Tim Groser

Beijing, China

I am delighted to join KEA China and your guests here in Beijing this morning. It is skilled professionals like you, not just the intrinsic strengths of the NZ economy, who count amongst our most successful exports to China. You represent a vital resource that "NZ Inc" can learn from if we are to maximise the immense opportunities China provides.

The New Zealand government has been very pleased to support the establishment of KEA networks around the world, none more so than in China. This has been a wise investment, confirmed by the strong partnership that our Embassy and Consulate-General in Shanghai enjoy with KEA China today.

China Looms Large for New Zealand, Asia-Pacific and the World

I don't need to remind this audience that China has never been a more important economic partner for New Zealand. This was illustrated by the Prime Minister's determination to visit China as his first bilateral visit abroad after Australia in 2009.

China is our third largest trading partner after Australia and the United States. Two way trade exceeded NZ$10 billion in August 2009 - a robust 12 percent annual increase.

China has also edged out Japan to become our third largest export market. The value of exports to China for the 12 months ending November 2009 totalled NZ$3.56 billion - a remarkable 47 percent increase from the previous year.

The increase in New Zealand exports to China over the past year - some $NZ1.1 billion - is not far behind New Zealand's total exports to Korea, and everyone understands the importance of Korea to New Zealand. In other words, in some 12 months, and with only a little exaggeration, we have added another Korea to New Zealand's export drive.

This is not just a story about dairy exports, significant as they are. Dairy accounts for more than 25% of New Zealand's exports to China. Exports across a wide range of products have grown strongly - meat, wood products, wool, kiwifruit and wine. While commodities still dominate our export basket to China, processed foods and beverages and some niche manufactured goods have also performed well.

With tumultuous economic times in 2009 impacting severely on global trade, China has played a major role in sheltering New Zealand from the impact of a global recession. Many New Zealanders owe their jobs and livelihood to the resilience and dynamism of the Chinese economy. Through living and working here, you are first hand witnesses to the process by which China is asserting its global importance.

In some ways, it may be more accurate to say China is 'reasserting' its global role. If you go back to 1750, it is estimated that China represented some 30% of global GDP. From a low point of around 5% of global GDP in the mid 1970s, China is probably around 18-20% of global GDP and we know that relative importance will increase.

This is not some minor academic point. China is clearly providing one of the engines for economic recovery in 2010. The latest IMF projections have China's economic growth averaging 9.6 percent (almost back to pre-crisis growth rates) over the next five years, with China set to account for 60 percent of Asia's economic growth over that period. We welcome the important and constructive role that China's US$4.9 trillion economy is playing regionally and globally.

New Zealand-China FTA Makes an Encouraging Start

The strong performance of New Zealand exports to China has paralleled the entry into force of the New Zealand-China Free Trade Agreement. Wider market forces, including robust demand for some of our key exports (notably for dairy and wood), has been a dominant factor in the trade equation. Nonetheless, the reduction in tariffs on New Zealand's exports to China (three rounds of tariff cuts to date) has contributed to export growth. Its impact will continue as tariffs further reduce and are eliminated. China's tariff on New Zealand wine, for example, has reduced to 5.6 % this year and will be zero in 2012 (compared to a base rate of 14%). The duty on our kiwifruit is now 13.3% (compared to a base rate of 20 percent) and will be zero in 2016.

New Zealand is proud to be the first developed country to conclude a comprehensive and high quality FTA with China.

The FTA encompasses 96 percent of our exports to China. The FTA provides an invaluable platform for our exporters to expand their presence in the Chinese market. It gives us a decisive head start in a competitive and tough market. At a time of global economic crisis, the New Zealand-China FTA also provides a strong message of the importance of expanding trade rather than resorting to protectionism. Despite our vast differences in scale, the lifeblood of both our countries is trade.

I would like to acknowledge the help and cooperation of the Chinese Ministry of Commerce (our main partner in FTA implementation) and other Chinese agencies in the progress that has been made to date in putting the FTA into practice. There has also been proactive coordination by the New Zealand agencies responsible for implementing the FTA, both at home and on the ground here in China.

China Skills Vital

As you can attest, there are real challenges and demands in working in China, but equally the rewards are immense. It's vital therefore that New Zealand builds up the necessary "China skills" to support our trade and economic interests and ensure that the FTA meets its full potential. Key government agencies are now well represented on the ground in China - the days when all roads led to the High Commission in London have long gone.

It's good to see that under the temporary employment entry provisions of the FTA, a first group of Mandarin language teaching assistants from China will be starting work in New Zealand secondary schools this year. This initiative has been jointly organised and funded our two Ministries of Education.

Can I also acknowledge the Chinese government's role in establishing Confucius Institutes at Auckland and Canterbury universities to promote the Chinese language and a greater understanding of China. This is paralleled by the good work that the Asia NZ Foundation is doing to improve New Zealanders understanding and familiarity with China and its people. I have a personal stake in that long-standing commitment of the Foundation to the NZ-China relationship, since I had the privilege of being the Foundation's Executive Director at an earlier stage in my career. Equally, KEA China has an important role to play in this process.

Partnership with the New Zealand business community is essential as we take the FTA forward and deliver tangible commercial benefits. A first review of the FTA's initial progress is mandated for this year (a joint New Zealand and China exercise) and we will be consulting closely with the private sector through this process.

Food Safety an Important New Strand in the Relationship

Food safety is an important new area of cooperation between New Zealand and China. A comprehensive government-to-government food safety cooperation programme is evolving. This brings together New Zealand's expertise as a food exporter and the emphasis that China is giving to implementing its new Food Safety Law. Initiatives to date include five food safety scholarships for Chinese officials, who will commence studies at New Zealand universities this year; and targeted shorter study programmes in food safety and dairy farmer training. A number of other cooperation initiatives are underway as part of the FTA work programme.

Business has a key role to play in adding value and sustainability to food safety cooperation. Much of New Zealand's technology and expertise in the agriculture and food safety sector lies with business. Some New Zealand companies are already active in China. We encourage food safety linked businesses to take advantage of the FTA and develop opportunities for their products and services in China. As part of this process, my colleague the Minister of Agriculture, Hon. David Carter, will bring a business delegation with him when he visits China in March. We hope that that his visit will help facilitate and introduce companies to the Chinese marketplace and foster new business opportunities.

Shanghai Expo: Major Focus for New Zealand in 2010

Expo 2010 in Shanghai is one of the major events in this year's global calendar. As with the Beijing Olympics, it represents a landmark and signature event for China on the world stage. The Expo is a unique opportunity for New Zealand to leverage its interests in China. It's a "no brainer" that we need to be in Shanghai and do it well. The government has made a significant political and financial commitment to the Expo and we have to maximise that investment. We will have a distinctive and impressive New Zealand pavilion that will illustrate New Zealand's traditional strengths of scenic beauty as well as highlighting our creative, innovative and technological assets.

In the course of the Expo we are planning six missions to China led by Ministers, including the Prime Minister who will officiate at New Zealand's national day. As you can testify from your time in China, for missions like these to be effective and open doors, ministerial leadership and input is essential. It's the visibility and "face time" that counts.

You will also see me back in China as part of this process. I look forward to next returning to China in March to open New Zealand Trade and Enterprise's new Shenzhen office. NZTE also plans to have its Qingdao office up and running by the middle of 2010.

Over the past two years KEA has been involved in the preparation for the Expo and many of you have offered your thoughts and advice, for which we are very grateful. You are key stakeholders in this NZ Inc enterprise and your ongoing support and partnership is vital throughout the Expo year. I would also encourage all of you to make use of the corporate hospitality that the pavilion will provide.

Climate Change

Given my responsibility for climate change negotiations, let me touch on this key global issue and the important role of China in addressing climate change. The Copenhagen Climate Change Conference tested the politics of the possible. It is clear that a UN-style negotiating process alone is unlikely to deliver an effective global agreement in the near future.

A new climate change treaty must shift from limited participation to comprehensive global coverage. We need international commitments from all major emitters that accommodate diverse national approaches to mitigation and adaptation. We need leadership from major economies. They need to listen to the voices of vulnerable nations that are facing the harsh realties of climate change. In New Zealand, we are acutely aware of the challenge climate change poses for our Pacific Island neighbours.

We must change attitudes and harness the private sector in order to: drive low-carbon development, spur innovation and deployment of technologies, and influence priorities for finance and investment. A new global climate deal must be durable - with in-built capacity to evolve over time - to keep up with scientific knowledge, technological breakthroughs, and economic and social development.

Copenhagen demonstrated that achieving that sort of deal is extraordinarily difficult. It is difficult because climate change and its responses reach right into the heart of nations, into our economies and our societies. The solution to the challenge of climate change is beyond the capacity of the mightiest of countries; international cooperation is the only way forward. It will have to take place across all fronts - science, technology, finance, economics, trade and investment.

New Zealand was pleased with the launch of the Global Research Alliance in Copenhagen, which establishes international cooperation in the field of agricultural greenhouse gas research. Agriculture plays a vital role in food security, poverty reduction and sustainable development. The world needs to increase food supply by 50% over the next 20 odd years. The agriculture sector currently contributes around 14 percent to global greenhouse gas emissions.

There are many opportunities for the sector to contribute to emission reductions and carbon sequestration. To realise these opportunities it will be essential to develop research breakthroughs in agriculture to ensure that the world does not face an impossible choice between food security and climate change.

Agriculture is an important sector of climate action for both New Zealand and China, and one of the focus areas for our bilateral climate change cooperation. We believe the Global Research Alliance will bring real opportunities for its members, and very much hope that China will join us in the Alliance, along with other major developing country members such as India and Indonesia.

Conclusion

This has been a wide ranging address, but I wanted to highlight the extent and depth of NZ-China relations and assure you of the Government's commitment to further strengthening trade and economic linkages. New Zealand has deliberately sought to be a first mover in developing our relationship with China - you may be familiar with the concept of "the four firsts".

New Zealand was the first developed country to:

conclude a WTO accession with China;

recognise China's market economy status;

commence FTA negotiations with China; and

conclude an FTA with China.

Now that we have become the first country in the world, other than China itself, to conclude a comprehensive FTA, or Comprehensive Economic Partnership to use the correct term in this case, with the separate customs territory of Hong Kong, I would argue we can now talk about the "five firsts".

We need to maintain this strategic, pro-active approach to our engagement with China. We have built up a dynamic and well targeted relationship. This requires constant hard work and persistence, and we have already seen the rewards of this effort. We can't rest on our laurels though - China is moving fast and New Zealand and the world is still in catch up mode. KEA China's collective experience on the ground gives you an unrivalled role in sustaining and advancing New Zealand's relationship with China.

I look forward to hearing more from you during the rest of the time that we have this morning.