New Zealand-China Free Trade Agreement Bill

Essentially we are dealing with the same underlying issue. This part is enabling legislation to make changes to the Electricity Act 1992, in order to allow the concept that we have been discussing under Part 3 and Part 4, the mutual recognition agreement, to take place. So let us quickly rehearse the key point here. This is not about adopting China’s standards; this is based on New Zealand standards. But we are relying, in this particular defined area, on conformity assessments that the New Zealand standards in respect of imports from China have met the requirements of our own Electricity Act—and vice versa in respect of Chinese standards, which are often based on similar international standards. Therefore, it is taken as read that our exports are consistent with Chinese standards before they leave the shores.

That has a number of advantages for our exporters, and we heard two excellent examples of that from my colleague Mr Tremain. I am familiar with both of those companies. They are the sorts of knowledge-type companies that this country so desperately needs. Of course, we would like to see some of them step up in terms of scale. Frankly, in order to transform our country we need to have only about 20 Fisher and Paykel Healthcares, if you will—I could use another example—to utterly transform this country and get it back into the top league of developed countries. That will be done by small steps, including through this very important agreement to provide the best possible framework for the future export growth of those companies, which are based on the creativity of New Zealanders that all of us in this Chamber know exists up and down the country.

The second point I would like to make is that Part 5 is not just about the New Zealand regulations; it is also about reciprocity—the export of New Zealand. If we look at clause 28(2) and (3), we see specific reference to exports from New Zealand “pursuant to the Conformity Cooperation Agreement”. Clause 28(2)(b) adds some definition to that, as does clause 28(3). So we are talking about a reciprocal agreement of mutual benefit to both parties to the free-trade agreement.

China now seems to have acquired the title “the workshop of the world”. It is an intriguing title when one reflects on the fact that a little more than 200 years ago that title was given to the first country ever to make the transition from an agrarian to an industrial base, the United Kingdom—the workshop of the world, it was then known as. Now we have a new and giant contender. We will be relying on Chinese electronic goods for many purposes in our own country over the next 25 years, as a simple reflection of that fact.

I do hope that this agreement provides New Zealand consumers not only with greater assurances but with the right sort of framework to see cooperation of an overtly commercial nature develop, of the type Mr Tremain was indicating in respect of voltage regulators. The voltage regulators used in semiconductor factories are the most sophisticated types of regulators that exist in the world, given the fact that each semiconductor factory requires investment these days of between US$4 billion and US$6 billion. So voltage change is a fundamental issue for those companies, and it is great to see a New Zealand company has stepped up to the mark and is working with a giant electronic industry in East Asia, and particularly in China. I have no doubt that this agreement will help companies of that type.

I will make just a few observations about the underlying concept of mutual recognition, because I think it is a difficult concept to grasp. It is really an alternative to business harmonisation policy in trade agreements. Once we have dealt with the first-tier issues of overt frontier protection, then we try to work out how to reduce barriers to trade by measures behind the frontier. This concept is of that type.

I am now speaking on Part 5, “Amendments to Electricity Act 1992”. This is very similar to—it is almost a mirror of—Part 3, which deals with radiocommunications, but this part clearly influences issues around electrical machinery. The point of it is to create regulation-making powers to enable legal action to be taken against persons who do not fulfil the requirements of international obligations while purporting to do so, and to provide for the seizure, sealing, or impounding of products in cases of non-compliance with the requirements of the two Acts. This also operates through an Order in Council, and surely my colleagues in New Zealand First, United Future, the Green Party, and the Māori Party would understand that it is in the interest of New Zealand consumers of electrical products—

💬 Hon Peter Dunne: We’re in favour of the bill.

—sorry; I thought the member’s party was voting against it—and exporters of those products to have that legal safeguard.

As my colleague Mr Groser has pointed out, we are dealing here with a tier-two issue. The trade remedies section of the free-trade agreement has preserved New Zealand’s rights to apply safeguard measures within the World Trade Organization’s umbrella arrangement. That allows either China or New Zealand to address situations where serious injury to a domestic industry is caused by increased exports due, for example, to reductions in a tariff or non-tariff barrier. China already has a very significant share of our export market and our import market, and the drops in our trading barriers, really since the mid-1980s, have meant that none of the provisions in this bill will have a significant impact on small to medium-sized businesses in New Zealand. So I think there are really significant strategic gains for our country to be had from the adoption of Part 5 and the legislation in it.

I really urge my colleagues in the Green Party to think about what they are voting against here. They are actually voting against the interests of New Zealand companies and New Zealand citizens. Why would they do that? New Zealand citizens elected them to come here to this Parliament to represent their interests. I cannot see that in a technical matter like this, those members can possibly vote against what is being suggested.

The technical cooperative mechanisms will be needed to minimise the impact of regulations on trade, and this process will also enable dialogue between our countries. Both countries will get a much better understanding of arrangements between them, because they will have mechanisms for discussing issues that may be concerning them. So I think that Part 5 is effectively a mechanism that will reduce transaction costs for our merchandise trade, because both countries will harmonise their requirements, or make their requirements the same. In the process of recognising an equivalence of the other party’s technical regulations, our regulations and the Chinese regulations will become the same. That conformity between our two countries has to be good; it actually has to be to the benefit of our communities.

I think that Part 5 provides a particularly good example of that second-tier benefit to our community, and I urge the Green Party, the Māori Party, and the New Zealand First Party to support this part of the bill, even if they cannot support the overall concept of the free-trade agreement. Thank you.

There was an article in the Independent just last week headed “Hidden hooks emerge in China FTA”, and I think the article does relate to Part 5. It is about standards—in this case, standards for electrical goods—and one chap by the name of Andrew Little, who is the national secretary of the Engineering, Printing and Manufacturing Union, is quoted here. I note that he is a member of the Labour Party and in some minds is pencilled in to be a future leader of that party. But he is rather concerned about some of these fish-hooks.

Andrew Little is worried, and he says his sector is worried, about the ability of employers and unions to verify and authenticate the qualifications of temporary Chinese workers. Instead of the Chinese industries being worried about New Zealand exports of electrical goods to China being in conformity with their standards, which this part is all about, they could say they will take over a New Zealand company, run it themselves, and import all the Chinese standards here. But, as Mr Little says, the quality of the work might not be up to our standards, if we cannot check properly the skills of the temporary workers who are to be allowed in under the free-trade agreement. There is a quota being allowed in, and who knows, really?

The standard of the skills can change in our regulations, but there is a clause in the treaty saying that if the skill standard in the New Zealand skilled migrant programme is raised for, say, electrical manufacturing workers, the old standard can continue to apply for up to 3 years to the quota of Chinese skilled workers who are to be allowed in.

The CHAIRPERSON (Hon Marian Hobbs): Mr Locke, you are actually straying away from the part.

No, it is to do with keeping in conformity with the standards for the export of electronic goods to China—

The CHAIRPERSON (Hon Marian Hobbs): Yes, but not to do with the skills.

In the case of Vector Wellington Electricity Network, the lines section of the electrical system has already been taken over by a Chinese firm, and that could well be extended into the manufacturing industry. That is a problem. Fletcher Construction chief executive Mark Binns, in this article, is also worried about the competition from cheap Chinese labour.

Throughout business, there are concerns. The latest Exporter magazine has just come out. It has a snap poll, and the first comment is “So what? There will be more in it for them than us.”—“them” being the Chinese. Another comment says “I have exported to China and am now working closely with the distributor but the Chinese authorities make it very hard, with all the documents and charges for getting products approved.” Another says “I might be old-fashioned”—this is an exporter—“but I want some of our country left for our children and grandchildren. If they are going to eventually earn 50c an hour, then I guess I could also go to China and make my fortune now and stuff the rest! But, no.” So that is the sort of problem we are up against when we just open the doors.

This part relating to the electrical standards is well meant, but in the context of the total agreement it might actually lead to a further undermining of the standards for our workers and for our industries, and not lead to any particular gain for the New Zealand people.

I will make just a few concluding remarks about Part 5 in terms of the underlying mutual recognition agreement concept, since it is a very difficult concept for people to get their heads around, as I was saying before. It is essentially an alternative to what used to be flavour of the month 20 years ago: business harmonisation. We discovered in our first real attempt to do this—with Australia in the context of CER—just how difficult it is to advance harmonised policies, because at the end of the day what we are really trying to do when we say “harmonise your policy” is to say “You adopt my policy or I will adopt yours.” In practice, there is massive resistance from both sides to adopting an entirely new policy. It is so much more sensible to go down the track of mutual recognition, which, in common language, would be to say that there are more ways to skin a cat than one, or that there are different ways—if I use the refrigerator example again—to wire a refrigerator so that it is safe for kids to open and get a glass of milk, or whatever it is they want. There are different ways of doing that to achieve the equivalent results. So it is about coming out of that whole concept of equivalence without trying to say there is only one particular wiring diagram we can use to achieve the effect.

I do not know intellectually what the origin of mutual recognition is but, in a practical political sense in the trading arena, we sort of learnt this from the Australians. In Australia I found to my surprise that the actual concept of mutual recognition of different Australian states’ standards is actually of relatively recent origin, and there are still many areas and services where mutual recognition is yet to be achieved, if I am not mistaken. I became familiar with it when I was the lead negotiator for New Zealand on the Singapore free-trade agreement, and we introduced into the Singaporean mindset the concept of mutual recognition agreement. It was, I have to say, a revolutionary concept for the Singaporeans, deeply sophisticated though they are in electronic and other matters, and generally as a country. We had to arrange to sell them the underlying idea that we are talking about in Part 5. We had to take New Zealand experts to Singapore to educate Singaporean regulators on what the underlying conceptual approach was. It took a bit of time to sell, but it was incorporated into the agreement.

I think it is an excellent advance now to have taken this into a far, far more important trade agreement, the China free-trade agreement. Essentially, it reduces compliance costs and facilitates trade, and it is very much my hope that the Chinese in particular will see the point in extending this into other areas. In every case there has to be a high degree of trust amongst the regulators; it does not work if there is distrust between regulators. The problem in this area is that regulators are often specific to sectors, so quite a lot of people-to-people exchanges are needed to make this work, and a lot of information flow is needed. But I think that potentially the economic returns long-term are very, very considerable.

I hope that the Chinese as well as our own Government will use this entire trade agreement, including its mutual recognition elements, in a proactive sense. I have no doubt that New Zealand will be seeking to do that. I strongly believe that from a Chinese perspective this agreement makes sense, frankly, only if the Chinese can use this as a template for their own internal purposes and their own negotiations with countries—countries, let us face it, that are rather more important to them than their 45th or 48th largest export market, or whatever New Zealand is—and I hope that we will come back into a future Parliament and see introduced into it similar legislation that builds on this agreement.

I was not going to take a call on this part, but after listening to the honourable member I must make a few points. First of all, the Singapore - New Zealand free-trade agreement is hugely advantageous to Singapore. Let us not kid ourselves. Singapore has done very, very well out of that agreement. The member sits there and quotes—

💬 John Hayes: Give us an example.

Singapore is of similar population size to New Zealand. China’s population is 1.3 billion, or something along those lines, compared with a country with a population of 4 million.

💬 Gerry Brownlee: What’s Winston doing there?

Those members are embarrassed. They can ask questions only about irrelevant subjects at this point in time. If the member who has just resumed his seat thinks that China is going to harmonise its electrical industry because New Zealand has signed a free-trade agreement, then I ask him who the hell he thinks he is fooling. I think he might have fooled his own party, but I notice that Government members on this side of the Chamber are staying silent. They are not standing up in support, because they know in their heart of hearts that this will not deliver as Mr Groser tried to make out. If we wanted to buy umpteen refrigerators from the Chinese, they would be making them now for us. They would make them to the standard we wanted, sell them, and deliver them on Chinese ships. We are fooling ourselves if we think that this agreement will have a major influence on the Chinese electrical industry. It will not. We are but a teardrop in a river.

I have sat here all night trying to listen so I can find out what this trade agreement is about in detail. I have listened to the National Party people but I have not learnt or gleaned one iota from them. I can only conclude that they themselves do not even know what it is about. They think it is a good thing, and I give them credit for that, but they do not understand the details. I ask National Party members what is in it for the Chinese. If they think there is nothing in it for the Chinese, they really are fooling themselves. I have had some dealings with the Chinese people in other fields of endeavour, and I can say that the Chinese look after the Chinese first and foremost. I can say that when it comes to electrical goods the Chinese will be doing exactly the same as they do in any other field of endeavour, which is putting their own country, their own people, and their own economic well-being first. They do not particularly look after their people. In fact, the working people in China work under terrible conditions. But I will say that if we wanted to buy refrigerators, as the honourable member suggested we might want to, then the Chinese would build them by the million if that is what we wanted, and to the standard that we want here. But to sign a free-trade agreement on that rather naive basis is beyond words. It is stupid to the maximum.

I would like the National members to conscientiously address this issue and tell us what is in it. There was an invitation to have a wide-ranging debate, and National turned that down. I have not heard one of its speakers stick to the part religiously and tell us what is what, including this part. And the member there, who is putting his hands together, in major parts of his speech, talked of his concerns about what New Zealand First is thinking. We do not need a free-trade agreement to have a market in electrical goods with the Chinese. They would saturate us with anything we wanted. If we gave them the order they would allow our firms to go out and employ Chinese to manufacture there.

The CHAIRPERSON (Hon Marian Hobbs): Mr Brown, please keep to the part concerned.

I am keeping to the part concerned, but I am also actually responding to some of the comments from National members that you, Madam Chairperson, have let go, and I cannot let them go uncontested.

I have not heard one reason in the debate on this part, or any other part, why this nation should sign a free-trade agreement with the Chinese. I would like to hear something from the National Party, because its members are sitting over there saying that they know it all and that they have all the answers. Well I am saying that in years to come there will be a Tui sign, saying: “Free-trade agreement advantage to New Zealand? Yeah, right!”.

The CHAIRPERSON (Hon Marian Hobbs): Before I call Mr Brownlee, I just warn him that the debate will be wider when we get to clauses 1 and 2, which is really what that last speech was about. I do not want a repetition, so I hope that the member is going to speak on Part 5.

Of course I will follow the rules of debate. Madam Chair, you will appreciate that one of the rules of debate is that one gets to rebut at the start of one’s comments. So I will take a moment, with your indulgence, to rebut some of the extraordinary things said by Peter Brown.

First off, Mr Brown confirmed the xenophobic nature of New Zealand First. He then announced to the entire Parliament that New Zealand’s Minister of Foreign Affairs—New Zealand First’s party leader, the Rt Hon Winston Peters—is also a xenophobe. He is hanging around Singapore at the present time and trying to impress various foreign dignitaries, presumably touting his own CV so that he has something to do later in the year. But the extraordinary thing that came through from Mr Brown’s speech was the suggestion that the Chinese are being cunning here, and that they will swamp us with refrigerators and all sorts of electrical goods. So here is the deal: China, with 1 billion people, is looking to expand its market by doing a deal with a country with 4 million people in it. We are not even the size of a small suburb of Beijing, but apparently we will do wonders for the Chinese economy!

Well, I have some news for Mr Brown. Despite Winston Peters’ best efforts, New Zealand is still primarily an agrarian economy—we are great producers of agricultural products. One of the things that will surprise Mr Brown and New Zealand First is that a lot of the 1 billion people in China are hungry. They actually want to buy the proteins that we produce, they want to buy the milk solids that we produce, and they are very interested in the myriad of other products that we produce. They cannot get enough of them.

The CHAIRPERSON (Hon Marian Hobbs): Mr Brownlee, you are two-fifths of the way through your speech and you are not yet talking about the part.

Am I really three-quarters of the way through 5 minutes?

The CHAIRPERSON (Hon Marian Hobbs): Two-fifths of the way through. That is not a beginning.

Well, Madam Chair, I am rebutting a whole 5-minute speech, for goodness’ sake!

The CHAIRPERSON (Hon Marian Hobbs): Please come to the part.

I will not keep you a lot longer. I just want to say to Mr Brown that he should wake up and smell the roses. He should stop believing all the nonsense that his leader tells him. Most people know that most of what he says is a load of rubbish anyway.

The question was put that the amendment set out on Supplementary Order Paper 215 in the name of the Hon Phil Goff to clause 28 be agreed to.