MercoPress. South Atlantic News Agency

New Zealand and China upgraded their free trade agreement: Bad news for Mercosur

Observers said China-New Zealand FTA serves as a model for Australia, which also signed a high-level FTA with China after nearly 10 years of talks

China and New Zealand signed the upgrading protocol of their free trade agreement (FTA) via video link on Tuesday with new commitments in trade market entry, investment, and other key aspects.

The announcement is bad news for Mercosur since country members are in direct competition with Oceania (NZ and Australia) when it comes to commodities' exports such as beef, wool, dairy produce, grains and oil seeds to the Chinese market. China is the main trading partner of Brazil, Argentina and Uruguay.

Observers said that the China-New Zealand FTA serves as a model for Australia, which also signed a high-level FTA with China after nearly 10 years of talks, but its move to follow the US' lead under the Trump administration, provoking and vilifying China, has strangled healthy trade relations.

Based on the original China-New Zealand FTA signed in April 2008, the two sides will enjoy more benefits after the upgrading, according to a statement on the website of China's Ministry of Commerce.

China will expand opening-up of its aviation, education, finance and other sectors to New Zealand, based on the Regional Comprehensive Economic Partnership (RCEP), while New Zealand will relax the review threshold for Chinese investment, making sure that Chinese investment enjoys the same treatment as members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Under the new protocol, New Zealand will not investigate Chinese government investors with funding of no more than NZ$100 million (US$ 71.82 million) or non-government investors with investments of no more than NZ$ 200 million, China News Service reported.

In addition, the scope of industries that Chinese investors can participate in has been enlarged, to include services such as marketing, human resources, and tourism in New Zealand, said the report.

Bilateral trade is expected to see rapid growth, as the ratio of zero-tariff goods that China imports from New Zealand will be increased, boosting imports of good-quality New Zealand products, analysts said.

Chinese Foreign Ministry spokesperson Zhao Lijian stressed at a regular press conference on Tuesday that the upgrading of the FTA reflects the two sides' resolve to support multilateralism and free trade through their actions.

“This upgrade ensures the agreement is modern and deepens our economic relationship further,” the New Zealand Ambassador to China Clare Fearnley told the Global Times on Tuesday. The Ambassador said this includes addressing issues like e-commerce, and putting an increased focus on environmental issues, including commitments to promote environment protection and a commitment not to lower environmental standards for a trade or investment advantage.

“Both New Zealand and Chinese exporters will benefit from the upgraded trade rules including through easier processes, reduced compliance costs, and expanded market access in some areas,” the Ambassador said.

As New Zealand's Minister for Trade and Export Growth, Damien O'Connor, said after the signing, 'This upgraded agreement comes at a time of considerable global economic disruption due to COVID-19.

The upgraded FTA is part of the New Zealand government's trade recovery strategy, in response to the economic shock of COVID-19',” the Ambassador said.