Little versus Key on Chinese trade

Andrew Little’s second shot at John Key in Question Time yesterday was short and not very sweet.

TradeSteel Imports

5. ANDREW LITTLE (Leader of the Opposition) to the Prime Minister: Does he stand by his statement that threats of trade retaliation by China if New Zealand investigates substandard Chinese steel imports are “unsubstantiated rumours”, given his Government has been discussing that threat with China since May?

Rt Hon JOHN KEY (Prime Minister): Yes. Every time the issue of possible retaliatory action against our exports has been raised, New Zealand has sought, and received, assurances from China.

Andrew Little: Was the Government’s decision not to investigate substandard Chinese steel imports connected to trade threats from China, or is that just a coincidence?

Rt Hon JOHN KEY: I am not aware of the decision that the Government has made in regard to that.

Andrew Little: Is it just another coincidence that our kiwifruit exports are now blocked from China after Chinese threats of trade retaliations if we investigate its steel dumping?

Rt Hon JOHN KEY: My understanding is that the issue holding up imports of Zespri kiwifruit into China is a technical matter. It is a technical matter related to some rot that was found on fruit that was imported some weeks earlier. My understanding is that Zespri has voluntarily decided not to export the fruit, because it is going through, now, a pre-examination process that will ensure that when it restarts the exports to China, they are rot-free.

Andrew Little: Why is it acceptable for China to ban New Zealand exports for containing a fungus that poses no health hazard and has been present on our kiwifruit exports to China for years?

Rt Hon JOHN KEY: The member is Leader of the Opposition and, on the basis of that, he has some responsibility at least to get the facts vaguely correct. The fact is that Zespri voluntarily stopped sending exports of kiwifruit to China for about a week. They have not been banned by the Chinese.

Andrew Little: How has he let the relationship with China get to the point where it is allowed to send us shoddy steel but we cannot send it top-quality kiwifruit?

Rt Hon JOHN KEY: The member is just making this stuff up. He does himself a disservice.


More from McClay on China trade issue

Trade Minister Todd McClay has now revealed that concerns about possible trade reprisals from China first came to his notice in May, two months before the Government denied any issue.

Stuff: Todd McClay confirms China-NZ talks since May over trade reprisal fears

The New Zealand and Chinese governments were in talks as early as May over fears of trade reprisals, Trade Minister Todd McClay has revealed.

McClay said the “engagement” in late May – long before Zespri passed on a warning from a Chinese commerce official in early July – were at “various levels of Government”.

The July warnings made to Zespri, Fonterra and potentially other primary exporters indicated exports would be slowed down by the imposition of so-called non-tariff barriers.

McClay on Monday told Stuff there were limits to what he could say “given the legislative constraints around the reporting of competition complaints that are not yet under investigation”.

But he said the concerns in May “in broad terms … related to both governments explaining their positions; clarifying legislative and other requirements around trade remedy issues; or seeking assurances in the event of suggestions or rumours of possible trade retaliation”.

He said it was not until July 8 – at least six weeks later – that he was briefed by the New Zealand Embassy in Shanghai on “an industry specific threat”.

When Stuff first broke news of the July 8 threat, passed on by Zespri, it was dismissed by exporters and the Government as an unsubstantiated rumour.

McClay had tried to brush off the issue but later apologised to the Prime Minister.

He also apologised to Prime Minister John Key who publicly reprimanded McClay for not giving broad enough answers and for “dancing on the head of a pin” with what he had said, leaving Key himself to provide false answers to reporters.

Key said McClay had left the impression that the only communication was between Zespri and a non-government organisation “and that’s not true”.

Trade and diplomacy has to be handled carefully in public but McClay too careful, or careless.

Last week Zespri said Chinese authorities had discovered on June 6 a fungus or rot in two containers of its kiwifruit. They had waited until early August to issue a “risk notification” that would have the effect of slowing down the clearance of kiwifruit at the border.

In response Zespri halted shipments to China for a week while it put in place “protocols” to address the issue. Meanwhile it diverted a million trays of fruit to other markets.

While the Chinese reaction matched the reported threat, officials and ministers have described it as a technical issue – reiterated by Key on Monday – and have denied any link to Chinese retaliation saying the timing was coincidental and an issue could have blown up at any time.

Are import issues common? Or is this an out of the ordinary ‘coincidence’?

It’s kinda ironic that one of our big exports to China are derivative varieties of what were known as Chinese gooseberries.

China allegedly threatens NZ on trade

The Sunday Star Times claims that “behind the scenes” China has threatened “retaliatory measures” against New Zealand trade if inquiries continue into the quality of Chinese supplied steel.

If accurate this is chilling. It puts a small country like us, dependent to a significant degree on trade with China, in a difficult and relatively powerless position.

China threatens reprisals on NZ dairy, wool and kiwifruit if government doesn’t back off cheap steel inquiry

China has threatened “retaliatory measures” against New Zealand trade, warning it will slow the flow of dairy, wool and kiwifruit imports.

The world’s biggest trading nation is angry at New Zealand inquiries into a glut of Chinese steel imports flooding the market; the Chinese believe New Zealand is part of a US-led alliance to target Chinese national interests.

New Zealand is angry that China should take such a combative approach, and is asking that it desist.

New Zealand ‘anger’ may be futile in a trade war between China and the US.

The quality of steel from China is becoming a concern.

Pacific Steel, the sister company of iron miner and processor NZ Steel, has lodged a confidential application, under local and World Trade Organisation rules, for an investigation into China dumping cut-price steel on the New Zealand market.

The local industry is struggling to compete with the glut of sometimes substandard Chinese metal, which is being used in major projects like the $1.4 billion Waterview Connection and bridges on the Waikato Expressway.

Competing with cheap imports from China has been a problem for New Zealand manufacturers for a long time, as has the quality of imported goods.

The durability of structural steel is is of much greater concern than the durability of track pants and onesies.

Right now, lawyers for the Ministry of Business, Innovation and Employment are deciding whether the investigation should proceed, which could result in punitive anti-dumping tariffs against China.

But somehow, China learned of the application – and it is taking retaliatory action.

In the past week, representatives of New Zealand’s biggest export industries have been called in by Chinese officials, and told to exert their influence to make sure the MBIE investigation does not go ahead.

To up the ante, they have been told China has begun consulting with its local food producers about imposing reprisal tariffs to slow down the access of New Zealand dairy, wool, kiwifruit and potentially meat to the 1.35 billion-strong Chinese consumer market.

Local producers are alarmed. 

So the should be – and not just local producers.

A trade war with China is definitely not in our interests,” says Andrew Hoggard, a Manawatu dairy farmer. “It’s about 20 per cent of our markets and we’re getting good market penetration with added value products in there.”

Highly-placed sources have confirmed China is applying pressure in an attempt to sway regulators away from imposing anti-dumping or countervailing duties – which are imposed when goods are subsidised – on imported Chinese steel. Zespri and Fonterra are said to have been heavied, and other exporters may have been.

But I don’t thing New Zealand can compromise on the quality of critical things like structural steel.

The world’s biggest trading nation believes the United States is leading an alliance of sycophantic nations, doing the US bidding by shutting down Chinese trade and trying to force its military out of the contested islands and atolls of the South China Sea.

China’s unusual tactics have caused government and industry to close ranks. The Ministry of Commerce of China (MOFCOM) has denied consulting on retaliatory tariffs. Fonterra spokesman Phil Turner and Zespri’s chief operating officer Simon Limmer both denied any knowledge of the Chinese industry consultation.

But trade expert Charles Finny, who has worked on China-New Zealand trade issues for decades, said sources in Government confirmed at least one major exporter had been told “the Chinese Government would like pressure to be applied to MBIE”.

I don’t think we have a choice – New Zealand has to stand firm on our procedures for dealing with potentially substandard imports of building materials.

If China takes retaliatory action in other markets then we just have to bear the brunt of that. We can’t allow another country – any other country – to dictate how we do things via threats.

It may adversely effect some of our trade but the alternative is worse.

UPDATE:  McClay to follow up on China retaliation claims (NZME)

Trade Minister Todd McClay says he will ask officials to contact the Chinese Embassy in Wellington to clarify China’s position on competition issues.

He was commenting about news reports that China could take retaliatory action against dairy and kiwifruit exports from New Zealand if a formal investigation into alleged steel dumping by China is launched by the Ministry of Business, Innovation and Employment (MBIE).

McClay said he would be asking his officials to contact China’s embassy.

“Certainly I would be asking officials to clarify the Chinese position in as far as any competition issue was concerned,” he said today from Townsville, en route to Indonesia with a trade delegation, where he is meeting up with Prime Minister John Key.

Retaliatory action was serious.

“Market economies don’t do that with each other. WTO [World Trade Organisation] rules don’t allow it,” McClay said.

“I will certainly be talking with my colleagues and the Prime Minister when we get to Indonesia.”

More ungloomy export news

NZ Herald have another instalment in their Gloombuster series – Fruit exports surge.

Demand for premium kiwifruit, apples and avocados helps counter weakness in dairy and forest products.

Data out from Statistics NZ showed the value of fruit exports reached an all time high of $2 billion in the year to June, up almost 20 per cent from a year earlier. Wine was another strong performer, up 7.3 per cent to $1.4 billion in the June year.

The performance of fruit and wine wasn’t enough to offset downturns in other parts of the primary sector – dairy exports were down by 24 per cent to $12 billion and log exports were down 11.3 per cent at $3.56 billion – but the data showed the downturn was not universal.

Both higher prices and a greater quantity of fruit exports – up 9 per cent – contributed to the overall rise, Statistics NZ said.

Kiwifruit and apples led the monthly increases, with exports in May 2015 being the highest value recorded for both kiwifruit ($280 million) and apples ($157 million).

Statistics NZ said kiwifruit was responsible for 59 per cent of fruit exports, followed by apples (28 per cent), and avocados (5.7 per cent).

Agriculture, horticulture and viticulture markets all wax and wane.

Agricultural analysts are bullish about kiwifruit as the sector continues to recover from the devastation caused by the Psa virus since its outbreak in 2010.

ANZ, in an analysis of the sector, said New Zealand kiwifruit sector typified many aspects of true “value-add” leading the way in producing and selling a premium offering.

While dairy trade is significant there is far more to the New Zealand economy than milk.

The apple sector is going from strength to strength with new plantings, by area, increasing by 5 per cent a year. NZX-listed Scales Corp – the country’s largest grower, packer and marketer of apples – said its export grade apple volumes were about 13 per cent ahead of prospectus forecasts.

The higher percentage of both premium apples and percentage of sales to Asia and “near” markets is expected to result in a higher average price per carton than prospectus forecast, said managing director Andy Borland.

Both higher volumes and higher prices.

The Opposition in particular and the media generally put a lot of focus om narrow negatives. It’s good the see the Herald lookig at the wider export economy.