Is Auckland stuck in second gear with China?

A question for my friend and incoming Auckland mayor Phil Goff:  How will you lift the city’s economic relationship with China?

One in 12 Aucklanders now identifies as Chinese; it is the country’s commercial capital and the gateway for Chinese visitors, students and merchandise trade.  But we are some way from realising the full potential on the economic side.  For a city with such a close cultural connection with China, we risk missing huge opportunities in markets from financial services to film, tourism and technology.

Last week the Committee for Auckland released a timely new stock-take of the city’s links with China across five vectors: trade, investment, tourism, education and migration.

The report attempts to set the record straight about what works and what needs still to be done.  It should be required reading for the new Mayor’s economic team.

To put it more simply, Auckland needs to target the premium layer of high value added activity that will drive Auckland’s economic development.  So how do we make this happen?

To begin with, Auckland needs to make greater headway growing trade revenue from higher value exports where the city holds a natural advantage, such as financial and business services, niche manufacturing and technology.  These are challenging areas to grow, and Auckland’s strategic direction for trade clearly needs more development.

We also need to need to raise Auckland’s profile among investors.  Chinese investment in New Zealand is low at just $7 billion, The largest investments to date have been in infrastructure and facilities, but it is the primary and food processing sectors that perhaps holds greatest attraction.  Auckland has an acute need for foreign capital to achieve its growth goals, and we should be thinking more proactively about how to attract Chinese investment in key projects.  There are still too many anecdotal stories of Chinese investors finding little to attract them in Auckland.

For a city that prides itself as one of the world’s most liveable, Auckland could do better at getting Chinese tourists to spend more time here.  If Queenstown remains the jewel in New Zealand’s adventure tourism crown, surely Auckland can become the destination of choice for tourists looking for water based activities, cultural experiences or our natural environment while staying close to high quality accommodation and shopping.  More hotels and more attractions can only come with investment and with facilitated approval processes.

We’re far and away the centre for export education. Some 70% of recent tertiary enrolments from Chinese students are in Auckland.  Yet there is still a perception that Auckland can be an unfriendly and unwelcoming place to live and study.  The number of Aucklanders travelling to China to study is also too low.

Finally, Auckland must be a place that migrants from China, and elsewhere, can readily call home.  Sadly, many face ingrained attitudes and prejudices that make settling a challenge.  The housing debate too often fixates on the impact of Chinese immigration on house prices rather than the broader economic potential of our relationship with China and the contribution migrants make to the city. This needs to change- quickly.

In short, Auckland has a huge stake in a successful relationship with China.  If we want to build a prosperous, dynamic, internationally connected and enterprise-friendly city, we must recognise that a richer relationship with China is a key engine that will drive this.

(Published in the New Zealand Herald online edition, 12 October).

No this is not a trade war!

 In this article I argue for calm when trade issues arise.

Some years ago I wrote “when elephants fight, it gets tough on the grass”.  That was when the United States under President George W Bush was blocking steel imports from New Zealand and other countries.  It took a World Trade Organisation case to sort that out eventually and in New Zealand’s favour.

This time steel is in the news again but it’s an anti-dumping complaint which our industry – or so it is alleged – is taking against steel imports from China.  The quality of imported steel has been a lot in the news but anti-dumping is not about quality – it’s about whether steel is sold under the market price in the sending country and – critically also – whether this has had an injurious effect on the domestic industry.

Dumping is notoriously difficult to prove but it is, quite legitimately, a remedy available to domestic industry when it feels it is subject to unfair competition. The processes for these complaints are defined in the WTO Anti-Dumping Code and are referenced in the NZ China FTA.  Under the FTA New Zealand is obliged to inform China when a properly constituted anti-dumping application is accepted.  There is no mystery about this – it is part of normal trade relations between countries operating within a recognised framework of international trade law.

But mystery there has been over the last week or so as the Chinese reaction to the possible New Zealand case and others launched by other countries has been the subject of speculation.  At times the mystery resembled a game of Cluedo – who spoke to whom in China and threatened a trade war?

No-one should expect the Chinese Government to have been thrilled to learn of the possibility of another anti-dumping action.  But the actions described – messages passed New Zealand exporters to China, possibly from industry rather than official sources – hardly seem to reflect a deliberate strategy with the aim of dissuading action by the New Zealand Government.  In any event the likelihood of retaliatory action has now been dismissed by the Chinese Ambassador.

There are some bigger lessons to be learnt from all this.  First, trade disputes may sometimes happen, particular when global supply and demand pressures are brought to bear.  Fortunately we have, through the WTO and our FTAs, the rules, protocols and processes to deal with them and to ensure that they do not escalate into trade wars.  That’s the chief advantage of trade agreements which detractors fail to grasp.  Rules are better, especially for smaller economies, than no rules at all.

The second lesson is that when it comes to dealing with China we need to realise that this is a big country with layers of officialdom and complex Government ties with industry, with multiple points of contact with New Zealand businesses.The random acts of individual officials do not necessarily reflect the considered policy of the Chinese Government.   This is not to say that New Zealand companies operating in China should not be alert to potential risks.  Indeed it is good to see that our leading exporters in China have people on the ground who can hear the jungle drums.  But these messages need to be seen in context.

The third lesson, and one we have learned with a number of large economies including the United States, the European Union, Indonesia and even our good friends Australia, is that we are not without protection from the WTO in the event trade disputes are not possible to solve at the bilateral level.  In these circumstances a clear head and a firm resolve are the best ways to meet challenges head on.

In the case of steel we will have to see where the anti-dumping process leads.  We should not let this cloud our judgment or our overriding interest in continuing to build a multi-faceted relationship with China which is based firmly on the rule of law and mutual respect.

 

 

 



 

 

Stephen meets Chinese Ambassador HE Wang Lutong

As Executive Director of the NZ China Council Stephen was honoured to call on Chinese Ambassador Wang Lutong.  See a readout of their meeting here.

Stephen is appointed Executive Director of the NZ China Council

Stephen has taken over the reins – at least until January 2017 – of the NZ China Council, an organisation funded by government and business to promote a strong and resilient relationship with China.   Read more about the appointment here.  Stephen will continue his other roles working with a range of business and government clients at Jacobi Consulting.

Under the microscope: TPP and copyright

In this article Stephen is joined by copyright expert Ken Moon of A J Park to discuss the impact of TPP’s provisions on copyright in New Zealand.

“The TPP intellectual property provisions, while a complex set of legal commitments, will not result in much change to the way things are done in New Zealand except in relation to copyright term and TPMs. This is most certainly not simply “US copyright law” has been claimed”

See the article here

Emerging trade agreements

Stephen spoke to the Primary Industry Summit in Wellington on 25 May.  Read his speech here.

I’d like to start today by asking the question – why do we seek negotiate trade agreements in the first place, especially when they seem so hard to I’ll then give you a sense of where I, as business observer, think some of the more current FTA negotiations are up to.

I’d also like to venture some thoughts about what all this might mean for the primary industries.

The next generation of FTAs – what does business want?

While in Qingdao , China, for the APEC Senior Officials’ meeting Stephen spoke to a workshop focused on sharing information between free trade agreements in operation in the Asia Pacific region.  He outlined what business wants to see from FTAs and what the APEC Business Advisory Council (ABAC) wants governments to do at this point to develop the next generation of agreements:

“Next generation issues can be new approaches to old issues as much as new issues not previously thought of. Next generation issues are rather more likely to be found behind the border than at the border. And so more than ever before we need to devise robust processes to address non-tariff barriers and other “behind the border” issues. We need to develop greater coherence in rule making around the region and co-ordinate – to the greatest extent possible our approach to issues like investment, innovation and competition.We need to develop a stronger focus on services trade issues recognizing the by growing share of services trade in global commerce.We need to continue to work on the digital economy and try to incorporate new disciplines relevant to the way business is being done today, including permanent duty free access for digital products.”

Read Stephen’s full address here.

 

Busy year looms for trade negotiators

China is established as our main market and the TPP’s nearly a done deal, but there’s plenty more work to do.

Read Stephen’s article on the New Zealand Herald website.

Stephen to TV9 talks about NZ/US, NZ/China, trade, investment, TPP and regional security issues.

Stephen talks to TV9
Watch the video: Stephen talks on the TV9 Asia Focus show about NZ/US, NZ/China, trade, investment, TPP and regional security issues.