Hon JOHN CARTER (Minister of Civil Defence) on behalf of the Minister of Trade) Link to this
I move, That the Tariff (New Zealand-Hong Kong, China Closer Economic Partnership Agreement) Amendment Bill be now read a second time. I thank the Foreign Affairs, Defence and Trade Committee for its consideration of the bill and for reporting the bill back to the House. The committee’s recommendation is that the bill be passed with no amendments.
As the committee noted in its report, the closer economic partnership—CEP—with Hong Kong will provide an important trading platform for building trade with the wider China market and, indeed, throughout the Asian region. New Zealand’s economic future points increasingly towards this vibrant region. The linkages through our high-quality trade agreements are increasing the opportunities for business. In the first year following entry into force of the China free-trade agreement, the increase in New Zealand exports to China was NZ$1.1 billion. China is now our second-largest export market and our second-largest overall trading partner. Through the closer economic partnership with Hong Kong we are hopeful that this growth will continue, and that the closer economic partnership will also facilitate the growing provision of New Zealand goods and services throughout the wider region.
Unlike New Zealand’s other concluded trade agreements, the closer economic partnership that we have negotiated with Hong Kong is not primarily about tariff barriers. The fact is that New Zealand and Hong Kong already have two of the most open economies in the world. Given the relatively low levels of tariff barriers between our economies—at zero in the case of Hong Kong—this agreement will secure New Zealand’s position in the Hong Kong market and underpin Hong Kong as a trading platform for our exporters into the wider region. We want to make it easier for New Zealand companies to do business in and through Hong Kong. This closer economic partnership will encourage New Zealand companies to integrate into global supply chains, because that is crucial to our future prosperity as a trading nation. Hong Kong’s location, its knowledge of China, and its links into the mainland position it perfectly for New Zealand’s rapidly expanding trade with China and the wider North Asia region.
Increasingly, New Zealand’s trade agreements acknowledge the importance of global supply chains. As with previous free-trade agreements that New Zealand has entered into, the rules of origin negotiated in the closer economic partnership will allow Hong Kong and New Zealand companies to make greater use of each other’s products in manufacturing. The closer economic partnership will also help to secure access into Hong Kong for New Zealand’s service suppliers into the future. As identified by the select committee report, the ratchet clause means that any future unilateral liberalisation by Hong Kong in certain sectors will be applied for the benefit of New Zealand services exporters. A most favoured nation clause will future-proof the access into Hong Kong of our services exporters, by enabling them to benefit from the same treatment that other countries negotiate with Hong Kong in the future in key sectors of interest to New Zealand. It is a significant commitment that this is the first free-trade agreement that Hong Kong has signed outside mainland China.
Consistent with our existing approach to free-trade agreements New Zealand has been careful to ensure that the removal of our remaining tariffs is phased out over time, to allow for the affected industries to adapt to the new settings. For the closer economic partnership this phasing has been deliberately matched to the phase-out delivered under the China free-trade agreement, which means that there is unlikely to be any additional material impact on New Zealand companies.
The Green Party, in its minority view included in the select committee report on the bill, has questioned the balance of consultation around the free-trade agreement, commenting that there is bias towards exporting interests. The opportunity to make submissions, request meetings, and attend briefing sessions was open to all businesses, sectors, and stakeholders. The national interest analysis also cites specific consultations about tariff reduction and rules of origin. These were conducted by Ministry of Foreign Affairs and Trade and Ministry of Economic Development officials to assess industry views on tariff reduction in respect of potential free-trade agreements, including that with Hong Kong. There was, in addition, a series of consultations with Textiles New Zealand and a range of clothing manufacturers specifically in relation to Hong Kong. Consultations were also held with the Employers and Manufacturers Association, which is the key representative body for the manufacturing sector, and it included the Hong Kong negotiations.
In respect of investment, the select committee report acknowledges that the investment screening regime in New Zealand will continue to apply to prospective investors from Hong Kong. Quite simply, the outcome of the closer economic partnership will not materially alter the way in which the overseas investment screening regime applies to investors from Hong Kong or exempt them from any aspect of it.
The minority view in the report of the select committee expressed by the Green Party questioned the basis upon which the Government rests its commitment to trade liberalisation. That commitment rests on a conviction that export growth is critical to New Zealand’s overall economic performance. The Government’s full agenda of trade negotiations in the Asia-Pacific region is central to this strategy and places us at the heart of the world’s economic growth engine.
This bill will amend the Tariff of New Zealand by inserting Hong Kong, China, and a list of preferential countries in note 3 of the Tariff. This is the only statutory amendment required to give effect to the closer economic partnership. Following this amendment, certain amendments by regulation will also be required in order to enable the application of preferential tariff rates under the closer economic partnership. The Government would like to see the bill enacted by October so that New Zealand can be ready to bring the closer economic partnership into force, therefore ensuring that New Zealand business can benefit from this agreement as soon as Hong Kong has also completed all of its internal procedures. I commend this bill to the House.
Hon MARYAN STREET (Labour) Link to this
I rise to speak on the second reading of the Tariff (New Zealand-Hong Kong, China Closer Economic Partnership Agreement) Amendment Bill, which will put in place the free-trade agreement with Hong Kong. The Minister of Trade has, elsewhere, noted that the benefits of this free-trade agreement with Hong Kong—or closer economic partnership, as we are calling it—have many aspects to them. He has said previously that this closer economic partnership complements our free-trade agreement with China, and there is no doubt that it does. In fact, when I finished my speech on the first reading of this bill I was at the point of saying that this closer economic partnership agreement rationalises and allows businesses to springboard between Hong Kong and China. New Zealand businesses will be better able to move seamlessly between Hong Kong and China with their trade and business arrangements.
The Minister who presented the first speech on the second reading, the Hon John Carter, referred to the fact that this closer economic partnership breaks new ground for Hong Kong. It is the first agreement of this type outside its agreement with Mainland China. For New Zealand, it adds to a growing list of free-trade agreements that are both high-quality and comprehensive. But it is worth noting that the novelty of this closer economic partnership was the item that took the media’s attention when, at the time of signing at the end of March earlier this year, the media reported this new free-trade deal. They said that New Zealand and Hong Kong signed a free-trade deal—the city’s first outside China. Clearly, Hong Kong is looking at it as a model and as a template for other such agreements, and that is good. Hopefully it is of benefit to them. For us, there is a whole panoply of new, high-quality free-trade agreements that we have achieved over the years, between successive Governments, I might add, as I do not think there is yet one free-trade agreement that has been signed by this National Government that began with it; they all began with the Labour Government.
I draw attention to a couple of points, and one that is particularly apposite is the trade in services. Usually we are accustomed to looking at tariff reductions and trade in commodities, but the trade in services is of real benefit to New Zealand. The securing of access should allow a whole range of services to maximise trade with Hong Kong. First, the closer economic partnership protects existing access for services. It is good to have that cemented in, but it is simply the status quo. The agreement goes on to talk quite comprehensively about the range of services now covered by this closer economic partnership such as professional services, business services, education, construction and engineering, logistics, air services, environmental services, computer and related services, tourism, sporting and other recreational services, and so on. The list is expansive.
One of the most exciting things about this closer economic partnership is the ability of New Zealand to trade on its strengths not just in commodities but in the provision of high-quality services. It is something that will become increasingly important if we are to improve the economic status and wealth of this country. We need to look further to the exporting of services and look past the exporting of commodities alone. So trade in services is significant.
The second point I draw attention to is noted in the national interest analysis. We have labour and environment agreements as part of this closer economic partnership. For a long time—certainly for the last 10 years, anyway—we have insisted on labour and environment clauses first of all being attached to our free-trade agreements, but, more latterly, becoming integral parts of our free-trade agreements, and that is a good thing. The national interest analysis states that the New Zealand study on the benefits of a closer economic partnership between New Zealand and Hong Kong identified sustainable development as a core national objective for both economies. I think we are getting to the stage with trade agreements where they cannot be seen in isolation. Trade agreements impact upon, and are impacted by, labour standards. They impact upon, and are impacted by, climate change agreements, and by emissions trading schemes and global efforts to reduce the carbon footprints of industry, in particular. The fact that this agreement identifies sustainable development as a core national objective for both economies may come as news to some members of the National Party, but it is an important and forward-looking element inside this closer economic partnership.
The labour memorandum of understanding and the environment agreement provide an opportunity for New Zealand to seek input from non-governmental sectors in identifying and developing potential areas for cooperation. If there are areas where we can cooperate with Hong Kong over labour standards—they may be health and safety standards, they may be more than that, they may be to do with income levels—or if we can assist with environmental protections and production of goods and delivery of services in a way that minimises the emissions impact of those commodities and services, then both economies and, even in a very small way, the world, the global environment, are enhanced. These things are now no longer simply clip-on elements. An agreement about labour standards and an agreement about environmental standards have become an integral part not only of this closer economic partnership but of other free-trade agreements. This is the way for the world to move forward. Free-trade agreements can be used for more than simply free trade. Thank you, Mr Deputy Speaker.
JOHN HAYES (National—Wairarapa) Link to this
I suggest that we on this side of the House did not find it surprising, at all, that this bill referred to sustainable development and the importance of having sustainable economies. In fact, this bill had its gestation in 2001, but it hit the wall in 2002 when the Government of the day—I think they might have been people from the other side of the House—decided to abort the dialogue between New Zealand and Hong Kong. It was only in 2009, when we had a new Prime Minister, the very active, non-bogged-down-in-process John Key, who engaged in dialogue with his counterpart in Hong Kong, David Tsang, that at a meeting in Singapore, effectively, this agreement was concluded. It will bring huge benefit to every New Zealander, and particularly to all the exporters in the Wairarapa electorate that I represent. For 9 years we sat here—9 years of frustration—while that Government took no action, at all. But—hello—John Key, our very excellent Prime Minister, has been given the opportunity to drive this country ahead, and that is what he has done. If we look at the record of that previous Labour Government through 9 long years, we see that it lifted our wages in this country by a magnificent 3 percent in real terms—
Hon Phil HeatleyThat is dead right. But I draw this country’s attention, and particularly the attention of that party, to the activities of John Key in 18 months. He has lifted real wages in this economy by 8.7 percent in the last 18 months. How has he done that? He has done it by refusing to get bogged down in process and arguments, and he has driven this country forward in a very practical way. This bill is a part of that process. This bill will boost innovation, and it will improve export access to world markets, which is one of the National Government’s six policy drivers for a step change in our economic performance.
The agreement with Hong Kong, a market of 7 million people, is an important part of our focus on free trade and the improvement of access for our exporters to world markets. That is very important in my electorate. The agreement is a priority, and it was included in the Prime Minister’s statement to this Parliament in February. Our Prime Minister has made it very clear that it is only by lifting our economic performance that we can create jobs, boost incomes, improve living standards, and provide the world-class Public Service that Kiwi families deserve. I am fully in support of this bill and will support it through its second reading stage. Thank you.
STUART NASH (Labour) Link to this
There is a saying that most people will know. It goes along the lines of “lies, damned lies, and statistics”. The economy grew by 25 percent under Labour, so when the previous speaker, John Hayes, talked about John Key increasing wage growth, I can tell that member that in the 9 years before the previous Labour Government came into office, National had increased the minimum wage by $1—$1—over 9 years. Labour took the minimum wage from $7.50 an hour to $12.75—
Mr DEPUTY SPEAKER Link to this
This is a second reading of a bill. I refer the member to Speakers’ rulings 105/5, 106/1 and 106/2. Although one can mention what the Opposition has said in terms of the debate, one cannot dwell on that at length.
When we look at New Zealand wages in comparison with those of Hong Kong, we see that we are in fact quite a low-wage economy. The reason why we are when compared with Hong Kong and our other Asian neighbours is that the former National Government increased the minimum wage by only $1 over 9 years.
If people had been living in Hong Kong, there would have been a revolt—even in a country like Hong Kong. And there was; New Zealand elected a Labour Government that took the minimum wage from $7.50 an hour to $12.75 an hour. When National members talk about Mr Key and his active agenda in terms of going to Hong Kong, I say that he has increased the minimum wage by only 50c an hour. If people are earning a million dollars a year—and about 350 people in New Zealand earn a million dollars a year—they are about to get another $1,000 a week. But if people are on the median wage in Hawke’s Bay, they will get only about $3 a week. That is a travesty.
I stand in support of this Tariff (New Zealand-Hong Kong, China Closer Economic Partnership Agreement) Amendment Bill, because bilateral trade agreements are vital to the country’s sustained economic development and growth. The previous speaker knows, because he was involved in the trade game for a long time, that every single free-trade agreement and closer economic partnership that has come before this House was negotiated by either Phil Goff or Jim Sutton. Labour started every single negotiation that has come through this House that we have passed into law. Mr Groser has taken the ball and dotted it down. He has received the final pass, and crossed the try line, just as that great Hawke’s Bay player, Israel Dagg—great Magpie man that he is—did in the recent test against the Springboks. That is all that Mr Groser has done. Phil Goff and the previous Labour Government were the team that actually took the ball and ran with it.
I will outline just two points. The first is the necessity of negotiating sound free-trade agreements. The second is the fact that this National Government is simply not doing enough to ensure that New Zealand companies can take advantage of new opportunities, like the one we are passing into law tonight. Closer economic partnerships, or CEPs as they are known, are a vital part of New Zealand’s economic development policy. They break down tariff quotas and custom duties that restrict access and profitability for New Zealand exporters and importers. They will hopefully lead to increased imports and exports, and to potential added wealth for both countries. New Zealand signed the closer economic partnership with Hong Kong on 29 March 2010 and this bill will implement that agreement.
Hong Kong is currently our ninth-largest export destination, accounting for $823 million last year in exports. New Zealand imported $199 million worth of merchandise goods from Hong Kong last year, making Hong Kong the 31st largest source of imported goods. However, let us put that into perspective. Hong Kong accounts for only 1.9 percent of New Zealand’s total exported goods, and only 0.4 percent of our total imported goods. Therein lies the challenge to this economy going forward. New Zealand’s ninth-largest export destination accounts for only 1.9 percent of our total exported goods. If there were ever a case for global diversification, those figures are it. There is a very strong argument for this type of free-trade agreement. It puts potential trading partners on the map and on the radar of New Zealand Trade and Enterprise, as well as of potential exporters. Despite Hong Kong’s small size, it is a market that is already rapidly expanding. Last year’s total exports increased by 33.6 percent compared with the figure for 2008. However, total imports declined by 2.5 percent, compared with the figure for 2008.
The largest area of export growth by percentage was actually that of apples, the value of which increased by 122 percent. It is good for the people of Hawke’s Bay, considering that that province is “the fruit bowl of New Zealand”. Members can believe it, or not, but the product registering the second-highest percentage growth is offal, which was up by 66 percent over that 2-year period. However, the product of the largest value, by far—by almost four times that of the next largest—is crustaceans. The value in 2009 was about NZ$200 million, free on board. To put that into context, sheepmeat exports were worth about $42 million. In terms of imports, the largest area of imports is machinery parts, which account for about $16 million worth, but that dropped by about 15 percent.
I note that the closer economic partnership does not provide Hong Kong investors with an exemption from New Zealand’s investment screening regime as set out in the Overseas Investment Act 2005. The Act requires overseas investors to apply to the Overseas Investment Office for consent to invest in New Zealand fishing quota, sensitive land, or business assets over $100 million. The screening threshold for Hong Kong, however, is $20 million, which is well below the threshold of $100 million applicable to other overseas investors. New Zealand service exporters, as was mentioned by my colleague the Hon Maryan Street, have also secured strong future-proofing of their position in the Hong Kong market through the most favoured nation treatment and a ratchet clause. The most favoured nation treatment means that New Zealand exporters will automatically benefit from any preferential treatment that Hong Kong provides to future free-trade agreement partners, subject to certain reservations and exceptions. The ratchet clause means that any future unilateral liberalisation undertaken by Hong Kong in certain sectors will be bound in and committed to New Zealand.
My second point is the fact that this Government is simply not doing enough to ensure that New Zealand companies can take advantage of any new opportunities generated by this and other free-trade agreements and closer economic partnerships. Prime Minister Key came away from China and said that he wanted trade to that country doubled in 4 years’ time. Well, the vast majority of us want the same. Increased sustainable trade is a necessity for New Zealand’s future economic growth and development, but the difference between National’s approach to trade and Labour’s approach to trade is quite stark. Under trade Ministers the Hon Phil Goff and the Hon Jim Sutton Labour increased the budget for market development and access opportunities by millions, in the knowledge that operating in a foreign environment like China requires very specific skills, knowledge, and support.
I ask members to imagine going into a country like Hong Kong, where the language, the customs, the laws, the business practice, etc. are completely different, then take into account that 97 percent of New Zealand’s businesses are small to medium sized enterprises. This means that 97 percent of New Zealand businesses employ 19 people or fewer. They simply do not have the skills, competencies, or resources to employ a full-time international marketing or market development manager. Labour recognised this and built a support network around key markets to help businesses optimise their opportunities. National, under Tim Groser and Gerry Brownlee, has instead cut the budget. When questioned about this, Mr Groser said: “Our plan is to do more with less.” That is not even a decent slogan—“more with less”—let alone a goal or a plan, and it is certainly not a strategy. That is why I say that this Government is not doing enough to help the country and its companies to take advantage of this type of free-trade agreement.
In conclusion, I say that I support this bill. It is a Labour bill, of course; it was negotiated by Phil Goff. It is another important step in the process of growing opportunities for New Zealand companies. However, as I said, that Government over there is simply not doing enough to allow New Zealand companies, New Zealand businessmen and businesswomen, to take advantage of this. One cannot do anything with a “more with less” strategy. This Government needs to engage more with the business community in terms of allowing these companies to take advantage of the opportunities generated by this agreement, which was negotiated by the next Prime Minister of New Zealand, the Hon Phil Goff. Thank you.
Dr RUSSEL NORMAN (Co-Leader—Green) Link to this
I stand to speak on behalf of the Green Party on the latest round of preferential trade agreements that National and Labour have been signing us up to. This is not a free-trade agreement, as the previous speaker, Stuart Nash, and other speakers have said; it is actually a preferential trade agreement—that is, it is a preferential trade agreement between two countries, or rather, in the case of Hong Kong, a kind of subset of a country. This is a preferential trade agreement. Like all of the preferential trade agreements that have been signed up to by Labour and National, it has some real problems for New Zealand. I will talk in general terms about some of the problems with these preferential trade agreements and then talk specifically about why signing a trade agreement with the Chinese Communist Party is a particularly stupid thing to do, as if all the others were not stupid enough.
One of the issues with these preferential trade agreements is the investment clauses within them. In this particular preferential trade agreement with Hong Kong, the investment clauses are to be negotiated by an exchange of letters, rather than be included in the agreement itself, but I think that the best way to understand the framework within which this agreement is operating is to look at the parallel agreement that goes alongside this, which is between China and New Zealand. Chapter 11 of the New Zealand - China preferential trade agreement looks at issues to do with investment clauses. Basically, it says that investments in each country have to be given national treatment—that is, under article 138, we need to treat Chinese investors in New Zealand the same as we treat New Zealand investors in New Zealand, except where we have non-conforming measures, as they are called. Non-conforming measures are addressed under article 141 of the New Zealand - China free-trade agreement, which is the parallel agreement to this one.
Basically, as is the case with most of these preferential trade agreements, it operates as a ratchet. It says that whatever non-conforming measures we have on investment at the time that the treaty was signed, we can keep them. We cannot make them any tighter, but we can weaken them. Our overseas investment laws, as they currently exist, place certain constraints on incoming investment from foreign countries. Those laws can remain in place, but they cannot be tightened. They can be weakened, and that acts as a ratchet. The overseas investment laws as they currently stand, whether they are to do with sensitive land—that is, blocks of rural land over 5 hectares—or business investments of over $100 million, can be weakened, as if they are not weak enough already, but they cannot be strengthened.
These trade deals try to freeze the existing overseas investment laws in place. They say that we can weaken those laws further, but we cannot strengthen them. Labour and National are signing up to what should really be called “sell the family farm trade agreements”, because that is what they are designed to do. The way that these agreements are negotiated say that our current investment laws cannot be strengthened. We know that under the current investment laws we have sold off maybe 150,000 hectares of farmland into foreign ownership over the last 5 years, although the figures on it are a little unclear because it is not all recorded. Under Labour’s watch we sold large chunks of the country into foreign ownership. These agreements say that we cannot tighten the laws any further, so that the laws currently in place, which enable very large amounts of New Zealand land to be sold into overseas ownership, cannot be tightened. That is exactly what is explicitly stated in these agreements.
In the Hong Kong agreement, it is to be done by an exchange of letters, which operates in parallel with the agreement and is currently being negotiated. In the agreement with the Chinese Communist Party, it is in chapter 11. I invite members to look seriously at chapter 11 of the New Zealand - China free-trade agreement—or preferential trade agreement, as it actually is—and they will see the provisions that prevent us from exercising our democratic rights as a sovereign Parliament to change the rules on foreign investment. Goodness knows, it would take quite some doing, but if this Parliament were to find the courage within itself to strengthen the rules around overseas investment to stop family farms being sold off—because this Parliament has overseen a massive sell-off in family farms and is planning to continue doing that—and if it were to find the moral courage to say that we do not want all of our family farms to go into overseas ownership in Hong Kong, China, or any other country, then we would find ourselves in breach of the investment treaties that Labour and National are so intent on signing the Government up to.
Article 141 of the New Zealand - China free-trade deal, which will be paralleled by the exchange of letters in the Hong Kong deal, says that the national treatment does not apply to any existing non-conforming measure. Our overseas investment laws are a non-conforming measure. It says that we can continue with that, but we cannot increase the non-conformity of the measure. Article 141(3) of the New Zealand - China free-trade agreement, which will be paralleled in the Hong Kong agreement, very clearly states that we cannot increase the non-conformity of these measures. That means that if we want to increase the restrictions on foreign ownership of New Zealand land, then we will be breaching the agreements that National and Labour are so intent on signing us up to.
Over and over again National and Labour are tying us into that situation. With China and Hong Kong, that means making a deal with the Chinese Communist Party, an authoritarian, capitalist regime that imprisons people who disagree with it, that locks up people if they do not agree with it. That is the deal we have signed in this particular case with the Chinese Communist Party. China is a one-party State, and that party controls the Chinese Government. The President of China, Hu Jintao, is not the President because he was elected; he is the President because he is the Secretary-General of the Chinese Communist Party, which, of course, appoints the President of China.
By signing up to these agreements, we have locked in place the current overseas investment regime. If we wanted to tighten the overseas investment regime, we would be breaching the terms of the agreements that Labour and National have locked us into. We have heard a lot recently from Labour and National about how they have somehow decided that they do not like the sale of family farms to foreign owners, even though they have both been overseeing it for a very long time. In particular, Labour as the previous Government was very keen on selling off the family farm; that is why it sold literally hundreds of thousands of hectares into overseas ownership. It has locked us into an agreement that means that we cannot tighten the rules on overseas investment. Chapter 11 of the New Zealand - China free-trade agreement, which parallels the exchange of letters that is to come in the Hong Kong free-trade agreement, says that we can have measures that treat overseas investors differently, like our overseas investment laws do now, but we cannot tighten them. We can weaken them, but we cannot tighten them. If we decided that we did not want any further family farms over, say, 500 hectares to go into overseas ownership, we would be breaching the terms of the New Zealand - China free-trade agreement and, no doubt, the terms that will be in the exchange of letters with the Hong Kong - New Zealand free-trade agreement.
When National and Labour members sit in this House, as they do day after day, and pretend that they are worried about the sale of foreign land, we have to wonder why they are signing us up to agreements that lock in the current rules that enable the sale of land to foreign owners. I think that that is something that is unexamined. In these debates about free-trade agreements, anything called a free-trade agreement immediately gets support from National and Labour. They just vote for it. They have a reflex reaction. If it is called a free-trade agreement, they vote for it. They do not think about it or read the treaties. They do not read chapter 11 of this treaty, which covers all the investment clauses. They think “Oh, free-trade agreements! We must vote for them.”, regardless of the fact that they are constraining the ability of this Parliament and future Parliaments to regulate in the democratic interests of people in this country. If we democratically decided that we wanted to tighten overseas investment laws beyond those that currently exist, we would be breaching chapter 11 of the New Zealand - China free-trade agreement and, no doubt, the exchange of letters required by the Hong Kong - New Zealand free-trade agreement.
That is why the Green Party will not be voting for this. Unlike National and Labour, we are not happy with the sale of New Zealand land being completely unregulated, and we think that we need to tighten the laws around investment in New Zealand in order to do what is in the best interests of this country, rather than being bound up by some kind of ideological position in favour of anything called a free-trade agreement, whatever the content of that agreement is.
JACQUI DEAN (National—Waitaki) Link to this
In my contribution on the Tariff (New Zealand-Hong Kong, China Closer Economic Partnership Agreement) Amendment Bill, I speak strongly in favour of it. I was interested in the contribution from the co-leader of the Green Party Dr Russel Norman. I think it is a shame that the permanent Green member on the Foreign Affairs, Defence and Trade Committee, Keith Locke, has not had an opportunity to speak on this bill, because at least he has gone through the select committee process and scrutinised the bill, along with the Labour and National members on that committee. Although I accept that he will not vote in favour of this bill, at least he has taken the time, unlike the co-leader of the Greens, to scrutinise the bill and its impact on New Zealand.
Rather than playing the blame game about who first started the process of this bill—which Minister started the negotiations, and who signed it—apart from congratulating the Hon Tim Groser on signing the deal, I want to focus on the benefits for New Zealand, and in particular on the benefits for the agricultural sector. I want to zero right down to a paddock of lambs that are being born in—well, it is a bit early for Central Otago—the North Island, where we now see lambs being born in the Bay of Plenty. We know that in little over a year a good proportion of those lambs will be on their way to the wet markets and supermarkets of Hong Kong, courtesy of this closer economic partnership agreement, the endeavours of the farmer, and the processing and marketing industry in New Zealand. New Zealand lamb and sheep meat is highly valued in Hong Kong. We could probably supply more of it, but with flock numbers falling, unfortunately, we seem to have a bit of a crisis in the sheepmeat industry in New Zealand. Things like this free-trade agreement can only do benefit to the health of the New Zealand agricultural sector. For that reason, for those paddocks in the North Island and in Central Otago, and for the farmers in that industry, I believe that the closer economic partnership agreements with Hong Kong and China can only bring benefit to New Zealand. Thank you.
Dr PAUL HUTCHISON (National—Hunua) Link to this
The Government is indeed to be congratulated on the Tariff (New Zealand-Hong Kong, China Closer Economic Partnership Agreement) Amendment Bill. It is very much in line with the Government’s aim to expand our trade. After all, we are an exporting nation. That is something that has escaped previous speakers. We are absolutely dependent on our exports and we need to take every advantage we can. This partnership agreement with Hong Kong enables us to do so. It is part of a network that has been established over the years that includes our free-trade agreements with Thailand, Singapore, China, Malaysia, and Brunei, and, of course, the ASEAN-Australia-New Zealand Free Trade Agreement.
It was interesting to hear the previous speaker, the excellent Jacqui Dean from Otago, talk about how vitally important this partnership agreement is to our primary products. I can say that the spring lambs are frolicking in the fields around Pukekohe, Franklin, and Karaka, where I live. They, along with the great produce that comes from the vegetable basket of New Zealand, from the rich, fertile soils of Franklin, are the sorts of things that will benefit from this partnership agreement with Hong Kong.
I want to make two particular points. First, this closer economic partnership will ensure that New Zealand’s exports to Hong Kong are locked in for exporters. Only 14 percent of New Zealand’s current exports to Hong Kong are in tariff lines that are unbound. This means that Hong Kong is currently free to increase tariffs to any level, without breaching its World Trade Organization commitments. Locking in New Zealand’s duty-free access will provide New Zealand exporters with certainty on tariffs that their competitors do not enjoy. Second, the closer economic partnership contains phasing of the elimination of tariffs that exactly mirrors that in the New Zealand - China free-trade agreement in order to avoid creating any incentive for Chinese manufacturers to route their products through Hong Kong in order to take advantage of the more favourable access enjoyed by Hong Kong. This, of course, is crucially important. Although Hong Kong has a population of only 7 million people, by about 2050 China will have a population of 1.5 billion people, with a much higher per capita income than they have today. Naturally, they will be hugely important for New Zealand exports.
I too commend this bill to the House.
Hon PETE HODGSON (Labour—Dunedin North) Link to this
Without wanting to derogate from the importance of the Tariff (New Zealand-Hong Kong, China Closer Economic Partnership) Amendment Bill one iota, it is probably worth recording that there is a certain sameness about debates on trade agreements. It is a good thing, but there is a certain sameness, because after the arguments of the 1970s and, more particularly, the 1980s, this country seems to have embraced free international competitive trade as a hallmark, without any hesitation. It has been quite open to it. As a result, the two big blobs of the political spectrum, Labour and National, go around saying how good it is, and what potential—
Well, it is the two-big-blob theory of politics, unlike the model in Scandinavia, for example, or wherever.
If the member does not want to be called a blob, I withdraw and apologise. It was not meant as a nasty comment; it was just a way of describing the political landscape. We go around talking about the importance of trade, the rules of origin, how we are very pleased about it, and the ratchet clause. Then we say that this trade Minister, that trade Minister, and the one before him—because I think they have always been “hims”—were very good trade Ministers, and, no doubt, trade Ministers yet to be born will be very good trade Ministers too. Then we say that in respect of the Greens we understand and respect their differentiated position, but we notice that, first of all, they are in a minority, and secondly, they are not exactly against trade. The Greens then get up to say that, verily, they are not against trade, but they are just against trade in this or that circumstance. That is what I mean about the sameness of trade debates. It is something to be celebrated, because little enough in politics is agreed across the House, and it is better that instead of fighting over everything, we fight only over stuff where there is genuine disagreement. This is one area where there is not disagreement.
However, I will make two points, which are slightly unrelated. The first is that the Holy Grail of Doha appears to me to be not making so much progress. We are always talking about another trade agreement with a country in South-east Asia, North Asia, East Asia, or wherever it might be, or we might go across to South America and fold in the Chileans and so on—and so too with this agreement in Hong Kong, which is an advance on an earlier agreement we had with that part of the world. But we notice that the agreement relates to Asia. We notice that it is not to do with Europe or North America.
I do not want to name-drop, but I had dinner on the Saturday before last with a woman called Ann Veneman, who was Secretary of Agriculture under President Bush. I do not want to quote her at length, because it was a private meeting, but she knew trade Ministers from long ago in New Zealand, and had met one or two them; she met Jim Sutton, for example. That former Secretary of Agriculture was much more interested in trying to get free trade running than was the populace she represented. Deep within those nations is a resistance to trade, and it will cost those countries, sooner or later. That is my first point. By a mistake of geography, we do not sit where Iceland or Cyprus are, we sit where Asia roughly begins or ends, and therefore we are caught up in the maelstrom of trading activity that is reshaping global economics and where the new hegemonies are rising.
The second thing I want to say—I will be critical of the Government, and its members will no doubt get up to say I have been unfair and unreasonable—is about the support being given to our exporters. Notwithstanding the fact that they are doing famously well at the moment—we have had trade surpluses for the last 6 or 7 months in a row, which is excellent news—over the decades our export performance has been less than it might have been. That is why we are facing things such as the Crafar farms debate, which we will always face as long as we have a current account deficit. If we cannot pay our way in the world, we will start selling parts of our country to the world—there is nothing surer in economics than that.
With that in mind, I wonder whether the Government would consider recommitting to some more effort in this area, both through Trade and Enterprise and through other means as well. Notwithstanding the great work done by Tim Groser and, no doubt, other Ministers from time to time, I do not see great effort in many of the great South-east Asian nations. I do not see us moving in a very determined way towards Thailand, for example, or Viet Nam, yet those are parts of the world where the emergence of the middle class is startling. I do not think we are doing enough, even in China, where under the previous Government plane-loads of business people went before, during, and after the signing of the free-trade agreement with China. Despite the fact that there are beachheads and offices for New Zealand Trade and Enterprise in various cities around China, and despite a great improvement, I still do not think it is enough.
Of course, many private sector companies do not need New Zealand Trade and Enterprise or some Cabinet Minister to go there to give the Government imprimatur, and to open the door. I understand that, but for those who can be assisted and who need the assistance, that assistance is not always timely or on the mark. I think we should adopt a different approach to exporters. Let us not tell them, but, rather, quietly treat them as heroic people. They often spend 100 days a year off-shore with their heads on someone else’s pillow, not their own, and that needs to be rewarded. Exporters are different, especially small or medium sized exporters that are going through a growth phase, moving into new markets, or “kicking butt”, basically. They really need a good deal of support. I do not think the current Government provides it. The wind-down of some of the New Zealand Trade and Enterprise stuff in the last 2 years has not been a good thing, and on that matter I am critical of the Government. That said, I think this legislation is great. The people who negotiated it are great. I pay my respects to the officials who led it, and I hope it has speedy passage.
TODD McCLAY (National—Rotorua) Link to this
It gives me pleasure to rise to speak on the Tariff (New Zealand-Hong Kong, China Closer Economic Partnership Agreement) Amendment Bill. I believe this is a very important bill before the House. A number of previous speakers have raised the issue of the work the previous Labour Government did in trade. I think it is very important to clarify for a moment that with the exception of one, all parties in this Parliament have generally been in favour of trade, free-trade agreements, and the promotion of New Zealand businesses and their interests overseas. It is important we recognise at the forefront that the previous Government held trade as a priority. Where that priority fell down for our exporters in New Zealand was the speed with which the previous Government was able to get results from the rhetoric of Cabinet, where somebody would say in a very deep voice that it would be a very good idea to have more trade with countries overseas, and a trade Minister would say in a squeaky voice that he or she would go overseas to have a look and see whether he or she could do some trade-agreement deals. Of course, 9 years later very few agreements were in place, but the system was started by at least one or two of the members opposite.
Who has delivered on this legislation? We have heard some analogies of rugby, and I would suggest that in some years to come when we think of that wonderful game of rugby that happened in South Africa the other day, it will be the last 3 minutes that will be remembered. Of course, there was a lot of very hard work in the lead-up to the half-hour before that, but the last 3 minutes were when the tries were scored, and it was our hard-working Minister of Trade, Tim Groser, who earlier this year, on 29 March, was able to make sure this agreement was signed. Five short months later, this agreement is about to enter into law in New Zealand.
It will be good for our exporters, for the people in forestry, and certainly for farmers. In my electorate the kiwifruit producers and orchardists think it is a wonderful thing. People in my electorate and in other members’ electorates who like to buy goods that are imported from overseas will enjoy the benefits that this agreement will deliver to them.
I support this bill fully and look forward to diving into it in greater depth in the Committee of the whole House. Thank you.
RAYMOND HUO (Labour) Link to this
I rise to speak in the second reading of the Tariff (New Zealand-Hong Kong, China Closer Economic Partnership Agreement) Amendment Bill. Labour supports this bill, as it will lead to increased opportunities for New Zealand exporters in the Hong Kong market, as well as strengthening our relationship with the Greater China and Asian regions. There are three issues that I wish to talk about as part of my contribution.
First of all, as the Labour spokesperson on trade, the Hon Maryan Street, said earlier in her first reading speech, this initiative is really interesting and quite exciting, because it will help to herald a significant move in the export of both goods and services to the Hong Kong market. Secondly, for a small economy like New Zealand’s, growing a sustainable and export-led economy is vital. This bill is, however, a timely reminder that an export-led recovery has not eventuated, and it is a missed opportunity to address one of the critical economic issues that face New Zealand, which is our monetary policy setting. Labour believes that that policy is in need of reform, and that it has been one of the underlining limits on economic reforms versus other OECD or wealthier developed countries. Thirdly, labour rights and environmental sustainability are core New Zealand values that should not be sacrificed for the sake of increased trade. When undertaking negotiations they need to be held high on the agenda. Reading the speech notes of the Council of Trade Unions president, Helen Kelly, in July this year on the relevant issues has reinforced my position on that.
I have recently posted an article on the Labour MPs’ blog Red Alert. I said that on our regular weekly radio show the Minister for Ethnic Affairs and I receive questions and messages from the Chinese constituency. In answer to some of the questions, the Hon Pansy Wong stated that exports had decreased under Labour and have increased since National came into office. She neglected to mention that it was the then Minister of Trade, Phil Goff, who signed the free-trade agreement with China. This opened up the floodgates to trade with China, making China our second-largest trading partner. In the first year of the free-trade agreement, trade with China increased by 62 percent, and National was in office for less than 4 months of that period. On the issue of the spiralling Asian unemployment rate, which has just hit a record high of 10.5 percent, Minister Wong said “although unemployment is increasing so is the rate of employment, although the speed of job creation is slower than that of the number of people who are losing their jobs.” I am not sure whether that statement even makes sense, but it shows that the Minister has no answer to the now more than 23,000 Asian New Zealanders who are unemployed.
Minister Wong’s answer also ignored the fact that bilateral or multilateral agreements on trade are often the product of joint efforts and collaboration. For instance, the origins of the New Zealand - Hong Kong, China closer economic partnership go back to as early as 2001. The idea was first mooted by the Hon Jim Sutton, who was the Minister for Trade Negotiations at that time. In 2002 the talks were suspended when New Zealand and Hong Kong became bogged down in discussions around rules of origin and problems with labelling regulations. The talks were subsequently revitalised under the Hon Phil Goff as Minister of Trade, and were pursued by the current Minister, the Hon Tim Groser.
Hong Kong is our ninth-largest export destination, accounting for $823 million last year. Just as important, it is our eighth-largest source of foreign direct investment. New Zealand imported $199 million of merchandise goods from Hong Kong last year, making it the 31st-largest source of imported goods. Hong Kong accounts for 1.9 percent of New Zealand’s total exported goods and 0.4 percent of total imported goods. This market is already rapidly expanding, with last year’s total exports increasing by 33.6 percent, compared with 2008. However, total imported goods declined by 2.5 percent last year, compared with 2008.
To summarise, closer economic partnership agreements are a vital part of New Zealand’s economic development policy. Closer economic partnerships break down tariffs, quotas, and customs duties, which restrict access and profitability for New Zealand exporters and importers. Closer economic partnerships lead to increased exports and imports, and have the potential to add to the wealth of both markets. I acknowledge that New Zealand signed a closer economic partnership with Hong Kong in March 2010, and this bill implements that agreement.
The latest release from the New Zealand Manufacturers and Exporters Association shows that an export-led economic recovery has not eventuated. While domestic sales increased by 19 percent in April 2010, export sales decreased by 5 percent. The signing of free-trade agreements and closer economic partnerships is important, and this particular closer economic partnership will boost the economy, but that is only part of the solution. The Government needs to support New Zealand businesses to best exploit the opportunities that free-trade agreements present. Sadly, the National Government has failed to assist New Zealand exporters. Its refusal to even consider examining monetary policy highlights that.
In 2009 the Labour Party withdrew from the cross-party consensus on monetary policy. Labour believes that the policy is in need of reform. Back in March 2004 Labour introduced an important change to enable the banks to pursue a more active role in the foreign exchange markets. This assisted the economy by tempering exchange rate volatility, and by moving New Zealand’s monetary management closer to Australian practices. Another important change would be the idea of amending the Reserve Bank of New Zealand Act in order to broaden the Reserve Bank’s objectives. The objectives of the Reserve Bank of Australia are not only to maintain the stability of the currency of Australia, but also the maintenance of full employment in Australia and of the economic prosperity and welfare of the people of Australia. In contrast, our Reserve Bank is tasked solely with maintaining stability in the general level of prices, and that is not helpful to our tradable economy.
Although free-trade agreements and closer economic partnerships come with undoubted benefits, we must not ignore the reality that for some businesses and sectors they can cause harm. This closer economic partnership has been evaluated as having a low negative impact on New Zealand business, largely because Hong Kong specialises in services rather than in cheap manufactured goods that could undercut local businesses. New Zealand manufacturers of footwear, textiles, etc. are most at risk from free-trade agreements and closer economic partnerships, and I am very glad that this closer economic partnership has given those sectors the longest phase-out period for tariffs in order to allow them time to adjust.
I reiterate that labour rights and environmental sustainability are core New Zealand values that should not be sacrificed for the sake of increased trade. When undertaking negotiations, they need to be held high on the agenda. Thank you very much.