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April 7, 2008
Model for China trade .. or not
A small item in today's Wall Street Journal caught my eye -- China, New Zealand Sign Trade Pact:
China and New Zealand signed a sweeping free trade agreement Monday, the rising economic giant's first such pact with a developed country.
. . .
When the deal goes into effect Oct. 1, New Zealand exports to China that now face tariffs of 5% or less will be cut to zero. There will be a staggered time frame for cuts on New Zealand exports that face larger tariffs, with 31% of New Zealand's exports to China tariff-free by 2013.
Tariffs on dairy products, a primary New Zealand export, will be phased out over a longer time frame, taking until 2019 when almost all of the country's current exports to China will be tariff-free. "The FTA provides for elimination over time of tariffs on 96% of New Zealand's current exports to China," a New Zealand government statement said.
Beyond trade in goods, the agreement covers the services sector, from insurance and banking to education and labor supply.
The agreement also calls for up to 1,800 Chinese to enter New Zealand each year to work in areas such as traditional Chinese medicine, language teaching and food service.
At first blush, this looks like a major step forward -- especially if it contains new language on services.
But, this may be less of a breakthrough than it looks like. As the Financial Times explains:
Beijing may have used New Zealand as a test case because it has a relatively straightforward trading relationship with the country, but that may also limit it as a model for other deals. “We didn’t have to deal with wheat, rice or motor vehicles,” Mr Goff [NZ Trade Minister] said.
Kevin Rudd, Australia’s prime minister, is due in Beijing later in the week to promote his country’s trade links with China. Although he is expected to emphasise Australia’s interest in securing a deal with China after 10 rounds of talks, the negotiations have lost momentum over the past year.
China has been unwilling to make concrete offers on sectors Australia is most focused on – agriculture and services – partly for fear that any such concessions would flow on to larger countries such as the US and in Europe.
The New Zealand-China agreement probably also didn't have to deal with the single most important factor in the US-China economic relationship: the issue of currency manipulation.
Still, what happens during PM Rudd's visit could give us a better indication of future directions of where the Chinese government sees itself going on trade policy.
One other note on China. There was this item also in the Wall Street Journal - Chinese Firms Face the Music On Downloads:
A Chinese court has agreed to consider copyright-infringement cases against two China-based Internet heavyweights that offer illicit music downloading, potentially opening Chinese companies to hefty damage claims they have previously dodged.
As China evolves its own version of the I-Cubed Economy, issues of intellectual property rights will be a key factor. Many feel that China's growing IP-related industries will force the government to eventually switch from an exploiting IPR to protecting IPR stance. This switch may already be happening -- which is a sign of the growing strengthen of the home-grown technology sector in China. Another thing to keep an eye on.
Posted by Ken Jarboe at April 7, 2008 9:12 AM
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