Key crowns Apec summit with China free-trade upgrade

New Zealand and China have agreed to renegotiate the historic free-trade agreement between the two countries, in an announcement at the Apec leaders' summit in the Peruvian capital, Lima, dominated by discussion about the baton on trade liberalisation leadership passing to China from the US.

Top of the list in the "upgrade" negotiations will be the so-called "dairy safeguards" – quotas that limit the amount of New Zealand dairy produce that can go into China duty-free.

At present, the annual duty-free quota disappears within days in January, with all remaining product facing tariffs in the Chinese market.

"But it's much broader than that. It will include forestry and a range of other products," Prime Minister John Key told journalists in Lima. The ambition for the upgraded agreement was for it to be the "best FTA they have in place."

The upgrade was an essential part of meeting the mutually agreed goal with the Chinese leadership of taking the current $20 billion two-way trade to $30 billion by 2020, he said.

The announcement came in the closing hours of an Apec summit where the dominant topic of conversation was the election of a protectionist US president in Donald Trump.

The president-elect campaigned on a platform of scrapping the Trans-Pacific Partnership trade and investment deal involving 12 Asia-Pacific countries, creating a vacuum on regional trade liberalisation that China has eagerly sought to fill, with several demonstrations of that intention at this year's APEC summit.

China's president, Xi Jinping, used a keynote address at the summit to stake a claim for trade liberalisation in the Asia-Pacific.

"China will not shut the door to the outside world but will open it even wider," said Xi, who described the US and China being at a "hinge moment" in their relationship.

In comments during a panel discussion at the summit, Mr Key said the TPP "was all about the United States showing leadership in the Asia-Pacific region. We like the US being in the region. But if the US is not there, that void needs to be filled, and it will be filled by China."

In New Zealand, leading anti-TPP campaigner Jane Kelsey issued a statement saying TPP leaders were "talking nonsense" about the potential to talk Mr Trump around to supporting it since opposition to the deal was strong in the Congress among both Republicans and Democrats.

Talk of doing TPP without the US would also require its renegotiation to remove elements that the US had insisted on, Ms Kelsey said.

Mr Key said he was leaving the Apec summit "a little more confident that we can get President Trump to come back to the table and have a look at TPP" but New Zealand had a lot of other free-trade opportunities, including good progress on an FTA with Gulf states and the potential to sign one with the EU next year.

Mr Key also had brief talks with the Russian president, Vladimir Putin, about New Zealand's willingness to resume FTA negotiations with Russia but only on a timetable allowed by European countries' attitude to Russia's efforts to destabilise Ukraine.

The China FTA upgrade is expected to take a year and is scheduled to cover issues including technical barriers to trade, customs practices, cooperation and trade facilitation, rules of origin, services, and environmental cooperation.

Food safety regulation, however, will continue to progress under a separate five-year plan.

On dairy safeguards, Key said they were scheduled to come off anyway between 2021 and 2023 "but this might be an opportunity to eliminate those a little bit faster.

"We'll have to wait and see."

Today's three-paragraph joint statement from the Chinese and New Zealand governments includes a specific commitment to "work toward the swift conclusion of the RCEP negotiations," a reference to the Regional Comprehensive Economic Partnership proposed first by the Asean Southeast Asian grouping and now led by China.

The deal is seen as an alternative to the TPP. Although it would not be as comprehensive and excludes the US, it would deliver a so-far elusive trade agreement with India.

"I don't think it would require RCEP to be completed for the FTA upgrade to happen," said Key. "They are two separate events but we do think there is a real possibility of RCEP being completed, and if it does, it's a good thing because it brings in India."

Key claimed the China upgrade as another 'first' for the country in relations with China.

"New Zealand was the first developed country to negotiate and conclude an FTA with China, and I'm pleased that today we have reached the fifth 'first' in our relationship, as the first developed country to launch an upgrade of an FTA."

Trade Minister Todd McClay, also at Apec, confirmed that China had not raised concerns about anti-dumping action by New Zealand against Chinese steel imports.

Also announced during the summit was a review of New Zealand's FTA with Malaysia.

(BusinessDesk)