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New Zealand: FTA with China an insurance policy
Updated: 2004-04-21 14:00

A free trade agreement (FTA) with China is an insurance policy against the collapse of World Trade Organization (WTO) talks, New Zealand Finance Minister Michael Cullen said Wednesday.

The New Zealand government last week announced it would open negotiations on a FTA with China worth potentially "hundreds of millions" to the economy.

Cullen told a business breakfast in Hamilton that there were compelling reasons to believe the deal would be clinched "relatively quickly".

New Zealand's small size and its relatively few areas where tariffs are imposed offer a chance for China to have an FTA with an OECD economy. New Zealand is a member of the Organization for Economic Cooperation and Development (OECD).

It would involve less complex negotiations than China would face with larger developed economy trading partners, he said.

"The agreement is also strategically important to New Zealand, in that it would provide us with some insurance against the possibility of a serious collapse in the WTO process," he said.

"If the current WTO round fails to deliver, one scenario would be the creation of free trade blocks in the Americas, Europe and Asia.

"An established FTA with China would ensure we are not locked out, if this eventuates," the minister said.

Trade Negotiations Minister Jim Sutton last week said an FTA with China could be completed as early as next year.

New Zealand was the first nation to back China joining the WTO.

It is also the first developed country China has agreed to negotiate an FTA with.

Any free trade deal with the world's sixth biggest economy and the fastest growing major economy would most benefit exporters of wool, dairy goods, wood and wood products, plus hides and skins, Cullen said.

China last year replaced Britain as the fourth largest export market for New Zealand, after Australia, the United States and Japan.

New Zealand exports to China have doubled in the past six years to 1.38 billion NZ dollars (US$870 million) in 2001, not counting over one billion NZ dollars (US$630 million) of services.

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