New Zealand-China Free Trade Agreement Bill

Today I am acting on behalf of the Minister of Trade, the Hon Phil Goff, who at this point is overseas representing New Zealand’s interests in further trade talks. But I know that he would want me to convey to the Committee his gratitude for the work that was undertaken by the Foreign Affairs, Defence and Trade Committee in examining this bill, which was recently before the select committee, and for its recommendation to this House that there be no amendment to it.

I think that members of this House have, in the main, worked very constructively on this bill, knowing that it will have a major impact on businesses in New Zealand. It allows our free-trade agreement with China to come into force. The signing of the agreement with China is a very significant achievement for this Labour-led Government.

Before the free-trade agreement was signed with China our exporters faced extra costs and charges when they tried to sell their products and services to the Chinese market, which is a very large market for us. They faced tariffs of up to 20 percent, making it harder for them to create the jobs and the wealth that can come from trade. That is because the Chinese tariffs on New Zealand products cost exporters almost $120 million a year. When it is easier because of this legislation for our Kiwi companies to do business, we will all benefit. Our companies will be able to expand and hire more staff, develop new products, and grow our economy. The Prime Minister, who has also been very instrumental in this deal, which came out of our work with China, said that the agreement sets a high standard and that 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.

Support for the free-trade agreement has come from many, many different quarters. For example, the agreement is supported by 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, the Wellington chamber of commerce, and many others. The agreement is widely supported by many organisations in New Zealand, whether they are businesses, organisations that represent our tourism industry, or part of our union movement.

The bill has two Supplementary Order Papers. One divides the bill into the Tariff Amendment Bill, the Customs and Excise Amendment Bill, the Radiocommunications Amendment Bill, the Fair Trading Amendment Bill, and the Electricity Amendment Bill, and a second one amends clause 2 to state that Parts 1 and 4 will come into force on 1 October 2008 rather than by Order in Council. The Committee is about to debate the Supplementary Order Papers and the bill itself. I commend this bill to the Committee, and once again I thank members for their very constructive approach across the political divide in supporting this legislation and the advantages that will flow from it for New Zealanders.

First of all I acknowledge amongst the Government’s advisers the presence of my former colleague Dr David Walker. I congratulate him and his team on the assiduous effort they have put in over a number of years to produce this agreement, which I described yesterday—and outside the House—as of potentially historic importance to New Zealand’s long-term trading prospects.

Today as we go through the Committee stage I will start by addressing some of the arguments against the New Zealand - China free-trade agreement, and I will start with the political case against it—the linkage with human rights—which, I think, is very important. Some other arguments of an economic character, which I think are fairly weak arguments, have been used, but obviously in terms of the broader public debate and the media attention it was the linkage with human rights issues that attracted attention. It is important to have some commentary around that to put it into perspective.

In this respect it is important to define what the difference is for the two main parties and, I am sure, for some of the smaller parties. The issue is not about the primacy of human rights. I do not want to get involved in a philosophical discussion about where in the hierarchy of human needs, human rights stand vis-à-vis things like poverty elimination. The underlying reality is that members of this House are absolutely at one on the absolute importance of proper respect for human rights. I think we would all also have the view that the human rights situation in China is far from perfect. So that is not the issue; the issue is whether we should therefore have turned away at the last minute from this trade agreement because that record is not perfect. On that, we have taken the view on this side of the House, as has the Government, that that would have been a catastrophic strategic misjudgment.

I want to explain in my own language why I think that is the case. On the first point there is another debate there about New Zealand interests. I cannot recall which great diplomat of the past said this, but it might have been Talleyrand: “If you don’t look after your country’s interests, no one else will.” But that is not the point we are discussing today. We are discussing whether it is even remotely plausible that not proceeding to trade with a country—and a free-trade agreement is simply a mechanism for accelerating trade between two countries, so it does not differ intrinsically from the concept of trading with a country—would in some sense help the position on human rights.

When we start to drill down into this argument, we come across, I think, a position that is completely implausible. First of all, I doubt that there is a country in the world—no doubt, including our own—that does not have, in some dark corner of the closet, some issue in respect of human rights that we would rather not hear about and that would not stand up to close international scrutiny. Fortunately, we live in a country where such issues would be few and far between but I am sure that they exist, according to the views of many people. So if we were to take the view that we should not form free-trade areas or find other avenues for accelerating trade with countries that have a less than perfect human rights record, what would we really be doing?

For a start, I would argue that we would be excluding trade with all developing countries, because in some generalised sense it is probably fair to say that few developing countries—as much because of the greater problems of poverty and want that face them at this stage in their development—have a larger measure of problems in terms of human rights than others. We would then turn round and say: “Well, what about Australia?”. No doubt there would be people who would stand up and say that they did not think too much of the apology that Prime Minister Kevin Rudd made to the first people of Australia, and that we should therefore pull out of the CER free-trade agreement. We might go systematically through all the countries of the world and find that actually there is nobody who meets our high standards and that we should therefore not trade with them. That is the first issue. When we drill down into it I think we come up with a completely implausible position. It is essentially an argument for economic autarchy.

The second aspect of this, putting aside New Zealand’s interests, is the question of whether it is even likely that this is the right way to advance human rights. I think, then, that we have to come down to a view that says this: every country that has gone through stages of development has had serious problems in terms of human rights. We can take our children—or in my case, grandchildren—to the Tower of London, we can go to see the torture chamber, and we can find that this of course is now an object of tourist delight. Well, we know that it was not put into the Tower of London as an object of tourist delight, and that inside the political antecedents of our very own country are torture, gross abuse, lack of habeas corpus, and the lack of the fundamental freedoms that underwrite a decent society such as we have in this country. So all countries have had this in their past, or their derived past, if you will.

The idea that we can somehow suddenly achieve the standard of excellence that some submitters expect in one hit—and only when that standard has been achieved will they be in a moral position fit for a free-trade agreement with New Zealand—is, frankly, not only ludicrous, when one drills down into the practicalities of it, but also representative of a fundamental misunderstanding about how this all-important issue of human rights is advanced in the real world. Although I would never want to buy into the argument that in some sense human rights are a relative issue and cannot be divorced from the state of economic development, I think it is stretching all the empirical evidence to suggest that there is no linkage between higher levels of economic development and increasing respect for international trade.

I have never been a believer in trade embargoes, not just because of New Zealand’s interests but because I fundamentally do not believe that they work. I have often used the following example. Nobody could think of a more extreme trade embargo to achieve political objectives than the American trade embargo on Cuba that has been in place since around 1957—for over 50 years. At the time when Castro took over power, American trade was responsible for 90 percent of Cuba’s exports, but there has been a trade embargo ever since. I have always taken the view that if Fidel Castro is a God-fearing man—and he may well be, because my understanding is that he was brought up by Catholics and may now be returning to that stage in life where he starts to be a God-fearing man—I would argue that he should be down on his knees every day of his life to thank God for the American trade embargo. I do not believe for one minute that he would be in power if the Americans had overrun Cuba with McDonald’s franchises, investment, American tourists, and American trade. That is why I am deeply sceptical about trade embargoes for political reasons.

It appears to me that members would like to roam widely in this debate—

💬 Tim Groser: Initially.

Well, I do not know, but I suspect that members would like to be able to raise all sorts of things rather than keep the debate very constrained as it is by the part by part consideration. I seek leave for the Committee to take the bill as one question so members can range across the entire debate. [Interruption] It can be as long as members want, but it means that members can talk about everything. If the Committee does not want to do that, that is fine. I noticed from Mr Groser’s very good speech that he wished to roam widely, and I suspect that Mr Hayes would also like to, as well as my colleague Keith Locke. I seek leave for this bill to be taken as one question.

The CHAIRPERSON (Hon Marian Hobbs): Leave is sought to address the bill’s five parts as one question. Is there any objection? There is objection. Before I call the next speaker, I say that since leave has been declined that means that the Committee will stick very closely to each part for the rest of the debate. I want members to talk about amendments to the Tariff Act in this part, followed by amendments to the Customs and Excise Act.

I raise a point of order, Madam Chairperson. Mr Groser gave quite a talk on human rights. Given that he was not stopped and that many of his comments were directed, partly, at the views that the Green Party holds, in fairness I think it would be in order for some response to be able to be made.

I support my colleague Mr Locke on this matter. I think it is entirely appropriate, given the importance of this matter, for us to start with some general comments. I am well aware of Mr Locke’s views. I have put forward my contrary view, I would like to hear his response, and then I think we can proceed with a more technical and detailed examination.

The CHAIRPERSON (Hon Marian Hobbs): I want to give some considered thought to this matter. It is a problem because of the way that the member actually introduced the matter into the debate. I would really like to confine the debate to Part 1, and members may go to general debate when they come to clauses 1 and 2 at the end. I am sorry, but I am now ruling that the Committee sticks, as was voted on by members of the Opposition party, to amendments to the Tariff Act.

I raise a point of order, Madam Chairperson.

The CHAIRPERSON (Hon Marian Hobbs): I have given a ruling.

May I draw to your attention, Madam Chairperson, that we have had a general contribution that was intended to presage more detailed comments and subsequent contributions. That was not objected to by the Government, and it seems only appropriate that the Green Party member is also able to address this. I certainly understand the need to stick to the individual parts, as you quite rightly say, but our denying leave to the Minister’s request was not to suggest that we therefore discuss only individual clauses. This is very important legislation, and it is appropriate that we deal with the detail. But before we get to the detail, I think that members want to be able to have a general discussion, and in particular the Green Party—

The CHAIRPERSON (Hon Marian Hobbs): The member will be seated, please. You are challenging my ruling. I will say it very clearly again: the Committee voted to consider the bill part by part. Members know, as experienced members of the House, that this is not a general debate. The general debate occurs either in the second reading, the third reading, or in the debate on clauses 1 and 2. Members chose to do this by voting against considering the bill as one question. I was lenient when I listened to the first speaker. I gave the Committee the choice, and the Committee made its choice. We will now go ahead, sticking to a part by part consideration of the bill.

Madam Chairperson, you have directed us to concentrate strictly on Part 1, and indeed on all the subsequent parts. There was no issue of a vote. Leave was sought and denied, and we simply said we would follow the rules. No vote was taken on the issue, at all. There was never a question of a vote, and I remind you, Madam Chairperson, that it is not an issue of taking a vote; simply, any one member can seek leave.

Part 1 deals directly with the reduction in tariffs. That is how the free-trade agreement works. What is the purpose of a free-trade agreement? It is to introduce free trade. What stops free trade? Tariffs stop free trade. In the trade between New Zealand and China, many goods—in particular, goods in the agricultural sector—suffer high tariffs. In addition to that, there are typically quotas, as well. A free-trade agreement by definition—and under World Trade Organization (WTO) rules—is designed to eliminate tariffs between the parties to that free-trade agreement at a faster rate than would otherwise be the case. Otherwise, the parties would be going just by their bound commitments under the World Trade Organization, and that would not be dealt with until the Doha round itself was dealt with. In this instance China and New Zealand, for strategic reasons as much as trade reasons, have decided to go for no tariffs and no tariff quotas on all trade between our nations. That will be achieved by 2019. That is the point of Part 1. That is the very particular legislation being introduced by Part 1—an amendment to the Tariff Act and the tariff codes thereof.

The remarkable thing about this is that New Zealand First is going to vote against Part 1 because it is not fast enough. One of the things I would like to know from the speakers of New Zealand First is how fast they think it should have been. Do they think there should have been full free trade between our two countries by, let us say, 2010 or 2012? I guess most New Zealand businesses would say that that would be a jolly good thing. But was it actually achievable? Was it ever likely that China would agree to eliminate all tariffs in 2 or 3 years? No, that would be an idle pretence. More particularly, New Zealand First knows the truth of that. Those members know that this is actually an excellent free-trade agreement.

If we look at the history of free-trade agreements, we will see that seldom, if ever—particularly where agricultural products are involved—are tariffs and tariff quotas eliminated completely within a 10-year period. That is an extraordinary precedent, and I congratulate the officials, led by Dr David Walker, on the extraordinary achievement they made on that. A major country like China, with major agricultural potential but vulnerable, with its small farmers, to trade from New Zealand, has nevertheless decided to allow full free trade in all temperate agricultural products, or in any agricultural products that New Zealand happens to produce—and we are an efficient producer of agricultural products. That is unlike other Asian nations that are always concerned to protect their small farmers. So China, a major agricultural producer, is willing to accept full free trade of our agricultural products, which will be started from 1 October this year. So the first changes will occur very quickly.

The committee heard from Fonterra, New Zealand’s single largest exporter, that it has already concluded arrangements worth $300 million. I also say that one of the things I have always found extraordinary in respect of ministry officials and official ministry documents is that they say there might be an increase, as a result of this agreement over the 10-year period, of maybe $300 million in trade. I have always wondered how that sum could possibly be so small.

I will take a very brief call, because I know that Dr Mapp, notwithstanding his very comprehensive delivery to the Committee, really wants to get this bill through.

R Doug Woolerton: Rubbish! It wasn’t comprehensive at all.

💬 Dr Wayne Mapp: Well, that’s because I only had 5 minutes.

Well, I am sure that Dr Mapp does not need much longer than 5 minutes, but that is another issue.

I want to state the obvious in terms of the fact that we are now confined by your ruling, Madam Chairperson, to being very focused on each part, part by part; that is certainly respected. I join other members in acknowledging the excellent help of the officials, and certainly the help they gave to the Foreign Affairs, Defence and Trade Committee. I note particularly, with regard to clause 10, in which new section 15G is substituted, that “The Minister may extend a transitional safeguard measure … if the extension is—(a) consistent with the provisions of the relevant free trade agreement;”—either the China free-trade agreement or the Thai free-trade agreement—“and (b) not inconsistent with New Zealand’s other international obligations.” This seems to me to be crossing the t’s and dotting the i’s, and I look forward, in view of your ruling, Madam Chairperson, to our now having a very narrowly focused, finite debate. That is the point of the Committee of the whole House, and I always adhere to it. The broader, sweeping debate will now obviously be confined to the third reading. Thank you.

I will continue to elaborate on the points I was making about the way Part 1 initiates the free-trade agreement by reducing the tariff schedules down to zero by 2019. It is a remarkable achievement by the officials to get that outcome in the negotiations. I note that the Government must take some credit for driving the negotiations in that way. Clearly, it takes a high-level push from the Government to be able to drive forward that level of success. I know that the Minister of Trade, and indeed the Prime Minister, were actively engaged with the Chinese Government to that effect. I think we have to consider just what a tremendous achievement that is.

I was saying, when I was closed off—if you will—that the Ministry of Foreign Affairs and Trade said there would be only a $300 million gain per year in a 10-year period—at least, by 2019. I have always thought that that is an absurd proposition. I choose those words carefully. Trade is already worth $2 billion. Is the ministry seriously suggesting that the effect of a free-trade agreement a decade from now will be only 10 percent of the current levels of trade? That does not seem credible, because it ignores the fact that it is not just about the potential gains we will get by the tariff reduction of 20 percent; it is actually about the relative advantage we will have over all other nations.

It is a well-known theory of free-trade agreements that one of the advantages countries seek is not just the growth in trade between countries but also trade diversionary effects from other countries. Although China might currently buy meat, grain, and dairy products from a range of countries, it will now divert that trade to New Zealand because we will have a 20 percent price-competitive advantage over all other nations once the agreement comes into full effect. People act before the reality of that full effect, which is why Fonterra was able to get the $300 million deal now, in anticipation, because the trend is already established. People act on the basis of the final effects, not just on the initial effects.

The second point I make as to why that $300 million gain has to be an underestimate is that once trade is boosted, total demand goes up. China is growing extraordinarily rapidly—even now, at a rate of 10 percent per annum. Even now, several hundred million people are able to spend $10 a day, or more, on advanced products in China. At 10 percent growth per annum, that will increase rapidly, and the demand that this agreement will generate in China will be far greater than a simple 10 percent increase in trade over the course of a decade. I predict that within 5 years China will be New Zealand’s single largest market. Trade will be largely in agricultural products, but it will also be in services, tourism, and so forth.

I say to the Māori Party that Māori organisations understand that advantage. That is why they came to the Foreign Affairs, Defence and Trade Committee and were so enthusiastic about the agreement. They saw the potential to grow a market, and that is what the reduction of tariff barriers does. It does not just divert trade; it leads to total growth in international trade. If we want a comprehensive demonstration of that, we have only to look at the European Union. The establishment of no tariffs right across the European community did not just divert trade from, say, New Zealand to Britain; it hugely increased the economic potential of Europe, and Europe has gained immensely over the 50-odd years since the establishment of that free-trade agreement. This agreement will do the same for New Zealand and China, and for other countries that join in, as well. It will not just lead to trade diversion; it will lead to a massive and total increase in trade and prosperity. That is the gain of Part 1.

I think Wayne Mapp is using parallels that are not particularly appropriate here when he talks about the European Union, because the example of the European Union is of economies that are at a relatively similar stage of development.

💬 Hon Member: What about Poland?

In fact, the other principle of the European Union—and there is a call about Poland—is that countries that were seen to be lagging behind a bit at its foundation, such as southern European countries, or Ireland in some respects, were given great assistance by the European Union to level up the whole situation. In that sense, whether we are talking about the European Union or about CER, where we have two comparable economies, the opening of trade and the removal of restrictions—and I am not saying each is perfect—we have a much more positive argument when we are talking about comparable economies. That is so particularly when they are neighbouring economies—in our case separated from Australia just by the Tasman Sea, and in the case of the European Union, adjacent geographically.

But it is quite different in the case of New Zealand and China, because the wages in China are hugely lower than the wages in New Zealand. Wayne Mapp mentioned business organisations here. I can mention one that submitted to the Foreign Affairs, Defence and Trade Committee—namely, Earth Sea Sky, a clothing manufacturer—which was very strongly against the free-trade agreement for that very reason. It is being driven out of business by the low wages in China, and it specifically talked about losing its skills base. The skills base is important for a country like New Zealand. The company said that things like the existing accumulated experience in cutting patterns, which is a very skilled trade, could disappear. The woman in Earth Sea Sky had her own experience of that. Her group is continuing more or less on the basis of her own experience, but with related experience as well.

That sort of hollowing out of New Zealand manufacturing is not in the long-term interests of the New Zealand economy. We want to have a more rounded economy. Wayne Mapp talked about agricultural exports. It may be that we will get some increase in agricultural exports as a result of this agreement, but at what cost to the rest of the economy? I think that is the point. It is just wrong to have this ideology of free trade where somehow everyone benefits, regardless of the state of each economy, the relative wage structures, the specialisations, etc. This is particularly the case with an economy as dominant as China’s. China not only has low wages but has heavy Government involvement to make sure it can smash any competition, including competition from New Zealand manufacturers, and force them either to go out of business or to move their manufacturing offshore. So the comparison Wayne Mapp has made is, I think, completely inappropriate.

I have heard some nonsense talked in this Chamber, and that speech was a significant contribution in that sense. My colleague from the Green Party, Keith Locke, talked a load of nonsense.

But before I climb into that I would like to acknowledge the officials who are here today, particularly my ex-colleagues from the Ministry of Foreign Affairs and Trade, who are led by David Walker. I would also like to publicly thank Simon Murdoch for his leadership in this process. What has been really good about the process is that it has involved officials from across a whole range of Government departments. It is good to see our departments working together in the same way that we in this Chamber are working across political divides this afternoon. So I extend my congratulations there.

I was particularly interested in the freedom and latitude you gave the previous speaker, Madam Chairperson, because clearly he was not in any sense talking about Part 1. Part 1 talks about removing tariffs and amends the Tariff Act 1988. As I said in the House last night—obviously, our Green colleague did not hear me—there is no fairer trade than free trade. Mr Locke talked about one of the arguments brought to the Foreign Affairs, Defence and Trade Committee, and I can talk about a group called New Zealanders with a Conscience that gave us a four-page submission outlining their concerns that the Government would get less income because it was going to drop tariffs, and that the Inland Revenue Department would fall into deficit.

That is a particularly serious problem that our committee addressed, and the submitter argued that small businesses would close down as a result of these tariffs being reduced. On page 2 of its submission the group says that the agreement “would cause a great drain on the Government purse”. I really have to say that the select committee members, across all parties, disagreed that that would be the outcome. The point is that as a select committee we decided that this bill—which I think is the most significant piece of legislation to pass through this Parliament in the last 3 years—will contribute to making New Zealand an open and competitive economy, and will give us strong links to the rest of the world. China is showing other countries that it too is prepared to engage more strongly internationally by dropping its trade barriers.

Trade liberalisation policies go back at least 25 years in this country, and the moves that we made with the CER agreement 25 years ago have enabled our economy to be in the strong position it is in today to make these tariff adjustments without having a significant impact on companies that operate in our community. I think that the removal of most tariff and other trade barriers with China, as foreshadowed in Part 1, will improve resource allocation in New Zealand, contribute to economic growth, and also lower prices for consumers.

My Green colleague has gone, but the point about free trade is that no buyers pay more for a product than they want to, because if they are asked to pay more and they do not want to pay, then there is no transaction. That is a fundamental point not understood by New Zealand First, not understood by the Green Party, and not understood by the Māori Party, and it is really important that the community understands that point. For the same reason, the economic adjustment faced by industries will be small compared with those adjustments that would have been required when import licensing existed 30 or 40 years ago—when our economy was protected by high tariffs. I have been around many businesses in my community, and of the 20 or 30 people I have talked to only one person has said that bringing tariffs down and allowing cheap Chinese machinery imports is going to be a bit of a problem and have an impact on his business. I am thinking now of Rob Saxton in Greytown, the town where I live. He is the Stihl agent, and his products are quite highly priced, but they are of high quality. Consumers choose whether they go that way or go to Bunnings warehouse and spend $10 or $15 on an instrument that is perhaps less robust. This is what free trade is all about.

My colleague Wayne Mapp said yesterday: “Traders are waiting for us to do our legislative work so they can get ahead and reap the gains of the agreement.” That is very, very true, and it is with pleasure that I rise to speak on Part 1 of the New Zealand-China Free Trade Agreement Bill. Part 1 is the mechanism that reduces the barriers while at the same time providing safeguards.

The barriers to trade are very, very real when one does not have free trade. I reflect on what the previous speaker said: free trade is fair trade. Exporters do not have an easy task, but it is an honourable one and it is one that, like it or not, the rest of us live by. So what will be the effect of this free-trade agreement? The tariffs on 96 percent of New Zealand’s current exports to China will be eliminated by 2019. Two-thirds of all of New Zealand’s goods will be tariff free within 5 years. What a wonderful opportunity has been created, and I would like to add my compliments to the officials, to the Ministry of Foreign Affairs and Trade, and to everybody who has been working tremendously hard to achieve it.

There are many ways of penetrating a market. There are probably as many ways of penetrating a market as there are exporters involved in the trade. I reflect back on a career in the Dairy Board. With the difficulties associated with quotas, with the endless conflict, and with the challenges for access, it was amazing that we had the trade we did have—and what an effort it took!

The task of the free-trade agreement is to reduce and eradicate the unnecessary blockages. So how do those blockages occur, and why do we have to have the transitional aspects that occur in Part 1? The blockages generally occur through apprehension on the part of manufacturers and local producers. If we look at the Common Agricultural Policy—which was a huge blockage to progress, and everybody acknowledged it was not sensible—we see they occur from fears of privation, from fears of starvation, from the experience of war, and from the experience of countries being unable to feed their people. We go right back to the basic law of the provision of food, shelter, and clothing being a Government’s first responsibility to its people. So food has always been an incredibly sensitive, delicate issue, and tariffs were a way of giving protection. They have been used clumsily, though.

When I think back to trading in the Pacific, I know that the Pacific offers New Zealand exporters tremendous trading opportunity. We have markets that are operated under French—

The CHAIRPERSON (Hon Marian Hobbs): China?

Well, indeed. But as a precursor to dealing with China, if one looks to see how trade is conducted within one’s own local theatre, one sees that there are many different ways. I can remember doing a chart of tariffs against particular dairy products—this, I am sure, will interest my colleague Doug Woolerton. The dairy product tariffs in, say, Tahiti used to run for line after line after line. They had been built up over an awfully long time, which meant that they were hard to reduce and hard to remove.

So we get to China—was it Napoleon who called it the sleeping dragon—and we look at its tariffs. We see China built a wall around itself—not just a wall of stone, but a wall of tariffs. Then New Zealand, through its negotiation and its approaches, started to penetrate that tariff wall, which is where we have come to today.

New Zealand has enjoyed free trade for a very long time. Having the benefit of grey hair and a bit of experience in life, I can go back—and I am sure Madam Chair will remember this—to the pre - free-trade times. The domestic life of New Zealand in the 1960s, when we were afflicted with tariffs, was one where we had very little choice of goods—very little choice of goods at all. In the 1970s people had plenty of money but there was a shortage of goods. There were import restrictions, tariffs, export restrictions, and all sorts of problems. Nowadays the logistics of exporting and importing are able to concentrate on the real elements of trading rather than the artificial ones.

I am very pleased to take a call on the Committee stage of the New Zealand-China Free Trade Agreement Bill. I have heard the snipes coming across the floor from New Zealand First—my colleague Wayne Mapp referred to them earlier—and from Winston Peters who, when this deal was originally signed, said that it is not good enough and we need more, and I am absolutely waiting for New Zealand First members to take a call and to hear what their objections are all about.

This free-trade agreement has been negotiated with the overriding objective of opening up economic opportunities for New Zealand business in China. A growing part of New Zealand business is Māori business. As my colleague Dr Mapp also mentioned, representatives from Māori business came to the Foreign Affairs, Defence and Trade Committee and went through what they saw as the huge advantages for Māori business.

I want to paint just a little bit of the context. This agreement is historic. It represents a challenge and a huge opportunity for Māori. In the current environment, where over the last 10 or 15 years we have seen the quite substantial return of significant fish, forestry, land, and other assets to Māori tribes—and that will continue over the next 10 years—this agreement is a major marker for what will happen going forward. Part 1 of the bill deals with the removal of tariffs. That could not be timelier for Māori business potential as we go forward.

I think we are all, particularly in this House and in the private sector, pretty much aware now of the growing asset base of Māori. It is estimated to be anywhere between $9 billion and $15 billion and it is growing—it is huge. We also know that its future is dependent on export—exporting goods to China and to the world. We all talk globally now, and free trade is what goes with a global economy. Free trade is absolutely critical, and the removal of tariffs and other trade barriers is the core of the free-trade initiative that has started with this and will no doubt grow.

According to Hui Taumata 2005, Māori enterprises are concentrated in export-oriented areas, primary production, and processing, and about 60 percent of Māori commercial assets are reliant on international trade. This is significant. It is significant because 96 percent of Chinese tariffs and trade barriers will be removed by 2019. That is a huge achievement. That is not far away; it is just around the corner. An example of where Māori interests will benefit is in the fisheries industry, with the removal of tariffs imposed by China on products such as live lobster and pāua, which are currently around 25 to 35 percent. We do not really have to think very far forward to see the immediate impact that this removal will have on Māori business and Māori exporters, and certainly for the long term as tribes get their assets and organise their governance arrangements.

There is a big challenge, of course. Treaty settlements were one part of this equation and we all thought that was hard; actually the harder part is coming now. We are on to the harder part now: nurturing those assets, growing them, creating wealth, and making sure we have access to world markets. The market in China is the biggest one could want to be in—the absolute biggest. Māori exporters are already going up into China; they have been for at least the last 5 years in a small way, but that is growing. As I say, there is no doubt whatsoever that free trade is the hallmark for growing Māori potential in the business and export sector going forward.

I move, That the question be now put.

The CHAIRPERSON (Hon Marian Hobbs): I think I will grant one more call, and that is to Tim Groser. I take notes as we go through. I have listened to the arguments, and they have become fairly repetitive and rather wide on the question of tariffs.

Madam Chair, first of all, let me give you my personal assurance that I have taken note of your harsh, but possibly just, ruling. I shall make carefully targeted points about Part 1, which after all is—to use plain language—the meat and potatoes of the agreement.

The preferential rates are very important, and I will illustrate the underlying point about this in a couple of different ways. First of all, we take Dr Mapp’s earlier point about the competitive edge and we look at it in terms of one example that comes to mind, which is wine. I stand to be corrected, but from memory the most favoured nation rate on wine imported in bottles into China is 14 percent. For a country that enjoys, as we do, the privilege of having the highest per-bottle price in the world—believe it or not—on the largest wine market, which is the London market, having this competitive edge will be of considerable benefit. There is absolutely no truth in the belief that the countries in Asia that are seeing the emergence of the middle class will not move into consumption of these products, and I think New Zealand wine exporters will benefit enormously from this competitive advantage. That is the first basic point that I make about the tariff reductions.

The second point is that I want to address some criticisms about the allegedly slow pace. First of all, I do not consider it slow at all by the standards of most trade agreements, particularly coming on top of the major liberalisation that China itself has undertaken in the context of its accession—or readmission, according to the official script—to the international trading system. I use the term “roughly a decade” to describe the overall totality of a complex tiered formula that has been negotiated on tariffs. I do not consider it a long period of time at all, particularly when we look at the profiling of our major exports in relationship to that timetable.

The other point I would make is about the automaticity of this process. In Part 2 we will come to the question of safeguard measures and contingency protection devices, which qualifies us a little bit, but I do not believe in any important way. When we come to look at the automaticity of this process, this is a very, very important qualifier to any criticisms about the slow pace. What is quite clear—and we have seen this in a variety of different trade agreements; I saw it 20 years earlier in respect of the Australia and New Zealand Closer Economic Relations Trade Agreement—is that when businesses know what the end point is, they can get ahead of that end point and accelerate the process. We had literally within weeks a spectacular example of that in the signing of the deal by Fonterra, our largest goods exporter, worth some $300 million over a period of time. Fonterra took advantage of tariff reductions that literally had not even come into legal effect, for the very simple reason that we are here today in this Committee enabling the legislation to go through to have that effect.

So already we have seen that this is not theory; this is how the market works. If we put in place what looks to some a modest pace, finally—within reason—it does not matter. The automaticity of the process is what matters. Then people can get ahead of the programme, as we have already seen.

The second point is in relation to tariff reductions, when we measure them with these econometric exercises. I have been involved in many of these exercises. Although they are highly sophisticated in terms of their methodology, personally I do not think they are particularly useful. They omit what in earlier times were called x-efficiency gains by economists—or the dynamic effects, in more plain language—and almost always seem to me to understate the importance of the tariff liberalisation process. The mere reduction of tariffs is one part of it, but the stimulatory effect in terms of actual company business also matters.

My own view is that this will have what is called demonstration effects, which has been much commented on internationally in the literature around trade agreements, and which will be particularly strong in this agreement. The reason I believe this is to do with the Confucian nature of the society we have negotiated this agreement with. When China designates New Zealand as a preferred tourist destination—I imagine that if the Australian Government did that, we would all fall around the floor laughing, along with our Australian cousins—I believe the signal to Chinese businesses will be considerable.

I raise a point of order, Madam Chairperson. I have sought this point of order because you indicated earlier that there would be only one more substantive call. I am aware of the rule that states that once you accept a closure motion, that is it and it cannot be contested, so it is important that I raise the point of order now.

I raise it in two parts. The first part relates to the general significance of this legislation. It is widely acknowledged and recognised, including by the Government, that this is the most significant economic legislation to be passed, certainly this year and realistically in this term, by this Government. I believe therefore that a proper level of debate is required. Part 1, as we all concede, is the core of this agreement. To have a debate that is not even an hour long is, frankly, not appropriate. The second point is that all of the discussions so far, by all of the speakers, have actually been on Subpart 1, “Implementation of preferential tariffs under New Zealand-China Free Trade Agreement”. There has been no discussion as yet on Subpart 2, which actually covers six clauses in relation to safeguard measures—virtually no discussion on it whatsoever. The reason for that, of course, is your strict ruling earlier, and we understand why you made that ruling in terms of the Standing Orders. We felt that we should therefore deal explicitly with tariffs in Subpart 1, and then we would move on to deal explicitly with the issues addressed in Subpart 2. To accept a closure motion now would effectively deny members the ability to have any debate whatsoever on Subpart 2 of this very, very important legislation.

It seems to me, with due respect, that the Committee did have the choice of having a very wide-ranging, comprehensive debate in which multiple calls could have been taken. Leave was sought for that and leave was denied. Consequently, I understand you then had to go back to the Standing Orders and that you were bound by the Standing Orders, leave having been denied.

The CHAIRPERSON (Hon Marian Hobbs): This is a question of debate. At the moment we have had, with all due respect, a series of very good lectures, but it has not been a debate. The debate has not been joined in the Committee. There was time to go on to Subpart 2, but speakers chose to stay on Subpart 1 and to mention only casually Subpart 2. Very many important laws have gone through this Parliament almost without there having been a Committee stage on them. I therefore will not give members further calls on this part.

I raise a point of order, Madam Chairperson.

The CHAIRPERSON (Hon Marian Hobbs): I hope the member is not going to challenge the point of order.

I draw your attention to Standing Order 109, the gist of which is that the House is not to anticipate discussion. With the greatest of respect, Madam Chairperson, I point out that you were not at the select committee and a party to the debates, and neither was the Minister in the chair, the Hon Nanaia Mahuta. There is quite a number of elements to the Tariff Act that are yet to be discussed. I am ready to discuss them, and I wish to have the opportunity to do so.

The CHAIRPERSON (Hon Marian Hobbs): I am sorry but the member had the opportunity to discuss both Subpart 1 and Subpart 2.

I move, That the question be now put.