Third Readings

Hon ANNETTE KING (Acting Minister of Trade) Link to this

I move, That the Tariff Amendment Bill, the Customs and Excise Amendment Bill (No 4), the Radiocommunications Amendment Bill (No 5), the Fair Trading Amendment Bill (No 2), and the Electricity Amendment Bill (No 3) be now read a third time. The bills amend New Zealand’s domestic legislation so that the free-trade agreement between the Government of New Zealand and the Government of the People’s Republic of China can come into force on 1 October 2008. Securing this comprehensive free-trade agreement was a major achievement for New Zealand and this Labour-led Government. It took more than 3 years and 15 rounds of negotiations to reach the deal. The agreement liberalises and facilitates trade in goods and services and in investment, removes barriers to trade, and promotes cooperation in a broad range of economic areas between New Zealand and China, our third-largest individual trading partner.

Initial tariff cuts will take place when the agreement comes into force. This will result in the immediate elimination of tariffs on over $200 million worth of current New Zealand exports to China. Tariffs on 96 percent of our exports to China will be phased out by 2017. The removal of tariffs and other obstacles to trade will give our businesses a competitive head start in the fastest-growing economy in the world. New Zealand exports to China will now total $2 billion a year and will continue to grow. That will create opportunities for a better standard of living and more jobs for New Zealanders. The agreement contains measures to make it easier to do business by improving customs procedures, and by enhancing the cooperation between officials in technical areas. It also has rules to counter unfair trade. It aims to reduce barriers to trade and services between the two countries and to provide additional protection for investors.

The bill enables the agreement to be brought into force. The Tariff Act 1988 will be amended so that tariff cuts can be applied. Amendments to the Customs and Excise Act 1996 will create a system for issuing certificates of origin for goods exported from New Zealand to China, to ensure our exports benefits from preferential tariffs. Amendments to the Fair Trading Act 1986, the Electricity Act 1992, and the Radiocommunications Act 1989 will mean that conformity of agreement on electrical and electronic equipment can be put into place.

New Zealand is the first developed country to seize the opportunity of negotiating and concluding an agreement with China. Being first will give New Zealand, for a time, a unique competitive advantage. This will better enable us to strengthen existing commercial relationships and to create new ones. New Zealand businesses are already leveraging off the deal.

As the Foreign Affairs, Defence and Trade Committee noted in its report back to the House on the treaties and the bill, the agreement is important because it contributes to New Zealand’s strategic trade objectives, including the objective of broadening and deepening relationships in Asia. The agreement is also significant in the wider international trade context. It goes towards New Zealand’s goal to strengthen economic integration in the Asia-Pacific region, and is being seen internationally as a pointer to enhance cooperation in our region. New opportunities for free-trade agreements are being explored with Korea, Japan, and India, and they have gained some momentum from the success of completing the China free-trade agreement. The Government’s confidence in the agreement is shared by a wide range of New Zealand businesses and industry groups, which have publicly welcomed the successful negotiations of the agreement and are looking forward to its enforcement.

I acknowledge the hard work and skill of the negotiating team, led by David Walker of the Ministry of Foreign Affairs and Trade. I acknowledge the role played by the Prime Minister, Helen Clark, and Minister of Trade, Phil Goff, in intervening to support the negotiations when required. I thank members of the Opposition for their support with this agreement. The New Zealand - China free-trade agreement has huge economic and strategic significance for New Zealand. The enactment of these bills will allow New Zealand businesses to begin benefiting from tariff cuts, and from the trade facilitating measures contained in the agreement, from 1 October 2008. I commend these bills to the House.

TIM GROSER (National) Link to this

This is the final legislative stage of a process to mark what I think a number of people have rightly called a very historic moment in terms of New Zealand’s chequered trading history, and, because I think it is appropriate to use this occasion to go back to first principles, I want not to dive into the detail of this agreement but just to rehearse the broad argument that underlies this whole initiative. Before doing so I will comment on the fact that although we now accept there is a large measure of consensus in New Zealand politics on international trade issues, this agreement marks a remarkable change from when I first became involved in such politics well over a quarter of a century ago. At that time international trade issues were one of the most divisive issues in New Zealand politics, and any move to open up New Zealand to import competition raised issues of the greatest sensitivity. For reasons we all understood at the time, because New Zealand had developed an industrial model that was highly dependent on very high levels of protection, I think it meant that no New Zealand negotiators of the past could likely enter into any international trade agreements with their front foot forward, because of the sensitivities of a political nature at home. So we have travelled quite a way; I happen to hold the view that this is the path we will eventually have to take on climate change, but we are well removed from that point at this stage.

But the basic infrastructure of the argument, although very important, I think is very simple. It is this: at the moment New Zealand’s trajectory, in my opinion and the opinion of my party, is not sustainable. We are losing—leaching—people. The most worrying statistic that I have in my head, when I think of the 80,000 people who left the country last year, is that 80 percent of them—four out of five—were under the age of 40. And they are moving abroad in their legions. I regret to say that I see, still, the likelihood of that accelerating until we can actually address the root of the problem, because the opportunities for highly skilled and semi-skilled New Zealanders now outstrip those opportunities available to them in our own country. So the key to this is to improve the functioning of the economy; to increase the productivity growth rate, which is the key to higher real wages; and to make New Zealand once again a dynamic place so that our young people can see a future for themselves in New Zealand.

Central to that process is the promotion of a greater export orientation of New Zealand. A trade agreement is simply an agreement about opportunity. We will not intrinsically earn a dollar from the Chinese free-trade agreement unless the opportunities are translated into specific action by individual New Zealand companies and entrepreneurs, and backed by all the agencies that the Government has to bring to bear to help New Zealanders take advantage of these opportunities. Nevertheless, the agreement is absolutely a central part of that equation, and I think that is the reason why we are—I would use the argument—celebrating today the final passage of this bill.

This agreement is fundamentally important for New Zealand simply because of the scale of the issue; it is about gaining access literally to a quarter of mankind. And as I and others have commented in recent days, for a country that has historically had a massive political problem in finding markets for its exports, this is absolutely a paradigm shift. It is absolutely a change of major significance for this country, and its implications will come through over the next 20 years, just as they did over the long term in respect of the other landmark trade agreement that New Zealand has in its own free-trade area with Australia—the CER agreement.

So that is the broad economic picture. It is not just about agriculture; it is also about the new economy that is emerging in New Zealand. It is very important we do not see here a false dichotomy set up between the traditionally great strengths of New Zealand and the emerging companies that I think so many members are so proud of, such as the examples given yesterday by my colleague Mr Tremain of the Bay, around the Napier-Hastings area.

But let me take a couple of examples to illustrate the point, and instead of using general arguments I will use some highly specific arguments. I will talk about a leading industry of exported goods—dairy—and then I will take the clothing industry, as an example. The dairy industry story I think is well known to members. We are seeing a situation where the average compound rate of growth—the average annual rate of growth—of dairy consumption in China is an astonishing 30 percent. Any number that increases by a compound rate of 30 percent is doubling in less than 3 years, obviously. But this is not all about imports, because Chinese dairy production is also growing at a stellar rate. I forget the figure, since I am speaking here without notes, but from memory the expansion in the last 5 years has been equal to the entire New Zealand dairy production. We must never forget this central fact about dairy: although we are a huge player internationally, with something over 40 percent of total world trade—and it is astonishing for a country of our size to have 40 percent of world trade in anything—we are still only around 2 to 2.5 percent of world production. So the paradox here is that New Zealand is not very large in world dairy terms in respect of production but it is massive in respect of world trade.

So this incredible, stellar rate of growth of dairy consumption in China is stimulating not only domestic growth but also a very rapid increase in imports, of which New Zealand, being the leading exporter of dairy products in the world, is the principal beneficiary. That is underwriting wealth creation, jobs, and export income for our future. By the way, this does not mean there is any particular reason to believe that the end of adjustment difficulties for the dairy industry has been seen in New Zealand. I think it means—and most people who deeply understand the dairy regime understand this—that we are moving to a higher equilibrium price in world dairy, but there will still be New Zealanders in the future who will lose their shirts over it. There will still be marked fluctuations around that higher equilibrium world dairy price and, unfortunately, since it is immediately capitalised into land values, some people will go in at the wrong time with far too high a gearing and still suffer.

But looking at it from an overall, national New Zealand perspective, this agreement underwrites an incredibly bright future for New Zealand. The debate that agriculture is a sunset industry is dead in this country. Agriculture will play just as vital a part in New Zealand’s future as it has done in our past, and this signal agreement will underwrite that future to a very considerable extent. For those members who think that we have seen the last of dairy expansion, I say they should just reflect on this: even given these high growth rates, dairy consumption in China is of the order of 12 kilograms per head. Well, in Europe it is 250 kilograms per head, and in Japan it is around 80 kilograms per head, so we will still see a remarkable growth for the future. We are well positioned; we are better positioned than any other country to take this up, in terms of both our intrinsic strengths and the competitive edge that we now have into this giant, emerging consumer market. Yesterday we talked about the fact that Fonterra has already cashed up on this by announcing a $300 million expansion with Chinese companies, to take advantage of the agreement even before it has come into effect. So that is a very positive example. That is my dairy example.

The other example I will give the House is less well known, and it is the Icebreaker example. I had the privilege of being briefed by its managing director, Jeremy Moon, in Beijing when I went there with the very large delegation for the signing of the agreement. Here we have a company that is in a sector that I believe every New Zealander, bar the most optimistic few, thought a liberalisation of our import regime would mean the end of—and understandably so, because the clothing and textile industry was deeply reliant on the highest levels of protection. In 1980, prior to the signing of the CER agreement, essentially its exports were zero, and it has made an adjustment that at times has obviously been quite painful for a number of the companies that were positioned in the wrong area of the market. New Zealand was never going to get rich by trying to compete on a pure labour-wage cost basis with countries like China.

So an adjustment has taken place, and now we can see companies emerging out of that adjustment process with an entirely different business model. I recall very clearly the managing director telling me that it had taken him, I think, from memory, 6 years to reach the very modest figure of $1 million in sales and another 5 years to reach $100 million. That is all done by this globalisation model. The design is done here, and it is, as everyone knows, outstanding design. The product is a very expensive, high-quality product that uses New Zealand merino wool. The company then uses factories in Shanghai, which the managing director described to me as having an atmosphere more akin to that of a university campus. Anyone who read the Listener article on its visit to Shanghai will know that this production model is a million miles removed from a sweated labour arrangement. So those are two practical examples, and I think that they should give New Zealand a great deal of confidence in our exporting future.

MARTIN GALLAGHER (Labour—Hamilton West) Link to this

As I have done previously, I certainly commend the contribution of the previous speaker, and not only his work on the free-trade agreement itself but also his contribution to the Foreign Affairs, Defence and Trade Committee. As I have done on previous occasions, I also acknowledge the contributions of all the members of the select committee. Obviously, I particularly want to acknowledge the excellent role of the Hon Phil Goff, that of our Prime Minister, the Rt Hon Helen Clark, and also that of the team of negotiators and advisers, some of whom were represented in this Parliament yesterday and last night during the Committee stage of this legislation.

As the Acting Minister of Trade, the Hon Annette King, said, securing this comprehensive free-trade agreement is indeed a major achievement for our country. It took more than 3 years and 15 rounds of negotiations to reach the deal. As we are aware, the agreement liberalises and facilitates trade in goods and services and facilitates investment. It removes barriers to trade and promotes cooperation in a broad range of economic areas between New Zealand and China, which is our third-largest individual trading partner.

I want to quote, if I may, from the report of the Foreign Affairs, Defence and Trade Committee, which, of course, I chair. We said in our report to the Parliament: “We believe that this agreement is a major event in New Zealand’s history and fundamental to the future economic wellbeing of this country. The main values for New Zealand in entering into the FTA and associated instruments are as follows … increased access for New Zealand trade and investment, which will contribute to growth, jobs, and higher living standards … the framework the FTA establishes for resolving trade and investment issues that may arise in the future … the framework established by the Memorandum of Understanding and the Environment Cooperation Agreement for discussing and cooperating on labour and environment issues”. I think that is a particularly important point, and I acknowledge the contribution of the Council of Trade Unions, other unions, and other organisations in terms of that very important specific issue. The report goes on to say the value for New Zealand is also in “the support the treaties give to New Zealand’s objective of broadening and deepening relations in Asia and with China in particular … the support the FTA gives to New Zealand’s wider trade policy interests in strengthening economic integration in the Asia-Pacific and multilaterally …[and] the FTA’s assistance in raising the commercial profile of New Zealand companies in China.” Our report, obviously, emphasises and illustrates those particular points.

I do not want to spend much longer on my contribution to this particular reading of the legislation, but I just make the point and emphasise yet again that before this free-trade agreement with China was signed our exporters faced extra costs when trying to sell their products and services. They faced tariffs of up to 20 percent, making it harder for them to make money and, of course, to feed that money into our economy. Chinese tariffs on New Zealand products cost exporters almost $120 million a year. On the other hand, conversely, Chinese exporters faced very few tariffs when they sold their products to New Zealand. The free-trade agreement will help to address that imbalance by reducing, and in many cases eliminating, tariffs, so that New Zealand goods will be able to enter China on a more even playing field.

I make the point that when it is easy for our Kiwi companies to do business, we all benefit. Companies can expand, hire more staff, develop new products, and grow our economy. And of course I make the point that the support for this free-trade agreement has come from a wide cross-section of groups, including the Council of Trade Unions, the Dairy Companies Association of New Zealand, Federated Farmers, Air New Zealand, Fonterra, the Hospitality Standards Institute, Ngāi Tahu, Meat and Wool New Zealand, the National Distribution Union, Zespri, Business New Zealand, the Seafood Industry Council, and the Wellington Chamber of Commerce.

Having said that, I acknowledge—and I have acknowledged in previous contributions on this issue to this House—there is a counter point of view, and I acknowledge it was reflected also in the submissions to the select committee. Hopefully the select committee report has tried to comprehensively acknowledge, if you like, some of the cross-section of concerns that were raised.

I quoted from the Prime Minister in my contribution to the debate on this legislation in the Committee of the whole House, and I will just repeat that quote in conclusion. I think it is a very apt and appropriate quote, which sums up the issue very well: “The agreement sets a high standard. It is a model for how two trading partners, disparate in size but complementary in the products and services they offer, can take a trading relationship to a new level.” There are certainly challenges. No one doubts that there are challenges in taking that relationship to a new level, but I think that with the skill and innovation of our whole country and the major players in our economy across the board there are huge opportunities under this agreement in terms of our relationship with China. I certainly believe that history will record that this is one of the major achievements of the current Government. But I also acknowledge the very broad multiparty support we have in terms of the legislation and the agreement. I congratulate all those who were involved, and I hope we will now seize the opportunity that this free-trade agreement gives to our country.

Dr WAYNE MAPP (National—North Shore) Link to this

Today we are passing into law legislation relating to the China free-trade agreement. I predict the legislation will be passed into law today by literally an overwhelming majority. There is a very, very good reason why this is the case, and it is fundamentally that—and I say this, in fact, to the three smaller parties that are opposing this bill—fair trade is free trade. I know this will come as a bit of a shock to those parties, but the reason is simple, actually—nations should concentrate on what they do best. New Zealand has a world advantage in agricultural products. Obviously we want to develop our economy, but at this point in time, and for some years to come, that is our fundamental advantage—and I say that to the Māori Party. One has only to work out where our economy grows best to know that it is in agriculture. Indeed, for the last 50 years it has been quite remarkable just how agriculture has sustained and retained its share of exports. We gain when other countries lower their export barriers. That could hardly be contradicted by anyone in this House, I would have thought. Even those with a modicum of economic understanding, and even those who will worry about the position of lower-paid people, would see, surely, the advantage in that.

Conversely, looking at it from the other point of view, every New Zealand consumer benefits when the cost of the things that he or she can buy reduces, and that will be the case in a wide range of goods, particularly clothing and other items. That has been one of the great gains of the reforms of the last two decades. China clearly has a comparative advantage in the production of all sorts of electronic goods, clothing, and so forth. It is not called “the factory of the world” for no reason; it is called that because it is the best at that production. New Zealand gains from that when we can buy goods from China at the lowest possible price.

I know the argument put up by other parties is that we have to be careful about this, there have to be transition arrangements, and so forth. I have to ask those parties whether they really believe that a 10 percent tariff actually saves any jobs at all in New Zealand. Ten percent is the maximum tariff in New Zealand. If a company can survive only on the basis of a 10 percent tariff, then I would suggest to members that it is a company that is quickly going to go out of business in any event. But, in truth, the lesson we are supposed to draw is to concentrate where we have skills and expertise. That is exactly the point about Icebreaker. You know, China can produce a billion T-shirts for $1, but it cannot produce high-fashion Italian wear that people are willing to pay thousands of dollars a suit for—or, for that matter, $1,200 for a yellow jacket. That is where areas of expertise are built in countries that go for their comparative advantage. Surely Italy is the object lesson for us in terms of clothing, not China’s billion T-shirts?

I have to say to those parties that are resistant to the idea of free trade that there is a vast body of research—not just opinion; actual, proven research—that demonstrates the fundamental importance of the proposition that fair trade is free trade, as was very carefully pointed out by my colleague John Hayes yesterday. That is why virtually every country has signed up to the World Trade Organization. That is why the European Union has been so successful. The European Union has gained immensely by the elimination—not just the reduction—of all tariffs between its parties. That is why European nations are clamouring to get in; that is why Turkey is clamouring to get in. I can tell members many nations in the Middle East also ultimately want to join the European Union. They want to do so because they want to join a successful trading area where there are no barriers. And, closer to home, who could possibly doubt that the New Zealand - Australia free-trade agreement has not been a great success? It has been, and much of our contemporary prosperity is built on it.

This agreement is profoundly important because the third-largest economy in the world has made a strategic decision—not obviously just about New Zealand, but about how it sees the trading environment globally—to enter into a free-trade agreement with New Zealand. It is a full and total agreement. It is a strange irony that New Zealand First comes along to say: “Oh well, we would quite like to support the agreement. If only it had been faster.” I would have to say to—

PETER BROWN (Deputy Leader—NZ First) Link to this

New Zealand First has taken a particular interest in this issue, although we were not on the Foreign Affairs, Defence and Trade Committee that addressed the agreement. We sat here yesterday—

RODNEY HIDE (Leader—ACT) Link to this

The ACT party rises to support this legislation because we favour free trade. We favour free trade in goods, we favour free trade in services, and we favour free trade in that most valuable commodity of all—a person’s labour and ideas. Therefore, we favour this legislation.

The ACT party is totally perplexed by Mr Peter Brown’s speech. On the one hand, the Minister of Foreign Affairs says that New Zealand First opposes this legislation, this free-trade deal with China, because it is not quick enough—it will take 10 years. Then Mr Brown, the deputy leader of New Zealand First, comes to the House and says that New Zealand First opposes this legislation, full stop, because it is free trade. Well, where does New Zealand First stand on this? Maybe its members need to check with some of their funders about what Winston Peters is saying and square it with what Peter Brown is saying, because it is very, very clear that New Zealand First MPs do not know who their funders are, they do not know what has happened to the money, they do not know what the interests are—

RODNEY HIDE (Leader—ACT) Link to this

I raise a point of order, Mr Speaker. Are you saying that the one speech the ACT party has on the China free-trade agreement legislation is terminated because this Labour Government does not like any references to be made to bribery or corruption, whether or not it is within the rules? I never made a reference to bribery or corruption; it was you who did so, Mr Assistant Speaker. But the speech gets terminated. Is that the message you are giving in this Parliament to the people of New Zealand—that anyone who makes any reference to Winston Peters and $100,000 going to a lawyer will have his or her speech terminated? That is all I did.

DAIL JONES (NZ First) Link to this

Mr Assistant Speaker, no one would have had any problem if the member had been speaking to the China - New Zealand free-trade agreement legislation. Clearly, he was not. That is why, ultimately, you had to make the decision on the third warning.

Dr WAYNE MAPP (National—North Shore) Link to this

I raise a point of order, Mr Speaker. Frankly, I think your ruling has been a bit harsh in this instance. Although Mr Hide’s comments transgressed a number of things, he did connect those comments to the free-trade agreement. I note also that the comments were not objected to by the New Zealand First Party, and that it took a Minister of the Government to object. I think that the Minister of the Government should think very carefully when he seeks to have speeches by Opposition members terminated, essentially at his pleasure. I ask you, Mr Assistant Speaker, to review your ruling. I appreciate that it would obviously be in the nature of a final warning at this point, but I think the penalty was excessive, in the circumstances.

RODNEY HIDE (Leader—ACT) Link to this

I raise a point of order, Mr Speaker. I consider this to be very serious in our Parliament, Mr Assistant Speaker—very serious. I would like you to tell the House what I said that caused you to terminate my speech—the exact words—because the Minister who complained never said or implied what those words were. I do not believe that I have breached any Standing Order in what I was saying, and you, Mr Assistant Speaker, cannot point to the words of the Standing Order that I breached.

DAIL JONES (NZ First) Link to this

Mr Assistant Speaker, it is well known on the part of those who have actually sat in your Chair—and there was a time when I did, as well—that the member is now trifling with the Chair. At this point, it would be quite customary for the member to be named, and, if he persisted, to be expelled from the House. That is the proper way of dealing with disorder in this House; otherwise the matter becomes totally unsatisfactory and everything falls out of order.

Dr RUSSEL NORMAN (Co-Leader—Green) Link to this

This trade agreement between New Zealand and China fails to protect the sovereignty of the democratically elected Government of New Zealand, and it places significant restrictions on the future ability of the New Zealand Government and Parliament to pass regulations to protect the people and environment of Aotearoa New Zealand.

There are many reasons why the New Zealand Government should not have signed this preferential trade agreement with China, not least of which is the fact that New Zealand signed this agreement while China was involved in the murderous oppression of the people of Tibet. It is also of grave concern that this agreement has no binding labour or environmental standards. The lower wages and standards in China will effectively be a non-tariff barrier to fair trade, giving corporations that pollute or pay inhumane wages a competitive advantage over those that do not.

However, here I wish to focus on the investment provisions and expose the risks to our people, our environment, and our sovereignty. The investment chapter of the agreement, chapter 11, taken together with the annex defining expropriation, annex 13, effectively forms a bilateral investment treaty between our two countries. This bilateral investment treaty inhibits the ability of the two Governments to regulate the businesses of foreign investors without compensating those investors for the cost of those regulations.

The investment treaty means that a Chinese corporation operating in New Zealand can sue the New Zealand Government if the Government changes regulations, resulting in a loss of value for that corporation. And if there is a dispute between a Chinese investor and the New Zealand Government as to whether the Government should compensate the investor, and to what extent, then the dispute is to be resolved in an international forum established under the auspices of the World Bank or the United Nations.

The effect of this investment treaty will be to place a chill over the ability or willingness of the New Zealand Government and Parliament to regulate the business activities of Chinese corporations operating in New Zealand, for fear of facing binding claims for compensation in international tribunals. This will make it much harder for our Government to carry out its duty to protect and advance the well-being of the people and environment of Aotearoa New Zealand.

Bilateral investment treaties have received an increasing amount of attention in the international law literature. This is for the simple reason that more and more bilateral investment treaties are being signed, and more and more cases are ending up in international courts or tribunals of one description or another. Corporations are suing Governments in international judicial hearings on a regular basis. In Canada, the University of Victoria’s Faculty of Law has an investment treaty arbitration website that provides access to all publicly available investment treaty awards, and lists over 200 cases since 1996.

It was long standard fare for treaties to protect corporations from expropriation; from the direct acquisition of a company by a Government without compensation. What is new is that now corporations are successfully suing Governments for what they call “indirect expropriation”. Indirect expropriation is where a Government changes laws or regulations, or acts in some way that impacts on a corporation’s activities, resulting in loss of profits and hence value for that corporation. In these cases the owner’s title to an asset is protected but the value of that asset declines.

The New Zealand - China preferential trade deal contains two components that together constitute a bilateral investment treaty between New Zealand and China. Those are chapter 11 and annex 13. The core of chapter 11 is article 145, which, I imagine, almost none of the members of this House have read, except me. It says that the New Zealand Government cannot expropriate Chinese investors unless the expropriation is fully compensated, and vice versa. If there are any disputes between a Chinese investor and the New Zealand Government, the investor can seek redress at the International Centre for Settlement of Investment Disputes or through the United Nations Commission on International Trade Law.

Central to such disputes is the definition of “expropriation”. This definition has been of critical importance to bilateral investment disputes overseas. There have been several cases where arbitrators have deemed that measures taken to protect the environment have expropriated investors, and that is extremely and directly applicable to this treaty. For example, in the case of Metalclad v Mexico, an international trade tribunal ruled that Mexico had violated the North American free-trade agreement in preventing Metalclad Corporation from opening a hazardous waste treatment and disposal site in Mexico. The tribunal found that local government opposition to the project amounted to expropriation of the company’s profits.

Public protest against Metalclad’s approval for the waste treatment led to local authorities investigating the potential environmental impacts of the treatment site. An environmental impact assessment revealed that the site was on top of an ecologically sensitive underground alluvial stream. As a result, the governor refused to allow Metalclad to operate the facility, and later declared it part of an ecological zone.

Metalclad claimed that this action effectively expropriated its future expected profits, and although it was awarded less than the $90 million in damages it sought, its claim was successful. There are more cases like this in international tribunals, and it is clear that measures taken by States to protect human health or the environment can be found by international arbitrators to be expropriation, resulting in large financial penalties. The key question is whether State action to regulate is considered a form of indirect expropriation. The definition of expropriation is addressed in annex 13, which I cannot imagine many other people here have read. This is really at the core of the agreement and what it might mean for the ability of the New Zealand Government to regulate without compensation.

I will assess annex 13 from the perspective of its relationship to the ability of a State to regulate when such regulation results in the partial loss of value to a Chinese investor’s asset. Annex 13 has five paragraphs. Paragraph 1 states: “An action or a series of actions by a Party cannot constitute an expropriation unless . . . it interferes with a property right”. This is a simple test to meet. Most State actions would interfere with property investment when the State is trying to regulate, and it costs something. Paragraph 2(b) states that indirect expropriation occurs “when a state takes an investor’s property in a manner equivalent to direct expropriation, in that it deprives the investor in substance of the use of the investor’s property,”. The kind of State action where State regulation costs money to a corporation protecting the environment is exactly the kind that would be caught by paragraph 2.

Paragraph 3 states: “In order to constitute indirect expropriation, the state’s deprivation of the investor’s property must be: (a) either severe or for an indefinite period; and (b) disproportionate to the public purpose.” Clearly, if the State was trying to regulate to protect the environment it would be permanent, and the question of whether it would be disproportionate would be decided by an international panel. Whether the Government’s judgment was allowed would be determined by an international disputes panel. Paragraph 4 states that if one targets a particular class of investor, one is very likely to get caught up in expropriating. That is an easy provision to meet if, for example, one targets a bunch of agricultural producers or dairy farmers and tries to clean them up.

Paragraph 5 states—and this is probably what the Government is hoping will protect it—“such measures taken in the exercise of a state’s regulatory powers as may be reasonably justified in the protection of the public welfare, including public health, safety and the environment, shall not constitute indirect expropriation.” Paragraph 5 gives the appearance of protecting State action. It says that State actions to protect public welfare do not constitute indirect expropriation. But there is an important exemption and an important qualifier. The exemption is that it does not cover the kinds of actions where any particular industry or class of investors is targeted. The qualifier is the term “reasonably justified”. Even if the State action does not meet the terms of paragraph 4 in that it does not target a class of investors, it must still be reasonably justified, and an international panel will decide whether the actions of the Government are reasonably justified. There is not even any guidance.

Once the exemption and the qualifier in paragraph 5 are included, the protection to State action looks weak. This is why Professor Matthew Porterfield from Georgetown University, an international expert in trade law, said that in our agreement with China we are actually exposing ourselves to greater risk of legal action than the US Government faces under its investment clauses. So a close reading of chapter 11 and annex 13 makes it clear that any kind of New Zealand Government regulatory action that negatively affects the value of Chinese investors’ assets is wide open to action being taken against the New Zealand Government by the Chinese investors.

Where the New Zealand Government action particularly affects a class of investors, then the Government’s only defence is to show that its actions were proportionate to the public purpose intended. It will be up to an international panel to decide whether the action was proportionate, regardless of the view of the people or Government of New Zealand. Where a State action does not affect a particular class of investors or is not in breach of a contract, then the Government has a better opportunity to win its case, but only if the tribunal agrees that the Government’s action was reasonably justified to protect public welfare. Thus, the New Zealand Government will have two lines of defence, but both of them involve convincing a non-elected, international panel that the actions of the Government were proportionate or reasonable to achieve the public purpose desired.

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

Tēnā koe, Mr Assistant Speaker, tēnā tātou katoa e te Whare. I tērā wiki i whakanuitia a Rererangi Aotearoa e te Minita Tāpoi a Damien O’Connor te whakatuwheratanga o te rere-kotahi mai i a Beijing ki Tāmaki-makau-rau. E mea ana te Minita, “he mārea hokohoko tino nui ki a Haina, mō ake tonu”. E toru rā ki muri, he tirohanga rere kē mō tēnei “mārea hokohoko tino nui ki Haina, mō ake tonu”, nā te Tatauranga o Aotearoa. I te marama o Pipiri, ko heke ngā manuhiri nō Haina i te 24 pai hēneti i te marama o Pipiri, i tērā tau e 1,600 ngā tāngata. E rua marama atu i te hainatanga o te kawenata hokohoko noa, kua kite tātou, kāhore pea ngā huamoni e rite ana ki nga tūmanako.

Ka matakite te pukapuka a Tū Mai, a ngā tau tekau e tū mai nei e 61 miriona ngā tūruhi nō Haina ka haere ki whenua kē. Ko te mārea hokohoko whai rawa o Haina tēnei e whakaarohia ana e te Minita Tāpoi. Engari ko te pātai nui ki a tātou me pēhea te mārea hokohoko nei e pātari ai ki tēnei whenua? He hīnaki rānei e mau ai tātou? Ko nga kaimahi utu-iti, hei maunu mā ngā pakihi o Aotearoa e raruraru ana i te kāinga. Kia pēnei rawa a Aotearoa nei? Hei kura pae mō Haina?

Kua tohutohu mai te Rōpū Rongomau me te Tika o te Ao ko te utu ki a tātou, ko ngā turanga mahi rua tekau mano ka ngaro, ko te nuinga he mahi wheketere i te mutunga o ngā taake hoko mai. E maumahara tonu ana tātou ki ngā tau waru tekau, he parekura te whakawāteatanga kia hokohoko noa i pā kino nei ki ngā kaimahi, arā, ngā kaimahi Māori i ngā wheketere. E maumahara tonu ana tātou ki te Multilateral Agreement on Investment me tōna tāhuhu kia taetae noa mai ngā kamupene nunui o te ao ki te hoko haere i wā tātou rawa. Ā, e mōhio anō hoki tātou he aituā ki ngā kaimahi o konei i te wā e whiwhi nui ana ngā kamupene nui o Haina, me ngā taniwha pēnei i a Fonterra.

Ko ngā hua e kore e eke ki te utu engari, ehara te utu i te moni anake. I te wā e ngaro ana te waihanga taputapu ki a Haina, ka heke to tātou mana i wētahi atu āhuatanga o tēnei pīrangi ki tō tātou hoa hokohoko hou. I te tīmatanga o te whakatata haere ki Beijing, e titiro ana te ao ki a Haina kia kitea mēnā e hiahia ana te kāwanatanga ki te whakatika i āna takahanga mana tangata pēnei i te whakapai i te paru ki te one. Engari auē taukuri e, e ai ki ngā kōrero a Amnesty International, ka whakawhiu tonu atu te kāwanatanga i ngā kaiwawao mana tangata. Kino atu i tērā, kei te mauhere tonu ngā kaiwawao, rātou e tohu ana i ngā hara a te kāwanatanga, kia tika katoa ai i mua o te tīmatanga o te tauwhainga Olympia. E maumahara ana au ki tētahi kauhau a te Pirimia i te Akoranga Rongomau o te Whare Wānanga o Tāmaki-makau-rau, ka pēnei ia: “Kei te tino māharahara au, ina whakawaireka te kāwanatanga Nāhinara ki a rātou o Āhia, e kore e taea tā rātou whakamaru mana tangata te kite.”

Kia mārama ai tātou nā te tino kino te takahi mana tangata o Haina, ka tuhi atu a Amnesty International i tētahi reta i runga i ngā auē a te tini mano huri noa te ao, e karanga ana ki a Haina, kia whakatikangia ngā mana tangata kua roa kē e tāmia ana.

Tērā ka mate anō te mātauranga tuku iho a ngā tūpuna i ngā mahi whakawaireka a te kāwanatanga. Kua tohu mai tērā pūkenga pakihi a Aroha Mead, ka totohu ngā toi Māori i te waipuke mai o ngā taputapu noa. Nāna anō te whakatūpato, kei waimeha te tohu mana o Toi Iho i te nui o ngā taputapu tinihanga e hokona ana.

I te wā o te komiti tirohanga, ka pēnei tonu ngā karanga a te Rōpū Tāpoi Māori o Aotearoa, a Toi Māori Aotearoa, o Ngā Aho Whakaari rātou ko kākahu Kia Kaha, ko Huia Kaitā e tautoko ana. Ehara ēnei i te ihu hūpē. He umanga tā pukapuka a Huia kua whiwhi tohu, otirā, nāna anō tō mātou mana o Aotearoa i whakapumau, nā te whakamātau, nā te whiriwhiri, nā te whakaputa i taua mana motuhake ki te ao. Kei a Kia Kaha te tikanga o ngā kākahu mō tō tātou toa haupōro a Cambo, mō ngā kākahu hoki mō o tātou kapa ki nga tauwhāinga o te ao, otirā, kua hokona atu wā rātou kākahu ki Poihākena, ki Amerika, ki Ūropi hoki.

Ko Ngā Aho Whakaari te rōpū o ngā kaimahi Māori whakaata, ngā kaiwhakatū whakaari, ngā ringa tohu, ngā kaimahi hangarau, ngā kaituhi hoki puta noa te ao. Tēnā, i te hui tahi ngā rōpū nei ki te tiaki i te rangatiratanga, me mataara te ao, me kī, tō tātou ao Māori. I mea atu rātou ki te komiti, me whakaū ngā ture i te tikanga kia tautoko te Karauna i te rangatiratanga Māori o ngā taonga katoa tae atu ki te mātauranga. E whakaae ana mātou ki te take i kōkiritia e te Uru Kahikatea me tupu te ōhanga whānui kia ora ai ngā pakihi Māori.

Engari, e kore mātou e whakaae ki te whakaaro kūware o te komiti mā te whai rawa haere o Haina, mā te whakawhanaunga haere ki te ao whānui e kaha ake ai tā rātou ārai i ngā mana tangata. E kore mātou e whakapono mā te kawenata hokohoko pokanoa me tō tātou whenua iti nei ka kitea e Haina te māramatanga kia huri ai rātou ki te ara tika.

Hei whakakapinga kōrero; i a tātou e whakatata ana ki te waru o ngā rā o Here-turi-kōkā, e mōhio ana tātou ki te whakaaro ngā rangatira nunui o te ao, tērā me huri tuarā rātou ki te rā whakatuwheratanga o te tauwhāinga Olympia hei tohu whakahē i te takahanga o Haina i ngā mana tangata, i te mana motuhake o Tibet. Ka pērā anō tō tātou whakahē? Ka huri rānei tātou ki te whakawaireka i a Hōri Puihi i a ia e whakawaireka ana ki a Haina?

E kore mātou o te Pāti Māori e piupiu i te haki whakapono ki te Kawenata Hokohoko Pokanoa. Tūturu, e tautoko ana mātou i te ōhanga Māori, e kite ana mātou i ngā painga ki ngā iwi e puta mai ana i te hokohoko kai moana, mahi tāpoi ki a Haina. Engari, me pēhea mātou e huri kē i te tāmitanga taikaha o ngā reo motuhake o Tibet he takahanga tērā i te tangata whenua? E mataara ana mātou ki ngā tara koi i roto i te hokohoko pokanoa, pai kē atu ki a mātou te hokohoko tika. E rapu ana mātou i ngā huarahi tiaki i te taiao, ngā mana tangata, me ngā tikanga mahi. I te tōnga o te rā, he taumaha rawa te utu o ngā tūranga mahi, ngā utu mahi, ngā mātauranga mahi, te mana motuhake e ngaro katoa ai. E kore mātou e tautoko i te Ture mō te kawenata hokohoko pokanoa me Haina.

JOHN HAYES (National—Wairarapa) Link to this

I need to make it very clear to the previous contributor to this debate, Hone Harawira, that there is no fairer trade than free trade. There is no fairer trade than free trade, and for any politician in this House to turn his or her back on that statement of fact is to undermine the interests of the people he or she purports to represent. I say to the earlier speaker from the Green Party, Dr Norman, that in China we are operating in a communist country—a country with a record of appropriating possessions belonging to members of its community—and the member expects, very naively, that New Zealand investors will go to that country with no form of protection at all, and will put their capital at risk. I say to the member he should get real and find an electorate that will put him into Parliament to represent it, because he is letting down every one of my constituents with everything he has said.

I say to the Māori Party that many Māori constituents are running businesses in my Wairarapa electorate—dairy businesses, fishing businesses, sheep and beef businesses—and they are doing very well. Those Māori-owned businesses will benefit unreservedly from this agreement, and it astonishes me that we have people who are prepared to get up in this House and let their supporters down. That is what has been going on here this afternoon.

This is the most important legislation that will be passed in this Parliament in its life. In fact, it is probably the most significant legislation in the trade and export area to be passed in this country for 25 years, since we signed up to the Closer Economic Relations agreement with Australia.

We have acknowledged the work of Dr David Walker, and that of officials from the Ministry of Foreign Affairs and 20 or 30 other Government agencies. I commend their work. But I would also like to reflect for a second or two on the contribution that underpins this agreement, made by people like Ted Woodfield—arguably, the father of trade policy work in this country—and also made by the first New Zealand head of the World Trade Organization, Mike Moore, who for a long period in this Parliament advocated for free trade. It was the work of those people, built on by successive generations of politicians and officials, that has led us to this point today.

The benefits from this legislation will flow on longer than the lives of anyone currently sitting in this Chamber and living in our country, because we are writing legislation that will provide benefits ad infinitum—for as far as we can see into the future. I would ask the Green Party and the Māori Party to please get real. Our wealth, our well-being, our ability to buy Herceptin, our ability to pay our schools a decent amount of money to educate our children, and our ability to keep school bus services going in the northern part of my electorate depend on our ability to generate income. If this country does not export anything, it will have no income. Exporting is how our country survives. When we think about this legislation, I want us to think about it as a mechanism to improve the ability of those people who produce things and sell them—and there are a few people around here who have never produced anything in their lives—to do their business better. I have seen difficult regimes make trade very difficult for New Zealand exporters; I have seen that firsthand when I have lived in countries like India, Bahrain, Saudi Arabia, and Iran. The National Party supports this legislation for the very reason that it will make work much easier for the people in our community who are out doing the hard graft of raising our national income.

I want to thank the submitters who came to the Foreign Affairs, Defence and Trade Committee, regardless of whichever perspective they came with—in a democracy they are entitled to their view.

However, it remains incomprehensible to me that people in this Parliament—particularly the New Zealand First Party members—can oppose this legislation, because they have not provided one piece of evidence to substantiate their opposition to it. Mr Brown talked about Chinese people not liking wine. I can only suggest to him that he has never been to a vendor of wine in this country and asked for a bottle of Great Wall wine. It is available in most Chinese restaurants in my electorate. Has Mr Brown heard of Tsingtao beer? Yes, the Chinese drink beer. I tell Mr Brown that some years ago, longer ago than I prefer to remember, I was working in Singapore in our high commission there. A Chinese contact in the national drug bureau, when we were chasing Mr Asia, said there were four things I needed to understand about Chinese communities: wherever there was a Chinese population, there would be gambling, drugs, prostitution, and brandy.