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R 040301Z APR 08
FM AMEMBASSY WELLINGTON
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RUCNMEM/EU MEMBER STATES COLLECTIVE
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RUEHSS/OECD POSTS COLLECTIVE
RUEAWJA/DEPT OF JUSTICE WASHINGTON DC
RUEHRC/USDA FAS WASHDC 0385
RUEHBS/USEU BRUSSELS

UNCLAS SECTION 01 OF 03 WELLINGTON 000121 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/ANP, EEB, INR, STATE PASS TO USTR AND COMMERCE, PACOM 
FOR JO1E/J2/J233/J5/SJFHQSTATE 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EFIN PGOV PREL NZ
SUBJECT:  NEW ZEALAND AND CHINA TO SIGN HISTORIC AND CONTROVERSIAL 
FREE TRADE AGREEMENT 
 
WELLINGTON 00000121  001.2 OF 003 
 
 
¶1. (U) Summary:  New Zealand's Prime Minister Helen Clark and 
Chinese Premier Wen Jiabao will sign an historic bilateral Free 
Trade Agreement (FTA) in Beijing on April 7, China's first free 
trade pact with an OECD country.  Details of the agreement, the 
result of three years of negotiations, will not be released until 
after the signing ceremony.  PM Clark will be leading a delegation 
of 150 New Zealand businesses, government officials and press in 
Beijing for the signing ceremony.  But the timing is less than 
optimal as it has been juxtaposed against the negative publicity 
over China's recent crackdown in Tibet.  Although the agreement is 
expected to eventually secure approval by the New Zealand 
Parliament, some MPs have begun to publicly distance themselves and 
express their disapproval, most notably Foreign Minister Winston 
Peters and Labour's left wing base.  End Summary. 
 
NEW ZEALAND POISED TO SIGN HISTORIC 
TRADE DEAL WITH CHINA 
----------------------------------- 
 
¶2.  (U) One of the biggest trade delegations to leave New Zealand in 
years has been assembled for the formal signing of the NZ-China FTA 
in Beijing; 150 representatives of some of New Zealand's biggest 
businesses, including dairy giant Fonterra, will be present.  But 
the size of the contingent could swell close to 200 once ministers, 
officials, local government and media representatives are included. 
New Zealand Trade Minister Phil Goff and Education Minister Chris 
Carter will also be part of the delegation, but notably absent is 
Foreign Minister Winston Peters. 
 
¶3. (U) "New Zealand's free trade agreement with China is about more 
than reducing tariffs - it is also a strategic move that 
acknowledges that the emerging superpower will become the world's 
biggest economy," said Prime Minister Helen Clark on the eve of her 
departure for an overseas trip that will conclude with the signing 
ceremony in Beijing.  The accord is being touted as the first free 
trade agreement signed by China with an OECD nation, and will mark 
New Zealand's biggest trade deal since its 1983 agreement with 
Australia (the "Closer Economic Relations" CER).  China is now the 
second-biggest source of imports into New Zealand and the 
fourth-largest buyer of its exports, including dairy products, logs 
and wood pulp.  Imports from China are valued at NZ$5.2 billion and 
represent an 18.7 percent increase in 2007, the fastest pace among 
trading partners in the past 13 years.  Australia remains New 
Zealand's largest bilateral trading partner (in term of total trade 
- exports and imports); followed by the U.S., Japan then China. 
 
¶4. (U) Preliminary studies estimate the value of the FTA to NZ 
exporters ranges between NZ$180 million and NZ$280 million a year. 
New Zealand goods now face average tariffs of about 9.5 percent on 
entering China - but in the case of agriculture imports, the average 
tariff is more than 15 per cent.  Tariffs on Chinese goods entering 
New Zealand are low by comparison.  Ninety-five percent enter free 
of any duties, while the remaining tariffs on clothing, footwear and 
carpets are due to fall to 10 per cent by 2009.  They could be 
eliminated altogether under the deal, raising fears of more job 
losses in NZ industries already in decline.  The deal is likely to 
phase out tariffs in other key areas, and the Government is 
understood to have resisted Chinese efforts for freer rules 
surrounding the movement of labor.  New Zealand trade unions have 
been silent thus far on the impending deal, which has led one of two 
informed observers to speculate that the Labour Government has asked 
its union supporters to hold their fire.  The deal will, however, 
open the door to more Chinese specialists in niche occupations, such 
as acupuncture. 
 
TIBET CASTS A DARK SHADOW 
------------------------- 
 
¶5. (U) The timing of the event, juxtaposed against the negative 
publicity brought on by China's recent crackdown in Tibet, has 
engendered public controversy.  Some commentators posit that the 
Government could be courting a public backlash after refusing to 
release details of the trade deal until Prime Minister Helen Clark 
 
WELLINGTON 00000121  002.2 OF 003 
 
 
arrives in Beijing next week.  Clark last week defended the trade 
agreement amid public calls to end three years of negotiations to 
officially protest recent violence in Tibet.  Revenue Minister Peter 
Dunne refused to travel to Beijing for the signing, citing China's 
"bloody crackdown" on its Tibetan citizens but he has said he will 
vote for the deal. 
 
¶6. (U) The March 31 New Zealand Herald-DigiPoll showed 44.7 per cent 
of those questioned still supported the FTA while 32.4 per cent did 
not. The other 22.9 per cent did not hold a strong opinion either 
way.  After it has been signed, the FTA will be studied by the 
Foreign Affairs and Trade Select Committee and will then be put to a 
vote in Parliament.  The Government remains confident that it has 
sufficient support to pass because it is backed by the opposition 
National Party.  The National Party's trade spokesman Tim Groser, a 
former senior trade negotiator in the last government, is among 
those few MPs who have been briefed confidentially on the agreement. 
 He stated publicly that "without going into specifics I can confirm 
it meets the tests of being a comprehensive and high-quality 
agreement and in our view is strategically vital."  Mr. Groser 
further said that "some of the talk about New Zealand wages being 
under-cut by a flood of Chinese workers would be revealed as 
groundless scaremongering when the details of the agreement were 
revealed."  But support from some of Parliament's other parties is 
not so assured.  Trade Minister Phil Goff has been arranging 
briefings on the deal's contents for other political parties, and 
among those spoken to have been United Future and New Zealand 
First. 
 
HOW NEW ZEALAND'S POLITICAL PARTIES VIEW THE DEAL 
--------------------------------------------- ---- 
 
¶7. (SBU) All eyes are turning now to New Zealand First leader 
Winston Peters - who as Foreign Minister is in a unique situation - 
and said he had received only one briefing on the deal but had 
requested another.  Mr. Peters said he expected to receive that 
briefing in a matter of days.  (Note: Winston Peters did not seek a 
briefing until recently despite the fact that MFAT staff have 
carried out nearly all the negotiations and drafting of the 
agreement.  End note).  He said his party's position had always been 
that it did not see the wisdom of doing free trade agreements with 
low-wage economies.  In the past Peters has specifically cited China 
as an example of a low-wage economy.  "However, we are waiting for 
the details on this one," he said. "I've had one briefing, I've 
asked for a more comprehensive one. I think the devil is in the 
detail in these things."  (Note:  Winston Peters and his New Zealand 
First Party have long relied on an anti-Asian and anti-immigrant 
platform to win votes from xenophobic conservative New Zealanders. 
With the national election about six months away, they have returned 
to tired rhetoric.  End Note.) 
 
¶8. (U) The Greens have said they will oppose the deal and have 
publicly denounced Chinese actions in Tibet.  The Maori Party caucus 
has also confirmed that they will oppose the free trade agreement 
with China.  "There are many reasons why we oppose it," said foreign 
affairs spokesperson Hone Harawira, "but I guess you could sum it up 
by saying we support fair trade, rather than free trade."  "Although 
we're told there may be benefits for Maori, the downsides in terms 
of compromises to our sovereignty, threats to the status of the 
Treaty (i.e., Waitangi), the impact on work standards and wage 
rates, and China's lack of respect for human rights, indigenous 
rights, and the environment, mean the downsides of any free trade 
agreement with China are simply unacceptable at this time," said Mr. 
Harawira. 
 
COMMENT 
------- 
 
¶9. (SBU) While the China FTA is expected to damage a few of the 
small manufacturing sectors still protected by domestic tariffs, the 
vast majority of NZ-China trade is already working under a de facto 
free trade regime, note MFAT negotiators.  That is, some are quick 
to note, much more true of Chinese exports to New Zealand than trade 
 
WELLINGTON 00000121  003.2 OF 003 
 
 
in the other direction.  Secrecy surrounding the agreement is in 
stark contrast to an earlier FTA with Thailand, whose details were 
known well in advance.  Given the expected opposition to the 
agreement from the Greens and NZ First, Clark likely wanted to 
ensure that the agreement was not leaked prematurely and debated 
endlessly by the media during an election year.  With the March 
crackdown in Tibet, the anticipated diplomatic coup for Helen Clark 
may not provide the much-hoped for political boost that Labour was 
counting on.  The agreement may do most to weaken Labour's support 
with its left-wing base, labor unions and the Greens.  The 
coincidence of the signing with continued protests over Tibet will 
only compound the damage.  End Comment. 
 
MCCORMICK