Former Trade Negotiator Warns of Heavy Trade Reliance on China

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Charles Finny, a New Zealand trade & Enterprise (NZTE) board member with more than 22 years experience in diplomatic roles and the top trade official for the NZ-China trade agreement, proposed new trade diversification policies to the Epidemic Response Committee on Thursday.
Charles Finny, a New Zealand trade & Enterprise (NZTE) board member with more than 22 years experience in diplomatic roles and the top trade official for the NZ-China trade agreement, proposed new trade diversification policies to the Epidemic Response Committee on Thursday.

A former top trade official Charles Finny has warned that New Zealand could emerge from the COVID-19 lockdown more dependent on the China market and agriculture sector than before the pandemic. 

Charles Finny, a New Zealand trade & Enterprise (NZTE) board member with more than 22 years experience in diplomatic roles and the top trade official for the NZ-China trade agreement, proposed new trade diversification policies to the Epidemic Response Committee on Thursday. 

While China is looking to be one of the only countries opening up its economy and recovering its trade industry, Western nations are still experiencing the worst of the pandemic.

This means New Zealand could become overly dependent on China, Finny warns:

“Obviously if China’s buying and no one else is, we sell as much to China as we can,” said Finny. “But as the rest of the world starts recovering, we need to be looking into ensuring we aren’t just selling into one market and just relying on one sector.”

Finny has urged New Zealand to diversify our trade partners, as the Chinese government has “shown a propensity to use trade dependency as a political lever” in recent years.

“There have been some instances in the last few years where China has not liked what certain jurisdictions might do. We’ve got a case with Canada right now. We’ve got evidence that when things went wrong at a political level with the republic of Korea, trade was used as a mechanism to put pressure on the Korean government,” said Finny.

Finny also cited the Huawei incident last year when Chinese authorities halted trade discussions with New Zealand as retaliation to the banning of Huawei from participating in the national 5G broadband infrastructure upgrade.

“If you’re selling more than 25% of your exports to that market I’d be cautious and you go in knowing the risk you’re taking,” Finny said.

NZs Growing Dependence on the China Market

China has been New Zealand’s top trading partner since 2017 and our second-largest trading partner since 2013. 

In the year ended December 2019, China accounted for 23 percent of New Zealand’s total goods and services exports at $20.1 billion worth. 

Our top four export products to China were dairy, wood, meat products, and travel services.

Finny stated that last year China took a third of our dairy exports, 41.9% of our meat, 58.3 of our forestry products, 37.5% of our seafood, 46.5% of our wool, 28.5% of our international education earnings, and 13.5% of our tourist earnings.

Pandemic’s Implications on Trade

While trade remains open with Australia —our second largest trade partner— as well as with Korea and Taiwan, Finny warned that our exports are seeing congestions in Europe, the United Kingdom, the United States, and Japan. 

“Services exports make up 30 percent of our total exports with $26 billion a year. These are being decimated. Our $11.6 billion international tourism income has flat-lined. Our $4.6 billion international education value looks as though it might half,” said Finny.

Finny has proposed a ten-point plan for when the country comes out of Level 4 lockdown —a decision which will be made on Monday.

He urged the government to restart the export of the manufacturing industry, including: processed wood, machinery, medical goods, wood products, iron, steel, plastics, textiles, paper and vehicle parts —worth around $9 billion a year to the economy. 

Finny said that keeping these sectors closed under Level 4 lockdown will cause New Zealand to “lose international contracts” with “international shipping lines reducing frequency of their services to New Zealand.” 

“We need to restart our $5 billion log trade. We need to be restarting our $350 million coal export business and our $800 million gold export business as quickly as possible,” said Finny.

Finny said New Zealand should focus on expanding exports to CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) and ASEAN (Association of Southeast Asian Nations) economies as well as securing trade agreements with the UK, Columbia, Russia, Turkey, EU, and countries in Africa. 

As for tourism, Finny said New Zealand needs to work on reopening quarantine-free travel with countries such as Australia, Singapore and Taiwan —countries we have confidence relatively quickly to be reopening.

“If we achieve that, we’d be looking at a $65 million person market for our tourists, not just a $5 million market for NZ domestic tourists,” Finny said. 

He proposed to have the New Zealand Trade and Enterprise (NZTE) and the Ministry of Foreign Affairs and Trade (MFAT) lead the way for new policies to diversify our trade:

“We need a very active market diversification policy led by NZTE and MFAT.” 

Finny also congratulated Trade and Export Minister David Parker on launching a new trade initiative with Singapore in promoting the trade of essential goods such as medical supplies and food.

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