Free Trade pacts promote bilateral trade

Free Trade Agreements (FTAs) are seen as the single most important avenue for fostering bilateral trade and multilateral trade in the case of pacts signed with regional blocs.

Expectations are high with the on-going discussions between the Indian and New Zealand government to reach a pact that would boost trade ties. The seventh round of talks held in Wellington last month between the officials of the two countries has given much hope of an early agreement being signed.

But we have always cautioned against over-optimism, especially since there are a number of imponderables that must be overcome before New Zealand and India can ink a deal.

However, FTAs are becoming a norm around the world and with the World Trade Organisation and the Doha Round in jeopardy, most countries see bilateral agreements as the ideal method to improve their trade prospects.

Trade blocs such as the Association of South East Asian Nations (ASEAN), the European Union (EU) and the Arab Gulf Cooperation Council (AGCC) are seen as ideal platforms for FTAs, giving signatories to FTAs distinctive advantage.

New Zealand could be cited as a good example. As a seafaring nation, the economy is dependent on exports to promote its high quality dairy products, wool, machinery, software and a number of other items.

While Australia remains the closest trade partner, New Zealand has been looking at other countries for agreements to boost its international trade.

The FTA signed with China two years ago a similar pact with ASEAN have opened up several possibilities for New Zealand.

The Government is to shortly enter into negotiations with India for a free trade pact but the process will be long-drawn and intense.

New Zealand is also in talks with the AGCC for an FTA.

Boost to Shipping

Shipping has always been a cornerstone of the New Zealand economy and its waters are open to ships from all over the world. The shipping industry, comprising shipping, forwarding, clearing and removal agents, will be a major beneficiary as international trade eases with FTAs.

Although shipping costs have gone up in recent years, a decline in trade barriers, the precipitous drop in the price of getting exported goods to foreign markets around the globe has had a huge impact on world trade.

Most shipping lines have expanded and modernised their fleet to cope with the rising demand for cargoes.

Buoyant world trade has provided bumper returns for the world’s leading container-shipping firms. Global trade has been growing annually by about 7%. According to an estimate, the total value of global trade today is about $US 9 trillion.

The demand for container transport has exceeded supply of late, despite an increase in the world’s container-fleet capacity by an average of 10.6% a year, largely as a result of China’s bumper economic-growth rates and burgeoning exports.

This has pushed up the rates that companies pay to ship their goods.

Rising Asia

New Zealand has vital political, security, trade and economic interests in Asia.

Dynamic growth in the Asian region is expected to continue over the medium term, fuelled by growth in China and India.

No other region will provide as many opportunities for New Zealand in the short and long terms and with the two countries becoming the global economic powerhouses, New Zealand should look for trade and investment opportunities in China and India.

If New Zealand is to keep pace with developments in Asia, it should become more proactive.

Our ties with Asia are longstanding and active across many sectors, both governmental and non-governmental. But the onus is on New Zealand to accelerate the tempo of these relationships.

Asia’s sheer size and diversity means that there can be no single approach to dealing with the countries in the Continent. The region contains the world’s two most populous nations, a rich collection of cultures, religions and societies, and varied political and government structures.

New Zealand needs to look at ways in which it can build a greater shared future in the region, enlarging its contribution to Asia as well as focusing on the gains that can accrue through sustained bilateral and trade relations.

New Zealand’s seaports are known for their efficient and modern operations. The pictures here show the Christchurch (Lyttelton) Ports

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