The free-trade agreement negotiations between New Zealand, Russia, Belarus and Kazakhstan (RBK) were part of ensuring New Zealand continued to be a world trader, NZIER economist John Ballingall said yesterday.
"More importantly, it will position New Zealand close to one of the world's emerging superpowers. It will ensure that we are never treated less favourably than Russia's other trading partners."
In a research note, Mr Ballingall, also deputy chief executive of the New Zealand Institute of Economic Research, said the FTA would deliver gains of about $27 million.
Dairy and meat exports to RBK would soar.
The announcement was a good example of how New Zealand's trade policy was becoming increasingly strategic and long term, and emphasised the need to develop a new way of assessing the long-term gains from trade agreements, he said.
On the face of it, RBK was not an obvious target for an FTA.
Russia was New Zealand's 30th-largest export market ($187 million in 2009), Kazakhstan was 119th ($1 million) and Belarus 184th (less than $1 million).
New Zealand's exports to RBK were concentrated in butter, cheese, lamb and beef, seafood and fruit.
Services trade and the investment relationship were harder to measure.
NZIER estimated a comprehensive FTA with RBK would have the following effects on New Zealand:
• The country would be $27 million a year better off.
• Dairy exports to RBK would rise by 170%.
• Meat exports would treble.
• Fish exports would rise by 25%.
• Returns to land would rise by 0.56%.
The question could be asked whether it was worth negotiating an FTA for such a "measly" gain, Mr Ballingall said.
The answer was: "Absolutely."
An FTA with RBK was not about the immediate gains from tariff removal, he said.
Longer-term benefits included the chance to cosy up to the world's 12th-largest economy.
"This is useful in a political economy sense. It is good to have global superpowers well disposed towards New Zealand. Taking the opportunity to show a willingness to engage with RBK, when other countries are not, could well have significant pay-offs down the track."
The trade relationship would grow.
RBK had a growing number of wealthy consumers wanting high-quality food and beverage products.
The FTA increased the pressure on countries such as Japan to negotiate high-quality FTAs, not just with New Zealand but countries with whom New Zealand had signed high-quality FTAs, he said.
It had long been forecast that BRIICS (Brazil, Russia, India, Indonesia, China and South Africa) would drive global economic growth in coming decades.
It was no coincidence that New Zealand now had, or was negotiating, FTAs with four of them: Russia, India, Indonesia and China.
"A betting man would probably get short odds on New Zealand announcing developments with Brazil and South Africa in coming years as well."
