The China-New Zealand FTA has now been signed and, in a follow up to an earlier post, I thought I would complete the analysis on its MFN clause.
MFN does not appear to apply for goods, and only applies to a limited number of services (environmental services, construction, agriculture and forestry, engineering, integrated engineering, computer and related services, and tourism) (Article 107), investment (Article 139) and government procurement.
The exclusion of goods from MFN is interesting, as it means that Australia may indeed strike a 'better' deal in terms of agricultural exports to China than New Zealand. I had initially believed that New Zealand was seeking an MFN clause to achieve equality with Australia in this very important export market.
Interestingly, and unsurprisingly, there is a carve out for FTAs signed prior to the completion of the China-NZ FTA . This deals with the problem of China giving 'Greater China' (i.e. Hong Kong and Macau, at the very least) and other close friends (ASEAN, Pakistan, etc) more favourable treatment.
Even more, the agreement excludes 'any measures taken as part of a wider process of economic integration or trade liberalization between the parties to such agreements'. My initial reaction to this is that it again allows China to provide subsequent, more favourable, treatment to countries/customs territories in which it is engaging in a 'wider process of economic integration or trade liberalization'. No doubt, this means 'Greater China'. Of course, this language is imprecise and open to interpretation. Could this language be read to mean that the MFN clause is almost worthless? Or am I mis-reading the text?
The text of Article 107 (MFN relating to services) is as follows:
1. In respect of the services sectors listed in Annex 9, and subject to any conditions and qualifications set out therein, each Party shall accord to services and service suppliers of the other Party treatment no less favourable than that it accords to like services and service suppliers of a third country.
2. Notwithstanding paragraph 1, the Parties reserve the right to adopt or maintain any measure that accords differential treatment to third countries under any free trade agreement or multilateral international agreement in force or signed prior to the date of entry into force of this Agreement.
3. For greater certainty, paragraph 2 includes, in respect of agreements on the liberalisation of trade in goods or services or investment, any measures taken as part of a wider process of economic integration or trade liberalization between the parties to such agreements.
