How the US-China trade war could affect New Zealand

COMMENTARY:

With a trade war between two of the largest economies in the world, China is more likely to be willing to accept more favorable conditions when upgrading its free trade agreement. exchange with New Zealand. In late May, the government announced that the next round of negotiations on the modernization of the FTA would take place this month.

Regardless of the June target, the timing of these talks is particularly interesting given that China and the United States

On June 15, the Trump administration announced that 39 it would impose a 25% tariff on Chinese products up to 50 billion US dollars (73.8 billion US dollars) to protect US intellectual property and technology. China reacted by imposing US $ 34 billion of US trade in US products, including agricultural products.

New Zealand may have some short-term benefits if Chinese producers replace some US products in China.

where our FTA talks can help, to position these short-term opportunities as long-term realities. And the Chinese can be grateful if we show good faith, which we have done in the past.

New Zealand was the first country to support China's accession to the WTO and the first developed country to recognize China.

This helped New Zealand become the first developed country to negotiate and sign an FTA with China. Trade Minister David Parker said that if the free trade agreement is upgraded as planned, it will be a modern and inclusive agreement focused on the future of the free trade agreement. Environment, competition, e-commerce and market expansion. trade in services

Parker acknowledged that the chapter on electronic commerce proposed in the revised EFA is of particular importance to New Zealand.

This is a difficult question as the government undertakes to reform its GST rules on online shopping. likely to imagine the headaches this could cause to New Zealand exporters if China adopted a similar rule and if New Zealand exporters had to register for VAT in China?

It is interesting that Americans cite restrictions on US investment in China as one of the causes of current tariff charges.

This refers to a Chinese policy that obliges any foreign company investing in China to form a joint venture with a Chinese company.

The accusation is that these joint ventures allow Chinese companies to steal trade secrets.

However, what is often omitted is that China no longer needs these joint venture rules in many industries, as several sectors are already competitive.

Closer to home, New Zealand will soon introduce restrictions on foreign ownership of residential properties.

When China introduced its restrictions They did not know that their problem was not about foreign investment, but the lack of competitiveness of their key industries.

For New Zealand, it is simply a question of reducing the demand for an asset class.

The fact is that the number of homes we build is lower than it was in the mid-1970s, although we were building more in terms of total area.

To put this in context, in August 1974, 38,000 new dwellings were granted, representing a total area of ​​4.2 million square meters.

In August 2016, 30,000 new homes were granted representing a total area of ​​5.4 million square meters. Thus, 40 years later, even by total area, the construction of new houses has only increased by 29%, while the total number of new houses has decreased.

Restrictions like the ones that are proposed are sometimes necessary for they are simply the means to help solve the problems.

From another angle, the decision of Minister Phil Twyford to ask foreign companies to express their interest in creating or expanding off-site manufacturing plants to make KiwiBuild homes are welcome, encouraging the Development of new technologies in the property and construction industries should not be limited to KiwiBuild.

Major construction projects can also benefit from new and better methods and materials. ] Perhaps the restrictions on foreign investment from New Zealand should also be strategically focused on the development of construction technologies here.

Chin has solved many problems that they hoped to solve through joint ventures, and can now continue without restrictions. Can New Zealand do the same? There may be other good things that we also want strangers, not just their money.

– Jenny Liu is a tax partner of Deloitte in New Zealand and leader of Deloitte's China Services Group.