The Great Wall

It’s hard to separate last week’s contrasting media images of scuffles by pro-Tibet protesters from those of a proud NZ government delegation kowtowing to the beaming Chinese trade mandarins. So does anyone really believe that the freshly inked free trade agreement (FTA) will bring a flood of economic opportunities to the doorstep of the average New Zealander? China’s determination to protect the image of the Olympic flame at the cost of other nations’ sovereignty is instructive. They built the Great Wall for a reason didn’t they?

I’m not surprised that details of the agreement were kept under wraps until the day of the signing ceremony, some of the concessions made are real shockers. For starters the dairy products component is phased in over 10 years and China even then has an ejection seat clause should they decide that their own dairy industry is threatened. Estimates of the dollar value benefit for New Zealand vary, but appear to be in the vicinity of $200 million per annum, which frankly seems like peanuts in the face of a massive $3.7 billion trade deficit.

Secondly, since when did an FTA ever proscribe rules on migrant labour? “Working holiday” and general category visas for sought after trades are to be broadened immediately for Chinese entering NZ, but there is no reciprocity. Not that I would want to live and work in the most polluted nation on Earth, but tell me how this is fair. However, I look forward to reports of a flood of highly experienced plumbers, hotel chefs and software developers gushing forth from China eager to plug critical gaps in our labour force. The Qualifications Authority will have a field day navigating the rules on equivalency. Given the number of migrant doctors, lawyers and university professors already prowling Queen Street in taxis, one has to wonder where this new influx will actually end up.

So at first glance the FTA looks a bit like it was cobbled together rather more with a sense of urgency than any overriding economic logic. But wait there’s more! It turns out that, having already signed the agreement, our parliamentarians now finally get the chance to discuss it in Select Committee and debate it in The House. What happens if the bill doesn’ t pass? What if the weight of public submissions is against the Bill? Talk about potential for losing face.

The FTA is certainly a historic document and I agree that it will open other doors in the future and (probably) bring a net gain in export trade value to New Zealand, as advertised. As well, a ratchet clause levels the playing field if any other nation negotiates a better deal, therefore going first is not neccessarily a disadvantage. And if the WTO round falls flat, it is highly likely that APEC will set about developing a regional FTA that will now have to favourably include New Zealand. So perhaps I’m being a little unfair. The FTA seems very much like a strategic neccessity. But in our haste to supplicate Beijing could we have possibly overlooked too much detail?

On the technology front, the Prime Minister has curiously fingered software exports to China as a growth opportunity for New Zealand under the FTA. But industry leaders have indicated that the ICT sector is not thinking that way at all. Unless the FTA somehow enshrines and guarantees the protection of intellectual property, China is about the last place I’d be wanting to export software to right now. So if our much hyped knowledge based goods and services are out of the equation, that just leaves us with flogging dairy commodities to China’s burgeoning middle classes. Great stuff, but how can I personally share in that opportunity? Oh right – Fonterra still hasn’t gotten around to listing – bugger!


New Zealand Trade and Enterprise has an informational website and seminar events planned on the topic of trade opportunities with China. Key outcomes of the FTA can be found here.

9 thoughts on “The Great Wall

  1. I’m not so negative about the FTA, but that’s to be expected, I guess, considering I live in Beijing.

    “But in our haste to supplicate Beijing could we have possibly overlooked too much detail?”

    I wouldn’t call it supplicating, necessarily, but I would not be surprised if details were overlooked. Kiwis have a reputation here for not knowing how to do business, the reputation is deserved, and I wouldn’t be surprised if it applies to government bureaucrats, too. I also object to the word “kowtowing”.

    “China’s determination to protect the image of the Olympic flame at the cost of other nations’ sovereignty is instructive.”

    Are they stepping on other nations’ sovereignty? Or is that just another marketing tactic from the media? Fear sells papers, remember, and there’s nothing better than fear of the rising power in the East.

    As for dairy, I wouldn’t worry. Judging by the interactive map on their user not very friendly website, Fonterra already has plenty of production bases in China- mostly around Hebei, which is not surprising considering they have an office in Beijing, but not good considering how much water industrial dairy uses and how little water north China has. And those of their products which can survive an 11,000 km trip without passing their use-by dates are easily available in those supermarkets that cater to foreigners- Chinese people are consuming more dairy, but they still don’t like cheese unless its on a pizza. I really don’t think the FTA or its apparently unequal clauses related to dairy will have any effect on Fonterra’s business.

    ““Working holiday” and general category visas for sought after trades are to be broadened immediately for Chinese entering NZ, but there is no reciprocity.”

    There’s no reciprocity because its absurdly easy for anybody from a developed nation to get a visa for China as it is. A regular English teaching job at any state school from kindy- right through to university-level counts as a working holiday- the pay ain’t great, but it’ll fund all your travel around China, and you’ll be working 12 – 16 hours per week with very little paperwork to do.

    “a flood of highly experienced plumbers, hotel chefs and software developers gushing forth from China eager to plug critical gaps in our labour force.”

    Not likely at all. China has a desperate shortage of skilled labour as it is, in both the trades and things like engineering and middle management, and tradesmen won’t be flooding to NZ even if they could afford the ticket because they won’t have the necessary English skills. Even with Auckland’s large Asian population there can’t be that big a market for tradesmen who can only speak Mandarin and their local dialect to make a decent living. Chefs and language teachers are desperately needed, if there isn’t already a market for Mandarin-English bilingual tour guides, there very soon will be, and you won’t need to worry about TCM doctors driving taxis because they’ll be setting up their own alternative medical practices, not trying to break into the state/mainstream system.

    But that does raise one worry- does anybody in the Ministry of Health have the expertise to regulate TCM practices? I suspect not, and that lack of expertise leaves a door wide open to charlatans.

    Lawyers? If they’re focussing on China business law, then NZ needs them- see me comment above about the reputation of Kiwis here.

    University professors? If our university managements have any sense they’ll be expanding their Chinese and Asian Studies departments. Just like language teachers, we need these people.

    As for tech, I understand your concerns, but Chinese companies are starting to succeed in software despite the pirates. Anyway, China’s strength is in hardware.

    Actually, I see plenty more opportunities for NZ business in China. Norsewear just signed a deal, did they not? And NZ, with good marketing, could- no, should be doing a lot more to raise its profile and create a good reputation here. Why not market NZ wool products as being the best quality in the world? What about possum fur? And wine? NZ wine is really hard to find here, but why limit it at exports? North China’s mountainous areas very similar in terms of geography and climate to Central Otago and are starting to produce some pretty good wines. Why shouldn’t NZ wine producers get in on this? And I’m sure NZ’s tech types could find ways to make things work, too.

    I have no doubt the FTA will pass- both Labour and the Nats support it, and that’s more than enough to get it through. My only worry about it is: Will NZ business (finally) step up to the plate- learn how to do business here and grab the opportunities the FTA opens up to them to get a head start before the Aussies and other, bigger players jump in? Better hurry up, because the Chinese coverage of the FTA made it pretty clear that from Beijing’s point of view, this is only one step towards bigger, better, brighter opportunities. They’re using our FTA as a model for future FTAs with other developed nations and to encourage them to hurry up and start negotiating. It’s working so far, too, ol Kev Rudd has agreed to reopen Aussie’s negotiations.

  2. Hi Chris and thanks for the informed opinion, I figured I would be hearing from you.

    We get that the FTA is disconnected from burgeoning demand for protein in Asia. Fonterra will do well whatever happens. I’m just steamed that I can’t benefit directly. Re software – I get approaches from Chinese developers wanting me to market their services here. Although we are short of software geeks, the local industry is still very wary of outsourcing to China or India because of perceived issues of quality and poor IP protection.

    Re the employment migration issue, it is a bit of a red herring, hence the note of irony.

    I hope I didn’t come across as too negative. On the whole I think the FTA is at worst neutral and probably slightly beneficial to NZ and certainly a strategic neccessity. Yes, I saw the Norsewear announcement which was no doubt timed appropriately. I’ve stated here and elsewhere that the FTA will open doors. It is up to NZ businesses to figure out how to leverage it. Maybe we need help from Kiwis such as yourself who can bridge cultural barriers to trade?

  3. Interesting comments guys.

    I figure NZ didn’t have much of a choice in the matter. Over time it has to have an open economy in order to get its exports out which it is very dependent upon.

    I’m interested in the perception from Wangbo that NZ is not too smart in doing business. Well look at our government for starters. They have no clue at all.

    But it reinforces who the boss is here. China more and more will start to flex its muscles internationally. The growth in commentary from Chinese bloggers is notable also. The recent Tibet actions have seen lots of two way debate which is new. I wonder if people are ready for this.

    It certainly makes for interesting times.

  4. Paul, I’d love to put my skills and experience to better use helping NZ businesses, but in my experience, NZ’s business leaders don’t value cultural and linguistic skills.

    Raf, check out this report in the NZ Herald:
    And to back that up, six weeks ago I was at the Kiwi Club (at the NZ embassy in Beijing, last Friday of every month except December, starting 6pm, feel free to come along if you’re in Beijing) talking to a woman from NZTE and a former colleague, and we all agreed with what’s in that report: Kiwis show up, do a deal, then disappear, then wonder why their business doesn’t go so well. Our business leaders need to learn to slow down and learn about the language and culture. The woman from NZTE pointed out that Fonterra had been working in Taiwan and Hong Kong for 20 or 30 years before coming to the Mainland, and so capitalised on that experience of doing business in a Chinese cultural environment. The rest of our business community desperately needs to learn from Fonterra or the FTA will be a waste of time.

  5. Chris, I think it’s a great idea and I’d be happy to circulate your details through the ION newsletter (publishing tomorrow) and through my other networks. Can you post a short paragraph that succinctly describes what you can offer?

  6. Thanks for the link to that story. It reminds me of a story Vincent Heeringa did at Idealog last year about the desire to own a bach, boat and BMW and that was it really.

    The desire of Kiwis to create real wealth is not comparable with that of other countries. Yes its a big part of the Kiwi culture….laid back and chilled out. The same with Aussies except they love to win and are super competitive, which always gives them an edge.

    It’s a shame because Kiwis have a great brand.

    But farmers aside, the work ethic seems to have gone walkabout. It’s all about leisure and consumption. That’s great but you still have to generate something to pay for it all. The Chinese and Indians are coming full steam ahead and as one wag wrote recently (can’t remember who), New Zealand will be the cheap labour economy one day.

    I wrote some time ago about the process of reverse colonisation that is going to occur. It will be a very rude shock to many. Reminds me of the school i attended in London. When i was there 1980-84 out of 800 boys there were maybe 10-20 Asians (by that i mean Indians and Chinese). About 10 years ago I interviewed a guy who had left recently and he told me the school was 50% Asian now.

    New Zealand is adrift in a sea of complacency, mediocrity and welfare. Ok maybe that’s harsh but I think there is a kernel of truth there. 9 years of Labour hasn’t exactly done much for the country as it’s ridden the coattails of a global economic boom.

    As for Winston Peters don’t get me started!

  7. Sorry, Paul, think I missed that newsletter.

    But here is my linkedin profile, for those who might be interested:

    What I offer first and foremost is language skills, particularly Chinese, and 8 years experience living and working in China.

    I’m not really looking for a job right now, that comment was a sort of wistful aspirational thing. Right now I’m working on a couple of little projects to make myself more employable, something more than just “English teacher” to put on the CV. Still, I’m open to all possibilities.

    Raf, you’ve summed up quite well why I prefer to live in China.

  8. hi,
    most kiwis still have the perception that china is a poor third world country thanks to western media bias.
    NZ has a good international reputation no doubt but after living in auckland for quite a number of years now. i realise the people’s attitude does not match that reputation.
    just look at the number of kiwi learning mandarin in NZ is far lack behind many countries like US, UK & even France.
    Kiwis still live in the colonial age thinking only English is migthy.
    I came across Koreans who worked in Malaysia seeking pivate mandarin tution in a country where English is the common language. In Auckland Koreans are learning Mandarins in the chinese-run community centre. I don’t see many kiwis in those classes.
    Kiwi should discard I-mightier-than-thou attitude if they were to catch up the wave of globalisation. Chris (wangbo) is right, NZ will become a low wage country. The GDP per capita in Shanghai and Zhuhai may have even surpassed that of NZ’s
    But China still have a huge underclass population to feed. Give them time they will come out alright.

  9. Soon, you have an excellent point about Kiwis and language learning and our mindset. What I liked most about the FTA was the extra visas for Chinese language teachers (and I’m hoping that helps my wife when the time comes- she’s an excellent teacher). One thing that has really disturbed me in China is the number of fellow Kiwis who boast- yes, boast!- about how they haven’t bothered to learn Chinese after so many years here. And my experiences as a French major way back in my university days….

    Yup, Kiwis need to wake up to the reality of a multi-lingual world. English monolingualism just doesn’t cut it anymore.

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