ASEAN-Australia-New Zealand Free Trade Area Bill

TODD McCLAY Link to this

No, no—listen to the man others in this House call their friend. Of course, I put that down in my debate notes, because I knew that it would be a message to those who are making my dinner at the moment. They are listening intently and the dinner will be ready.

TODD McCLAY Link to this

Ha, ha! The note that was passed to me said: “Don’t take any notice of the member opposite. He hardly ever says anything of interest.” I agree with that.

Where I was before I was thinking of my dinner—and I apologise if the member took any offence to that; it was meant in jest, as many things in this House are—was to say that our New Zealand exports to ASEAN countries have increased by 121 percent since the year 2000—a 121 percent increase of our exports to that group of countries since the year 2000. Imports have increased dramatically by 244 percent in that same time period. There are 566 million people in those countries, in the ASEAN markets. They are responsible for about NZ$2.2 billion of global trade. What have we achieved with this negotiation and this agreement? In effect, there will be no tariffs on 99 percent of New Zealand exports to Indonesia, Malaysia, the Philippines, and Viet Nam by 2020 at the latest. That means that, in relation to that increase of 121 percent of exports to these countries over the last 9 years, 99 percent of the products we export will face no tariff barriers over the next 12 years, between now and 2020. That will be a saving of $50 million on duty at today’s rates, and based on today’s trade, for our exports to these countries. That is a direct saving for the New Zealand producer, and that makes our goods more competitive when they reach these markets. By 2010 tariffs will be eliminated on $429 million worth of New Zealand exports at current levels.

I mentioned earlier a number of the areas that will be covered by this agreement, and I want to focus on the area of dairy, for a moment. The select committee received a submission from Fonterra on behalf of the dairy industry, and it is interesting to look at what it had to say. Of course, it will be no surprise to those who are involved in dairying in New Zealand that Fonterra strongly supported this free-trade agreement, and supported it being implemented as quickly as possible. Fonterra recognises that dairy tariffs in key ASEAN markets typically range up to 10 percent, and that our exports incur about $50 million in tariffs per annum. Over that period of time in respect of those countries, with a reduction of tariff rates and the removal of barriers, those in the dairy industry—and the farmers in my electorate of Rotorua—stand to gain. In 2010 there will be an elimination of dairy products from tariffs, as I said. That will include milk powder, casein, butter, ice cream, and cheese. In Reporoa, in my electorate, there is the Fonterra dairy factory, which employs many people and supports many, many farmers indirectly through the processing of their milk. This agreement will mean a greater resource there. I think there will be more employment in my region because of this agreement.

Meat and wool are also very important in many parts of my electorate. We received a submission from Meat and Wool New Zealand that also covered the Meat Industry Association. That, too, supports the agreement strongly. Those entities said that the red meat and wool industries are export-focused sectors of the economy, and that they accounted for about 17 percent of New Zealand’s total merchandise export receipts to the year ended September 2008. The industries employed about 40,000 people, either directly or indirectly, and they have said that during the same period their sectors exported $330 million worth of their goods to the 10 ASEAN countries concerned. Again, the agreement means that tariff barriers will be reduced. The tariffs on beef exports will be reduced for beef to enter these markets between 2012 and 2020, with sheep meats and wool by 2010 to 2016. Those amongst us who have meat and wool producers in our electorates know that the last few years have been difficult times for them. The prices they have been receiving, particularly for sheep meat, have been down. The good news is that prices have increased this year, and a number of farmers tell me they believe that the future is brighter. However, this agreement will go a long way towards helping them and making sure that in the future their access to those markets is sustainable.

Let us get to forestry. Members opposite like talking about forestry; I know that. Forestry is very important in Rotorua, the forestry capital of New Zealand. We are proud of that. Tariffs will be eliminated on key forestry products, again between 2010 and 2020. Again, that is not just about logs—and in my electorate we do export a lot of logs—because this agreement reduces tariffs on processed products, in many cases, like paper. The mills in Kawerau produce a lot of paper; they employ a lot of people there to produce fibre plyboard. One of the problems we have in this country, which we certainly have found over the last 9 years, is that there is not enough focus on the forestry sector. There is absolutely not enough focus on the forestry sector or support for the many people who are employed or gain income from forestry in my electorate, which is one of the reasons, probably, that the people of the Rotorua electorate decided they would like a change, along with the rest of New Zealand last year. We should be investing more in forestry in our country, to add value to forestry in our country, and to add value for jobs so that we can export goods to other countries where we will get a greater return. Through that, the forestry industry will be supported and will gain much, much more.

In respect of horticulture, kiwifruit and apples will have the same conditions. Between 2010 and 2011 their tariffs will be reduced. I am glad that tariffs are coming off onions. I do not like onions, so I tell the person making my dinner not to put onions in it. I am about to finish here—

STUART NASH Link to this

Well, let us give credit where credit is due: Helen Clark and especially Phil Goff took years of work to arrive at such an important agreement. It is a fantastic result for New Zealand, and I think that we should give credit where credit is due. I congratulate Minister Groser for being in the right position at the right time—

STUART NASH Link to this

Well, is that his name? I have not seen him, but he does exist. If we listened to him we would think that he had negotiated the vast majority of contracts that we have ever had. In fact, did he not sign the Treaty of Waitangi?

STUART NASH Link to this

He did everything!

STUART NASH Link to this

Oh, was that Aaron Gilmore? At least Mr Groser was there to pick up this free-trade agreement and sign it on behalf of New Zealand.

STUART NASH Link to this

I was cut down in full flight while talking about the wonderful things that Minister Groser had done, but they were not as good as the wonderful things that the Hon Phil Goff and the Hon Helen Clark did in getting the deal under way and signed.

What tends to happen is that Labour and National attack these things in a bipartisan and cooperative way when it comes to international trade, but not, sadly, when it comes to policy. I will deal with that a little bit later, but now I will talk about some of the work that Phil Goff has done on this agreement. Organisations like Federated Farmers have applauded the Hon Phil Goff for his work on this free-trade agreement. That organisation has said: “Despite all the doom and gloom in the other sectors, it strategically sets New Zealand up for the long haul and farmers appreciate that,”. Farmers appreciate what Phil Goff did for them. The Wellington Regional Chamber of Commerce chief executive has commented: “I would like to congratulate Phil Goff and his officials for their hard work and successful outcome.” Alisdair Thompson, from the Employers and Manufacturers Association (Northern), said: “Overseas Trade Minister Phil Goff is to be congratulated for his work in expediting the ASEAN/CER FTA for New Zealand,”.

All of us in this House at the moment would agree that Phil Goff was an extremely hard-working Minister of Trade, and the previous quotes, this bill, and the free-trade agreement with China are testament to the fact that New Zealanders, especially those engaged in any form of international trade, are eternally grateful to the Hon Phil Goff and to the officials who did the groundwork on these very important and seminal free-trade agreements.

The passing of this bill will be the conversion to law of a Labour vision for greater international engagement for New Zealand companies. It will be a great victory for New Zealand businesses with export aspirations. But I must admit that those businesses have been severely let down by the current Budget. I support this bill because it opens up enormous potential opportunities for New Zealand businesses that either are currently engaged in exporting or want to become engaged in the export arena. As mentioned by, I think, every single speaker in this debate, the ASEAN market has over half a billion people and accounts for approximately $1.4 billion in global trade. That is a lot of people, and a lot of those people are for the first time entering the age of consumerism. It is absolutely fantastic.

We all agree that increasing the number of free-trade agreements is very much in the best interests of all New Zealanders going forward, for a whole number of reasons. Sustainable economic growth will be achieved only with a much greater degree of international engagement. Of that, I have absolutely no doubt. Export growth is the only way forward for New Zealand. We are a market of 4 million people, and therefore the ability to grow a significant company in this market is slight, if not close to impossible. I cannot think of one large company that has made significant profits without some form of international growth.

Let me pose a question: how will we get maximum benefit out of this agreement? Let me tell members. Ninety-seven percent of New Zealand businesses are small to medium sized enterprises, which means they employ fewer than 20 people. The vast majority of those companies simply cannot afford international marketing or an international market development manager. They cannot afford to relocate sales reps offshore into a market they have no understanding of or control over. Let us remember that we are talking about doing business in countries that have different languages, different legal systems, different business cultures, different mind-sets, and different attitudes to business as a whole. This is especially so in the ASEAN countries—I am talking about Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Viet Nam. The languages are different, their legal systems are different, their business cultures are different, the channels to market are different—members will get the picture. Doing business in Saigon is not the same as doing business in Tauranga. Gone are the days when New Zealand business people could turn up with All Black jerseys and hope to clinch a deal.

One of the major problems with our economy at the moment is the lack of people with international business experience. So what do companies do in a time of recession?

STUART NASH Link to this

No, they do not. That is the wrong answer. I am talking about companies. The best ones increase their marketing budget. That is Marketing 101, but those members would not know that.

STUART NASH Link to this

Actually, I remember that member saying that he won Tauranga because he had two ears and one mouth so he listened and did not speak. I suggest that he practise that as he might learn something.

New Zealand’s eyes and ears—our international marketing managers and market development gurus—work for a Government department called New Zealand Trade and Enterprise. That organisation was set up by Mike Moore. I think that members on both sides of the House would agree that Mike Moore knew a little bit about trade. After all, he became the head of the WTO—I tell the characters opposite that that is the World Trade Organization. Gerry Brownlee is now in charge of New Zealand Trade and Enterprise, and what happened to it in the last Budget? It lost $10 million of funding. What? Mr English stripped $10 million from the budget of the country’s international marketing arm. New Zealand will never reach its full international potential—it will never reach full, sustainable growth—unless it understands its international competitive advantage and can market it offshore.

Where was Mr Groser when the gods were handing out the dollars for 2009? Was his ego such that he could not get down on bended knee for an organisation that has a mandate to implement his vision? Why did Mr Groser not tell Mr English that he needed more staff with experience on the ground? He needed people who, in this time of recession, could help businesses to internationalise through providing opportunities so that when things take off, we would fly. Where was Mr Groser? I have no idea.

New Zealand’s SMEs—for members opposite who have no business experience, I say that that means small to medium sized enterprises—are the backbone of New Zealand companies. Opposite I see a doctor and a lawyer but no business people. What is going on? Labour is the party of business—we all know that. In fact, the only gentleman with business experience is Mr Tremain, and he is keeping quiet because he knows I am right. If we are to develop our vision for international competitiveness—[Interruption] Dr Coleman is a medical doctor who could not manage his way out of a paper bag, let alone Mt Albert—then these people will need the money and expertise to take it offshore. Yet Mr Brownlee cut $10 million from our international marketing development managers. In these times of uncertainty, it is even more important to open up global trade routes. We absolutely need people on the ground who know how to open up channels for market so that our small to medium sized enterprises can get over there and make it happen. You cut $10 million from that budget. That is shameful; it makes me cry.

STUART NASH Link to this

But, Mr Assistant Speaker Roy, even you understand that this is shameful. I apologise.

The Budget said to me that Mr English simply does not understand the dynamics of this country’s economy, nor does he understand what needs to happen to achieve sustainable economic growth. Cutting $10 million from New Zealand Trade and Enterprise when we are debating a significant free-trade agreement is akin to stealing the future—

JACQUI DEAN Link to this

I do not know whether there is a farmer amongst the Labour ranks. I remember that the Minister of Agriculture in the previous Labour Government had not been anywhere near a farm. I fail to see how the previous Labour Government could have had any sense of the importance of agriculture—it certainly did not show any signs of it in its policy. But this National Government does, and the ASEAN-Australia-New Zealand Free Trade Area Bill is an excellent opportunity for New Zealand. Interestingly, it was recommended by majority that the bill be passed without amendment. It was supported through the select committee process by all parties except the Greens.

JACQUI DEAN Link to this

Labour members worked very hard in the select committee process to understand the provisions in the bill. Given that Labour members do not represent the agricultural community, where the main benefits of this bill are—

JACQUI DEAN Link to this

Well, the previous Labour Government and current members struggle with representing city folk, whereas in the main National MPs, and I am one of those proud members—and I am surrounded by them, as a matter of fact—have their roots in rural and provincial New Zealand. We will be the beneficiaries of the provisions in this bill.

I address this bill because it is important and significant for us in New Zealand. Just briefly, the Association of South-east Asian Nations, or ASEAN, includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Viet Nam. These are good, strong, emerging markets for New Zealand exporters, and this bill puts in place the provisions where New Zealand exporters can take advantage of the provisions that will go into this bill. The agreement was concluded on 27 February 2009, and this Government is wasting no time in bringing this legislation before the House so that New Zealand exporters and importers can take advantage of its provisions.

Addressing the bill itself, Part 1 makes amendments to the Tariff Act, creating provisions to designate preferential tariffs for goods that are produced or manufactured by the parties to the ASEAN-Australia-New Zealand Free Trade Area Bill. Under those amendments to the Tariff Act, New Zealand can then set different tariff rates for specified parties. This is quite a technical bill, so I will take the time to go through the provisions. For the benefit of members opposite, I am dealing with Part 1—

JACQUI DEAN Link to this

Yes, the list members on the other side of the House. Part 1 addresses the issues in the Tariff Act. Secondly, this bill amends the definition of “free trade agreement” in section 15A of the Tariff Act to provide for transitional safeguard measures for this agreement. Of course, there must be transitional provisions, and this is the part of the bill where those come into play.

Part 2 amends the Customs and Excise Act to allow the chief executive of the New Zealand Customs Service to designate certification bodies that are authorised to issue a New Zealand certificate of origin to goods that are to be exported to ASEAN agreement parties. There was a lot of discussion within the select committee on how we must endeavour through the process of considering this bill, and, in fact, through any activity of this Government, to make commerce easier, and to make exporting and importing of products easier, more streamlined, and more efficient in order to encourage trade between these ASEAN partners. The amendments to the Customs and Excise Act are designed to facilitate that. The certificate of origin will identify the goods, and certify that they are of New Zealand origin.

Part 2 and the amendments to the Customs and Excise Act will create the criteria that the chief executive of the Customs Service must measure applications against before the service can certify a body to issue certificates. In the bill the criteria to certify that goods are of a New Zealand origin are described so that goods can be measured against them before certification can take place. This provision also enables the creation of regulations that will set prescribed terms and conditions for certification. This is very important for our exporters, who need certainty. It also sets the criteria, application forms, and fees. As members can see, this bill is quite technical. There was a lot of discussion around it, and it was designed to make the process easier for our exporters in New Zealand.

Moving to the key outcomes of the ASEAN agreement, there will be no tariffs on 99 percent of New Zealand’s current exports to the four key markets within the 12 years to 2020. These four key markets for New Zealand are Indonesia, Malaysia, the Philippines, and Viet Nam. Those of us who have an interest in agricultural matters will understand very clearly that those four markets are very important emerging markets for our exporters.

JACQUI DEAN Link to this

Yes, I can happily inform my colleague from Rotorua that the farmers are pleased about that. On full implementation by 2020 the bill will provide a total duty saving to New Zealand of $50 million, based on current trade levels. In 2010, tariffs will be eliminated on $429 million of current New Zealand exports to Indonesia, Malaysia, and the Philippines.

At this point I will acknowledge that this has been a bipartisan agreement, and the approach in the select committee has been generally cooperative and constructive, and I thank my select committee colleagues for that. We were not always in total agreement, but generally we moved in a bipartisan way. It is important to note that tariffs are progressively being eliminated on exports to our very important export markets including Indonesia, Malaysia, and the Philippines, but in some of those markets only on milk-powder, butter, wool, products such as kiwifruit, and some manufactured products. This bill brings good news to the New Zealand agricultural sector. From 2011 to 2020, tariffs will be removed on a further $435 million worth of exports to Indonesia, Malaysia, Viet Nam, and the Philippines. We have looked at New Zealand exports, but for ASEAN exports to New Zealand there will be improved access to New Zealand markets through the gradual elimination of tariffs, and that is the nature of this bill. That is what this bill is all about. By 2010 goods from ASEAN countries that are within the 85 percent of tariff lines will be able to enter New Zealand duty-free. There are some good, practical measures in this bill.

I finish my speech this evening by noting that—and I did say this before, but I will say it again—this bill is hugely beneficial to New Zealand trade. It was very encouraging to note Minister Groser saying that New Zealand Trade and Enterprise will be directed into having a focus on our exporters. That is also good news, because it is all very well putting into place a free-trade agreement, and I have described some of those measures in the bill, but in order for that to take effect, and for New Zealand farmers, exporters, and producers to take advantage of it, New Zealand Trade and Enterprise must have its focus on exports and productivity. That is one of the key messages of the National Government through its Budget. I think this bill is a very clear example of this National Government’s desire.