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New Zealand FTA round-up

22 September 2010

New Zealand’s FTA negotiations continue apace.  The key developments are summarised below.

On 1 August 2010, the NZ-Malaysia FTA (signed in October 2009) entered into force.  This FTA built on concessions made in the ASEAN- Australia-NZ FTA (AANZFTA) which entered into force earlier this year.

Although the AANZFTA contained an investment chapter, this does not apply as between New Zealand and Australia due to a February 2009 exchange of letters between the two countries’ trade ministers.  One of the reasons for this carve-out is that New Zealand and Australia have been negotiating an investment protocol to the Closer Economic Relations (CER) Agreement between the two countries.  The text of that protocol has reportedly now been agreed and is subject to legal verification before being presented for signature.  The timing of its execution may indicate the extent to which the Gillard government is focused on trans-Tasman integration issues.

It will be interesting to compare that text to the investment protocol due to be negotiated between New Zealand and Hong Kong.  In March 2010, New Zealand and Hong Kong signed a Closer Economic Partnership Agreement which did not include an investment chapter.  At the same time, the parties signed side-letters recording a mutual intent to negotiate a separate investment protocol, stating:

The Investment Protocol shall build on and be broader in scope than the Agreement between the Government of New Zealand and the Government of Hong Kong for the Promotion and Protection of Investments done at Hong Kong on 6 July 1995, and its provisions shall be drafted with reference to the New Zealand - China Free Trade Agreement done at Beijing on 7 April 2008.

There is apparently genuine intent on both sides to conclude this protocol.  It is to be hoped that the result is indeed “broader in scope” than the 1995 Agreement between New Zealand and Hong Kong, which does not offer substantive enforceable protection to New Zealand investors. 

New Zealand and Russia announced at the beginning of June 2010 that they would begin scoping discussions for an FTA between the two countries (which would extend also to Belarus and Kazakhstan, with which Russia is in a customs union).  The first round of these discussions has been completed successfully.  The second round is scheduled to take place in Wellington in October 2010.  These are not yet FTA negotiations, but preliminary discussions to determine whether FTA negotiations are viable.  Present intentions do, however, appear to be towards producing a comprehensive FTA with investment, intellectual property and labour protections.  Russia is not presently a member of the WTO.  Indeed, aside from its customs union with Belarus and Kazakhstan, it does not appear to be a party to any FTAs (it has signed a 1994 FTA with the other CIS countries, but this has not entered into force).  Accordingly, signing an FTA with Russia would be a significant strategic step for New Zealand.  Vietnam may, however, make faster progress: on 17 September 2010, Vietnam and Russia announced that they had agreed to begin FTA negotiations in earnest.

New Zealand’s FTA negotiations with Korea were given a resuscitative boost by Prime Minister John Key’s visit to Seoul in July 2010.  Progress on the talks had “largely stalled”, with Korea negotiators unconvinced of the value of concessions an already essentially tariff-free New Zealand was able to offer in exchange for seeking better access for New Zealand’s agricultural produce.  Despite Mr Key’s intervention, progress does not appear to have picked up, with no further negotiating rounds held since May 2010.  Like many modern FTA negotiations, the way through – if there is one – is likely to lie in liberalising non-goods trade (such as in services and investment), strengthening protection in areas of mutual interest (such as intellectual property), harmonising regulatory non-tariff barriers, and facilitating the movement of people between the two countries (for instance through promoting student exchange and temporary worker programmes).  Korea’s 2009 FTA with the EU is now scheduled to enter into force in July 2010 after Italy confirmed it would not veto the FTA provided its implementation was delayed by six months.  The EU-Korea FTA will be an important reference point for both New Zealand, as will the on-going (and seemingly productive) Korea-Australia negotiations.  

FTA negotiations with India continue, with a second round held in New Delhi in mid-August 2010.

Also continuing are the Trans-Pacific Partnership Agreement (TPP) negotiations with several Pacific Rim countries, including the United States.  A second round was held in San Francisco in June 2010.  Following an intersessional meeting in Lima held last month, the third round commences in Brunei in early October 2010.  Negotiations are expected to continue into 2011.  (Separately, the United States in mid-September 2010 filed two new WTO cases against China, perhaps underlining the economic rivalry which is fuelling the United States’ interest in concluding a regional trade agreement to which China is not a party.)