Limited Expectations for Market Access: New Zealand Prime Minister's Visit to China Amid Trade Tensions

Expectations for market access breakthroughs are low among primary exporters as Prime Minister Chris Hipkins prepares to meet his Chinese counterpart in Beijing this weekend. Hipkins, accompanied by a 29-member business delegation, will be the first New Zealand PM to visit China since Jacinda Ardern's trip in 2019. Representing the country's largest primary industry interests, companies like Fonterra, Synlait, Silver Fern Farms, Alliance Group, and Zespri will be part of the five-day trip, including visits to Shanghai and Tianjin. With China yet to regain its pre-pandemic growth rates, the exporters are eager to gauge the pulse of their largest trading partner.

During the visit, geopolitical and trade tensions will take center stage as Hipkins meets China's President Xi Jinping on Sunday. It has been over a year since China controversially applied to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) trade agreement. However, CPTPP members such as Canada, Australia, and Japan have expressed skepticism about China's commitment to upholding the required standards of free trade for entry into the 11-country agreement. Former top trade official Charles Finny noted that while CPTPP countries have focused on considering an earlier application by the United Kingdom, the imminent ratification of the UK's accession in July makes it challenging to maintain that argument for much longer.

There is a possibility that Hipkins may face pressure from Xi to pledge New Zealand's support for an easier path to membership for China. However, this approach carries significant risks, as granting China's demands, such as the continuation of massive subsidization for state-owned companies, could discourage the United States from rejoining CPTPP and dissuade other countries like South Korea and Thailand from seeing the value in joining. The purpose of CPTPP is to establish high standards, encourage further participation, and exert pressure on the rest of the World Trade Organisation's members to come on board. Lowering these standards now would be deeply disappointing, according to Charles Finny.

Kimberly Crewther, the executive director of the Dairy Companies Association, emphasized the importance of maintaining CPTPP's standards and supporting broader trade liberalization and regional economic integration objectives. She acknowledged that the dairy trade with China is generally in good shape, with tariffs on milk powders on track to be eliminated on January 1 as scheduled under the 2008 free trade agreement. While there have been efforts to have the tariffs phased out earlier, it is not seen as a realistic prospect in the near future.

Sirma Karapeeva, the chief executive of the Meat Industry Association, mentioned that the industry is currently re-certifying all export licenses as part of a digitization project undertaken by Chinese authorities. This project affects all fresh food imports into China but has not caused any disruptions to exports thus far. However, access for high-value chilled and other products remains restricted for some exporters. There are no expectations for announcements regarding the expansion of access during Hipkins's trip, as had occurred on previous visits to China by New Zealand prime ministers, according to Karapeeva.