On January 26, 2021, Wang Wentao, Minister of Commerce of China, and Damien O’Connor, New Zealand’s Minister for Trade and Export Growth, held a virtual meeting to sign the Protocol between the Government of the People's Republic of China and the Government of New Zealand on Upgrading the Free Trade Agreement between the Government of the People's Republic of China and the Government of New Zealand (hereinafter referred to as the Upgrade Protocol) on behalf of the two governments. In order to help the public and businesses understand the Upgrade Protocol in a more comprehensive and accurate manner, head of the Department of International Trade and Economic Affairs of the Ministry of Commerce introduced and explained the background and contents of the FTA Upgrade in detail.
Q: What’s the significance of the Upgrade Protocol?
A: Since it was singed and took effect in 2008, China-New Zealand FTA has boosted the trade in goods, trade in services, and investment cooperation between the two countries. Bilateral import and export surged from USD4.4 billion in 2008 to USD18.1 billion in 2020, with an annual growth of 14%. China has been the largest trading partner of New Zealand for many years in a row. In November 2016, the two sides launched the negotiations to upgrade the FTA and announced the conclusion of negotiations in November 2019. Signing the Upgrade Protocol is an important move to “adopt a strategy to upgrade FTAs and build a open and high-standard FTA network”, the goal put forward at the 5th Plenum of the 19th CPC Central Committee. This is a step further in the strategy to upgrade FTAs, and will contribute to the new development paradigm. The Upgrade Protocol will also enhance pragmatic bilateral cooperation in various fields, enrich and substantiate the comprehensive strategic partnership, and benefit the businesses and peoples from both sides. The signing of the Upgrade Protocol at this critical moment in the fight against COVID-19 also sends a positive message to the international community that China and New Zealand are working together to cope with the pandemic, support multilateralism and free trade, and promote stability and recovery of the global economy.
Q: What are the main elements of the Upgrade Protocol?
A: China-New Zealand FTA was signed in April 2008 and took effect in October 2008. It is the first comprehensive bilateral FTA that China has entered into, covering broad areas such as trade in goods, trade in services, and investment. It is also the first FTA China signed with a developed country. The Upgrade Protocol has made revisions to the original FTA, and consists of the Preamble, nine chapters, and four exchange of notes. In addition to upgrading rules of origin, customs procedure and trade facilitation, technical trade barriers, trade in services, and cooperation, it has also included new areas such as e-commerce, government procurement, competition policy, and environment and trade. Annexes, such as the commitment schedule for service trade, have also been upgraded. Furthermore, the four exchange of notes reflect the consensus reached on China’s investment in New Zealand, job arrangement for special professions, cosmetics trade, and tariff reduction for timber and paper products.
Q: How is the market access for goods further eased?
A: In the original FTA, market access for goods has already been greatly liberalized, with New Zealand applying zero tariff to 100% imports from China, and China applying zero tariff to 97% imports from New Zealand. In the Upgrade Protocol, considering domestic demand and the overall balance of interests, China will apply zero tariff to part of the timber and paper products from New Zealand, including wood fiber board, napkin, writing paper, kraft paper, adhesive paper, paper board, and paper labels, etc. This will help to stabilize and expand the source of resource products imports, save timber resources at home, and drive the transformation and upgrading of domestic industries.
Q: What progress has been made in opening up trade in services?
A: The two sides have made stronger commitments to ease market access, greatly enlarging the coverage of MFN treatment. For further opening-up, the two sides also agreed to negotiate a negative list for service trade two years after the Upgrade Protocol takes effect. As to the specific commitments, New Zealand has further opened up the legal service, engineering and integrated engineering services, etc; added commitments on management consulting and all its related services, allowing Chinese-funded management consulting firms to provide cross-border consulting services in marketing, human resources, public relations, and tourism development businesses, or establish commercial presence. China will further open up the aviation, construction, shipping, and finance sectors, especially by adding commitments on airport operation service, ground service, and professional aviation services.
Question: What are the highlights of the exchange of letters on Chinese investment in New Zealand in the Upgrading Protocol?
According to this exchange of letters, New Zealand confirms eased threshold on Chinese investment review, leveling it down to that for members of the CPTPP. Specifically, the review threshold is NZD 100 million for Chinese government investors, and NZD 200 million for non-government Chinese investors. This marks a substantial improvement on the NZD 10 million under the original China-New Zealand FTA.
Question: What are the highlights in bilateral trade facilitation?
Answer: In terms of rules of origin and management, the two sides have improved the direct transport provision and introduced the self-declaration system for verified exporters to facilitate the access of importers and exporters to benefits. Besides, additions have been made to clauses on ROO certificate reissuance, waiver of ROO documents, inspection networking system and minor errors and discrepancies. As regards customs procedures and trade facilitation, the parties will provide efficient and express clearance service for businesses from both sides by further streamlining clearance procedures and employing risk management and information technology. In terms of technical barriers to trade, the two sides have expanded the scope of agency cooperation on product certification procedures while upgrading procedural provisions on product entry. Besides, the two sides will set up a special working mechanism on mutual recognition of electronic and electric products for further improved mutual recognition level.
Question: What are the contents of the exchange of letters on the movement of natural persons with special skills in the Upgrade Protocol?
Answer: Under the China-New Zealand FTA, the two sides creatively introduced measures such as specialists and working holiday schemes to facilitate the movement of personnel between the two countries. In the Upgrade Protocol, New Zealand has improved work permit arrangements for Chinese specialists via an exchange of letters, doubling the quotas for the most applied-for Chinese language teachers and tour guides from 150 and 100 to 300 and 200 and further relaxing the approval conditions of work permits for Chinese language tour guides.
Question: The Upgrade Protocol includes a chapter on e-commerce for the first time. What are the specific provisions?
Answer: The e-commerce chapter is part and parcel of the Protocol, featuring e-certification and digital certificates, cyber consumer protection, cyber data protection and paperless trade. The two sides will create a favourable development environment for e-commerce, raise transparency, enhance bilateral trade facilitation and spur businesses, especially SMEs on both sides to explore markets through e-commerce for healthy and sustainable development of bilateral trade.
Question: What are the new highlights of the Protocol on the environment and trade front?
Answer: The two sides commit to effectively enforce environmental measures, encourage trade and environment without compromising environmental protection and refrain from using environmental standards for trade protectionist purposes. At an appropriate time after the agreement enters into force, a post-EIF environmental impact assessment will be conducted. Under the framework of existing bilateral agreements, cooperation will be conducted and deepened in areas of common interests in a timely manner.
Question: When is the Protocol expected to enter into force?
Answer: The Protocol will enter into force sixty days after the two sides exchange written notices confirming the completion of domestic legal procedures necessary for the effectiveness of the Protocol or on another date agreed in the written notices. Moving forward, the two sides will respectively go through domestic legal approval procedures and push for the early entry into force of the Protocol. Before that, we will publish the text on http://fta.mofcom.gov.cn for the reference of interested enterprises and individuals.
