Impact of Free Trade Agreements on New Zealand Economy - Dissertation Example

 FTAs will likely result in tariff minimisation in the majority of the products traded between the nations.

This research paper will endeavour to examine whether FTAs entered by New Zealand (NZ) with Australia, China, and ASEAN has helped the NZ economy to grow further or not and whether NZ derived many benefits from such FTAs like employment creation, technology transfer, increased standard of living, simplification of customs procedures, trade expansion and overall economic growth by investigating into the earlier empirical evidence available on the subject and statistics offered by the respective governments.

When two or more nations eliminate tariffs against products emanating within these nations is known as a Free-trade agreement. (FTA). Under FTA, each nation has the right to maintain its own tariff and the privilege to administer its own trade policy thereby resulting in shallow integration. (Goode 2005:1).

If a New Zealand (NZ) manufacturer found a buyer for his product in Australia, and the Australian importer has to pay a tariff of 20% meaning for $100 product imported from NZ, an Australian has to pay $120 ( cost of material + tariff). However, under NZ and Australia FTA agreement, these products can enter into Australia without tariff and vice-versa. The preferential tariff rates under FTA make NZ products cheaper for Australians. The elimination of tariff offers the NZ, a competitive benefit over other nations that do not have FTA with Australia.

Thus, FTAs make NZ producers and exporters more competitive both abroad and domestically. (“Renda, 2013, p.1”). An FTA has the following advantages: Safeguards NZ investments in the partner’s nation Offer new market access for NZ manufacturers and consumers Offer market access to remanufactured products Trade-in-services will get a fillip Offers advantages to medium and small exporters of both the nation Enhances custom facilitation (Garnaut, 2002, p.125). If we analyse the economic growth rates of nations that have FTAs with the developing nations, as indicated by GDP, we can find that in many cases, it has surpassed those of advanced economies.

NZ companies exporting to Australia enjoy double benefits with ever-growing consumer bases and low tariff rates. In spite of the recent global economic crisis, FTA has facilitated many small nations to sustain the growth and to maintain the same in the coming years also whereas advanced economies are in turmoil. (Barry, 2012, p1). 1-2 History of Free Trade Agreements As per Dent (2007), the regionalised and imperial trade arrangements that existed between the Middle East, China, Europe and India have given birth to the international trade systems.