The big news of the moment is that New Zealand and China have signed a free trade agreement. The NZ market would be lost in the roundings of most Chinese exports, and NZ is already tariff-free for most Chinese goods, so what’s in it for China? A huge precedent, that’s what. This is China’s first FTA with a developed nation and will attract world-wide attention. It proves to the rest of the world that China can and will cut a fair deal if the circumstances are right. China cuts out a lot of noise in future negotiations. The deal with New Zealand will act as a clean template for future deals with more powerful nations, which might otherwise become entangled by petty domestic politics, tortuous negotiations, delays, and “special arrangements” - the bane of such deals. China can now point to its NZ agreement and say “that’s the model we’re happy to accept, so let’s get on with it”.

A few Kiwi naysayers are predicting NZ job losses. They’re missing the point. Notwithstanding that NZ has a labour shortage and needs to free up scarce labour for more valuable activities, most Chinese goods already have tariff-free access, and most import-driven restructuring has already happened.

New Zealand gains tariff-free access for most goods and service categories (except forest products and professional services, which leaves something on the table for future developments). That’s good news for NZ commodities, food, beverages, and high value specialist manufactures. And for a while, New Zealand will enjoy a window of opportunity while it is a star international trading partner, which should enable a lot of Chinese doors to be opened and friendly deals to be done, before the bigger players get their FTA deals in place.

Some people mistakenly think China buys cheap. My experience is different. Chinese customers buy the best when they understand and want the value proposition (be it a hard-nosed business case, or an emotional one such as status). My old firm Deltec did a lot of business in China, thanks to a great product, smart marketing, and a savvy local distributor (an ex-employee). We held our price for 3 years, while competitors without our Teletilt technology fought fierce price wars. We’d probably have done even more business if an FTA deal was in place then.

This agreement is a good one for both countries - clean, tidy, fair and both sides get what they really want out of it. Everyone else will be rushing for a deal with China now. Kiwis would be advised to make hay while the sun shines.