep meat from the UK to EU, nor beef and dairy products from the EU to the UK.
The extended time it took to negotiate the deal and the uncertainty this caused has seen some European countries start to
diversify into other markets. For example, Ireland has increased its exports of dairy products to China.
One issue yet to be resolved is the meat quota. It has been proposed that the quota available to New Zealand exporters be split between the UK and the EU.
Despite the quota being well under-used in recent years exporters are reluctant to accept this proposal, as it reduces the flexibility they have in accessing each of these markets (high tariffs make it extremely prohibitive to send meat (nto the EU/UK outside of the quota).
Negotiations are continuing to resolve this issue.