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On 9 November 2010, New Zealand, Russia and its Customs Union partners Belarus and Kazakhstan agreed to commence negotiations on a comprehensive and modern Free Trade Agreement (FTA). This followed the completion of experts’ scoping discussions that began in June 2010.
Six rounds of negotiations have been held so far, with the most recent being held in Moscow during the week of 23 April 2012. The atmosphere between the parties has been consistently positive and focused, and good progress has been made across the negotiation. The parties are on track to complete the negotiations before the end of this year.
The Seventh Round of negotiations is due be held in Paris during the week of 21 May 2012.
At the APEC summit on 13 November, Prime Minister John Key announced negotiations on a Free Trade Agreement with Russia, Belarus and Kazakhstan which will start early next year.
"Free trade deals offer real benefits for jobs and economic growth in New Zealand and I am very pleased to be able to announce the start of negotiations on the FTA" Mr Key said. See here for the PM's media release [external link].
The Prime Minister's announcement followed a meeting on 9 November between Trade Minister Groser and Russian Economic Development Minister Elvira Nabiullina, at which a Joint Ministerial statement was agreed between New Zealand, Russia and its Customs Union partners Belarus and Kazakhstan to commence negotiations on a comprehensive and modern Free Trade Agreement (FTA), and to complete these negotiations by the end of 2011. This followed the completion of experts’ scoping discussions that began in June 2010 and produced a roadmap for the FTA negotiations [PDF 33KB] endorsed by Ministers.
An FTA with Russia would present a unique opportunity for New Zealand to future-proof its relationship with the largest country in the world, and the 12th-largest economy. While New Zealand’s current trade with Russia (NZ$187m of exports in 2009) is currently relatively modest, the relationship is one which has strong growth potential.
Russia was the world’s fifth-largest food importer in 2008, with imports totalling US$30 billion. There is little question that Russia could be a sizeable growth market for New Zealand’s high-quality products in Russia.
New Zealand’s exports to Russia grew 267% from NZ$51.0 million in 2000 to NZ$187.1 million in 2009. The average annual growth rate over this period was 23.1%. Despite this strong growth, Russia is currently only New Zealand’s 35th-largest export destination, and an FTA could further boost the trade relationship, and better position New Zealand to take advantage of the opportunities in the Russian market.
In addition to Russia, an FTA would also cover Belarus and Kazakhstan. In 2010, these three countries established a Customs Union, with a common customs tariff and customs code, and New Zealand is therefore negotiating an FTA with all three countries.
Russia is the 12th-largest economy in the world, and has the highest per capita income of the BRIC (Brazil, Russia, India, China) economies. Russia’s economy grew an average of 7% per annum from 1999-2008, a growth rate similar to that of India and China.
While Russia was hit by the global financial and economic crisis in 2009, it has since returned to GDP growth, and Russia’s economy is projected to grow around 4.5% per annum until 2015.
Russia’s potential is linked to its vast natural endowments. Along with its oil and gas reserves, Russia has significant resources in arable land, coal, fresh water, fish, timber, diamond deposits, potassium reserves, and rich reserves in nearly every other significant mineral.
Russia imports approximately 40% of its food needs. In 2008, Russia was, by value, the 3rd-largest global importer of beef, the 9th-largest global importer of dairy products, and the 16th-largest global importer of sheep meat. New Zealand has further opportunities to export agricultural technology and know-how, as Russia is looking to develop its own agricultural sector.
The IMF estimates Russian GDP in 2009 as US$1.23 trillion, making it the 12th-largest economy in the world.
Goldman Sachs estimated in 2007 that, if Russia met its productivity potential, it could have the 6th largest GDP in the world in 2050 - larger than any single European country, Japan, or Canada. Additionally, Russia was the only BRIC economy forecast to reach GDP per capita parity with Europe. Under those forecasts, its GDP per capita would be slightly less than the UK, but higher than France, Germany, and Italy. Such an income level would provide a significant opportunity for New Zealand producers.
Real wages in Russia have doubled since 2002. Household debt is low, and disposable income high.
Russia is well known for its energy resources – it is the world’s largest energy exporter - but its vast natural resources also signal its potential in a variety of areas. For example, Russia is the largest land mass in the world and has significant tracts of fertile agricultural land, it has 20% of the world’s fresh water resources and enormous fish reserves off its coasts, and the forests of Siberia contain an estimated 20% of the world's timber.
Belarus has a population of 9.5 million, and GDP of US$60 billion in 2008. GDP growth has been strong in recent years, averaging 9.5% from 2005-2008. GDP growth has resumed this year, and is projected to top 6% in 2010 and 2011. New Zealand exports to Belarus are small, totalling NZ$1.2 million in 2008, dropping to NZ$630,000 in 2009, with fish being the main export.
Kazakhstan has a population of 16 million, and GDP of US$135 billion in 2008. Kazakhstan’s GDP grew by an average of 9.4% from 2000 to 2008, meaning GDP jumped from US$20 billion to US$135 billion. GDP growth of 6% is projected for 2011-2015. New Zealand’s exports to Kazakhstan are small, totalling NZ$930,000 in 2009 (mainly machinery and butter). Imports, however, are much higher: NZ$9 million in 2009 (metals, sulphates, acids).
This FTA negotiation will cover a wide range of trade related issues; similar to other FTAs New Zealand has negotiated.Typically these include the following areas:
| Trade in Goods: e.g: | Market Access |
| Rules of Origin | |
| Customs Procedures | |
| Sanitary and Phytosanitary Measures | |
| Technical Barriers to Trade | |
| Trade in Services | |
| Investment | |
| Other Issues: e.g: | Intellectual Property |
| Government Procurement | |
| Electonic Commerce | |
| Competition Policy | |
| Trade and Labour | |
| Trade and Environment | |
| Dispute Settlement |
Please direct any questions you have about the FTA negotiations with Russia, Belarus and Kazakhstan to:
David Lilly
Coordinator, Russia-Belarus-Kazakstan FTA
Ministry of Foreign Affairs and Trade
Private Bag 18901
Wellington
Tel: 04 439 8611
Email: david.lilly@mfat.govt.nz
