Negotiators will square off with Chinese counterparts in Beijing on Tuesday, marking the official start to the “upgrade” of the historic New Zealand-China historic free trade agreement.
A group of officials led by Brad Burgess, the deputy negotiator in the TPP process, has travelled to the Chinese capital to hold initial meetings and lay out a timetable for future talks, which are expected to last a year.
Political will for a new deal appears to be strong, since the negotiations were first announced in November.
During Chinese premier Li Keqiang’s visit to New Zealand in March, he and Prime Minister Bill English announced the timing of talks, saying a renegotiation was essential to raise two-way trade between the two countries from the current $23 billion to $30b by 2020, a goal set in 2014.
READ MORE: Chinese Premier Li Keqiang arrives in New Zealand for visit and trade talks
But observers warn New Zealand takes a problem into the talks: the number of areas where it is seeking to make gains.
Stephen Jacobi, executive director of the New Zealand China Council, said while the main sticking point for New Zealand would be the hope to bring forward the phasing out of restrictions on tariff-free dairy trade, industries from avocados and apricots to forestry and paper were wanting help to ease the path for exports into China.
“The problem we have in the negotiations, I think, is our list is possible quite a bit longer than the Chinese list,” Jacobi said.
McClay said this week’s talks would resemble a scoping exercise.
“Officials will begin talking about the priorities of each side, and sort of scheduling when they will deal with them and over what period of time,” McClay said.
Although a wide range of areas will be discussed, including a framework for dealing with ongoing non-tariff barriers as they arise, McClay said the issue of New Zealand’s dairy safeguards will be raised.
Agreed in the 2008 FTA, New Zealand’s dairy industry faces tariffs once a volume threshold is met.
However such has been the growth of trade, the annual export threshold is typically met midway through January.
“Trade in a number of areas has grown more quickly than anyone predicted,” McClay said.
The 2008 agreement included an end date for dairy safeguards, expected to kick in in about four years. McClay said while this end date was “locked in” New Zealand has already indicated to the Chinese that it wanted subject to be part of the renegotiations.
Jacobi said New Zealand’s dairy industry wanted the safeguards removed sooner, possibly in a phased manner, however the Chinese may not find it easy to agree, given its attempts to reform its own dairy industry.
What China wanted was less clear, Jacobi said, with New Zealand already agreeing to be part of the belt and road initiative. It may push for an increase in the investment threshold at which Overseas Investment Office (OIO) clearance is needed.
China’s most favoured nation status – agreed in the 2008 FTA – meant it was set to get an uplift in the threshold when New Zealand implemented the trans Pacific partnership (TPP). Jacobi said Beijing may push for the issue to form part of the renegotiation, now that it was “dubious” that the TPP would be implemented.
Chinese food exporters may also raise issues around New Zealand’s import regulations.
“As difficult as our exporters find it to work through the Chinese system, they also find our system difficult to deal with,” Jacobi said.