EDUCACIÓN POPULAR Y ACTORAS SOCIALES

Trade talks between Australia and China commenced in 2005 and to date there have been fifteen rounds of negotiations, the last one being in July 2010 (DFAT Australia, 2011). A successful signing of a FTA between these two nations is expected to have an impact on New Zealand given the similar trading patterns to that of Australia. This section analyses, within the high-growth model, how the signing of a China- Australia FTA affects the gains established to New Zealand under its FTA with China.81 For this analysis it is assumed that the tariff reductions between Australia and China are the same as that signed between New Zealand and China and will be fully implemented by 2020, also it is assumed that China will grow at nine percent per year and thus the simulation is based on the updated data derived from section 7.1.

Much of New Zealand’s export gains came from the wool and textiles industries as discussed in the previous section, however if Australia signs the FTA with China much of these gains are eroded. Table 7.13 quantify these changes in total exports and imports with both New Zealand and Australia signed up for FTAs with China. While wool exports still rise by US$33.3 million in New Zealand this is substantially less than the $499.7 million when they are alone on the FTA with China, this is due to the increased competitiveness of Australia, the world’s largest wool producer and exporter. For Australia, wool exports to China increases by $US2.61 billion which translates to a $US2.27 billion growth in total wool exports, this makes the Australian wool industry the biggest winner upon the implementation of a FTA with

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China.82 Consequently, the increased competitiveness of Australian wool lowers wool exports (and output) in New Zealand, the upshot is that dairy, meat, and horticultural exports (and output) all increase. Australia, on the other hand, sees decreased exports in other agricultural products, but also performs strongly in raw minerals and textiles. For China, as expected, export gains again predominantly come from the TCF sector. The value of Chinese imports from New Zealand drop across the board with the inclusion of Australia in a FTA, most notably in agricultural sectors. Overall, both exports and imports are lowered in New Zealand with the inclusion of an Australia-China FTA with export gains falling by 23.7 percent and imports by 21.9 percent, regardless both are still up overall.

The Australia-China FTA has a depressing effect on the prices in most sectors of the New Zealand economy with only two exceptions, natural resources and fisheries. Wool prices would drop the most, from a 7.79 percent increase with the NZ-China FTA to a 1.55% increase with the inclusion of Australia-China FTA. Almost half of expected rises in both unskilled and skilled labour wages under a New Zealand- China FTA are eroded in this simulation. Land prices which saw a large 24.15 percent increase as a result of the NZ-China FTA is reduced to 7.45 percent with the addition of Australia. New Zealand production in each sector follows a similar trend to that of exports, specifically output of wool declines while rising in other agricultural sectors.

Welfare effects of Chinas’ implementation of FTAs with New Zealand and Australia, under high-growth scenario, are shown above in Table 7.14. In this scenario Australia gains the most with a welfare improvement of US$1.91 billion amounting to 0.30 percent of GDP, largely comprised of terms of trade gains. Welfare gains for New Zealand amount to US$219 million (0.23%) which is approximately half of what was achieved under only the NZ-China FTA scenario. For China, welfare gains of US$313 million (0.02%) are a reversal from the small losses made in the NZ- China FTA scenario. The rest of the world suffer a small loss as a result of these

82 _{These values are the differences between the change in wool exports resulting from the already}

implemented FTA between NZ and China simulated in the previous section, and the inclusion of an Australia-China FTA into the simulation as described in this section. For example, Australia lost $0.15 billion in total wool exports under NZ-China FTA but gains $2.12 billion with Australia’s inclusion, a net gain of $2.27 billion.

TABLE 7.13 – Change New Zealand and Australia’s Global Export and Import Changes with Australia’s inclusion of FTA with China

New Zealand Australia

Exports (US$ millions) Imports (US$ millions) Exports (US$ millions) Imports (US$ millions) Dairy 244.7 1.1 -21.9 9.4 Meat 6.0 1.3 -238.4 19.1 Wool 33.3 0.1 2123.5 8.3

Other Animal Prod. 55.5 0.6 73.0 4.4

Horticulture 25.3 3.0 -24.1 22.0

Rice -0.0 0.2 -4.5 2.0

Cereal -0.0 0.6 -324.7 0.5

Bev. & Tobacco -0.9 1.8 -14.0 7.2

Other Food 96.3 24.2 -77.9 89.2 Forestry -4.4 -0.0 -0.4 0.2 Fisheries -2.1 0.4 4.3 0.8 Raw M&M 16.1 3.6 956.9 239.9 TCF 190.1 229.9 969.9 1867.7 Wood -15.3 35.5 42.2 225.6 M&M Manu. 11.3 97.4 344.8 648.6 Other. Manu -36.1 151.3 221.7 1103.2 Services -113.5 68.3 -453.7 322.2 Total 506.2 619.2 3576.7 4570.2

SOURCE: Model simulation

TABLE 7.14 – Welfare Effects resulting from a CER-China FTA under the Chinese High-Growth Scenario Welfare (EV) Welfare (% of GDP) Allocative Efficiency Terms of Trade I-S Effect New Zealand 218.8 0.23% 42.6 177.2 -1.1 China 312.6 0.02% 794.6 -292.0 -190.0 Australia 1907.2 0.30% 445.0 1365.4 96.8 Total 820.9 0.00% 824.8 -3.8 -0.2

SOURCE: Model simulation and author’s calculations

FTAs due to deteriorating terms of trade, with Japan ($306 million) and the EU ($468 million) seeing the largest decreases. Global welfare increases in this model by US$821 million, attributed entirely to improved allocation of resources resulting from the removal of distortionary tariffs by the three countries, this gain is significantly larger with the inclusion of the FTA between Australia and China.

TABLE 7.15 – Welfare Effects of China signing FTA with only Australia Welfare (EV) Welfare (% of GDP) Allocative Efficiency Terms of Trade I-S Effect New Zealand -94.9 -0.10% -8.3 -87.6 0.9 China 204.0 0.01% 672.1 -286.8 -181.3 Australia 2012.9 0.32% 447.7 1463.9 101.2 Total 725.3 0.00% 729.4 -3.8 -0.2

SOURCE: Model simulation and author’s calculations

For comparative purposes Table 7.15 below shows the effects on welfare when considering only a FTA between Australia and China. This confirms the adverse effect to New Zealand from the carrying out of this FTA. Out of the four possible scenarios for New Zealand a FTA between Australia and China is the worst (-$95 million), followed by no FTA with China by either country ($0), then FTAs with China signed by both nations ($219 million), and finally the best scenario is an exclusive FTA with China ($415 million).