Tariff (Malaysia Free Trade Agreement) Amendment Bill

Hon Dr WAYNE MAPP (Minister of Defence) on behalf of the Minister of Trade) Link to this

I move, That the Tariff (Malaysia Free Trade Agreement) Amendment Bill be now read a first time. At the appropriate time I intend to move that the Tariff (Malaysia Free Trade Agreement) Amendment Bill be considered by the Foreign Affairs, Defence and Trade Committee, that the committee report to the House on or before 15 June 2010, and that the committee have the authority to meet at any time while the House is sitting, except during questions for oral answer, during an evening on a day on which there has been a sitting of the House, and on a Friday in a week in which there has been a sitting of the House, despite Standing Orders 187 and 190(1)(b) and (c).

A report presented by the committee on or before that date, 15 June, will enable New Zealand to remain on course to complete its domestic procedures for the purpose of the free-trade agreement’s entry into force on 1 August 2010—hence the shortness of time. For this to occur, both Malaysia and New Zealand have to notify each other that they have completed their domestic procedures, and in our case that involves passing this bill through all its stages.

The business relationship between New Zealand and Malaysia is characterised by growth and potential. The relationship is underpinned by close and friendly relations between our respective Governments and populations. That stems from a multifarious selection of things, including our Commonwealth ties, the Colombo Plan, and our shared defence concerns, particularly through the Five Power Defence Arrangement. Malaysia is one of the countries in South-East Asia best known to all New Zealanders. We note that its rapid growth in recent years, coupled with our understanding of Malaysian people developed through trade and commerce, has enabled trade to grow very substantially.

It is worth noting that Malaysia is already our 10th largest trading partner. Two-way trade between our nations is approaching $2 billion a year. New Zealand exports $750 million worth of goods to Malaysia, and over the last 4 years our exports have grown by 50 percent. A proportion of that time was during the recession. Services are also flourishing in a range of sectors, including private education, engineering, and information and computer technology services. Of course, there has been a substantial increase in the number of Malaysian international students in New Zealand over the last decade. Investment links have also grown, and total New Zealand investment into Malaysia has grown from $26 million to $450 million in the year ending March 2008 over a 5-year period. That was a growth rate of 77 percent per annum. In contrast, overall investment growth collectively is 8.5 percent. Members can see the impact that Malaysia, and indeed South-east Asia generally, have had on New Zealand’s growth prospects.

Entering into this agreement will do a great deal to enhance and expand that position. It is worth noting, for instance, that last year Parliament gave effect to the free-trade agreement negotiated by New Zealand and Australia with the 10 South-east Asian nations, the ASEAN nations, which include Malaysia. We are doing a bilateral free-trade agreement to secure further benefits with a Commonwealth country that go above and beyond the general ASEAN deal. As members would expect, this is a high-quality and comprehensive agreement. It is a standpoint for all New Zealand free-trade agreements, and it will deliver three benefits: first, it will enhance access to the Malaysian market for New Zealand goods and service exporters, by reducing direct and indirect trade barriers; second, it will provide greater certainty for New Zealand businesses about future trading and the investment environment; and, third, it will provide potential long-term gains from enhanced regional integration and further outcomes within the ASEAN region generally.

In practical terms, on day 1 of the agreement entering into force, 95 percent of our exports will become duty-free, and within 7 years 99.5 percent of our exports to Malaysia will become duty-free. This time frame is an excellent and a very high-quality outcome, and is 5 years shorter than that for the ASEAN deal or the China free-trade agreement. That speaks a great deal about the depth of the relationship between our two countries. New Zealanders, in short, will be the only ones in Malaysia who will be able to guarantee to their clients that New Zealand goods will clear Malaysian customs within 48 hours. In commercial terms, that means that Malaysian importers will be able to have a legal assurance that New Zealand products will clear Malaysian customs within that period. No other competitor of ours will have that particular advantage. Of course, advantages of that nature are reciprocal.

New provisions in the agreement will make it easier for New Zealand companies to establish a business in Malaysia, to work more closely with Malaysian partners, and to deliver services across the Internet, as one would expect in these modern times. Those commitments made by Malaysia are new and are concentrated in those sectors where New Zealand is most competitive, such as in engineering, education, environmental services, and software services. The free-trade agreement future-proofs New Zealand’s investment and service interests in key areas. We have a first-mover advantage, we have an edge on our competitors, and we stand to benefit automatically from concessions that Malaysia negotiates with future free-trade agreement partners. For instance, Malaysia is negotiating agreements with the United States and Australia, amongst others. We are ahead of those countries, and we will have any protections that those two parties negotiate.

It is worth noting to members of the House—and this will be of interest to the Green Party—that the free-trade agreement will be binding and given treaty status. Environment and labour agreements have also been concluded, built on existing agreements. I say at this point, deviating slightly from the provisions of this bill, that the Green Party needs to take those aspects of the agreement on board when its members perhaps consider this treaty during the select committee process. Those outcomes build on existing instruments in those areas with other ASEAN parties, so they enhance communication and cooperation on labour and environmental issues.

The timing of this agreement is particularly important as global economies emerge from the financial crisis. In strategic terms, the free-trade agreement with Malaysia strengthens key relationships that we have with a vibrant partner that many of us are very familiar with. It is a further building block towards the goal of securing a free-trade agreement for the entire region. That is a tremendously important goal for the APEC group of nations. It underlies our strategic positioning as a nation within the Asia-Pacific region and provides an incentive for other countries to follow suit.

I conclude by saying the free-trade agreement is expected to contribute to New Zealand’s performance by promoting the volume and velocity of trade in goods, services, capital, people, and knowledge, and is intended to be part of a wider framework in due course. It is the Government’s intention to see this bill enacted by 30 June 2010 in order to meet the target date, which is very important, of 1 August for entry into force of the free-trade agreement. I commend the bill to the House.

Hon MARYAN STREET (Labour) Link to this

It gives me great pleasure to rise and support the Tariff (Malaysia Free Trade Agreement) Amendment Bill. In fact, if I thought I could help by taking a 5-minute call rather than a 10-minute call to get it passed sooner, I would do that, because there are people who would benefit from it immediately on its implementation.

I am not a kiwifruit grower, but if I were, then I would be waiting in anticipation of this bill being passed, because it will make an immediate difference to kiwifruit growers and exporters in New Zealand. They will receive a 15 percent tariff reduction on the implementation of this free-trade agreement. So I welcome it appearing today. But I want to take a few minutes to talk about some of the economic benefits that will accrue to New Zealand through the free-trade agreement. I will also talk about where it takes us from here, because one must always have an eye on the future with these kinds of agreements.

First of all, of course, the economic benefits are not inconsiderable. Malaysia is New Zealand’s eighth-largest export market, totalling almost $1 billion in 2008. As communicated by Minister Wayne Mapp, between 2004 and 2008 exports to Malaysia grew by nearly 80 percent, which was more than double the rate of growth of exports to the rest of the world. I think the Minister may have made a slight mistake with the figures he was reading at one point; 95.1 percent of tariffs will go immediately on implementation, but within 7 years it will be 99.5 percent—I think the Minister said 95.5 percent by mistake. I think that was simply an error; 99.5 percent of all tariffs will disappear by 2016. That is significant for two reasons: not only do we get the majority of the tariff reduction immediately on implementation but, beyond that, we get almost everything taken away, almost every tariff reduced in a very speedy time frame. It will be in place by 2016, which is faster than the ASEAN free-trade agreement allows for in its terms. I think the Minister of Trade once referred to the New Zealand - Malaysia Free Trade Agreement as the “ASEAN free-trade agreement on steroids”—although I could be wrong. It is certainly faster and more comprehensive than the ASEAN free-trade agreement, which was a significant development in itself.

Of course, these kinds of agreements do not come out of a vacuum; they come out of a history and after years of development. So it is pertinent to pay tribute to previous Ministers with the trade portfolio, beginning with Jim Sutton, but also including Phil Goff and the current Minister of Trade, Tim Groser, who has brought the agreement to its conclusion, in good time. All the Ministers deserve recognition for the work they put in, given that the negotiations around this began back in 2005.

It was my great pleasure to accept an invitation from the Minister of Trade, Tim Groser, to attend the signing of the Malaysia free-trade agreement in October of last year. That is now a convention indicative of what is essentially, in large measure, a bipartisan approach to the trade portfolio. During the course of that trip, Prime Minister John Key, who was also present, opened a new facility that Fonterra had developed out of Kuala Lumpur. It will be significant for our dairy exports because it is a manufacturing plant that allows our dairy exports to be turned into products that are palatable to the Malaysian diet and appetite. Fonterra is to be congratulated for its multi-million-dollar investment in that plant—and certainly the plant was very impressive. But if we did not have such an agreement as this, then it would be so much harder for Fonterra to make the gains it seeks to make by advancement and investment in the Malaysian market. Kiwifruit, dairy products, meat and other food products, services, and education are the critical components of this Malaysia free-trade agreement. I welcome them.

It is also important to draw two other things to the attention of the House. The first is that the now customary side agreements on labour and environment conditions are also attached to this, because they are now conventional parts of the apparatus around free-trade agreements—and so they should be. But there are two exceptions that have been included in this agreement that I think are, again, apposite—funnily enough—today, as we have just passed the second reading of the Waikato-Tainui Raupatu Claims (Waikato River) Settlement Bill and the Government has been emphatic about lauding the signing of a non-binding and aspirational declaration on the rights of indigenous people.

Here is something that makes Māori aspirations concrete. In this agreement there is an exception in relation to the Treaty of Waitangi, which is consistent with New Zealand’s previous free-trade agreements. The New Zealand - Malaysia Free Trade Agreement maintains New Zealand’s ability to take the measures it deems necessary to accord more favourable treatment to Māori, including for the fulfilment of New Zealand’s obligations under the Treaty of Waitangi. That is meaningful. I say to the Māori Party that that is the way things are done. That is the way, through words on the page that are binding across nations, that the Treaty of Waitangi has international status, has international recognition, and means something in this country.

There is also an exception around the creative arts. That, again, is something that Māori will have profound interest in. The words on the page state that the free-trade agreement does not preclude New Zealand from taking measures necessary to protect national treasures, or taonga, specific sites of historical or archaeological value, or to support creative arts of national value. That absolutely relates to Māori creative arts and the things that are important to Māori. I say again to the Māori Party that that is the way that those aspirations are concretised. That is the way that those aspirations for Māori, which we share and which we support, are given life, status, and meaning. It is not in empty rhetoric around a declaration that the Prime Minister is very keen to stress is non-binding and aspirational. That is how a Parliament, a Government, and a country should make the recognition of things precious to Māori real, protected, and absolutely embedded, not only in the law of this country but in the way in which this country deals internationally with its trading partners. I hope this legislation is a lesson for the Māori Party in how to do things in a real and meaningful way. Thank you.

JOHN HAYES (National—Wairarapa) Link to this

I was reflecting, as my colleague Maryan Street was speaking, about history. It is a word she used in her speech, and it took me back to my days at university. Most people of my vintage will remember the Colombo Plan and Malaysian students studying in our classes. A fellow called Ong was in our class at Lincoln University when I was doing my degree there. Moving on from that, my first-ever job was actually up in Alor Setar, looking, under our aid programme, at the location of an abattoir. The fact that I had never been in one in my life did not seem to matter.

After that I got a job with the Ministry of Foreign Affairs, and I remember very clearly the briefings we used to get in Singapore at our High Commission on the activities of the communists during the period of Konfrontasi, which, of course, underpinned the reason why we kept a battalion in Singapore, and why we did a lot of exercises in Malaysia, as we are doing today in Afghanistan. Today is a far cry from those days when people lived in attap huts and Malaysia was generally regarded as an underdeveloped country. Today we meet as equal countries signing a trade agreement, which leaves us in an equal relationship on both sides.

Rather than traverse some of the territory that has been covered so far by previous speakers, I will speak particularly to my constituents in the Wairarapa and outline to them the importance of this trade agreement to their day-to-day work. Specifically, we are exporting about $350 million of dairy products into Malaysia. We are producing a couple of million litres of milk a day down in South Wairarapa—much of that will end up in Malaysia. We export something in the order of $50 million worth of meat a year—sheep meat and goat meat particularly. That is a product that we have a lot of in the Wairarapa and in Central Hawke’s Bay.

We are exporting $30 million worth of fruit and nuts to Malaysia, and we have, particularly, plenty of fruit in my electorate. We are exporting $20 million worth of machinery. People like Metalcraft Industries in Dannevirke are producing and exporting to the global market things like wheelchairs, and we have just hit our 500th unit. Other significant products that Malaysia takes from New Zealand include about $20 million worth of paper and paperboard, $16 million worth of wood pulp, and $15 million worth of timber. All of those products come from my electorate, so this bill will be hugely important to the day-to-day market opportunities for many people in that area, which stretches from Ngawi to Waipawa.

I think it is also important to keep in mind that the global economic crisis had very little impact on the growth of GDP in Malaysia and on the growth of our exports to Malaysia. Our exports have continued to grow really strongly. Food, as I have said, comprised roughly 50 percent of our exports annually to Malaysia over the last 5 years. The real additional growth is not so much in commodity products but in prepared foods. We are adding value to what we are able to put into that market, and that is also because as incomes are rising in Malaysia, people can pay more for our produce.

I think the other thing that has not been mentioned today and is very significant is that, particularly to eastern Malaysia, much of our exports are actually transhipped in Singapore. We can probably guarantee that our exports to Malaysia are $60 million to $100 million a year more than the official statistics show because a lot of our product is actually getting caught through the Singapore net.

Another area of great importance to us is tourism. Every hotel bed represents three jobs. Nearly 20,000 Malaysians visit New Zealand each year. Both New Zealand and Malaysia will benefit from this agreement and from the ASEAN-Australia-New Zealand Free Trade Agreement, which has entered into force. The profile with Malaysia will be really high amongst our export community and our tourist industry. I think that, increasingly, New Zealanders will be off to visit Malaysia as tourists, as well.

I think this bill is a very good bill. There is no point in my continuing on about it. I look forward to it coming to our select committee, and we will be reporting back to the House in due course. Thank you.

STUART NASH (Labour) Link to this

I stand in support of the Tariff (Malaysia Free Trade Agreement) Amendment Bill in its first reading. This bill amends the Tariff Act 1988 in order to implement the New Zealand - Malaysia Free Trade Agreement, which was signed in Kuala Lumpur in October last year. The bill’s amendments will allow transitional safeguard measures to be applied in appropriate circumstances to imports originating from Malaysia. Like all free-trade agreements ratified in this House during this Government’s term, negotiations for this agreement were started by the previous Labour Government, in this instance back in 2005 under the Hon Jim Sutton. They were carried out with diligence, competence, and leadership by the then Minister of Trade, Phil Goff, our next Prime Minister. It would be good if the National Government could give credit where it is due when it comes to these sorts of bipartisan matters concerning trade.

This deal expands on the ASEAN-Australia-New Zealand Free Trade Agreement, which was signed in February 2009. It cuts trade barriers between Malaysia and New Zealand more swiftly and to a greater extent than the ASEAN-Australia-New Zealand Free Trade Agreement does. This free-trade agreement underlines the close relationship that New Zealand has built with Malaysia over the decades. We hope it will provide a platform for even stronger ties. We have heard the statistics on the growth in trade between the two countries. We all know that if New Zealand is to develop sustainable economic growth, then it must follow a policy of export-led growth, it must work to foster an economic environment where key competencies around export strategy must be encouraged in any way, shape, or form, and it must continue to foster, develop, and ratify key relationships with our major trading partners.

Bill English has stated that his Government’s goal is to drive an export-led recovery. He said: “We’re looking for how to make sure we get a sustainable, export-led recovery.” In my view, three things are holding back companies in New Zealand from optimising their export growth and, therefore, New Zealand’s sustainable export growth and wealth creation. Bill English’s Government not only is doing nothing to address these but also is making them worse. Therefore, this Government’s actions are increasingly suboptimising any chance New Zealand has of increasing economic growth through the further development of the export sector. The three things holding New Zealand companies back from optimising their export opportunities are a lack of affordable capital, a lack of true export competency, and an outdated monetary policy. Let me expand on these.

First is the lack of affordable capital. Only around 10 percent of all business loans are unsecured. This means that around 90 percent of all business loans are secured against assets of the owner of the company—often the family house. This attitude to access to capital will never allow the country to address the issue that we overvalue capital and undervalue labour in this country. Basically, this means that we prefer to employ cheap labour rather than spend money on capital in order to improve productivity. This issue has not been addressed by the current Government; rather, it has worked against this principle in two ways. First, research has shown that the higher the wage, the more likely the company is to spend money on capital improvements. This does not—

Dr KENNEDY GRAHAM (Green) Link to this

The New Zealand - Malaysia Free Trade Agreement is not the first of its kind to come before this House. It follows the China and ASEAN free-trade agreements, and will be followed by the Gulf States, some Pacific countries, and India. The fundamentals of these agreements are all the same, so the debates in the House have a certain quality of déjà vu. The debate over trade is simply part of the debate over the global economy. The difference between National and Labour orthodoxy on the one hand, and the Green alternative on the other, is in the most fundamental way a difference in economic philosophy. We have to revisit first principles, as it were. Essentially, National and Labour embrace traditional neoclassical economics. The Greens adopt ecological economics. The difference is qualitative.

The Government’s case for free trade rests on two arguments: short-term morality, and efficiency. The Green’s case for sustainable trade rests on two arguments: long-term morality, and scale. The moral argument, as propounded by the Minister of Trade, Tim Groser, is the following: the global population is set to grow from 6 billion to 8 billion by 2030, and food demand will increase by 50 percent. New Zealand has an obligation to feed that expanding and urbanising population. That moral obligation is accompanied by a financial interest in increasing our export income. So morality sanctions us to engage in production and trade, and to do so at optimal efficiency. The global economy is to grow through productivity specialisation, reflecting the theory of comparative trade advantage. The combined economic output is increased, and all countries stand to gain to some extent, even if some gain more than others.

So we are all better off, and New Zealand in particular combines economic wealth with moral satisfaction. With a population of 4 million we feed some 18 million people around the world already. With improved productivity we could feed more. However, specialisation means that our land, financial capital, and labour force will be required to realign from the less to the more productive sectors. But this can be done through time-bound, phased-out regimes.

That world view was most recently expressed in Mr Groser’s foreword to the United Nations Conference on Trade and Development’s 2010 trade and environment review. Mr Groser wrote: “All countries have a common interest in food security, removing impediments to trade and reducing global emissions of greenhouse gases. … Increased economic wealth would also improve the ability of countries over time to contribute to global action on climate change.” I note the phrase “over time”. The Minister believes that the world, with New Zealand punching above its weight as a fast follower, has the luxury of time as it slopes off into the 21st century; that it is not our problem, to determine the pace of change.

The Green world view is different. It has to do with sustainability and it has a different conception of both the magnitude of the problem and the urgency of its resolution. The carrying capacity of the planet, based on current technology, is less than 8 billion. In fact, it is less than today’s 6 billion. Precisely what figure the optimal population is depends on the level of material consumption for humanity as a whole. If we all live Western lifestyles, we need six planets. Even at the average global level of consumption today, we have an ecological overshoot of some 30 percent. So with our current technology and our current lifestyle we are simply overpopulated on the planet. If we cannot bring ourselves to accept this unpalatable fact, then alternatively we have to acknowledge that the global economy is breaching the planet’s ecological limits.

In light of this, New Zealand’s moral obligation is not so straightforward. The National-Labour position is not to query the greater human numbers but to simply feed them and make a dollar. The Green position is to search for optimality of scale. That is a long-term moral imperative rather than a short-term moral choice. Mr Key and Mr Goff toss the phrase “sustainable development” around, through a vague intuition that it is a modern political good, but they do not understand its true meaning and they do not comprehend its implications for macroeconomic management or trade policy.

British scientist James Lovelock contends that the planet’s carrying capacity is closer to 1 billion, that we may not reach 8 billion, and that the population will probably decline towards that much lower figure. Whether or not he is accurate with the figure, he is correct within an order of magnitude; National and Labour are not. Does the moral obligation for New Zealand exports hold for a global population of 20 billion? British governmental adviser John Beddington warns of a perfect storm around 2030 when resource depletion, climate stress, population numbers, lifestyle aspirations, and energy constraints roil the global economy and inflame the body politic. Whether or not he is accurate in his time prediction, he is correct about the prognostication.

So where does this leave global trade policy? Globalised free trade is the manifestation of the problem of the globalised economy. The case for free trade rests on the assumption that trade is voluntary. Both parties must be better off than before the voluntary act. When trade is based on the absolute advantage enjoyed by the countries for the commodities in question, this is self-evident, but the Ricardian theory of comparative advantage still justifies trade even when a country may have absolute advantage in all goods. The theory is that the combined production of all countries trading is greater than if they produced separately, and that each country stands to gain individually, even if not to the same extent.

Only last week the World Trade Organization chief Pascal Lamy dismissed any challenge to the notion that open trade brings overall societal benefit. He said that contested policy provides a fertile field for the growth of urban legend and falsely premised ideas with popular appeal. He identified what he saw as six fallacies, or economic myths, and sought to refute them. Time does not permit me to examine each one here. Mr Lamy contended that the benefits of trade, which he identified as economic well-being and political harmony, will be realised only if the overall policy context is right. How right he was. Mr Lamy called for a public debate, so the response of the Greens is to identify the mistakes in his thinking.

There are six fallacies in the Ricardo-Lamy-Groser theory of free trade, and they are as follows. First, the extra combined production from free trade cannot, in fact, be achieved without extra resources. There is the increase in the rate of depletion in the natural resource base from which the product is made. What trade economists mean when they say “no extra resources” is simply no additional labour or financial capital, because neoclassical economics omits natural capital in its theory. Second, the extra transport costs associated with free trade are not included. International transport is energy intensive, often subsidised, and its external costs are omitted from its pricing. Sea trade emits 0.8 billion tonnes of carbon dioxide—3 percent of all anthropogenic emissions—and this is expected to triple by 2050. The same is expected of aviation and surface freight.

Third, free trade assumes the economic cost of specialisation to be negligible, but it ignores the social cost, it requires retraining, and perhaps physical relocation. That is a loss in human welfare. The invisible hand has narrowed the freedom to choose. Fourth, free-trade agreements have a withdrawal clause, and if a trade becomes too disadvantageous New Zealand can, theoretically, opt out. But that assumes that specialisation is reversible. Is a furniture-maker to return to the Wairarapa after a brief stint as a sharemilker in Canterbury, simply because things did not work out?

Fifth, the specialisation results in a narrow range of sectoral products, country by country. That makes each country vulnerable to the vagaries of the global economy. When cute varieties of ice cream and salted crackers pass in the night across the Tasman in the name of choice, and carbon emissions, that is simply daft. Sixth, Ricardo’s free-trade theory was confined to trade in goods alone. The two productive factors, labour and capital, remain confined within national boundaries. Only commodities crossed national frontiers. Today’s globalisation bequeaths far greater mobility in financial capital than in goods. The Minister glorifies our export growth to China since the free-trade agreement came into force, but he ignores the land and other assets going to Chinese ownership as we speak. Far from freeing up a country to benefit from free trade, New Zealand becomes a 21st century colony imprisoned through global free investment.

This Malaysian free-trade agreement is simply more of the same. As such, it spells disaster, not because of nefarious intent; Mr Lamy and Mr Groser are honourable men, but their economic thought needs reform. When this bill comes to the House for a second reading, I shall explore the philosophical differences between the National and previous Labour Governments, and Green alternatives, and how they play out in the case of the Malaysia trade agreement.

JACQUI DEAN (National—Waitaki) Link to this

In the first reading of the Tariff (Malaysia Free Trade Agreement) Amendment Bill I will touch first on the purpose of the bill, which amends the Tariff Act 1988 and implements the New Zealand - Malaysia Free Trade Agreement signed in Kuala Lumpur on 26 October last year. The bill speeds up tariff reduction between our two countries. It will take nearly half the time agreed in the agreement that established the ASEAN-Australia-New Zealand Free Trade Area.

The comments that I will make in the first reading of this bill I will make largely in the context of the drought conditions that have been declared in much of the eastern area of New Zealand, and particularly in North Otago and Central Otago, in my electorate. Anything that the National-led Government can do to enhance favourable trading conditions, particularly for New Zealand farmers, can only be applauded. This agreement with Malaysia is a very important part of National’s focus on free trade and improving access for our exporters to world markets. In the context of my electorate, those exporters are in the agricultural sector. This priority was included in the Prime Minister’s statement to Parliament in February, so I am very proud to stand and speak in the first reading of this bill.

I will give a little background. Over the past 4 years New Zealand goods exported to Malaysia grew by more than 50 percent, making Malaysia New Zealand’s 10th largest trading partner. To me, that is exciting and significant. Malaysia provides New Zealand exporters with a wealth of opportunity. In the field of education—which is also important to us—between 2003 and 2008 the number of fee-paying Malaysian students in New Zealand increased by more than 70 percent. That is a significant increase. It makes Malaysian students New Zealand’s third-largest source of fee-paying university students and the second-largest source of PhD students. It is worth noting that international full fee paying students are worth over $2 billion a year to the New Zealand economy.

I will speak on some of the detail of this Malaysian free-trade agreement. It eliminates Malaysian tariffs on 99.5 percent of New Zealand’s exports within 7 years of its entry into force. That is quite significant. That rate—99.5 percent of New Zealand’s exports to Malaysia being duty-free within 7 years—is much faster than the agreed rate of 99.4 percent over 12 years under the ASEAN agreement. On full implementation of the Malaysian agreement, the duty savings will amount to over $10 million a year for New Zealand exporters. Ninety-five percent of New Zealand’s exports to Malaysia will be duty-free on day one of the agreement coming into force.

The bill also provides 48-hour customs clearance, and self-declaration of origin for our exports. Anything that can be done to smooth the way for exporters and to cut some of the red tape under which they operate must be applauded.

I will talk about a couple of specific components of this free-trade agreement. Although the provisions with regard to kiwifruit are exciting, I will leave those to my colleagues who live in the North Island to talk about, because we do not tend to grow kiwifruit commercially down south; we have much more exciting things to grow, like meat products, wool, dairy—excluding liquid milk—fish, and particularly forestry. Those meat, wool, dairy, fish, and forestry sectors retain their duty-free access. That duty-free access is bound in, so Malaysia cannot reapply tariffs on New Zealand’s agricultural exports. In my introductory comments to this brief contribution I referred to the droughts declared today; in that context, I think that that component is exciting and should be encouraging. In terms of liquid milk, there is significant improvement. In-quota duties will be eliminated, and in-quota volumes will increase by up to 5 percent a year.

The New Zealand - Malaysia Free Trade Agreement is boosting innovation. I am quite sure that those in the exporting agricultural sector will be excited about the improvement in the access of exports to world markets. This is one of National’s six policy drivers for a step-change in New Zealand’s economic performance, and it is one that will be welcomed by farmers and by the agricultural sector, particularly in the dry areas of the South Island. I commend this bill to the House.

Hon CHRIS CARTER (Labour—Te Atatū) Link to this

The Labour Party supports this free-trade proposal, which is a proposal that happened when Labour was previously in Government. With all due respect to our Green colleagues, the Labour Party knows that without trade our country could not exist. We could not import goods, and we could not pay for the lifestyle that we have. Trade is the lifeblood of New Zealand, being a developed country.

As I am sure all members of this House are aware, New Zealand faces severe geographic barriers to prosperity. We are the most distant country from the European market. We are far from the North American market. We are, relatively speaking, close to the emerging Asian markets, but remember that we are as far from Singapore as London is. So, geographically, even for South-east Asia and for a country like Malaysia, New Zealand is still a distant market. Malaysia is currently our eighth-largest export market. We export goods of about $1 billion worth to Malaysia. Hopefully, this free-trade agreement, signed so recently and soon to be ratified by this Parliament, will increase that trade.

I think back to 2008 when as Minister of Education I accompanied the then Prime Minister, Helen Clark, and the then Minister of Trade, Phil Goff, to Beijing for the signing of the Free Trade Agreement between the Government of New Zealand and the Government of the People’s Republic of China. I tell members to look at what the results of that free-trade agreement have been: an increase in trade of $1 billion in the last 2 years. That is an increase of 34 percent in our trade with China—that huge emerging market. One of the critical things to see the development that the China free-trade agreement personifies is a Government taking a very proactive role in promoting and encouraging the opportunities that the free-trade agreement provides. For example, when I went to China with the then Prime Minister for the signing of the China free-trade agreement, I had meetings with the Minister of Education, Zhou Ji. I signed a memorandum of understanding for the mutual recognition of high school qualifications so that students coming to study in New Zealand at high school level would not be penalised in China for having New Zealand diplomas, and similarly for New Zealand students going to study in China. I visited schools and tertiary institutions. I really worked hard, as we would expect any Minister of Education to do, to try to utilise those opportunities. Mr Goff and I went to Hangzhou. He spoke with exporters, and I dealt with educationalists in Zhejiang province in that very rich middle part of China. It is really important that a Government seizes those opportunities and takes a leadership role.

After that free-trade agreement the Labour-led Government set up a road show. It travelled all around New Zealand giving exporters, business people, and agriculturalists the chance to see what was available through the free-trade agreement. We set up web-based information services so that people could access ready and quick answers to the opportunities provided by the free-trade agreement. Between 2005 and 2008, when Labour was in Government, it increased New Zealand Trade and Enterprise funding from $6 million to $54 million. We knew that it was critical to invest to maximise these opportunities. I am really pleased that the present Government has signed the free-trade agreement with Malaysia, but I ask myself what it has done to encourage New Zealand exporters, businesses, education providers, and primary producers to take advantage of this situation. New Zealand Trade and Enterprise’s funding over 4 years will be reduced by $101 million.

Dr PAUL HUTCHISON (National—Hunua) Link to this

I am grateful for the opportunity to speak on the Tariff (Malaysia Free Trade Agreement) Amendment Bill. I must say that this bill signifies another great achievement under this excellent National Government. It was good to hear the Hon Maryan Street saying how important she thought this bill was, and that she would be prepared to sacrifice some of her speaking time if that meant the bill would be passed earlier. However, despite her saying she would take just a 5-minute call she could not help herself, and went on for the full 10 minutes in talking about the merits of this excellent bill under the National Government.

It is appropriate to acknowledge trade Ministers, both past and present. I think of the Hon Dr Lockwood Smith—who was not acknowledged by Maryan Street—Jim Sutton, Phil Goff, and of course the extremely hard-working and productive Hon Tim Groser. All of those members have worked extraordinarily hard for New Zealand, often under hugely difficult time constraints, day and night.

There is no doubt that this bill signifies the gathering pace of many free-trade agreements that have gone on in recent times. Those include, on 1 January, the agreement establishing the ASEAN-Australia-New Zealand Free Trade Area. On 29 March the Minister of Trade, Tim Groser, signed the New Zealand - Hong Kong, China Closer Economic Partnership agreement, and of course the New Zealand - Gulf Co-operation Council free-trade agreement negotiations have been concluded. More recently, John Key has just returned from a very successful visit to the United States, further consolidating the Trans-Pacific Economic Partnership Agreement, for which talks began in Melbourne last month. The Government has secured approvals for free-trade agreement negotiations to start with India, and that, again, is another very significant achievement. I note that if all the free-trade agreements come to fruition, it will mean that we have direct and indirect agreements with the four most populous nations on earth: China, India, the United States, and Indonesia. That represents almost half of the planet’s population and much of the world’s economic activity.

I thought the contribution from the Greens was a somewhat gloomy one. It cited Dr Lovelock, the British scientist who has suggested an optimal world population of a billion when we have 6 billion already, and when almost inevitably the world’s population will go up another 2 or 3 billion in the next 20 to 30 years. It is vital for New Zealand that we have greater opportunities for our food supply to go to these heavily populated countries. Undoubtedly with time there will be natural adjustments to population, but I think it is absurd to hear the Greens suggest that the world population of 6 billion would optimally be only 1 billion. How are they possibly suggesting that we reduce the population, in this short period of time, from 6 billion to that much lower level? Talking about the perfect storm and 2030 of course, I tell the House that countries throughout the world, through such mechanisms as emissions trading systems, are taking the global warming issue very seriously.

This bill certainly signifies a great leap forward for New Zealand, and a practical opportunity to increase our per capita income. That is absolutely central and vital for New Zealanders in order to have the opportunity to get better health, welfare, social services, and education services, which people such as the Greens and most New Zealanders so badly wish to have.

I will comment on three last things—firstly, the environment part of this bill. The Malaysia - New Zealand Environmental Cooperation Agreement, negotiated in the context of the Malaysia free-trade agreement, establishes a set of shared trade and environmental principles to promote sound environmental practices and sustainable development. The agreement is Malaysia’s first bilateral treaty on environmental cooperation negotiated in the context of a free-trade agreement. I have been to Malaysia and have seen personally the spectre of fires going on continuously in the area around Kuala Lumpur, so I think it is extremely good and a step forward that the environmental aspect of the free-trade agreement has been embedded. Then, of course, the labour cooperation agreement, negotiated in the context of the Malaysia free-trade agreement, reaffirms commitment to the principles of the ILO Declaration on Fundamental Principles and Rights at Work, and is the follow-up to the declaration.

Finally, I think it is important to point out that there will be a review. The review will take place within 5 years of the agreement’s entry into force, and at least every 3 years following that. So this bill is another excellent initiative under this forward-looking National Government.

Hon PETE HODGSON (Labour—Dunedin North) Link to this

We are largely agreed in this House on the benefits of this free-trade agreement. I am sorry to say that I was not here to listen to the contribution of the Greens. I dare say that I would have listened to it with some measure of agreement and some measure of disagreement—and, I hope, a lot of respect—but as I did not hear it, I cannot comment further. Beyond that, generally speaking, the parties in this House seem to think that our progress on free-trade agreements is satisfactory. I add my remarks about past trade Ministers and also past and present officials, who, of course, do the yards. Yes, we are gathering pace. Doha appears to be making very slow progress, so our ability to make bilateral progress in the stead of Doha matters. However, that is where my agreement with National rests at the moment.

I have become increasingly disturbed over the past 15 or 18 months about the ability of this Government to follow up on free-trade agreements. I have been concerned about the ability of our exporters to follow up on the ASEAN agreement. I am concerned about the ability of our exporters to follow up on the Malaysian free-trade agreement. I think that our ability to follow up on the Chinese free-trade agreement was better, and that is the distinction I would draw. People can call it partisan if they wish; I think it matters. I think it matters that when we got ourselves a free-trade agreement in China, we took a number of steps. There were, and still are, a number of trade missions going to different parts of China. The signing ceremony was a significant public event and was carried significantly in all of the major dailies in New Zealand and China. Admittedly, that was because it was China’s first free-trade agreement, and they were thinking that having one was a pretty good start, but that has not been the case with this free-trade agreement in Malaysia, and it has not been the case with the ASEAN free-trade agreement.

I think that we are dropping the ball in terms of the Government’s role in promoting follow-up to the establishment of a free-trade agreement. It is as if the Government is saying that it has negotiated an agreement and now the exporters of this land of New Zealand can go and make good, but it will not be able to help them any more than it helped them before. That is simply wrong. It is simply wrong for there not to be some Government involvement. Of course most of the job rests with the exporters. Of course the private sector is the key player in export development. That is obvious.

The Export Credit Office was begun under a Labour Government and is getting stretched, I imagine, by the drying-up of credit in the last 18 months. I wonder whether the budget for that office will be extended next month in the Budget. I do not think so.

I wonder whether the Beachheads programme, which was started under a Labour Government and has been retained by this Government, will be expanded by this Government. After all, when we got ourselves into China, a Beachheads programme went with the free-trade agreement. As far as I am aware, there is no way that a Beachheads programme is going with the free-trade agreement in Malaysia; I would like a Government Minister to get up and tell me that I am wrong. I wonder whether we can make as big inroads with our agricultural exports into Malaysia when we have ditched Fast Forward, and whether our exporters feel as supported as they might have had we not done so.

I wonder what has happened to Market Development Assistance, which was, again, begun by Labour and continued for a number of years. It was in transition under the previous Government, so I am not suggesting that it would have remained unchanged had there not been a change of Government; it was being migrated across to the Growth Services Fund, which is a new label with a new purpose and a slightly different set of policies. But I know that in the meantime the money has gone missing.

Just at a time when we need, say, a Growth Services Fund for our biggest exporters, we find that that is not available any more, and that is troubling me. I think that perhaps not our biggest exporters but some of our medium-sized exporters that are growing quickly will have significant cash-flow problems and will have significant problems breaking into new markets and setting up new relationships quickly, yet that is exactly where a good Government can make a difference. I assert—with, I think, some knowledge in the matter—that when it comes to more recent free-trade agreements, the Government has pretty much said to the export sector that it is on its own. Of course, the export sector does not have to have a Government to make progress. Indeed, I recall that in Malaysia before a free-trade agreement, the volume—I think it is a volume figure—of trade doubled between 2004 and 2008. It is already a rapidly growing export market, but it is a big country.

I ask whether we are satisfied with that level of growth. Why can we not aspire to greater levels of growth? Is it not a fact that we have a persistent current account deficit? Is it not a fact that if we continue to have a current account deficit, then we will continue to own less and less of our own country? Is it not clear that investment flowing into New Zealand to buy dairy farms or whatever is created by the fact that we have an external account deficit? Is it not the case that if we can sell more, then we can own more of our own land? That has not reached the desperate stage yet, but some people are getting worried—I am starting to.

I think that when we have a free-trade agreement coming along, we should nail it. We should not just negotiate it; we should go ahead and nail it subsequently with good export assistance. In the case of Malaysia it is made all the easier by 30 or 40 years of Malaysian students training in New Zealand. Our knowledge of each other’s countries is already quite good. The amount of interpersonal relationship between New Zealand and Malaysia is already quite good.

I have the pleasure of representing Otago University. Even today, if one looks at the numbers of foreign students at Otago University, one sees that, after the US, Malaysia comes second. It is ahead of China, ahead of Germany, and well ahead of Australia, the UK, or any of those nations. Malaysia comes in second.

Even today, long after the demise of the Colombo Plan 40 years ago, we have through export education very, very strong links with Malaysia. This is a country where we can do seriously good business, because we have seriously good relationships and seriously good history. But if there is no Beachheads programme, if there is no Market Development Assistance fund, if there is no intention on the part of the Government to support those companies that need an Export Credit Office to get themselves a bond lodged in order to go and build a travelator at Kuala Lumpur Airport or whatever it is to be, and if there is no support or insufficient support for our exporters, then we have done only half a job. Half a job, when there is a current account deficit the size of ours, is not good enough, and it is not good enough for National members to bang on at length about how we need to have more exports but at the same time we need to reduce the amount of programme support that is going to our exporters. It was modest enough under the previous Labour Government, one might argue, but it is getting even more modest, indeed.

That is not to say that New Zealand Trade and Enterprise does not do a good job, and it is not to say that that agency is somehow absent in Malaysia. Neither of those things is true. The question is: what is enough? If we have a country with which we have a volume of trade that has doubled in 4 years and with which we have extraordinary historical links, then surely we should be going hard after further trade development with that country. I bet they are going hard with our little economy. I bet they are! But that is not the case when we look from New Zealand towards Malaysia.

I congratulate the Government on concluding the free-trade agreement. I hope this legislation passes quickly, and I ask the Government to please start paying attention to ensuring that we can put some runs on the board now that we have the ink dry on the paper.

HONE HARAWIRA (Māori Party—Te Tai Tokerau) Link to this

Tēnā koe, Mr Assistant Speaker. Kia ora tātou katoa e te Whare. A few years ago a group of Malaysian organisations came here to Aotearoa to learn how the Māori people of New Zealand had brought their culture back from the brink of extinction. The delegation included tribal leaders from the Bajau people, one of the more well-known indigenous populations in Malaysia, who were keen to visit kōhanga reo, kura kaupapa, wharekura, and wānanga to witness the resurgence and revitalisation of te reo Māori in everyday use in schools and the community, and to learn how we have been able to defend and protect our customary heritage and culture, including our language.

I raise this experience here, because I would have thought that positive exchanges like that might be what we want to foster in an international relationship with Malaysia. Yet in this deal there is nothing, nada, horekau. There is no mention whatsoever of first-nation peoples’ involvement in decision making on international trade agreements, which is a bit of an irony, considering that on this day, Tuesday, 20 April 2010, the Māori Party co-leader and Minister of Māori Affairs announced New Zealand’s support for the Declaration on the Rights of Indigenous Peoples at the opening session of the Permanent Forum on Indigenous Issues in New York, where he acknowledged the special status held by Māori as tangata whenua, with an interest in all policy and legislative matters, and affirmed this country’s commitment to the common objectives of the declaration and the Treaty of Waitangi. In doing so he set right New Zealand’s grave injustice when in 2007, 143 countries voted in favour of the Declaration on the Rights of Indigenous Peoples, but the New Zealand Labour Government refused to support it, sending a clear and unequivocal message to the rest of the world that as long as Labour was in power, New Zealand would oppose the fundamental rights and aspirations of Māori people.

Thankfully for the indigenous people of the world, and for the Māori people of Aotearoa in particular, Labour was not to have much more than another 12 months in office before it was booted to the Opposition benches, clearing the way for the Māori Party to open negotiations with the National Government, which has led to today’s historic announcement to support the Declaration on the Rights of Indigenous Peoples, a document that had the support of such luminaries within the Māori world as Sir James Henare, Dame Whina Cooper, Dame Mira Szaszy, Te Atairangikaahu, Sir Robert Māhuta, Whakahuihui Vercoe, Sir Paul Reeves, Sir Hepi te Heuheu, the Māori Women’s Welfare League, and the New Zealand Māori Council, but that has been opposed vociferously by the New Zealand Labour Party, Parekura Horomia, Nanaia Mahuta, Mahara Okeroa, Mita Ririnui, Dover Samuels—

TODD McCLAY (National—Rotorua) Link to this

It gives me pleasure to rise to speak on the Tariff (Malaysia Free Trade Agreement) Amendment Bill. This bill amends the Tariff Act of 1988 and implements the New Zealand - Malaysia Free Trade Agreement, which was signed in Kuala Lumpur, Malaysia, on 26 October 2009. It speeds up tariff reductions between our two countries in nearly half the time agreed in the agreement established by the ASEAN-Australia-New Zealand Free Trade Agreement.

Over the last 4 years the amount of New Zealand goods exported to Malaysia grew by more than 50 percent. That means Malaysia is New Zealand’s 10th largest trading partner. This bill and the agreement, when it enters into force, will mean that 99.5 percent of New Zealand exports to Malaysia will be exported duty-free within 7 years. That will be a saving in duty of some $10 million to New Zealand, and that saving will be of direct benefit to New Zealand producers.

I will speak about some of the products that will be covered by the bill, and in my electorate in particular there will be great advantage to producers. The first product is kiwifruit. At present, the kiwifruit industry faces a 15 percent tariff barrier when it enters the Malaysian market. By 2012, under this agreement, that duty rate will be reduced to zero. That is very good news for kiwifruit farmers all over New Zealand, but it is of particular benefit to my electorate. Exports of kiwifruit to Malaysia grew by a staggering 173 percent over the last 3 years. I will repeat that figure—a staggering 173 percent over the last 3 years. Last year we exported one million trays of kiwifruit to Malaysia. That is of great significance.

The Minister of Agriculture, the Hon David Carter, was in my electorate not so long ago, and we had an opportunity to meet with Zespri and talk with a number of other producers. I have visited a number of kiwifruit farms and have talked to those exporters. They raised a concern and an issue that kiwifruit exports to Korea face an extremely high tariff barrier. In fact, that barrier makes our kiwifruit less competitive when it is exported to Korea. In some cases, other countries that export kiwifruit already have trade agreements with Korea, and some of the rates of tariffs that are imposed against those other countries, particularly Chile, are close to reaching zero. That means that our kiwifruit producers—the best kiwifruit producers in the world—are at a disadvantage. The great news is that this free-trade agreement with Malaysia, which is a market of growing importance to New Zealand producers, means that by 2012—which I think, from memory, will be only 1 year after our Government has been returned to power for a second term—the 15 percent tariff will be reduced. That will mean extra money in the pockets of kiwifruit producers in my electorate and in other electorates.

A lot of meat, wool, and dairy products are also produced in my electorate, and forestry is very important to us. Those commodities already have duty-free access to the Malaysian market, but this agreement will bind those rates. There will be a binding commitment on the part of Malaysia, which means that in the future, when this free-trade agreement can be renegotiated, those preferential rates of duty-free access cannot be changed. That has to be good news for our producers. It gives them a certain amount of certainty. Indeed, it means that they can build those markets and export more products to the Malaysian market, and there can be no fear that duty will be placed upon them. That is a very important issue.

I want to touch on just two additional parts of the bill, and the first is education. Between 2003 and 2008 the number of fee-paying Malaysian students coming into New Zealand increased by more than 70 percent, and that made Malaysian students New Zealand’s third-largest source of fee-paying university students. Indeed, it was worth $2 billion to our economy last year. In Rotorua and in Tauranga we have two technical institutes—the Bay of Plenty Polytechnic and the Waiariki Institute of Technology in Rotorua. This agreement will be very good news to them. The reason for that is both technical institutes have a number of foreign fee-paying students who have come to New Zealand and love to live in the Bay of Plenty. This agreement means that those two very fine institutions in the Bay of Plenty will be able to go out and promote their services more to the Malaysian market. I can see a direct impact upon our local economy—certainly as far as employment is concerned—when more students come here.

The final point I will make is about goods from Malaysia that will be imported into New Zealand. New Zealand provides duty-free access for about 72 percent of imports from Malaysia at this time. Under this free-trade agreement that will move to 90 percent this year, and graduate to 100 percent by 2016. There will be a number of sensitive products imported from Malaysia, and some producers in New Zealand will have concern about a great influx of products coming in, and how they might compete. There will be a longer transition period, of up to 7 years, for the import of sensitive products. Examples are clothing, footwear, carpets, and some manufactured products, including wooden furniture. That transition period will give industries in New Zealand time to adjust to the change and to become more competitive. I believe that they have a very, very good opportunity to compete in our own markets, but also to take up the challenge of furthering their production and exporting to Malaysia.

In conclusion, I recognise the importance of the environment and say that Malaysia and New Zealand signed an environment cooperation agreement, negotiated in the context of our free-trade agreement, and that establishes a set of shared trade and environment principles to promote sound environmental practices and sustainable development. This agreement is Malaysia’s first bilateral treaty on environment cooperation, negotiated under the free-trade agreement, and is something New Zealand should be very proud of. I believe it will be something that other countries will look to include in their agreements, particularly in any negotiations with Malaysia or any other Asian country.

It is a pleasure to support this bill. I look forward to receiving it in the Foreign Affairs, Defence and Trade Committee so that we can talk more about the very positive impact it will have. It is worth repeating the last figure of a 15 percent tariff rate against kiwifruit farmers in my electorate will be reduced over the next 2 years. That can be nothing but good news. It will make them more competitive, it will add to their productivity, and it means there will be more money in their pockets in the Rotorua electorate. That is a good thing, and I support this bill. Thank you.

Hon Dr WAYNE MAPP (Minister of Defence) Link to this

I move, That the Foreign Affairs, Defence and Trade Committee consider the Tariff (Malaysia Free Trade Agreement) Amendment Bill , that the committee report finally to the House on or before 15 June 2010, and that the committee have the authority to meet at any time while the House is sitting (except during questions for oral answer), and during any evening on a day on which there has been a sitting of the House, and on a Friday in a week in which there has been a sitting of the House, despite Standing Orders 187 and 190(1)(b) and (c).