New Zealand-China Free Trade Agreement Bill

Before we begin the debate on these clauses I will read members Speaker’s ruling 106/2. “When debating the preliminary clauses at the end, members should have some latitude to summarise, and make concluding remarks about, the issues they have raised during the committee’s consideration of the bill.”

In the discussion on Part 5, which we have just heard, Mr Brown said he had not heard one reason from National as to why we need a free-trade agreement with China. He then added—and I wrote it down—“Tell us what is in it for New Zealand.” I know that it was probably not intended as a serious question, and I am even more certain that it does not deserve a serious answer. Nevertheless, ignoring those simple facts, I will proceed in the assumption that there might just be a New Zealand First person listening to this debate who is still wondering what on earth the New Zealand First problem with this bill is. I will try to answer the question as if it were a serious point.

I think we have to start with an appreciation of the fundamental challenge facing New Zealand economically. The fundamental challenge is to raise real wages. The fundamental solution is to increase total factor productivity, and the fundamental best way to achieve that is to increase the export orientation of our economy. We know that New Zealand, far from being a small but great trading nation, is actually at the absolute bottom of the heap of the 15 small developed countries with a population of 10 million or less in terms of the ratio of trade to GDP. It is of fundamental, long-term importance, even to those 4 to 5 percent who vote for New Zealand First, that we change this over the next 20 years.

A variety of things must be done in this country if we are to address this underlying economic challenge, and one of the issues is to provide markets for New Zealand. Anyone with any actual appreciation, let alone any real-world experience, of the international trading situation facing New Zealand in the last 30 years is well aware that of all the developed countries in the world, large or small, this country—our country—has been more constrained by the lack of access to markets for the products we produce competitively than any country in the world. There are myriad studies to back up that judgment.

So against the background of 30 years of, frankly, bitter struggle by “New Zealand Inc.”, both the major political parties have been in charge of the country, and we have had Prime Ministers, trade Ministers, farming leaders, and all manner of New Zealanders—including people like Dr Walker, and myself, in my former job—trying to find a solution for access for New Zealand markets. Then what happens? A giant emerging economy, which is responsible for 24 percent of the population of the world, comes to New Zealand’s door and asks whether we would like, essentially, completely free access, in about a decade, for whatever we can produce. I am sorry, but if one’s answer to that is no, one would have to be a prime candidate for village idiot of the year. That is the underlying point of this agreement, and it related right back, through that logical train, to the need to ensure that the young people coming up in our country can make a future for themselves in this country. The right way to do this is to provide competitive opportunities. This is fundamentally important to New Zealand.

We have a situation where we know that the Chinese people are moving up in the income world. Thirty-four percent of Chinese people are nowadays in the $1 to $2-a-day bracket. This is miles ahead of the other giant developing country, India, which still has something like 70 percent of its population in the $1 to $2-a-day bracket. We know that China will manage its way through the super-fast growth problems, the inflationary issues, and the issue of churn in its employment markets. China will continue to grow at a stellar rate. It will need this country—this small country of which we are all so proud—to provide the high-quality foodstuffs that Mr Brownlee just referred to in the first response to this, frankly, very ill-conceived attempt by New Zealand First to provide a thin rationale for its position.

Boy, when Tim Groser gets his knickers in a twist, they sure get in a tangle. Let me say to the honourable member who has just resumed his seat that I have here an extract from Exporter magazine. This is what it states: “For some exporters, New Zealand’s free-trade agreement with China is a decisive triumph, laying a clear pipeline for future revenues. For other China old hands, the FTA’s future benefits remain illusory, considering the sheer cultural divide and business complexity China poses.” It goes on to state: “Anecdotal evidence suggests Kiwi business owners are not rushing to the middle kingdom. Those already steeped in the Chinese market say the FTA with China should not be seen as a panacea to Kiwi exporters’ aspirations to crack the Chinese market.” If we listened to Mr Groser we would think it was the be all and end all of everything. But I say to the honourable member, what is in it for the Chinese? That is what we should be examining. I can tell him that they see a huge advantage. But Mr Groser told us, when he was debating the tariff issue, that we are going to export more wine and the Chinese are going to drink our wine by the bucket load. Who is he kidding? The Chinese culture does not allow its people to get involved in wine.

💬 John Hayes: You don’t know anything.

The Chinese do not drink grape-produced wine in great quantities. I can tell members that now. This is not going to change it. For God’s sake!

Let me talk a bit about the humanitarian concerns that we share. China operates under a Draconian employment regime; that is the only way we can talk about it. It has very low wages—peanut wages—long hours of work for all ages, with no age restrictions; young people, old people, all working long hours for peanut wages. It has very poor working conditions, and little or no employment commitment from the employer. Is that the sort of people we want to have a free-trade agreement with?

💬 Dr Wayne Mapp: You want it to go faster, Peter. Get your story right.

Well, we know that Dr Mapp wants to employ New Zealanders and sack them within 90 days. What about the working-holiday scheme that is in place? This is what it says in the select committee report: “The scheme is non-reciprocal, and provides for a maximum of 1,000 Chinese entrants per annum. As with other similar schemes, the scheme is an arrangement of less than treaty status.” On an earlier page in the same document, where it refers to temporary entry, it states that it will: “provide for entry of Chinese business visitors and installers/servicers for up to three months in any calendar year. Executives and managers are permitted to enter as intra-corporate transferees, for up to three years. Also as intra-corporate transferees, senior specialists are permitted to enter for up to 12 months and other specialists—subject to labour market tests—for up to three years.” That is what we have agreed to. That is what we are rolling over. That is what this country is giving in to. I can tell the Committee that the Chinese have more intelligence in their little finger, than that group of National Party MPs have in their whatever.

I know that this agreement will pass tonight, but I would have liked to see it pass for the right reasons. I have sat here and listened to National members for 2 or 3 hours now and I have not heard anything worthwhile. They have given me the total impression—and I have tried to approach it objectively—that they are rolling over for the Chinese and they want the country to roll over for them, too. The Chinese have 1.3 billion people; we have 4 million people. They are taking us in and making fools of this nation. This party, and the Greens and the Māori Party, say that we will put New Zealand’s interests first, and this free-trade agreement is not doing that.

Tim Groser, quite a bit earlier on, was particularly worried about using this trade agreement in some way to advance human rights concerns—that is, in relation to the Green position that it is very bad timing to be signing an agreement a couple of weeks out from the Olympic Games when there is such a huge campaign to try to use this period to improve the human rights of Chinese people by supporting those millions of Chinese who are struggling against the one-party State that rules over them for greater human rights.

The arguments used by Tim Groser were in contradiction to our foreign policy. One of his arguments was that there are human rights violations everywhere and that if we used trade to advance human rights concerns we would have to use it against all of those countries. We are selective in our foreign policy as to how we use whatever instrument, a carrot or a stick, to achieve a gain for human rights. In South Africa we used sanctions; in other countries we have used other ways. There is anything from sanctions to rewards. The Green position is not to put any additional sanctions on China. We support trade agreements with China. We support trade with China. What we are against is giving a preferential agreement—free entry of Chinese goods into our country—and signing this agreement right at this time, which is the very wrong time to do it. We can have the arguments about the goodness of the agreement as a whole, but the timing is completely wrong. The idea that we do not use instruments or rewards in foreign policy to achieve human rights gains is totally wrong.

There is the idea that economic development and the development of an educated middle class etc. is commonly accompanied by an improvement in human rights, and that has happened to some degree in China today. There have been some advances, but that does not always happen and it does not always happen if the world tolerates dictatorship. We saw it in Germany, which was the most advanced industrial country. That did not mean to say that it was advanced in human rights during the Hitler period. We see it today in the most advanced economy, the United States, where there has been a huge deterioration of human rights—for example, Guantánamo Bay, the complete abuse of proper trial procedures, high rates of execution, etc, which have been a very bad model for human rights in the world, and that is in the most developed economy. So there is more to it than just saying that industrial development will be good.

I think that the idea that trade is the answer to everything is wrong, too. Sure New Zealand has advanced through being a major trading nation, but it is not necessarily the best way forward to say that we will replace our manufacturing economy and we will let Chinese competition, through low wages, smash that, and that we will compensate by increased agricultural exports. That would end up with an economy that is not balanced and that is more at the whim of the international economy and international markets etc. That is not the future.

The ideology that trade is everything and the proportion of trade to GDP is everything is not the way forward for New Zealand, particularly as we approach peak oil. The costs of trade, in some respects, will increase and countries are looking to greater food sovereignty and such things, and rightly so, given the way the international market in food has led to huge problems in many countries. There are huge increases in price because the free-trading environment is often substituted for local food production, and that has led to much higher costs and devastation for millions of people worldwide. We see that in the big demonstrations and riots that are occurring in several countries. That is partly a result of the ideology that trade is everything and balanced economies are nothing. Thank you.

I guess those closing remarks by Mr Keith Locke say it all! He would say to New Zealand farmers that they are wasting their time and should not produce anything for the international market. He does not think anyone should buy their products. In his view, who really cares that New Zealand is the most efficient producer of dairy products in the world and the most efficient producer of meat, and who really worries that trading is how we primarily derive our international income? He thinks that farmers should be focused on supplying the New Zealand population. I guess there was a time—a few hundred years ago—when New Zealand had a population of about 200,000 and supplying our population was all that was done in this country. It was local agriculture for the supply of those people alone. The truth is that our production then simply did not reach the potential, in the slightest sense, of this country.

I remind Mr Locke that this world has 6 billion people. We need food to be grown in the most effective and efficient places in the world in order to sustain that population. If there was not international trade, the world simply could not support a population of 6 billion people. I say to Mr Keith Locke that his understanding of economics, as shown by those last comments, is frankly appalling.

💬 Keith Locke: I’m not against trade.

He says he is not really against trade, but his policies would stop the world being fed. He is simply wrong, and his policies are false.

The second argument by Mr Locke that I feel I have to address is the human rights argument. He said that China is having an Olympic Games and therefore it is a bad time to have a free-trade agreement. What an absurdity! I would have thought the complete opposite of that. China is opening up to the world. Yes, there were difficulties in Tibet, and, interestingly enough, this time China understood the world’s message on that and was substantially more restrained than perhaps it would have been in earlier years.

💬 Tim Groser: 1989.

Yes, in particular it was more restrained than it was in Tiananmen Square in 1989, as my colleague Mr Groser has mentioned. So China has learnt that being internationally engaged brings with it international responsibility. Am I saying China is perfect? Obviously, I am not. China has a great way to go yet, but it has hugely improved compared with how it was in 1989 and in years prior. Almost all of that is because China is now open to the world; the world looks at it and judges it. China has the Olympic Games, and this is the perfect time to have a free-trade agreement because it cements into being that opening to the world.

As for the views of the New Zealand First Party, I say to Mr Peter Brown that he should get his story right. His leader said that New Zealand First was opposed to the free-trade agreement because it was not fast enough; he said getting completely free trade in 10 years was not fast enough. I guess I would have to say to the officials that if they wanted a New Zealand First vote, they should have negotiated a 5-year phase-out of tariffs, and they might have got New Zealand First’s vote then. If that is the argument, then Mr Brown cannot say this is a bad agreement because it opens New Zealand up to trade. The story has to be one or the other; it cannot be both. I suggest that Mr Brown talk to his leader and get his story right.

National does support this agreement, for profoundly important economic reasons. Mr Groser set those reasons out superbly. New Zealand’s future is as a trading nation. We have an extremely poor performance amongst small OECD countries, and I know the Government knows that. The work by David Skilling shows that amongst the 15 small OECD countries, the proportion of our economy that is devoted to international trading is actually the lowest. We should be doing better and we have to do better. The way to do that is to find the points of advantage—to find the trade agreements. This agreement is such an agreement. Indeed, I say to the Government that this is a very important agreement, and I acknowledge that. When the historians look at the record of this Labour Government, they will say this agreement should go down as one of its significant achievements. Why would any party in this House vote against it? Why would a party say to New Zealand farmers, to New Zealand businesses, and to New Zealand workers that it would stamp out their opportunities?

I will take a very brief call, but it is appropriate for me, as chair of the Foreign Affairs, Defence and Trade Committee and as one who sat through the select committee process on the New Zealand-China Free Trade Agreement Bill—and I know that the Leader of the House would want me to do this—to fulsomely praise and thank the officials at this stage, because the committee received some very comprehensive advice. I point out that we have had a very good working select committee, and I acknowledge particularly Mr Tim Groser for his excellent assistance. I also respect absolutely and acknowledge the diversity of views that was represented both in the submissions and by members of the committee. I acknowledge the very fine contribution of Keith Locke, albeit we agree to differ on this issue. However, his contribution was important. I also acknowledge Peter Brown, and I do that in this democratic Parliament tonight.

The challenge on those of us who are supporting this agreement, which is the will of the overwhelming majority of the House, is to do everything we can and to work to make sure that some of the concerns and fears that have been expressed do not come to pass. In terms of the glass being half full or the glass being half empty, the point of view that the glass is half full offers huge potential for this agreement.

I will close with a quote from our Prime Minister, who stated: “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.” Hopefully, it will be a win-win situation for both countries. That is our intent.

Having said that, let me acknowledge all members of the select committee for the excellent contribution they made in terms of the report back. We look forward to the third reading of the bill.

A number of things have concerned me, starting with the recent comments by Peter Brown from the New Zealand First Party. He said the Singapore free-trade agreement had significantly benefited the people of Singapore, and then proceeded to give absolutely no example to prove his point. I think that was outrageous.

Second, I would also like to address the issues that seem to be disturbing New Zealand First and other parties in this House, including the Māori Party, who think that China’s lower-wage economy than ours will in some way cause huge damage in our economy. The protectionists in this Parliament say that because the Chinese make television sets, toys, and clothes more cheaply than we can, our people will lose their jobs unless we protect our domestic production with taxes on Chinese products. Well, there are countries that do that sort of thing. The international textile trade, for example, is subject to very, very complex trade regulations right across the world. If members think about it, they will realise agriculture is considerably protected in many countries—for example, Japan and the USA—and that is a direct problem for the people in my electorate who produce agricultural products and want to export them.

New Zealand First, the Green Party, and the Māori Party say we should stem the flow of goods into New Zealand, particularly the cheap ones. Well, I would like to refer them to an economist called Ricardo, who many years ago said the best thing a country could do was to get rid of trade barriers. Even if the country could not produce something more efficiently than something produced in another country, he said the objective was to remove the barriers to trade because doing that would help both countries. For example, China may be far more efficient than New Zealand at producing wide-screen television sets or rice, but rather less proficient than New Zealand at producing dairy products. China and New Zealand must stick to producing what each country does best; New Zealand must do that and China must do that. If there are no trade barriers between our two countries, then we have both got to be better off and the communities in our country must be better off. We need to address this issue, because we must stop our people leaving New Zealand in droves. We must give them higher standards of living here, and this trade agreement will do that.

This trade agreement will not destroy our jobs. It is not possible for this country to stop exporting, and to import everything from abroad, because we would have nothing to pay for the imports with. If one does not export one cannot import, because one has no money to buy the imports with. So it seems to me that New Zealand must export to the global markets, and it must pay for imports from wherever those products are cheapest. As I said a couple of days ago, in response to Māori Party concerns, free trade is fair trade. The transaction does not have to happen if the two parties do not want it. It is quite clear that when two people discuss engaging in a transaction, one party can say yes and the other party can say no. The transaction does not have to go ahead. People engage in a transaction because each party will be better off by doing so. Each party wants to engage in the transaction.

This bill is the most significant legislation that has been put forward in the life of this Parliament. It will provide benefits to our communities long past the life of every person in this parliamentary complex. I support this bill, and the National Party supports it wholeheartedly. Again, I would just thank the officials involved in putting the detail of the agreement in place.

This bill puts New Zealand first; that is what it sets out to do. I was dismayed to hear Mr Brown saying that he did not consider it to be a good bill, that he thought all sorts of fish-hooks were being revealed, and that it was basically a bad thing for us to be engaged in. I am sorry that some parties feel that way, and I am dismayed that they see things in that way. I appreciate that their concern is genuine and sincere, but in my view it is misplaced. The vulnerability that they perceive we have is without foundation, but it is emotionally understandable.

The reality is that New Zealand is already a pretty wide open market for goods from China, but China has not been open to us. The great wall was secure in the form of tariffs, but the free-trade agreement opens up that wall to our trades, our businesses, our entrepreneurs, our enterprises, and our marketing and selling skills—and New Zealand has those skills in considerable quantity. Speaking from experience, I say that what exporters need is certainty in terms of the opportunities before them—not deal by deal, and not one opportunity at a time, but certainty in terms of country to country relationships. For decades our traders have been excelling in the work they do. What an opportunity they now have. As I said, I am saddened by the lack of vision in the speech by Mr Brown. China is a very substantial producer and exporter of food, and, as has already been demonstrated in previous speeches, the continuing economic improvement and well-being of the people of China will create an ever-increasing demand for our products.

Another frequent concern expressed in relation to the free-trade agreement with China, which I find ironic, is that it could result in a single market taking all our products, so we will become dependent on a single market. That is not actually how trade works. The popularity of our products, and the demand for our products in China, will result in increased demand from other markets.

Let us reflect back. We used to be single market - oriented. We used to send all our products to dear mother England, and that was the basic market.

💬 Hon Dr Michael Cullen: And Scotland!

I thank Dr Cullen. I well remember New Zealand products being consumed at our table, but then the UK joined the Common Market. I remember being in Hokianga—and this point relates particularly to the opportunity for free trade—and having a discussion with a neighbour who said we were finished as a country. The reality was that this point was just the beginning of New Zealand embarking on open trade rather than being single market - oriented.

As a country we have had a celebrated period of remarkable good fortune. This has not come about through Government policy but through good fortune in respect of overseas prices for our products. But we are now in a recession. How quickly things have changed in the last 6 months. We need our exporters to be more dynamic than ever. This bill will allow them that opportunity. We need the money, we need to create wealth, and this free-trade bill will enable us to increase our opportunities to do that. Thank you, Madam Chairperson.

I am very pleased to take a call during this part of the debate, and to follow my colleagues and confirm, categorically—obviously—that National supports the New Zealand-China Free Trade Agreement Bill, and why would we not? It is the only way our country will move forward. It is the only way we will grow our economy. It is the only way we will trade our way in the world. We live in a global economy, and a global economy means free trade. Free trade, as my colleague said, is also fair trade, because both parties find their areas of comparative advantage in any event, and that is one of the things that this free-trade agreement is all about.

This afternoon I raised the issue of Māori business. Clearly, this free-trade agreement is a landmark event for the growing Māori economy. That economy, as we have seen, has developed rather slowly over the two previous decades, but it is now reaching its zenith. Given the many assets that have been returned to Māori in Treaty of Waitangi settlements—fish, land, and areas in terms of the farming enterprises being developed—it is critical, since a lot of Māori businesses are export focused, that we are able to trade with an economy that is becoming the biggest economy in the world.

This afternoon I put out a quote from Hui Taumata 2005. They saw that the best way for Māori development to improve domestically and internationally is through economic growth through trade with the rest of the world. My colleague Dr Mapp said that our future is with trade. Well, if our past has been with trade, which it has been—the ability to trade with the world—our future most definitely is. It is a disappointment to me that members of the Māori Party should see no overall benefit in this free-trade agreement, particularly when they are so focused on Treaty settlements and on the return of assets to Māori. As I said, those assets are in forestry, fisheries, and land assets.

My question to Māori Party members—and I hope they take a call this evening—would be: “What are we going to do once all those assets are returned?” Will we sit on them in our little valleys and do nothing? We will trade with ourselves and do business with ourselves? Where would that get us? It is a nonsense—an absolute nonsense. If we think about the other side of the equation, about jobs for our people, we see that this agreement is a guarantee of jobs for our people. It gives us the ability to trade, to create wealth with our assets, to take care of iwi and ordinary individuals, and to make sure that their future is guaranteed. It is not guaranteed by sitting in one’s valley with one’s assets and not doing anything with them. Do we achieve anything by sitting on our hands? No; I cannot figure that one out.

As I said, I would be interested to hear from members of the Māori Party about that. Perhaps Te Ururoa Flavell might take a call this evening, help me with my predicament, and tell me why the Māori he seems to represent would not see this free-trade agreement as a historic agreement that will be a landmark in Māori development. I am very proud to be part of the National Party, which supports the Government in what it has done.

💬 Dr Wayne Mapp: Let’s not get too carried away.

Maybe my colleague Dr Wayne Mapp gave the Government more praise than he should have.

Our team was led by my colleague Tim Groser, who set out admirably exactly why this free-trade agreement is so important to New Zealand. I endorse everything he said. He ought to know; he has worked in this area for—what; 30 or 40 years?

💬 Tim Groser: Too long!

It is never too long. He has had a full career in this area, and he, more than anybody in this Chamber, this House, this Parliament, knows just how important this free-trade agreement with China is.