How Can The Sino Singapore Free Trade Agreement Be Mutually Beneficial?

Experts point out that because of the relatively small scale of economic development, the direct benefits of New Zealand from the new China free trade agreement must be greater than that of China, and the main advantage that China obtains is indirect. The signing of the agreement will prompt western countries to focus on seeking fair and win-win trade and dealing with China's economic and trade issues.

In April 7th, New Zealand became the first developed country to sign a free trade agreement with China.

Under the testimony of Chinese Premier Wen Jiabao and New Zealand Prime Minister Helen Clark, Chinese Minister of Commerce Chen Deming and New Zealand Trade Minister Phil gove signed a bilateral free trade agreement in Beijing.

The agreement covers trade in goods, trade in services, investment and many other fields.

Mei Xinyu, an Associate Research Fellow of the international trade and Economic Cooperation Research Institute of China's Ministry of Commerce, told reporters that the direct benefits of New Zealand from the agreement must be greater than that of China because of the relatively small scale of the economy. The main benefits China has obtained are indirect, that is, it can give other western countries a demonstration role in giving China Fair Trade treatment and concentrating on dealing with China's economic and trade issues in seeking mutual benefits.

According to the above agreement, the new side is committed to cancel all tariffs on imports from China by January 1, 2016, of which 63.6% of the products will achieve zero tariffs from the time the agreement comes into effect. China is committed to cancel tariffs on 97.2% products imported from New Zealand by January 1, 2019, and 24.3% of them will achieve zero tariffs from the time the agreement comes into effect.

In addition, the two sides also made commitments for trade in services higher than the world trade organization, and made specific provisions for the movement of personnel, including skilled workers.

According to a statement issued by the New Zealand government after the signing of the agreement, the agreement will take effect in October 1st.

Specifically, China's import tariffs on New Zealand dairy products will be abolished in the next 12 years. Tariffs on meat and New Zealand fruits will be abolished in 9 years, while seafood and apple tariffs will be abolished within 5 years.

In response, New Zealand will cancel tariffs on textiles, clothing and footwear imported from China in 9 years.

At present, the tariffs on dairy products exported to China are 15%, the tariffs on fruit and meat are 20%, and the tariffs on textiles, clothing and footwear exported to New Zealand are 14%.

The New Zealand government estimates that the number of the middle class in China exceeds 100 million, equivalent to the total population of Spain and the United Kingdom.

The population of New Zealand is only 4 million.

As incomes increase, Chinese people are spending more on food and consumer goods. The middle class wants to increase consumption of high protein foods such as beef and mutton, and New Zealand can satisfy these people's increasing demand for Western food such as mutton, butter, cheese and fish. This will help the Pacific island countries to slow down the domestic demand because of a record high interest rate.

Phil gove said last month that the free-trade agreement, which is expected to increase exports by only 1% in the first few years, will create jobs and promote the long-term growth of New Zealand's $104 billion economies of scale.

Data show that in the year ending February 29th, New Zealand's exports to China increased by 8.1% to 2 billion yuan (US $1 billion 600 million), and China has become the fourth largest export market in New Zealand.

New Zealand's total exports to the world are 38 billion, accounting for 30% of the total economy.

Gough predicted that the agreement could increase the export volume of New Zealand for up to $350 million a year.

Matt Robinson, an economist at Moodie's economic network, wrote in a note to reporters that the agreement would also reduce New Zealand's dependence on the declining US economy.

According to the current development trend, China will catch up with the United States to become the third largest trading partner of New Zealand in a few years.

Of course, the increase in exports may not be enough for New Zealand's economy to avoid the negative impact of record high interest rates on consumer spending and real estate this year.

Housing sales fell to 7 years low in February, and house prices have been falling since last November.

According to Peng Bo's median forecast for 12 economists, the growth of New Zealand's economy this year is likely to slow from 1.7% last year to 1.7%.

Gibbs, chief economist of Deutsche Bank in New Zealand, said that although FTA is usually beneficial to the economy, it is not a panacea for New Zealand's economic problems. "The question is not whether there is demand, but whether we can produce more without inducing inflation."

Matt Robinson said the agreement is also good for China, which can increase about 80 million New Zealand's exports to New Zealand every year.

At present, China's total exports to New Zealand are 5 billion 500 million yuan.

Mei Xin Yu believes that the direct benefits brought about by the agreement are not particularly prominent for a large country like China.

The benefits are mainly indirect, namely, giving other western countries a demonstration effect in giving China Fair Trade treatment and dealing with China's economic and trade issues.

Mei Xin Yu said that for New Zealand, China is its important trading partner, while for China, New Zealand is only a relatively small trading partner.

Therefore, the benefits of the signing of the Sino Singapore Free Trade Agreement are mainly indirect to China.

"First of all, China's prerequisite for free trade negotiations is mutual recognition of each other's market economy status. As the first western country to recognize China's market economy status and sign free trade agreements with China, the action of New Zealand has demonstrative effect.

Second, the signing of the agreement can inspire western countries to focus their efforts on dealing with China's economic and trade issues in seeking mutual benefit rather than creating and intensifying disputes.

For China, this demonstration effect is a little far away from Europe, the United States and Japan, but the incentive effect for Australia is more prominent.

Because Australia has already signed a FTA with New Zealand, the signing of the FTA agreement between New Zealand and China may be relatively large.

If Australia does not speed up its negotiation with China, some of its existing businesses may be diverted.

He said so.

At present, the trade between Australia and China is much larger than that of new China trade. In July last year, China became Australia's largest trading partner.

Last year and the first two months of this year, the total trade volume of the former was 10 times higher than that of the latter, and the trade growth rate exceeded 30%.

Australia, South Korea and Peru are negotiating a free trade agreement with China.

In addition, Mei Xin Yu also said that in the past, China has always been passively connected with international practice, but now it hopes to strive for more fair trade treatment.

The signing of the Sino Singapore free trade agreement shows that, in dealing with those unfair trade rules, although China can not solve the problem once and for all through multilateral channels such as the world trade organization, it can still get a fair treatment in the regional framework.