Nimble New Zealand on the free-trade bus

PUBLISHED : Tuesday, 16 June, 2009, 12:00am
UPDATED : Tuesday, 16 June, 2009, 12:00am

Seven years after they broke down, talks between Hong Kong and New Zealand on a free-trade agreement, technically called a closer economic partnership agreement, have been revived.

The talks, started in 2001, stalled in 2002 because, in the words of New Zealand's then-trade minister Jim Sutton, 'New Zealand couldn't agree to rules of origin that were not enforceable'. There was a fear that goods completed on the mainland could be exported as 'made in Hong Kong'.

At the time, the two sides could not bridge this gap. However, fortuitously, circumstances have changed.

In 2008, after three years of negotiations, New Zealand and China signed a free-trade agreement, which came into force in October - the first such agreement Beijing had signed with a developed nation.

There was something of a race between New Zealand and Australia to be the first developed country to secure an accord with China. In the end, perhaps because its economy is smaller, with fewer issues to negotiate, New Zealand clinched the deal. Australia and China continue to negotiate.

Beijing made it clear it considered an agreement with New Zealand crucial because it creates a precedent for similar accords with other developed countries. From New Zealand's point of view, the deal was also important because it provides preferential access to the world's fastest growing major economy.

Where Hong Kong is concerned, the New Zealand-China FTA removed New Zealand's concerns about mainland goods being shipped as 'made in Hong Kong'.

An announcement in February about the resumption of Hong Kong-New Zealand talks was followed by a first round in New Zealand, early last month, to be followed by a second round in Hong Kong next month. The lead negotiator on the New Zealand side is Julian Ludbrook, who was consul general in Hong Kong until last November. On the Hong Kong side, the lead negotiator is Leonia Tai Shuk-yiu, the deputy director-general of trade and industry.

With a major obstacle now removed, talks are expected to go relatively smoothly. Adele Bryant, New Zealand's current consul general here, is hopeful that talks will be successfully concluded by the end of the year.

If an agreement is reached, it will be Hong Kong's first free-trade accord with a foreign country. Our only such pact so far is the Closer Economic Partnership Arrangement with the mainland. There has been talk of Hong Kong negotiating trade agreements with places such as Singapore or India, but not much has come of it.

Hong Kong and New Zealand have much in common. Chief Executive Donald Tsang Yam-kuen said during his visit to New Zealand in September 2007: 'We are both small, open economies. The trouble with small, open economies such as ours is that we have relatively small home markets.' But while Hong Kong has the mainland as its hinterland, New Zealand has little to fall back on. New Zealand, therefore, has to be nimble. As Brian Lynch, director of the New Zealand Institute of International Affairs, has said: 'From New Zealand's point of view, the bus is going to leave the terminal and we can't afford not to get on it. Geography requires us to be attentive to what's going on in Asia.'

Attention and agility has served New Zealand well. In 2005, it fought hard, and successfully, to be included in the first East Asia Summit, which was held in Malaysia. That struggle was part of the country's conscious transformation from a European outpost in the Pacific into a nation whose future is inextricably tied to Asia.

And so, New Zealand and Hong Kong are now poised to help each other. Hong Kong provides an important stepping stone for New Zealand into Asia. And New Zealand is providing a precedent for Hong Kong to reach out to the rest of the world.

Frank Ching is a Hong Kong-based writer and commentator.