Trade With China -- May 2021

As a dairy farmer, whenever I am asked what I think is the greatest risk to farming in the foreseeable future I invariably and only half-jokingly reply that it is politicians. I wasn’t laughing recently, however, when Brook van Velden, the ACT party’s foreign affairs spokesperson, submitted a motion to Parliament asking MPs to declare China’s treatment of the Uyghur people a genocide. She had the full backing of her leader, David Seymour, who boldly exclaimed “We shouldn’t care about trade and declare a genocide in China”.

This somewhat idealistic proposition came hard on the heels of the Labour Government being criticized by their Five Eyes partners for being too cosy with China. Five Eyes, an intelligence gathering and sharing arrangement between the United States, Canada, United Kingdom, Australia and New Zealand, has in recent times tried to expand its remit into other areas of policy. These policy statements are invariably some kind of criticism of China, but New Zealand has annoyed its Five Eyes partners by charting their own course and not signing on to these statements.  

New Zealand exporters have looked on in horror as Australian politicians continue to needle China in the most undiplomatic fashion as only Australians can, from being the most strident in calling for an independent investigation into the origins of Covid-19 to openly discussing the possibility of war with China, if there has been a button to push then Australia has found it and pressed it hard.

The Chinese response has been swift; they have stopped importing rock lobsters which has crashed the price in Australia from $80 per kg to $25; tariffs on wine of 220% have been imposed for the next five years, barley exports have halted after tariffs of 80.5% were introduced and China have banned imports of beef from four of Australia’s largest abattoirs.

Despite this and the immense pain being felt by producers across Australia, their exports to China grew on the back of increased demand for iron ore. Australia and the United States, who also engaged in a trade war with China under former President Trump, have large enough economies and domestic markets to weather these storms. New Zealand does not.

Way back in April 2008, Helen Clark’s Labour Government made history when New Zealand became the first developed nation in the world to sign a bilateral free trade agreement with China, an agreement that was pivotal in softening the impact of the impending global financial crisis on this country. Under the agreement, 37% of Chinese exports to New Zealand and 35% of New Zealand’s exports to China were tariff free by October 2008. By 2019 a whopping 96% of New Zealand’s exports to China were tariff free and this year the agreement has been upgraded. It is the most comprehensive free trade agreement we have with any of our trading partners, including our Five Eyes allies.

Free trade with China has also been an essential component in our rapid recovery from the financial effects of the global pandemic, dairy exports remained almost unaffected, and farmers enjoyed sustained high prices for their raw milk. For the year ended June 2020, China bought $32.4 billion of the $86.4 billion worth of goods New Zealand exported: that is a massive 37.5%.

None of this is to say New Zealand should remain silent or bow down to China’s every wish, Foreign Affairs Minister Nanaia Mahuta struck the right chord when she said the relationship should be one of mutual respect. New Zealand refused to allow Chinese company Huawei to bid for the right to build our 5G cellular network due to well founded security concerns, and Parliament unanimously declared severe human rights abuses are occurring against the Uyghur people in China’s Xianjiang province.

Despite David Seymour’s headline grabbing statement we absolutely should care about trade, we’re too small not to.