The New Zealand and Hong Kong governments are currently engaged in “exploratory talks” with the aim of negotiating a free trade and investment agreement (FTIA). Reportedly, it will be based on the Singapore-New Zealand Closer Economic Partnership (SNZCEP), which came into effect on 1 January 2001. In addition, New Zealand has had, since 1995, an Investment Promotion and Protection Agreement (IPPA) with Hong Kong which has a minimum term of 15 years2 .
The agreement with Singapore was seen as a “Trojan Horse” for further similar agreements with other ASEAN nations and Australia, according to Tim Groser former chief trade negotiator for New Zealand, and now the head of Asia 20003 . The government is pursuing full free trade and investment agreements with Chile, ASEAN nations as a group, and the “Pacific 5” (U.S.A., Australia, Singapore, Chile and New Zealand, though South Korea has been suggested as an addition), while continuing to negotiate the widening of the CER agreements with Australia. The Hong Kong negotiations will be used as evidence that that strategy is working, and that the momentum towards free trade among the APEC countries is being maintained. So, like the Singapore agreement itself, the Hong Kong negotiations have wider significance than simply the Hong Kong–New Zealand relationship.
There is an additional feature that would make a Hong Kong agreement unusually significant: the fact that it is part of China. It is deliberately used by China as a door to the world. Much of its trade is channeled through Hong Kong. Its international companies (such as CITIC, and China National Foreign Trade Transportation Corporation, which are both active in New Zealand) maintain active branches and subsidiaries in Hong Kong. Many corporations from Hong Kong and other countries maintain closely related operations in both Hong Kong and China, which may be very difficult for an outside party to disentangle. Therefore the agreement with Hong Kong must be seen, to some degree, as an agreement with China itself.
At the time of writing, there is no publicly available information as to the content of any Hong Kong agreement. That is typical of such negotiations, and increasingly at odds with international practice, such as the Canadian government, which on 13 December 2000 released Canada's written submissions to Free Trade Area of the Americas (FTAA) negotiating groups, the release of a draft FTAA text by the U.S. on 17 January 2001, and the release of drafts of the Multilateral Agreement on Investment at the OECD, admittedly only after intensive public pressure. Without such information being made available during negotiations, public debate is deliberately hamstrung.
This paper therefore uses the plausible assumptions that any agreement will include the provisions of the IPPA, will be based substantially on the Singapore-New Zealand agreement, where it does not weaken the IPPA, and will be consistent with the WTO agreements, notably (in the context of investment), the General Agreement on Trade in Services (GATS) and the Agreement on Trade-Related Investment Measures (TRIMS). The SNZCEP also referred to non-binding declarations made under APEC, and deliberately put some of them into concrete and binding form. A Hong Kong agreement is likely to do the same.
This analysis looks at the current investment position with regards to Hong Kong-based investment in New Zealand. It uses that information to anticipate the effects of further liberalization of investment in the proposed FTIA.
As in the Singapore agreement, it is likely that the area that will be emphasized by the New Zealand Government will be services. It will claim market-opening gains for New Zealand companies in the services sector. Both sides will be trying to extend their commitments in the General Agreement on Trade in Services (GATS) under the WTO. Both have already very liberalized services sectors, but New Zealand even more so than Hong Kong. There are a number of concerns this raises for New Zealanders: how will it affect education, health, environmental and other social services? Will it lead to further concessions and removal of more of the already feeble controls on foreign investment here? Will it make even more difficult the restoration of domestic capacity in depleted areas such as shipping, broadcasting, banking and government procurement?
There is thus cause for concern that this agreement will further liberalize an already almost uncontrolled foreign investment regime, and certainly put yet another obstacle in the way of reclaiming some of the necessary controls in future.