The China NZ FTA

April 18th, 2012 at 9:00 am by David Farrar

The Herald editorial:

Listening to the Greens, it could also be thought that one of ’s most senior figures has followed the Crafar farms saga in great detail, so much so that he is now prepared to place “enormous pressure” on the ministers making the final decision. This, again, seems fanciful. In pursuing the interests of a country with a fifth of the world’s humanity but only 7 per cent of its arable land, Mr Jia’s interests are surely far wider than one farm deal.

The Greens should have read his comments with a rather more open mind. Had they done so, they would have found plenty of encouragement for the future development of trade between New Zealand and China. Mr Jia refers to the “smooth implementation” of the ground-breaking free trade agreement signed in 2008 and the need for both countries to make good use of it to meet ahead of schedule a trade target of $20 billion by 2015. …

In terms of that balance, he could have been thinking of Fonterra’s plans, announced last Friday, to spend $100 million on two more farms in China’s Hebei province. This is part of the co-operative’s ambition to set up an integrated milk business in China that taps a growing middle-class demand for high-protein food. It wants its farming hubs throughout the country to be producing up to 1 billion litres of high-quality milk every year by 2020.

The Greens campaign against China is economically dumb. We even have the proof of how dumb it is. They railed against the FTA with China (as did then Foreign Minister Winston Peters).

So let us look at what these economic geniuses railed against:

The FTA was agreed in April 2008 and came into force in October 2008. Note up until then modest export growth and strong export growth with the trade deficit increasing steadily. Again remember this when Greens and NZ First complain about the trade deficit.

Then after the FTA, exports surge, and imports continue much the same growth. The result is exports break $6b for the first time ever and the trade deficit is cut by over two thirds.

This shows the annual growth. So the data for Jan 2007 is how much the value of trade was in the 12 months to Jan 2007 compared to the 12 months to Jan 2006.

So imports growing far faster than exports. Then as the FTA is signed, export growth skyrockets up to 35% and even three years on is still at over 20%. These are incredible figures. The Greens argue it is pure coincidence and would have happened regardless. I’d stick a Tui billboard around that.

Here’s another couple of stats. In the year prior to the FTA coming into force our average monthly exports were  $186m. In the last 12 months they were an average $505m a month.

The annual exports in the year before the FTA were $2.24b. If they had stayed at that level over the next three and a third years our exports would have been $7.45b. Instead they have been $15.79b. So that is an extra $8.3b of export income that the Greens and NZ First railed against, and still rail against.

God knows how many fewer jobs we would have without that FTA, let alone the greater deficit and debt.

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13 Responses to “The China NZ FTA”

  1. Cunningham (844 comments) says:

    Thanks David, that is very interesting indeed. I just wish the MSM would run more of this kind of stuff to show how important China is to us and how much we benefit from the relationship. Maybe people wouldn’t be so xenophobic about them buying some farms if they knew these sort of stats. However I think hell would freeze over before the MSM would write a story like this. It is sad for NZ really.

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  2. flipper (4,056 comments) says:

    David,
    The only surprising thing about your excellent comments was that they did not include something like the following:

    “It should be noted, however, that a need for realism applies equally to the Greens. One day the pink or red-melons (the Greens) will mature and realise that they live in a real world and not “russel in pink land” (Russel [sic] Norman, Greens co-leader and a former card-carrying Communist Party, Australia member). Those people would have us all back in sack cloth and ashes. Once the public becomes aware (See also Part 5.) of where they would take us, the Greens will revert to being a minor bit-player – unless Labour decides against moves to democratise the party and to anchor its philosophy in the real, post 2008 world.”

    Source: Demolishing New Zealand’s Political Comfort Zone. Outside the Beltway Group, Jan 2012.

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  3. db.. (84 comments) says:

    MSM, Main Stream Media ?? Most media seem to be clambering along the Left bank and getting no where.
    They are losing there own jobs and their industry is dwindling and losing revenue rapidly. Stupid and ineffective.

    db..

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  4. davidp (3,581 comments) says:

    But Chinese people took Norman’s flag and he will NEVER forgive them!

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  5. Neil (586 comments) says:

    Listening to the radio reporting on the Greens is a bit similar to NZFirst. The Greens are great at grabbing a news item and riding it. Misinformation is the name of the game, which will be believed by about 60% of the population. The Greens take it for granted that most kiwis are very slothful and do little thinking for themselves. TV sound bites by Red Russel, Clown Hughes,ex-McGillicuddy Turei and other teat suckers are filling the heads of many New Zealanders.
    They are a deep shade of Red but disguised in nonsensical camouflage playing to an ignorant audience.
    A last comment. The Greens in Australia are in a precarious position having gone into a support position for Labor. With Labor losing favor for things like the Green inspired carbon tax, recent state elections have shown the Greens losing support.Losing Bob Brown as leader will not help as well.
    God help NZ if the Greens become an active coalition partner of Labor again.

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  6. Stuart (41 comments) says:

    I have to say I’ve just been converted by good old facts. I was always torn between supporting free trade, but at the same time having a fear of cheap Chinese goods flooding in and losing NZ jobs as everything gets outsourced. Specifically I imagined the deficit getting worse because of the FTA.

    I am very glad to see the FTA is working so well, great post DPF.

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  7. cows4me (248 comments) says:

    A great pity Doctor Woo and his party of fruitcakes get to enjoy the same benefits as the vast majority of the population who welcome growth and the use of natural resources. They’re like yapping little lap dogs safe in the knowledge the pit bull will never get out of the yard. The Melons will moan like fuck and dis any advancement the country makes as they know they will never have to come up with a plan to pay the bills, hypocritical scum.

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  8. anonymouse (715 comments) says:

    David, unfortunately there is also one other major thing that has helped NZ’s trade, The Melamine Milk scandal, it pretty much crippled the local milk industry (especially the production of baby Formula) and this happen in the middle of 2008 right at the time of the FTA.

    Dairy (especially powder) is responsible for 1/2 of the increase in NZ exports,

    The growth of Dairy exports is happening outside of the FTA as NZ continually exceeds its FTA quota and is hit by the regular MFN Tariff.

    Yes the FTA has helped our trade, but circumstances have also played a large part.

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  9. Mark (1,488 comments) says:

    China will be the dominant world economy in the very near future if it isn’t already. The FTA with China is no doubt going to improve our export performance. It will not be without its bumps and bruises along the way but the reality is that the good will outweigh the bad significantly in NZ’s favour

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  10. Fost (102 comments) says:

    I personally find it very amusing that people still talk about the Crafar farms as ‘our’ or ‘NZ’ as if somehow we collectively own them now (they are actually owned by Australian Banks as the receivers) or ever did – I suspect a few years ago while the Crafar family owned them, I doubt very much they’d be happy for you to stroll about, on the assumption that they were ‘ours’ or ‘NZ’ farm – they were privately owned then, are privately owned now, and will be in the future.

    Even more amusing is the Chinese are ‘stealing’ NZ’s “strategic assets’ – what are they going to come here and dig up the grass and dirt to ship it back to China? Muppets and wombles the lot of them.

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  11. Poliwatch (335 comments) says:

    Thanks DPF – very good information.

    Stuart, there are also other benefits. I know of one large NZ company that has a manufacturing presence in China in addition to their other manufacturing locations elsewhere in the world and particularly in NZ. The China pressence has given them an ability to attract business, but demand has meant that some of this work has come back to NZ at a premium and created jobs here. This does not show in these figures as the work is done for other global markets – it is just an intangible benefit of having the location in China.

    Fonterra and others are establishing locations in China. It would be good to see the “invisible” flows including profit repatriation between NZ and China.

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  12. Nick K (1,243 comments) says:

    Don’t forget that Winston First (and therefore New Zealand last) is also against this. And they want to be the next government, along with the Greens.

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  13. osiris7 (1 comment) says:

    All I know is this: I buy things from China and they never, ever have the name of the company or any responsible person listed in English or Chinese on the courier mail packaging. If there is a name listed it is never the name of the company I bought it from. Maybe that’s just so that no one will have to be ultimately responsible. This makes it difficult to log and track inwards goods. I find it irritating and just sort of indicative of their overall approach to business: Shifty.

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