Benefits and Drawbacks of NZ-China Free Trade Agreements

The assignment discusses the benefits and drawbacks of Free Trade Agreements (FTAs) between New Zealand and China. It highlights the elimination of tariffs, increased duty savings, and facilitated trade as key advantages. However, it also notes that China emphasized on maintaining WTO tariff rate quotas, restricting access to new markets, and imposing extra duties if Chinese industry is threatened, which are some drawbacks.

Running head: International Business 1
International Business
ESSAY 2

International Business 2
Introduction
The Free Trade Agreements is basically a system under which there is free flow of the labours,
capital and goods from one nation to another without any kind of barricade that can hinder and
restrain trading process between two different countries. To have effective exports to China, the
Government of New Zealand has pursued and negotiated “Free Trade Agreements” with Asian
countries and it has offered several benefits to the country while exporting its products to China
(Kelsey, 2015). The paper will present several benefits as well as drawbacks of these “Free
Trade Agreements” between China and New Zealand.
Benefits and drawbacks of the free trade agreements between New Zealand and China
China is one of the largest nation destinations for the exports of New Zealand and so there were
imposed huge duty payments on yearly basis. Since the time FTA i.e. Free Trade Agreement
came into force, there was elimination of the tariffs which were imposed on the exports to China
from a huge percentage and with the complete implementation of such agreements there will be
realized upsurge and high amount of duty saving on the trade practices (Bano, 2014). The FTA
made it obligatory that all the products trading must met the relevant ROO i.e. Rules of Origin
criteria for qualifying for the favoured tariff treatment. This helps in prevention of the goods
from various other sources from acquiring the benefits of the FTA by participating through the
back door (Lookafterme, 2015). The ROO helps in facilitating trade and minimizing the cost of
compliance for the exporters. It has several benefits such as enabling the manufactures to use
materials in the international supply chain as well as can have modifications in the process of
manufacturing. With the FTA, New Zealand access the competence to undertake the remedy
actions against any kind of unfair trade practices while trading with China. It is consistent with
the obligations and rights of WTO so that no unfair practices can take place against the producers
of New Zealand (Petri, Plummer and Zhai, 2014). The other benefits of the Free Trade
Agreements comprises of competence to take the international safeguard action, offers a
framework for increased level of cooperation on the purpose of phytosanitary and sanitary
measures, improves transparency, helps in bringing certainty and predictability in the bilateral
investment and trade associations and facilitates expansion of trade in goods and services among
China and New Zealand (Mfat, 2016).

International Business 3
Along with numerous benefits of Free Trade Agreement, there are some of the drawbacks also
which are associated with the same for trade between China and New Zealand. The biggest
drawback or disadvantage is that China emphasized on maintaining the WTO tariff rate quota
which will be applying on few products only and will not be providing access to any other
market other than that which is mentioned under FTA and this restricts the exporters of New
Zealand to have effective access to new markets (Aggarwal and Urata, 2013). There is also a
bilateral transitional safeguard mechanism under the FTA which enables China to imposes heavy
and extra duties on the products of New Zealand if the products cause serious danger to the
Chinese industry and thus the additional duties and tariffs eliminate the profits of the exporters of
New Zealand. The few other drawbacks include surplus production, declined domestic economic
stability and structural unemployment (Mfat, 2016).
There are several improvements made to this trade agreement in the recent march 2017
negotiations that comprises of improved market access, to have an access to 96 percent of the
various categories of goods without any duty from exports from New Zealand to China. This
gives increased amount of annual savings to the exporters. The products which were left
excluded from the FTA were given eligibility for having a tariff free access into the regions of
China. The other improvements include clear process for dispute settlements, enhanced security
of investments, increased cooperation in terms of sanitary and phytosanitary measures, customs
and intellectual property and faster entry to China (mfat, 2017).
Conclusion
To expand and enhance the trade between New Zealand and China, the FTA i.e. Free Trade
Agreement play a vital role as it has several benefits and advantages associated with it that
leverage exporting to foreign Asian countries and majorly China. FTA has helped the New
Zealand exporters to have an improved access to the increased number of goods to be exports as
well as also facilitated various other beneficial things. But it is also necessary that the drawbacks
must also be consider so that the loop holes can be improved and more effective trading can take
place in future.

International Business 4
References
Aggarwal, V., & Urata, S. (Eds.). (2013). Bilateral trade agreements in the Asia-Pacific:
Origins, evolution, and implications. Routledge.
Bano, S. (2014). Trade relations between New Zealand and China: an empirical analysis in the
context of a free trade agreement. Review of Economics & Finance, 4, 75-92.
Kelsey, J. (2015). Reclaiming the future: New Zealand and the global economy. Bridget
Williams Books.
Lookafterme, (2015). Potential Economic impact of Free Trade Agreement between NZ and
China, Retrieved on: 7th September, 2017, Retrieved from:
http://www.lookafterme.co.nz/article/potential-economic-impact-of-free-trade-
agreement-between-nz-and-china
Mfat, (2016). New Zealand – china FREE TRADE AGREEMENT NATIONAL INTEREST
ANALYSI, PP.76, Retrieved on: 7th September, 2017, Retrieved from:
https://www.mfat.govt.nz/assets/FTAs-agreements-in-force/China-FTA/National-
interest-analysis.pdf
Mfat, (2017). NZ-China FTA upgrade, Retrieved on: 7th September, 2017, Retrieved from:
https://www.mfat.govt.nz/en/trade/free-trade-agreements/free-trade-agreements-in-
force/nz-china-free-trade-agreement
Petri, P. A., Plummer, M. G., & Zhai, F. (2014). The TPP, China and the FTAAP: The case for
convergence.