New Zealand has signed a trade deal with Taiwan on Wednesday to become the isolated Taipei's first trading partner outside its allies. Taiwan will become New Zealand's eighth biggest export market.
The economic cooperation agreement has been negotiated quietly since last year. The two-way trade between the two countries totaled US$1.2 billion in 2012, making New Zealand the 40th largest trading partner of Taiwan.
Taipei's SinoPac Securities economist Shih Hsiao-chi says New Zealand is a small economy so its trade capacity may be limited in terms of growth. He takes a cautious stance regarding the trade deal between the two countries.
Taiwan's exports to New Zealand are expected to increase by US$624 million. New Zealand's imports to Taiwan will rise by $606 million according to local media news reports.
Taiwan's petrochemical and high-tech product exporters should see some gains in trading as tariffs are expected to fall as indicated in the trade agreement. Manufactured goods will make up 29 per cent of Taiwan's exports to New Zealand followed by refined fuels at 26 per cent and transport equipment at 23 per cent.
New Zealand will export mostly food products making up 76 per cent of the country's total exports. Beef exports from New Zealand are popular in Taipei restaurants. Taipei's U.S. beef imports have dropped during the last two years due to the fear of disease-infected cows.
As soon as the deal takes effect, tariffs for 44 per cent of New Zealand exports to Taiwan will be eliminated. This will save duties totalling more than $40m a year for industries including rock lobsters, apples, cherries, wine and almost all dairy goods.
Taiwan has been negotiating a trade agreement with Singapore for three years but nothing has come out of it yet. The deal is a big one since Taiwan is signing its first trade agreement with New Zealand, a Chinese diplomatic ally.
Tens of millions of dollars of custom duties will be removed thanks to New Zealand's exports to Taiwan over the next four years. The Economic Cooperation Agreement was signed at Victoria University in a groundbreaking deal between New Zealand and the island nation that declared sovereignty over China.
China signed a free trade agreement with New Zealand five years ago and is well aware of the deal with Taiwan.