China FTA and Manufacturing
New Zealand manufacturing has been hit hard by the free trade agenda of the last two decades. Manufacturers endured a rapid increase in imported goods and reduced tariffs. Thousands of people lost their jobs. So the trade agreement to give preferential trade access to China was nothing new for the 250,000 New Zealanders who work on our manufacturing sector. In fact for many of them it is an improvement because it delays some tariff reductions and provides more certainty for manufacturers.
But what the agreement does mean is that Chinese manufacturers will have more and easier access to put their goods on the shelves of New Zealand shops. That means New Zealanders who want to buy Kiwi made goods will need to look even harder to find that 'Kiwi made' logo. New Zealand manufacturers could face increased competition from manufacturers who have their goods produced in a country that, on average, has lower wages and fewer protections for working people.
The latest statistics from our Overseas Merchandise Trade show that last year we exported $2.0 billion dollars worth of stuff to China. But we imported $5.6 billion dollars worth of stuff.
That's a total trade deficit of $3.6 billion with China alone (our trade deficit with the rest of the world tells a similar story) – up by over $0.6 billion from only the year before.
Research from 2006 shows that the benefits to the New Zealand economy for every $1m of imports that we replace with Kiwi made goods are:
- The creation of 11.16 jobs
- Government income tax revenue increases by $117,214
- In total an additional $1 million of value added manufacturing results in $2.16 million of initial value plus downstream value added.
Yet a free trade agreement with China will mean we import more Chinese stuff, not less. So you can start doing that calculation in reverse.
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