Trade (Safeguard Measures) Bill

Hon SIMON POWER (Minister of Commerce) Link to this

I move, That the Trade (Safeguard Measures) Bill be now read a first time. At the appropriate time, I intend to move that the Trade (Safeguard Measures) Bill be referred to the Foreign Affairs, Defence and Trade Committee for consideration.

This bill significantly overhauls New Zealand’s regime for the imposition of safeguard measures on imported goods. Safeguards are emergency measures—with emphasis on the word “emergency”—applied at the border, usually in the form of a duty that may be taken to provide temporary protection to a domestic industry from injury caused by a surge in imported goods.

This bill is designed to ensure that New Zealand’s safeguard regime is consistent with World Trade Organization (WTO) rules—again, that is an important point to make—and to promote efficient, transparent, and objective investigative and decision-making processes. It is worth noting the contribution of the previous Government in the bringing of this bill to the Parliament, and I am happy to progress it in a timely manner—something that was previously not the case.

The current regime is subject to the Temporary Safeguard Authorities Act 1987, which has not been subject to a comprehensive review since its inception. As a consequence—

Hon LIANNE DALZIEL (Labour—Christchurch East) Link to this

I rise to support the first reading of the Trade (Safeguard Measures) Bill, and I congratulate the Minister Simon Power on making a fine speech. I could not have read it better myself. [ Interruption] I read along with him, actually, because I happen to have a copy of the speech with me.

It is unusual for a commerce bill to be referred to the Foreign Affairs, Defence and Trade Committee, and I think that is worthy of some comment. The fact that this bill is being referred to that select committee and not to the Commerce Committee really shows that the bill is as much about international trade and World Trade Organization (WTO) compliance as it is about protecting New Zealand’s commercial interests from dramatic increases in import competition.

JOHN HAYES (National—Wairarapa) Link to this

That was a very helpful speech from our colleague Lianne Dalziel, the previous Minister of Commerce, whom I know understands this legislation backwards. I would like to pick up on her comment that some people in this House, and out in the community, are opposed to free trade. It is worth reflecting on that comment, because over the last few weeks in our local papers we have seen the Swazi Apparel industry in Levin calling for protection because of the threat it faces if its contract to supply clothing to the New Zealand Defence Force is shifted to China. The same situation applies in my electorate in respect of Whitehead Productions, which supplied equipment for our military.

I would like to look back about 300 years to Europe, to a port called Bruges. This city is located on the Zwijn estuary. It was a real entrepôt. People became very wealthy, because the port of Bruges was connected to the rest of the world. Over time the Zwijn estuary silted up and the entrepôt moved down the coast to a place called Antwerp, which is located on the Schelde River. Antwerp is still connected to the rest of the world because that river is still running, and when one goes there now one sees the signs of the great economic power that was Antwerp. Its wealth, built long ago, is still very, very visible today. Antwerp is still the diamond capital of the world, and its mighty port operates 24 hours a day, 7 days a week.

I bring to this House a message from that example—that is, if we want to be rich, it pays to stay connected and to forge strong links with other countries of the world. My colleague Tim Groser is not here today, because he is out doing that. He has already signed a free-trade agreement with Thailand. He is undertaking a precursor study to a free-trade agreement with Korea. He has signed us up to an ASEAN regional trade agreement. He is actively engaged in keeping New Zealand locked into the global economy.

If people want to do nothing and make no progress, as some parties in this House would like, then we should let our rivers silt up and our economy wither. That would be the outcome. If we think about our situation here in New Zealand, we find that the most visible sign of our linkages with the rest of the world is the array of products we find from all sorts of places available in our shops.

A while back an economist whose name was Ricardo developed a theory about comparative advantage and the importance of every country doing what it did best. If we go back to the example of Levin, we hear that Chinese wages are so low that we cannot compete with them. Therefore, it is argued that to protect our industry and the 30 workers in Masterton, or the 50 workers in Levin, we should impose taxes, or even ban shirts and other clothes from being brought in from China. My feeling about that goes like this. In 1936 there was another economist called Lerner. His theorem tells us, which he empirically proved, that if we put a tax on an import, then effectively we impose an identical tax on an export. So if we take his theory around the issue of bringing in manufactured clothing from China, or even Fiji, in order to protect industry in New Zealand, we would be putting an equivalent tax on jobs in, for example, the dairy industry or the meat industry.

We must, as a country, minimise taxes at our border. We must run as open an economy as we can. Sadly for workers in developing countries, very few of them compete with our workers, just on the issue of price, because they are lower paid. They are also, generally, much lower in productivity. We have to increase productivity in this country if we are to lift our collective standard of living. There is a very close relationship between low productivity and low wages. We have signed a free-trade agreement with China; the economies of both countries will be better off.

I think that we also need to acknowledge that free trade is not good for everybody. There are plenty of examples of that in New Zealand. My colleague Roger Douglas from the ACT Party will be only too well aware of the strife that occurred when we opened up our market to imported cars, tyres, clothing, and many other things back in the mid-1980s. Those changes hurt a lot of people, but is New Zealand today worse off as a result of that? Of course it is not. So there is a solution in a civilised and progressive society, which is not to restrict trade.

However, what we also need to do is to not ignore the plight of people who are put out of work by low-cost imports. We need to allow progress and to move forward while at the same time helping to support and retrain those who are hurt in this process. We cannot be callous. When someone loses his or her job it is a personal tragedy. But in a healthy economy jobs are lost all the time, just as new jobs are created all the time. That is why this bill is so important.

The Trade (Safeguard Measures) Bill will allow us to repeal the Temporary Safeguard Authorities Act 1987, which embodies New Zealand’s current safeguards regime, and to replace it with a new set of rules consistent with the World Trade Organization (WTO) rules. It will promote efficient, transparent, and investigative decision-making processes. I think that this bill is very, very important to all the people of New Zealand. It will carry a lot of benefits, and I am very glad that it is coming to the Foreign Affairs, Defence and Trade Committee, where my colleagues and I will have pleasure in processing it through the committee.

The bill’s purpose is, in particular, to allow New Zealand to apply safeguard measures at the border, in accordance with the WTO rules adopted in Marrakech back in April 1994. The bill states that such measures are intended to provide temporary protection to a domestic industry from serious injury caused by increased imports. Clearly, the free-trade agreement between New Zealand and China, or New Zealand and ASEAN, will see new exporters in those countries able to send their produce to our market. We are dealing with the reality that some of those goods may affect some of our domestic industries. The bill will help to facilitate the adjustment by New Zealand domestic industries to increased competition from increased imports. As I have said, two clear examples of this are the Swazi Apparel plant in Levin and Whitehead Productions in my own electorate.

The bill as drafted provides that public servants will be able to investigate such things as whether increased imports are causing serious injury, or pose a threat of serious injury; whether increased imports were due to unforeseen developments that we did not understand when the free-trade agreement was being signed; and whether a safeguard measurement is necessary to prevent or remedy serious injury. It will also facilitate adjustment by the New Zealand domestic industry to increased competition. It will investigate whether there is a particular public interest, and it will consider, for example, things like the effectiveness of a safeguard measure.

CLARE CURRAN (Labour—Dunedin South) Link to this

I rise to support the first reading of the Trade (Safeguard Measures) Bill. I agree with the member opposite that this bill is important. It should be noted that this bill was originally introduced by the Hon Lianne Dalziel in the last Parliament under the previous Labour Government—and a very fine bill it is, too. The bill is the result of a review initiated under the Labour-led Government of the existing Act, the Temporary Safeguard Authorities Act 1987. There was extensive public consultation, and the bill is the result of that work.

As members have heard, this legislation not only means compliance with the World Trade Organization rules but also streamlines the process of responding to allegations of dumped or subsidised goods being released on the New Zealand market. It will be welcomed by New Zealand’s manufacturers and producers, which is very important. It is also important to note that it is a cost-effective measure, in that it removes the requirement to establish temporary safeguard authorities and enables the existing expertise of the Ministry of Economic Development to be utilised instead. This bill, unlike National’s own bills, fully complies with the regulatory impact analysis regime. Members have heard that some of the changes proposed by this bill include an extension of the current time frame of 30 working days for the completion of a safeguard investigation to 75 working days, or 85 days if provisional safeguard duties are requested, and a provision that safeguard investigations are to be undertaken by the ministry rather than by independent temporary safeguard authorities.

I will talk just a little about what is in the bill. It implements a new safeguards regime for New Zealand. Safeguards, as a number of members have indicated tonight, are emergency measures applied at the border, usually in the form of a duty that may be taken in order to provide temporary protection to a domestic industry from injury caused by a surge in imported goods as a result of unforeseen developments. Safeguards are provided for under the General Agreement on Tariffs and Trade and by the World Trade Organization, and agreements on safeguards are intended to facilitate adjustment by a domestic industry to increased imports. So the bill’s purpose, really, is to enable New Zealand to apply safeguards measures at its border, as the member opposite has indicated, and to do so in accordance with the agreement adopted at Marrakech in 1994 that established the World Trade Organization.

The bill states that such measures are intended to provide temporary protection to a domestic industry from serious injury caused by increased imports, and to facilitate adjustment by a domestic industry to increased competition from increased imports. The bill provides that the Minister may, on application by any person or at the Minister’s discretion, initiate a safeguard investigation by the chief executive into increased imports, if the Minister is satisfied there are reasonable grounds for an investigation into whether the increased imports are causing serious injury or the threat of serious injury.

The matters that the chief executive must investigate in a safeguard investigation include the following: whether increased imports have caused serious injury or a threat of serious injury, and whether the increased imports have been due to unforeseen developments; whether a safeguard measure is necessary to prevent or remedy serious injury and to facilitate adjustment by the domestic industry to the increased competition from the increased imports; and, if a safeguard measure is necessary, which goods should be subject to a measure, which measure is appropriate, and the appropriate extent and duration of the measure. Then there is also the matter of the public interest, which may entail, amongst other matters, consideration of the likely effectiveness of a safeguard measure in assisting the domestic industry, and the alternatives to a safeguard measure. There is also the likely effect of a safeguard measure on the market—which includes the effect on consumers—and on New Zealand’s international relations and trade goals, and the strategic importance of the domestic industry.

The bill also provides that in investigating whether the increased imports have caused serious injury or a threat of serious injury, the chief executive must consider the impact of the increased imports on the domestic industry, including an actual or potential decline in output, sales, market share, productivity, employment, and utilisation of production capacity. The chief executive must consider the nature and extent of imports of the goods by the domestic industry, including their value, quantity, and frequency; the purpose of the imports; and factors other than the imports that have injured or are injuring the domestic industry. So there is a range of important issues there.

The bill also provides for the circumstances in which the Minister may impose a provisional safeguard duty. The Minister may impose that duty on imported goods if the Minister is satisfied there are reasonable grounds to believe that a delay in imposing a duty would cause damage that would be difficult to repair, and also that the increased imports are causing serious injury or, again, the threat of serious injury.

The bill provides for several different types of safeguard measure, any of which may be imposed on, or in relation to, imported goods. They include a safeguard duty; a duty or a variation of any rate or duty, or an exemption from any duty under the Tariff Act 1988; a restriction on importing the goods under the Customs And Excise Act 1996 or the Imports and Exports (Restrictions) Act 1988; and also any other action that the Minister considers to be appropriate.

The bill provides that after receiving the chief executive’s report about a safeguard investigation, the Minister may take one or more of those actions in relation to imported goods if the Minister is satisfied that increased imports have caused serious injury or a threat of serious injury, and that the increased imports were due to unforeseen developments. The Minister must be satisfied also that the safeguard measure is necessary to prevent or remedy serious injury and to facilitate adjustment by the domestic industry to the increased competition from the increased imports; that the safeguard measure relates to the appropriate goods, is the appropriate measure, and is of the appropriate extent and duration; and that the action is in the public interest. The particular safeguard measure must not be incompatible with New Zealand’s international obligations as a party to the World Trade Organization agreement or other agreements.

Finally, I will finish by saying this bill is about ensuring that New Zealand’s safeguards regime is consistent with World Trade Organization rules, provides an efficient, transparent, and objective investigative and decision-making process, and is responsible. The bill is timely, sensible law developed by the previous Labour Government; it strengthens the protections for our domestic industry at a time of increased globalisation and competition from imported products. I have great pleasure in supporting the bill.

Dr KENNEDY GRAHAM (Green) Link to this

The Green Party supports the adoption of the Trade (Safeguard Measures) Bill. It is not my intention to take up too much time of the House in explaining why, but a few quick points are, I believe, in order. This bill repeals the earlier 1987 Act, which embodies the current safeguards regime. That Act, of course, preceded the establishment of the World Trade Organization (WTO) in 1995, and the aim of the new bill is to make the 1987 regime consistent with WTO rules.

The underlying purpose, as described, is to improve the investigative and transparent processes of international trade. Our aspiration is to meet three standards, so stated: efficiency, transparency, and objectivity. No one opposes efficient, transparent, and objective processes, particularly in the area of international trade. It is a passing lament, perhaps, that the same standards were not met as stringently as the Green Party believes was appropriate in the cases of the recent bilateral and regional free-trade agreements this country has held over the past few years, and is holding currently. I note the comments made by my colleague Lianne Dalziel about some concerns over the nature of free and fair trade that are held by some parties; of course, we in the Green Party have harboured those concerns—and, I would add, in today’s world there is an equally deep concern about the imperative of green trade.

We have also heard from our colleague John Hayes, who was gracious enough to offer some insights into the merits of free trade, based on the theory of comparative advantage. He recalled for our edification Ricardo, while omitting, in some haste, the theories of Smith and Mill. To prove the point, Mr Hayes drew as an example the case of, as he put it, “Brug-es”, which he said gave way in the fullness of time to the rise of Antwerp: the river was silting up so people had to move from Bruges to Antwerp, and Antwerp became the great economic power supplanting Bruges—QED, the need for free trade. I thank the member. I have some passing acquaintance with Bruges, or Brugge. The town is Flemish, actually, so it is properly pronounced “Bruha”. I lived there from 2002 to 2005, and intermittently from 2005 until the end of last year. In fact, I had an apartment there until 2 weeks ago.

I know Bruges. I also know the theory of free trade as it underpinned, or did not underpin, Bruges, and its aspirations and its destiny. The point here is that Bruges did not collapse because it turned its back on free trade; it collapsed because of environmental concerns. Because of silting at Bruges, the coastline developed. Free trade and the shipping trade did not switch immediately to Antwerp; it went to Zeebrugge, which is now on the coast and is close to Bruges. The point of this passing exchange is that the theory of free trade has a partial truth—not a total, absolute truth.

The Green Party recognises the partial truth of free trade. That partial truth has to be calibrated with fair trade and with green trade. We are creating a hell on earth if we go headlong for free trade without due regard to the most basic notions of global equity and the imperative of global sustainability.

Let me return to the Green Party’s concerns. They are particularly to do with transparency when it comes to international trade. I recognise that diplomatic negotiations—whether on security, environment, or trade issues—cannot be conducted in the full glare of live broadcasting. But, in today’s world, neither should they be conceived in the cosy backrooms of Geneva or national capitals and then carefully incubated under the artificial warmth of a hermetically sealed confidentiality until they are judged ready to be hatched for public christening after the creature’s DNA is forever determined.

Today we live in a world that is effectively globalised and in which the public not only has a right to know but also has an ability to keep pace with events and make informed judgments. In such a world, a balance has to be struck, ensuring that the public input on issues that directly affect them—whether corporate, farming, or individual—is neither premature and thus unhelpful, nor belated and thus futile. That balance is not always easy to strike, but we do not think that the democratic and parliamentary process on our international trade negotiations has found it yet. We need to be more transparent with the public than we were with the New Zealand - China Free Trade Agreement. The Green Party looks forward to improvement with the Trans-Pacific Strategic Economic Partnership Agreement and with the Indian and ASEAN negotiations.

That is a general context for addressing this more specific bill before us. The aim is to reduce the risk of a successful WTO dispute settlement, or judicial review, should a safeguard measure be applied. That is an objective the Green Party supports. We do, however, have some concern about the specifics. First, the meaning of “public interest” is elaborated upon in the bill. Although non-exhaustive, the guidelines are the likely effectiveness in assisting the domestic industry; the alternatives available; the likely effect on the market, including on consumers; New Zealand’s international relations and trade goals; and the strategic importance of the domestic industry. We are concerned that the guidelines for taking into account the public interest are unduly limited. They could steer the outcome away from protecting a domestic industry that does not necessarily meet the Government’s current test of strategic importance, but, if and when oil prices rise again, it may prove to be something we might regret.

Secondly, moving the investigative power from an independent authority to the Ministry of Economic Development could result in investigations having a greater political input from the Government of the day—they could perhaps, or perhaps not, have greater professionalism, but quite possibly they could have greater political input. This will need attention. With due regard to these concerns, we support the bill and we will be supporting it going to the Foreign Affairs, Defence and Trade Committee.

Hon Sir ROGER DOUGLAS (ACT) Link to this

Without doubt, free trade is one of the seven factors in economic progress for any nation. I enjoyed the speech of the member for Wairarapa, John Hayes. He gave me a level of comfort about the Trade (Safeguard Measures) Bill that I probably did not have until I listened to him. However, ACT is very cautious about this bill. I guess we are instinctively suspicious, and it could be that at some point in its progress we may well oppose it.

The reason for our suspicion is the possibility that the bill might be used to hinder free trade in some way. Undoubtedly, under the bill the powers of the Minister are extensive. We recognise the need to meet the World Trade Organization’s rules, but we wonder whether the bill is the appropriate way of doing that. The problem with this type of legislation is that it can be used as an effective non-tariff barrier, and undoubtedly New Zealand has suffered in this regard in many cases. It is because of this possibility that we are cautious.

As the member for Wairarapa said, New Zealand can only gain by selling goods that it can produce at relatively low cost and using the proceeds to buy things that others produce cheaper than we do, or that we produce at high cost. The principles involved in international trade are basically the same as those involved in any voluntary exchange. Each partner produces and consumes more than it would otherwise have been able to achieve. There are three reasons why this is so. First, with international trade, the people of each nation will be able to use more resources to produce and sell things that they do well, and use the proceeds to purchase goods they can produce only at high cost. I guess the question is whether this bill actually fosters or helps us achieve that objective, or whether it hinders it.

Secondly, international trade allows both domestic producers and domestic consumers to gain from reductions in per unit costs that often accompany large-scale production, marketing, and distribution. I believe that this point is particularly important for small countries like New Zealand. We need to ask how this bill facilitates that principle, or whether it is likely to be used as an excuse for those overseas who want to impose, shall we say, some barriers on New Zealand trade.

Thirdly, international trade promotes competition in domestic markets and allows consumers to purchase a wide variety of goods at reasonable prices. Competition from abroad helps keep domestic producers on their toes. It forces them to improve the quality of their products and to keep those products at low cost.

I guess I would like the Minister to assure this House that this bill will not be used to restrict desirable trade, and surely that issue has had its day here. Measures such as those proposed in this bill undoubtedly increase transaction costs. Whatever we say, one of the impacts of this bill will be that it will increase transaction costs and thereby reduce the gains available from free trade. The question is whether this measure is actually worth the cost that it will undoubtedly impose, or whether it is yet another example of bureaucratic red tape and controls.

RAHUI KATENE (Māori Party—Te Tai Tonga) Link to this

I have always been amused by the concept of dumping. That is because when I was growing up in Nelson, “dumping” had a particular meaning. According to my uncles and aunties, when they were children it was the site at which the sweetest, juiciest fishbones would be found. But as I drill further into the concept in the Trade (Safeguard Measures) Bill, which we are looking at today, there is hardly a fishbone in sight. There are definitely some fish-hooks, but there is a sad lack of fishbones.

The dumping in question in this bill is to do with the situation where goods are exported at a price that is lower than the price charged in the home market of the exporter. The concern is that the dumping of imported products may create a threat to the growth and survival of an industry. Dumping has been registered as becoming of increasing concern across the globe, with the World Trade Organization secretariat recently reporting a sharp increase of 39 percent in the number of new anti-dumping investigations between 2007 and 2008. The products most frequently dumped are base metals, textiles, chemicals, steel, and plastics.

So today we have legislative amendments. They are intended to provide temporary protection to a domestic industry, as well as to support the industry to adjust to the threat of increased competition from increased imports. There are matters that must be considered when determining whether the application of a safeguard measure is in the public interest. It is in the public interest that the decision-making process is about enhancing certainty and transparency.

Currently, investigations will be initiated if there are reasonable grounds that increased imports will cause or threaten serious injury to a domestic industry. This bill deals with the processes around the safeguard investigations. It puts in place the means by which investigations can be undertaken by the Ministry of Economic Development, including the process of addressing delays in investigations. The bill provides for the Minister of Commerce to impose a provisional safeguard duty for up to 200 days. The bill also extends the time frame for completing safeguard investigations from 30 working days to 75 working days.

Up until this point it all sounds very good—the processes are clarified, the base for safeguards is established, and protections are in place. But this is where the fish-hooks start to show. We must care about the environment for trade and the position it leaves our New Zealand market in. Yet no matter how positive this new legislation is, the remnants of one too many free-trade agreements are there for all to see. The trade liberalisation agenda has been perpetuated in Aotearoa by the means of a whole stock of trade agreements, which has opened the door to the dumping of copious imports from overseas.

All existing bilateral trade agreements have some form of exemption. The New Zealand - China free-trade agreement stipulates that either party may exclude imports of goods from a global safeguard measure. There is a similar clause in the New Zealand - Thailand Closer Economic Partnership Agreement. In both the Agreement Between New Zealand and Singapore on a Closer Economic Partnership and the Australia and New Zealand Closer Economic Relations Trade Agreement, neither party can impose a global safeguard measure against goods from another party.

This is why this legislation is so bizarre. We have the introduction of safeguards designed to adjust to the impact of increased competition. We have initiatives to clarify ambiguities in the Temporary Safeguard Authorities Act 1987. But, at the same time, we have free-trade agreements that counter all of this progress. Under the free-trade agreement with China, although China is able to set a maximum volume of agricultural goods imported from New Zealand each year, New Zealand does not have the ability to set similar maximum volumes on goods—agricultural or otherwise—imported from China. If New Zealand did set a customs duty to try to prevent too much competition in a particular market, our Government would need to compensate China for doing so. It does not really seem to make much sense.

This issue concerns the Māori Party greatly. We believe that decisions should be based on a rigorous and thorough analysis of potential costs and benefits. Such an analysis should be subject to an independent and contestable process, and we should be ever mindful of the need for focusing on results, having an eye on the outcome, and making sure that those outcomes reflect the full range of social, cultural, physical, financial, and spiritual consequences of a particular course of trade.

The news today revealed that the terms of trade have dropped further. Statistics New Zealand has released information showing a 0.9 percent drop, with export prices dropping further than import prices. This is the economic bottom line that dominates our thinking when we look at trade agreements and safeguard measures, but we need to also consider the need for scrutiny and oversight of the total picture—the complexities that come with our increased import dependency.

We need to understand how the quest for corporate profit maximisation has affected workers. We need to be asking what happens to the New Zealand market when our trade agreements allow imports in without safeguard measures. How many people will be fired before we say there has been an injurious effect on an industry? If sales are reduced, we should ask what kinds of sales they are. These are just some of the issues that need to come into the broader discussion.

The Māori Party will support the referral of the Trade (Safeguard Measures) Bill to the select committee today as a matter of principle. We want to see what the critics, commentators, analysts, and advisors say about some of the issues we have raised, and we want to know their views on the virtues or otherwise of this bill. So we will not be dumping this bill just yet.

JACQUI DEAN (National—Waitaki) Link to this

I am speaking in the first reading of the Trade (Safeguard Measures) Bill, which I believe is a very timely bill to be considered by Parliament.

The purpose of this bill is to bring our temporary safeguard measures both up to date and in line with international rules of trade. This bill was introduced in September 2008 by the then Minister of Commerce, Lianne Dalziel; the changes to the bill were designed and introduced to the House by the current, most excellent Minister of Commerce, Simon Power. The changes are designed to promote efficient, transparent, and objective investigative and decision-making processes. The legislation, when passed, will provide protection where and when it is necessary to help New Zealand businesses stay competitive in what is proving to be a tough economic environment.

I said that this bill is timely. I reflect on the early 1990s, when, I understand—I was told—a complaint was made with regards to a large amount of men’s and boys’ underwear that was brought in from China. I do not know whether members will recall it—

Hon MARYAN STREET (Labour) Link to this

I rise to speak on the first reading of the Trade (Safeguard Measures) Bill. I will speak for a moment about the kinds of balancing acts that are required in the development of free trade around the world and about the role that this bill plays in that regard.

There is legislation that this bill modernises. Even since the 1987 passing of the Temporary Safeguard Authorities Act, the world has changed substantially. The need to balance a Sovereign nation’s requirement to protect itself and its people with the requirements of open, free, and fair trade obligations under the World Trade Organization (WTO) is a responsibility that should properly fall to Parliament, and it is doing so with the introduction and first reading of this bill.

There are balances to be struck between how a nation protects its domestic industries and, at the same time, manages bilateral and multilateral relationships on a trade basis in a progressive and ongoing way. That balancing act needs to be updated, and is updated somewhat by this bill. The most important thing this bill does is to bring our provisions for emergency measures into line with WTO requirements. That is imperative. We no longer live in a world where we can pull up the shutters and pretend other nations do not exist. Our very existence as an export-driven economy is dependent on the agreement of trade arrangements with other countries.

We have been particularly successful in that respect in the last 9 years. Helen Clark, Phil Goff, and, before that, the Hon Jim Sutton have worked hard to expand our bilateral trade agreements. They have been enormously successful. Perhaps the most successful manifestation of that work was last year’s signing of the free-trade agreement with China.

At every turn with these free-trade agreements, New Zealand seeks to put in labour and environment standards. They are an essential part of our integrity in ensuring that free-trade agreements meet with standards that are acceptable to New Zealanders. We have in the past, when New Zealand underwent huge economic reforms in the 1980s, seen domestic industries, particularly manufacturing, go to the wall because of rapid tariff reduction. We are one of the most open economies in the world, so there are very few protections in the way of tariff barriers remaining for our manufacturers. That caused a great deal of pain 20 years ago, but a more vibrant, more articulate manufacturing sector has emerged from that because of the need to find new markets, and niches within those markets, where New Zealand can produce and sell goods that are desirable overseas and that, preferably, have value added to them before they depart these shores.

With the kinds of free-trade agreements we have been entering into recently—and we have just recently seen a multilateral free-trade agreement signed between Australia, New Zealand, and the 10 ASEAN nations, which takes us into a different realm of free-trade agreements entirely—we need to be able to keep up with this kind of progress, and I believe firmly that it is progress, with suitable protection measures as and when required. They are temporary, they are urgent, and they are in the public interest, as is stated in the provisions outlined in this bill. But more than anything else, they are consistent with WTO requirements.

Our bilateral arrangements are one thing, and they are significant, but we need our bilateral arrangements to be able to move into multilateral arrangements. The Trans-Pacific Strategic Economic Partnership Agreement negotiations that are under way at the moment, which started off with Singapore, Brunei, Chile, and New Zealand as the first four signatories and have now had the United States and Viet Nam added, create a different kind of multilateral forum for us to market our goods.

Where protections are required for the public good in New Zealand, this bill provides for such safeguards. As I said, they are temporary, they are urgent, and they must be in the public good and consistent with WTO provisions. We are not talking here about protectionism, and it is important that members and the public understand the difference. This is not about protectionism; this is about temporary safeguards where an injury may be done to the public good or where a domestic industry needs some time to adjust to a tariff reduction. This is not about allowing dumping and it is not about importing lesser standards into our economy than we would tolerate for our own New Zealand workers; it is about engaging with countries on the international stage on a multilateral basis, in order to achieve the kind of free trade and the exchange of goods that is necessary for this country to maintain the standard of living it requires. This bill brings us up to date in that respect.

One other point I will make about the bill is about the work that went on prior to the Minister of Commerce bringing the bill to the House and prior to its introduction to the House by the previous Minister of Commerce, the Hon Lianne Dalziel—that is, the statement of consultation undertaken in order to enact these provisions. We must not ever overlook the stakeholder consultation that goes on in order to bring about this kind of progressive measure. There was consultation through a discussion paper with a range of New Zealand business groups and firms and also, importantly, with the Council of Trade Unions. Those consultative stakeholder representations give me the confidence we need in this Parliament to ensure that this measure enhances New Zealand’s standard of living and our progress in trade relationships on the international stage. Thank you, Mr Deputy Speaker.

Dr PAUL HUTCHISON (National—Hunua) Link to this

Thank you for the opportunity to support this Trade (Safeguard Measures) Bill, which was initially tabled by the Hon Lianne Dalziel back in September 2008, but which is now being debated under the name of that very excellent Minister, Simon Power. What a great team National has in this field, given that we have Tim Groser as our trade Minister. He is doing extraordinary and sterling work on New Zealand’s behalf, day in, day out.

This bill implements a new safeguards regime for New Zealand. It safeguards the emergency measures that are applied at our border, usually in the form of a duty that may be taken to provide temporary protection to a domestic industry from injury caused by a surge in the number of imported goods resulting from unforeseen developments.

Although I was not here for the earlier part of the debate, I did happen to just catch a glimpse of the speech by Dr Kennedy Graham, which was very erudite. He was talking about the concept of free trade being ideal, but that that is only a partial truth. He said that the Green Party espouses fair trade and green trade. He talked about what those are, exactly, and he talked about the importance of having global equity and global sustainability. These qualities may be very admirable, but they are almost impossible—if not actually impossible—to legislate for, because fair trade would be almost impossible to define, and trade being free and fair would require extraordinarily individual integrity in all the players. This bill, as its title suggests, is about safeguard measures, usually in the form of a duty that may be taken to provide those temporary protections we have talked about earlier.

I also happened to get a glimpse of Sir Roger Douglas’ speech, in which he talked about how vital and fundamental free trade is to increasing economic growth on a world basis. What a contribution he has made since the 1980s in terms of opening up New Zealand markets. Today, when my wife rang me to ask about opportunities in buying whiteware, I marvelled that it is extraordinary that in New Zealand we have hugely wide choice at very competitive prices, and we have had that choice for a long time. Goods at the best quality and at the best prices of anywhere in the world have probably been available to us through our pursuit of free trade over some period of years.

But I note that Sir Roger said he had some suspicions about the bill, including the question of whether it would be used to hinder free trade in some way, the need to meet World Trade Organization (WTO) rules—which I believe the bill is absolutely in alignment with—and the questions of whether it is the appropriate way to meet those WTO rules and whether it could be used as an effective non-tariff trade barrier. As I understand it, that last possibility is highly unlikely.

Sir Roger said that the principles involved in international trade should be basically the same as in any voluntary exchange. In international trade, firstly, the people of a particular nation can undoubtedly sell things that that nation produces well and effectively, and it can buy things that it does not produce well or easily. Secondly, it allows an individual country to concentrate on what it does best, and produce that product at the lowest cost per unit. Thirdly, it promotes competition in domestic markets and allows consumers to purchase goods at an internationally competitive best available price. That is very much like the example I was talking about earlier on, in terms of the availability and choice of a whole range of products in New Zealand.

I understand that my excellent colleague Jacqui Dean mentioned the flood into New Zealand markets of Chinese underpants. Again, around Christmas time my dear wife happened to give me a book by that excellent author Joe Bennett about his pursuit to find out exactly where those Chinese underpants came from. He traced them back to the very silk worms that had produced the cotton to enable that particular brand to be made. That pursuit took him many months, and went over a huge variety of different importers and people who put the product together. But again, at the end of the day, what consumers are interested in is quality and value for money. That, indeed, is one of the great values of free trade.

I note that the current bill has a regulatory impact statement, and that does give one comfort as to the fact that the degree of regulation being imposed by this bill is minimal. It should also give a degree of comfort to Sir Roger Douglas. I note that only four investigations have been carried out under the Temporary Safeguards Authority Act 1987, with one investigation resulting in a safeguard being applied. However, New Zealand is potentially exposed to a greater risk of World Trade Organization dispute settlements, and that is why it is so necessary to have this bill. It is to ensure that if there were a challenge through the courts, we have a mechanism to improve the efficiency and clarity of the safeguarding legislation. I note that there was a discussion of a non-regulatory option, but the view was that no non-regulatory measures exist that would be capable of achieving the specified objectives.

In the bill there are a variety of regulatory options, which have been taken up. There is also a statement of net benefit of proposal, including the total regulatory costs. The key benefit of the preferred option with regard to the Government is a significant reduction in the risk of a successful World Trade Organization dispute settlement or judicial review, should an investigation be concluded and a safeguard measure applied. In terms of business, there are not expected to be any significant additional costs to business, and in terms of societal effects, New Zealanders as a whole will benefit significantly from the reduction of trade barriers. This, indeed, is a very worthwhile bill, and it gives me great pleasure to support it in its first reading.

RAYMOND HUO (Labour) Link to this

I rise to support the Trade (Safeguard Measures) Bill at its first reading. I am very pleased to see that this bill, which was originally introduced by the Hon Lianne Dalziel under the previous Labour Government, has been reinstated as a Government bill. It is great to see that legislation introduced by the Labour-led Government is now proceeding through the House at reasonable pace.

In an age of globalisation, New Zealand, like any other developed or developing country, benefits significantly from the reduction of trade barriers. However, as a limited exception to free trade, an effective safeguard regime has the potential to promote support for future trade liberalisation among import-competing domestic manufacturers. This bill is about the safeguard regime as part of a coherent trade remedies regime, which could and would have positive effects on investment by providing a means to protect domestic industry from international supply shocks. The safeguard regime, which is temporary, targeted, and adjustment orientated, is not contrary to, but is complementary to, trade policies such as tariff reduction. To be specific, safeguards are emergency measures applied at the border, usually in the form of a duty, which may be taken to provide temporary protection to a domestic industry from injury caused by a surge in imported goods. Such regimes are provided for under the General Agreement on Tariffs and Trade and the World Trade Organization Agreement on Safeguards, which are intended to facilitate adjustment by a domestic industry to increased import competition. Safeguards of this nature are particularly relevant to New Zealand and, to some extent, they are vital for us to ensure that manufacturers retain access to an effective safeguards mechanism at a time when other domestic industry is exposed to increasing import competition.

The existing legislation, the Temporary Safeguard Authorities Act 1987, is outdated. It does not provide adequate means for New Zealand to comply with its World Trade Organization obligations should it be necessary to take safeguard action. The legislation was subject to a review under the Labour-led Government, and that review included wide public consultation. The bill before the House is the result of that good work. The bill repeals the current Act, and doing so will produce compliance with the World Trade Organization rules. It streamlines the process of responding to allegations of dumped or subsidised goods on the New Zealand market, something that will definitely be welcomed by New Zealand manufacturers and suppliers.

Under the leadership of the previous Minister of Commerce the Hon Lianne Dalziel, a comprehensive consultation was carried out. Treasury, the Ministry of Foreign Affairs and Trade, the New Zealand Customs Service, and other agencies were consulted on the discussion document. I note with interest that it was proposed that safeguard investigations be carried out by the Ministry of Economic Development—rather than by independent safeguard authorities—which would report to the Minister of Commerce and recommend whether safeguard measures should be imposed. There is a substantial overlap between different regimes and agencies. For instance, the current legislation does not provide for the imposition of a final safeguard measure where the measure involves an increase in the standard protection through an increase in the tariff. This must be done by Order in Council, under section 9 of the Tariff Act 1988. This can be a lengthy process that could potentially reduce the effectiveness of the safeguard remedy.

The current bill, which is the result of the review and wide consultation, promotes efficient, transparent, and objective investigative and decision-making processes. The changes implemented in the bill will strengthen New Zealand’s safeguards regime and provide better protection for New Zealand domestic industry.

TODD McCLAY (National—Rotorua) Link to this

I rise to speak in support of the Trade (Safeguard Measures) Bill. I recognise the contribution to the debate earlier tonight by the Hon Lianne Dalziel. I also recognise the wide consultation that took place before this bill was introduced in September last year.

Trade is vitally important to New Zealand, and I am a firm supporter of free and freer trade. I congratulate the Minister of Trade, Tim Groser, on his excellent work since coming to office and on agreeing to and signing a great number of free-trade agreements—a significant number of which have been signed this year. These free-trade agreements will offer great opportunity to New Zealand businesses and to New Zealand industry. The agreements the Minister has been working on so diligently will open up billions of dollars of trade opportunities to New Zealanders and will offer New Zealand industry important access to the growing markets in Asia. They are markets in which consumers are reaching higher levels of disposable income and developing appetites for many of the goods we produce right here in New Zealand.

Not everybody is as excited by trade negotiations as the members in the House tonight are. When I get home to Rotorua tomorrow I am not sure my family will be waiting to say to me “Can you please explain the Trade (Safeguard Measures) Bill 2008, and take your time. Don’t limit yourself to 10 minutes. Go and do it in full detail, because it is exciting stuff.” But trade is important, and trade negotiation is also important. The importance of this bill is that it will give certainty to New Zealand business and industry and provide protection to our industries where appropriate and where needed.

This bill does a number of things. Safeguards are provided for under GATT and under other World Trade Organization (WTO) agreements. Why are safeguards in trade important? They are important because they protect local industries in exceptional and difficult times from unfair competition.

The bill makes a number of changes. The Ministry of Economic Development will be responsible for safeguard investigations, rather than a temporary safeguard authority. The ministry already has expertise in trade rules and resources, so this bill is an important step in the evolution of our trade protection rules.

The safeguard will also provide immediate protection. It makes sense to have a system that works straight away, and it is important that Ministers are able to take fast and immediate action to protect New Zealand businesses. After all, there is no point in providing protection when businesses have been harmed or have gone out of business.

The time frames will also be looked at. The time frame for safeguard investigations will be increased from 30 to 75 working days, and in some cases to 85 working days. Other speakers have recognised that this is more in line with the WTO standard. This extension brings New Zealand into line with WTO requirements for any investigation.

It is not automatic that if a Minister has concerns about a particular matter, at the end of the investigation the measures will remain in place. However, investigation allows due diligence and an opportunity to look at the effects that imports and cheaper imports may have on New Zealand business, and I think this is a fair and appropriate measure. As I said earlier, the Minister of Commerce will have the authority to impose a provisional and then a final safeguard duty, taking it through to a lengthier Cabinet process.

This bill is also about public interest, and it is only where there is public interest that it would be enacted. The likely effects in considering the public interest could be the effectiveness of the safeguard measure in assisting the domestic industry. There is a need to demonstrate that there was reason for the safeguard measure and that there would be good effects as a result, and also to consider whether other provisions might be taken in its place; the likely effect of the safeguard measure on the market, including on consumers; New Zealand’s international relations and trade goals; and the strategic importance of the domestic industry concerned.

In line with that I will give an example to the House of where the measures might well be used. I am the member of Parliament for Rotorua, and all members in the House will know—I do not need to remind them—that Rotorua is the mountain bike capital of New Zealand. Rotorua has some of the best mountain bike tracks in New Zealand. There are hundreds of kilometres of tracks, and many thousands of people visit Rotorua every year to enjoy these tracks and to ride bikes. The local Rotorua economy gets more than $10 million a year from mountain biking, and this amount is growing year upon year. We have bike manufacturing in Rotorua. These are small companies such as Kiwibikes, which is in the centre of Rotorua and has been manufacturing its own bikes for some time. I know that my friend and colleague Steve Chadwick supports this company very well. The company’s position at 1128 Hinemoa Street puts it right in the centre of Rotorua.

We are very proud of bike manufacturing in Rotorua, and the thousands of people who come to Rotorua very much enjoy riding bikes that are manufactured and produced in Rotorua. I believe that our bike manufacturers, which are growing businesses, can compete with anybody, based upon quality and certainly upon enthusiasm. But there could be times when they could be forced to compete unfairly with overseas manufacturers that for a number of reasons and in a number of ways could flood our market with cheaper products. This could be because of a downturn in the economy or because the New Zealand dollar has strengthened in relation to the currencies of the countries producing bikes and exporting them to New Zealand. It could also be because overseas manufacturers wish to flood our market with their bikes, which would do harm to our market and to local manufacturing by forcing New Zealand businesses out of business, and in so doing getting rid of local competition. Once local competition has gone, those manufacturers can raise their prices and therefore their profits in our markets.

This bill before us today will provide the means for Ministers to provide important protection to New Zealand industry and businesses so that companies such as Kiwibikes in Rotorua are not unfairly affected by the practices of others. This is fitting—and I believe it is right—and WTO law allows when and where such measures are warranted. I am sure that Kiwibikes and other large and small manufacturers throughout New Zealand would want us to support such an important measure, and that Kiwibikes would want me to support this bill and in so doing support its business.

This bill will give certainty to small and large businesses alike; it will give certainty to those that invest in manufacturing and production in New Zealand and in our local economies, and, where necessary, it will give them protection. The bill prevents New Zealand from receiving a rapid influx of cheap imports. It allows time for New Zealand businesses to bring themselves up to the level of international competition required to stay afloat in the current economic climate. It provides for temporary measures whereby New Zealand consumers will continue to have the benefit of the free-trade principles that underpin New Zealand’s trading environment. The key components of an investigation into a temporary safeguard remain essentially unchanged, so no significant increase in the cost to participate is expected.

Earlier speakers in this debate spoke about their concern that the bill would harm free trade. This is a free-trade bill. It provides protections so that free trade can continue, and provides rules and a rules-based approach to trade whereby the WTO is able to stop fighting amongst us. I note, looking at its website, that from 1 January to 30 June 2008 there was a 39 percent increase compared with the previous year in anti-dumping or safeguard measures referred to the WTO. These came from a number of countries, both large and small, and developed or otherwise. In fact, the country that introduced the most measures in that time was Turkey. It is important to recognise this. Decisions taken in New Zealand are not taken in isolation, and there will be WTO oversight. I think the WTO is telling us that the number of measures that were brought into place last year from different parts of the world means that others are watching us, and I have great confidence both in the ministry and in the Minister to be aware of this.

I proudly support this bill as introduced to the House today. It is an important measure. It brings us into line with other countries of the world, and it is an important step towards a continuing trade environment that supports our manufacturers and our important businesses. Thank you.