Taiwan, New Zealand Ink Pathbreaking Trade Pact

The ceremony at which Taiwan and New Zealand signed their new economic cooperation agreement was opened with a Maori prayer, after which Taiwan’s representative in New Zealand Elliot ­Charng, director of the Tai­pei Economic and Cultural Office in Wellington, and Stephen Payton, director of New Zealand’s Commerce and Industry Office in Tai­pei, formally inked the pact. This compact opens up new possibilities for the series of international economic agreements that Taiwan is currently negotiating.

The signing was watched live at a press conference held in Tai­pei, after which ROC foreign minister David Lin noted that, as Taiwan’s main exports are industrial and New Zealand’s are agricultural, there is a high degree of mutual complementarity between the two, and the agreement should be highly beneficial to the development of bilateral trade. Moreover, because New Zealand is a member of the Organisation for Economic Cooperation and Development, is one of the countries to initiate the Trans-Pacific Partnership, and is also a member of the Regional Comprehensive Economic Partnership, the signing of ANZTEC will be a positive factor as Taiwan moves in the future to join the TPP and RCEP and increase cooperation with ASEAN states.

When ANZTEC comes into effect, tariffs on imports of New Zealand fruit into Taiwan will steadily fall to zero. People in Taiwan will be able to enjoy delicious kiwifruit at a much cheaper price.

ANZTEC, which includes 25 chapters, has two especially noteworthy features: First, it covers a much wider range of issues than does the WTO treaty, including chapters on investment, air transport services, trade and environment, film and television co-production, and cooperation on indigenous issues. Secondly, the agreement will reduce New Zealand’s tariffs to zero on 100% of imports from Taiwan, and do likewise for Taiwan’s on 99.98% of imports from New Zealand, while Taiwan will also give the go-ahead to the opening of a New Zealand school here.

Taiwan is New Zealand’s 12th largest trading partner, 10th largest export market and 13th largest source of imports. In 2012 two-way trade was over US$1.2 billion.

The Chung-Hua Institution for Economic Research estimates that when bilateral trade is fully liberalized, Taiwan’s agricultural sector will see a decline in the value of its production of about NT$5 billion, or 1.66%. The main blow will come in livestock products. However, over the course of its implementation during the next 12 years, the agreement should add US$303 million to Taiwan’s GDP. It is expected to create more than NT$35 billion in production value in various sectors of the economy.

Minister of Economic Affairs Chang Chia-juch states of the agreement, “Aside from agriculture, all the other provisions favor Taiwan!” Industry will gain the most, with New Zealand tariffs on products like steel, petrochemicals, bicycles, and motor vehicles falling to zero in the future.

In the agricultural sector, tariffs on over 1300 New Zealand agro-products (including cherries, apples, pork, and frozen vegetables) will immediately fall to zero when the agreement comes into effect. For some items, such as beef, bovine offal, and kiwifruit, tariff barriers will be steadily eliminated over several years. Looking at kiwifruit, for example, Taiwan currently sets the tariff at 20%, which means that when the agreement has been fully implemented, the price of imported NZ kiwifruit could fall by as much as a sixth.

Council of Agriculture vice-minister Hu Sing-hwa relates that since Taiwan has already excluded the most sensitive crop, rice, from the agreement, the first items to feel the impact of ANZTEC will likely be dairy products, beef, lamb, and deer antler. The COA will draw on the NT$9 billion fund it has available for relief of sectors adversely affected by imports to help farmers survive the intensified competition, in which they will be at a price disadvantage for a short transitional period.

Hu adds, however, that for the most part the agricultural products produced by New Zealand are very different from those produced in Taiwan, so this agreement should be generally advantageous in terms of export competitiveness for fruit growers in both countries.

Today there is a global trend toward free trade agreements. Taiwan has signed five FTAs, all with Latin American countries with which it has formal diplomatic relations, and which, in total, account for less than 5% of our foreign trade. Taiwan still has a long row to hoe if it wants to broaden its international economic access and maintain market share.

President Ma Ying-jeou praised the efficiency shown by the two negotiating teams. He pointed out that though ­ANZTEC talks started only on May 18 of 2012, they took less than 14 months to complete, which he likened to “late coming out of the blocks but with a fast sprint to the finish line.”

Now that Taiwan has successfully inked an economic cooperation agreement with New Zealand, observers are watching closely to see which country might be the next to sign an FTA with us.

Roy Chun Lee, deputy director of the Taiwan WTO Center at the Chung-Hua Institution for Economic Research, says that the most likely next FTA will be with Chile or Australia. Chilean red wine and apples compete with those from New Zealand, and Australia runs neck and neck with New Zealand in the markets for meat and dairy products. Therefore, the signing of the agreement with New Zealand has spurred Chile and Australia to be more proactive about negotiating their own FTAs with Taiwan. Now that’s a great demonstration of the “demonstration effect”!