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New Zealand Economic and Financial Overview 2014

Principal Trading Partners

Australia: Australia is New Zealand's largest trading partner. In the year ended September 2013, two-way merchandise trade amounted to $15.6 billion, with Australia taking 20.2% of New Zealand's exports and supplying 14.0% of imports. Australia is New Zealand's top destination for overseas investment and New Zealand's largest source of foreign investment. As at March 2013, New Zealand had $48 billion invested in Australia, while Australia had $110 billion invested in New Zealand.

Trade with Australia has flourished under CER. CER is a series of agreements and arrangements governing bilateral trade and economic relations, built on the Australia New Zealand Closer Economic Relations Trade Agreement (ANZCERTA) which took effect on 1 January 1983. Full free trade in goods was achieved on 1 July 1990, five years ahead of schedule. CER was extended to cover trade in almost all services from 1 January 1989. CER creates a market of more than 25 million people. It increases the effective size of New Zealand's domestic market six-fold and provides Australia with access to another market the size of Queensland.

New Zealand's main exports to Australia include light crude oil, gold, wine, cheese and timber, as well as a wide range of manufactured items, while New Zealand's main imports from Australia include heavier crude oils, petroleum oils, motor vehicles and aluminium oxide, as well as a range of manufactured and consumer items.

The original ANZCERTA has been extended and added to as the relationship has developed. Other key aspects of CER now include: mutual recognition of goods and occupations, under which most goods legally sold in one country can be legally sold in the other, and persons who are registered to practise an occupation in one country can register to practise an equivalent occupation in the other country; a free labour market, which allows New Zealand citizens and Australian residents to enter, live and work freely in each other's country; and joint agencies in certain regulatory areas.

Building on CER, successive New Zealand and Australian governments have committed to the long term goal of establishing a seamless trans-Tasman business environment - the Single Economic Market (SEM). The SEM builds on the freer trans-Tasman trading environment created by CER by addressing 'behind the border' barriers to flows of goods, services, capital and people through a broad range of initiatives. Ongoing work to co-ordinate Australian and New Zealand business law takes place within a Memorandum of Understanding. Both sides also co-ordinate banking regulation and supervision through the Trans-Tasman Council on Banking Supervision.

Recently completed or near-completed initiatives include implementation of a CER investment protocol, converging financial reporting standards and implementation of a portability scheme for retirement savings. Other initiatives currently in progress include streamlining trans-Tasman travel, mutual recognition of auditors and financial advisors and measures to harmonise intellectual property regulations.

China: China overtook the United States at the end of 2008 to become New Zealand's second largest trading partner, with bilateral trade amounting to $16.1 billion in the year ended September 2013. A Free Trade Agreement between New Zealand and China commenced on 1 October 2008 as New Zealand became the first developed country to negotiate such an agreement with China. In the year to September 2013, exports to China comprised 18.0% of New Zealand's total exports, with the major categories being milk powder, meat, logs and a wide range of other primary products. China supplied 17.4% of New Zealand's total imports, with the major categories being computers, telecommunications equipment, apparel and toys.

Chinese demand for New Zealand commodity exports, especially dairy products and logs, has risen rapidly in recent times and has been the major factor supporting New Zealand's commodity prices and terms of trade. China is expected to become increasingly important for New Zealand in coming years. China's increasing industrialisation and rapidly growing incomes will mean that it requires more of those commodities that New Zealand produces.

United States: The United States is New Zealand's third largest single trading partner with bilateral trade amounting to $8.2 billion in the year ended September 2013. Exports to the United States comprised 8.9% of New Zealand's total exports, and the United States supplied 9.2% of New Zealand's total imports, the major categories being aircraft and parts, medical and veterinary instruments, motor vehicles and computers. New Zealand's major exports to the United States are beef, casein, timber, lamb, cheese and a growing range of manufactured goods. The development of trade in dairy products has been constrained by long-standing quotas on these items. As China and emerging Asia take on more importance as trading partners, the United States and some other developed economies (excluding Australia), are becoming less important as their share of New Zealand's exports shows a declining trend.

Japan: Japan is New Zealand's fourth largest trading partner, with bilateral trade amounting to $5.6 billion in the year ended September 2013. Japan takes around 6.1% of total merchandise exports. Key exports to Japan include aluminium, wood, dairy products, fish, kiwifruit, meat, vegetables and other fruits.

Japan is also a major supplier of New Zealand's imports, providing 6.2% of total imports in the year to September 2013. Imports from Japan are dominated by motor vehicles, petroleum products and a vast range of technology-intensive appliances.

The Republic of Korea: The Republic of Korea is now New Zealand's fifth largest trading partner, recently overtaking the UK, with bilateral trade of $3.3 billion dollars in the year to September 2013.

European Union: Although trade with the members of the European Union has declined in value terms, taken as a bloc the Union would be New Zealand's third largest trading partner and is an important market for exports such as sheepmeat and wine. Together, the Union members take around 10% of exports (in value terms) and provide around 16.5% of imports. Bilateral goods trade amounts to around $12.4 billion or around 13.3% of total exports and imports. Services, particularly tourism are also an important element of EU/New Zealand trade.

Other Asian Economies: Like China, other Asian economies are taking on more importance as New Zealand's trading partners. This is providing benefits to New Zealand as the area is one of the fastest growing in the world. While most of the developed world is experiencing a gradual recovery from the GFC, Asia is providing significant demand for New Zealand's exports, especially commodities. Trade with the economies of Taiwan, Hong Kong, Malaysia, Indonesia, Singapore, Thailand, India and the Philippines is growing in importance. All are in the top 20 largest export markets for New Zealand and together account for around 14.1% of merchandise exports.

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