Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill

I wanted to take just the last bit of this time to point out to the House that it is not just New Zealand First that opposes the investor-State dispute settlement provisions in these trade agreements, and to put it to our trade experts that they could have been a bit more conscientious in the negotiations.

We like trade, we want trade, and we do want our businesses to make that money by selling New Zealand goods overseas. The reality is that, back to the point, it is not just New Zealand First that opposes these provisions. Around the world now, you are talking about countries such as South Africa, Germany, and France all investigating how to remove themselves entirely either from trade agreements that have investor-State dispute settlement provisions in them, or to remove the investor-State dispute settlement provision itself from their trade agreements. They understand that this is an insidious attack on the democracy and the functioning of their Government within their country. They understand that. They have seen the evidence of it and they are desperately now trying to do something about it. The unfortunate reality for them is that they are beginning to discover that it is not that easy to get yourself out of these trade agreements once you have signed up to them. We are talking about 20 to 25 years’ notice in order for those countries to take themselves out of these trade agreements with the likes of the investor-State dispute settlement provisions in them.

I just want to talk about the European Union, to finish. The European Union has said categorically that investor-State dispute settlement provisions are dead and that they need to go. That is New Zealand First’s stance. There are other ways. There are open and transparent ways to undertake and protect the rights of businesses, which they do have, in trade agreements, but having investor-State dispute settlement provisions through a secret tribunal is not the way to do it.

It was a pleasure to come down to the House to take that last call. It is unfortunate that New Zealand First cannot support this trade agreement legislation. There are two reasons, as I said to the House: firstly, and most important, because of the investor-State dispute settlement provisions but, to conclude, it is actually a bad trade deal for New Zealand. Thank you.

Tēnā koe, e Te Mana Whakawā. I rise to take a brief call in this second reading debate of the Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill in the name of my colleague the Hon Tim Groser, our country’s hard-working and supremely sophisticated Minister of Trade. This bill amends the Tariff Act 1988 to implement the free-trade agreement that was concluded in Seoul on 23 March this year. Our exporters currently pay $229 million worth of duties each year on the products they shift to Korea. This bill implements immediate reductions in the order of $65 million on those duties in the first year alone. It will allow growth in the $2 billion worth of exports that we shift to Korea every year.

This is very important for our exporters. The trading relationship with Korea is a balanced one. It is worth about $4 billion in total and it is around $2 billion each way. It is a highly sophisticated and advanced trading relationship, given the diverse nature of goods that we shift—from both agricultural products through to highly sophisticated industrial and technological products. The industry has welcomed this bill and the free-trade agreement itself. There have been particularly warm comments from the kiwifruit industry and the wine industry, and that might have something to do with the advantages in the reductions in duties that they will experience in the first year of implementation. In fact, wine, cherries, sheepskins, aluminium, and a wide range of industrial goods will enjoy those reduced duties immediately.

This is very good for New Zealand, not just for the people who own those companies but for the many, many thousands of New Zealanders who are employed in those valuable sectors. It is also useful in that Korea is a significant source of imports into New Zealand—everything from heavy machinery, which is used in agriculture and other sectors, through to the consumer electronics we all enjoy in our households, such as the Samsung Galaxy phones and the LG LED televisions, which we all get a lot of entertainment and enjoyment from. This is a positive measure. It is yet another successful free-trade agreement concluded by that hard-working Minister Tim Groser. For that reason I commend the bill to the House.

The next call is a split call. Denise Roche—5 minutes.

I rise to take a call for the Greens on the Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill. We will be opposing this bill. You will have heard from previous speakers from the Greens, co-leader James Shaw, Julie Anne Genter, and Russel Norman, who all talked about the reason, which is around the lack of enforceability of the so-called labour and environmental protections in this bill and the insidious investor-State dispute mechanism.

Let us look at the so-called benefits to the New Zealand economy that this deal will bring. Too many times this Government has announced something that was supposed to be a good deal, but that has later flopped. Too often the analysis has been around the short-term view of what constituted economic efficiency, and it leaves the people behind. I guess the Skycity deal is a classic example. Another sad case of this was when the Government awarded the KiwiRail contract to a Chinese company, gutting the Hillside railway workshops in Dunedin and degrading the industrial capacity of this nation. The fact that this Government thought that that was good economic policy and thinks that this deal is good economic policy should have members across the House extremely worried.

The investor-State dispute process is also of concern. It has the potential to impose a number of unplanned costs and threatens the sovereignty of our country. Consider the recent case of Bilcon and Canada, where the Canadian Government was sued by a global mining company for $300 million in damages for daring to put in an environmental review. There have been more cases where environmental, labour, and cultural rights have come up against the profit imperative, and, frankly, they have lost. The investor-State dispute provisions are too threatening to New Zealand’s sovereignty and impose, in the Green Party’s view, an unacceptable risk. The Australian Productivity Commission’s review on trade agreements concluded that the investor-State dispute settlement process has created “potentially large unfunded contingent liabilities dependent on decisions by international arbitration tribunals”, and that the costs to defend these decisions were “unknown, unfunded and likely to be substantial.”

I would also like to talk about workers’ rights and how this bill has the potential to exacerbate an already bad problem of labour rights. The Greens stand up and will defend workers’ rights, both here in Aotearoa New Zealand and also around the world. South Korea has a particularly bad problem with migrant farm labour abuse. In 2014 Amnesty International released a report describing the industry in Korea as rife with exploitative practices. This bill does contain a very nice chapter—some protocols around labour standards—but, as my co-leader has already pointed out, they are neither binding nor enforceable. A recent report in May 2015 by Channel NewsAsia quoted the National Human Rights Commission for Korea investigator, Yook Seong-cheol, who said that making sure the Korean agricultural sector remains competitive is a priority for authorities and that drastic changes to immediately improve pay and conditions for workers may not be welcome or sustainable. There are essentially already incentives for migrant labour abuse in South Korea, and they will be strengthened if they have to compete with New Zealand in what is our most competitive area, agriculture.

We are big fans of trade agreements, but they must bring mutual benefits for everyone.

💬 David Shearer: No, you’re not. You vote against them every time. When was the last time you voted for a trade agreement?

We support trade agreements that respect sovereignty, Mr Shearer. We support trade agreements that have respect for human rights, for labour standards—and I would have thought Labour would support that—and the promotion of sustainability. There is too much at risk in this trade deal, and so we will be opposing this bill.

I call Clare Curran—5 minutes.

There have been some very good contributions to the second reading debate on this bill, particularly from my two colleagues David Parker and Phil Goff. Also, I particularly want to acknowledge the contribution of Russel Norman to the debate on this bill last week. Sadly, though, there have been some very poor contributions—the worst of them coming from National MP David Bennett, who last week unleashed a deeply personal attack on Phil Goff, and on Labour, New Zealand First, and the Greens also. He could not string an argument together, so he resorted to juvenile name-calling. It is members like him who give this Parliament, the debate in this House, and politics in general a bad name.

I just want to touch on the two main points that David Parker made in his contribution, which are relevant to my contribution. This is the only time that we will get to debate this free-trade agreement in this Parliament, so the quality of the debate is very important. I think that the quality of the debate from the Labour side and from the Greens and New Zealand First has been very thoughtful. They have been willing to engage in debate. Unfortunately, I have not seen a lot of that from the other side of the House.

Labour supports this bill because we have come to the conclusion that it is, on balance, about right. The thing about this that really annoys the Government is that Labour has negotiated better trade agreements than it has, and we are prepared to stand up and articulate clearly what our bottom lines are and to say what we will support and what we will not support, and with a lot of credibility behind that. That really annoys the Government, and that is why you get the likes of David Bennett, who just hurled abuse because, really, he could not come up with an argument.

The Labour Party accepts that the South Korean free-trade agreement substantially reduces the tariffs currently faced by New Zealand exporters to South Korea. Currently, our exporters are suffering substantial disadvantages when competing with sellers to South Korea from other countries that pay lower tariffs because their earlier trade agreements have already reduced tariffs. That is the main basis for our support. We support growing our trade and we support exports. This is another thing that National is not so good at—that is, growing the percentage of exports. Just today it was revealed that the ratio of exports to GDP is at its lowest since 1997. The target was 40 percent of GDP then; right now it is at just 28 percent. So it is really not much to write home about.

If you are going to take advantage of these free-trade agreements, then, really, you have got to put the effort in behind the scenes to boost the industries that are exporting. I am a champion of the tech export industry, which accounts for about 7 percent of our GDP, more than 124,000 jobs, and growth of 16.5 percent a year. But we could be doing a lot more to grow jobs in this sector. In particular, I would just like to touch on the video gaming industry, which is one of our fastest-growing tech sectors—83 percent of that sector is exported. It could do with just a little bit of help from this Government, such as getting the post-production digital and visual effects scheme and qualifying for that 20 percent rebate, which it cannot get access to. That is something that this Government could be doing.

We acknowledge the concerns of submitters on this bill. We will not blindly support free-trade agreements, like this Government does, but, also, we will not blindly oppose them. We negotiate good ones and point out the flaws. We know that there has been a botch-up in this bill, but we say that, on balance, we support it. Our biggest concern is the lack of engagement with civil society.

It is a pleasure to rise to make a short contribution on this debate on the free-trade agreement with the Republic of Korea. With so much attention being on some of the sideshow issues that have been going on around the place with regard to the Trans-Pacific Partnership, many people have overlooked the benefits of free-trade agreements in general and, in particular, of this one with the Republic of Korea.

New Zealand has been a trading nation since its inception, really, and it is important for us to be able to trade, where possible, on equal terms right around the world. With Korea in particular, it is really important for us to be able to continue to trade with it because it is in fact our sixth-largest export destination. We need to do what we can to protect the trade that is going on with the Republic of Korea already and to give ourselves the best possible opportunity to be able to trade on very good terms for our exporters moving into the future.

This free-trade agreement does secure the long-term future for New Zealand exports, which, I have to say, has been under threat because of Korea’s other free-trade agreements with other nations. It now means that with this free-trade agreement we will be able to compete with the likes of the United States, Chile, and the European Union, in terms of our ability to trade with Korea. That, of course, is very important because there are particular products that we want to expand, in terms of exports to the Republic of Korea, including kiwifruit, beef, lamb, and dairy products and the like.

If you look at the likes of Chile, which is also in some of these markets, it is really crucial that we can attain an even footing with it and be able to compete really well in Korea. Obviously, there is going to be a transition period as some of these tariffs are removed, but, actually, over time 97.9 percent, I am told, of New Zealand’s current exports to Korea will be duty-free by the time this agreement comes into full force. I think that is good news for New Zealand’s economy, I think it is good news for exporters in New Zealand, and that is why I am happy to commend this bill to the House.

I want to take probably not a full call on this bill just to reiterate that the Labour Party supports the bill. This bill was brought about because we have to pass some enabling legislation to enable this treaty to come into force. We do not get to have the purview of the treaty before it is signed, but we do have the ability, in a sense, to debate the merits of the enabling legislation to bring this into force.

The Korean free-trade agreement was a tough deal. It was very tough for our negotiators, and they did it over a period of about 5 years. Why was it so tough? Well, it is on the basis that Korea will benefit by $4 million from the tariffs that we impose on their trade to us, and we, on the other hand, will benefit in the order of $229 million. You have got to look at that and think that is a pretty good deal. In any view of this, it is a pretty good deal. If Korea is sitting there and saying: “We’re only getting $4 million and you’re getting $229 million.”, obviously it is going to be bargaining pretty hard. So in a sense I want to commend our negotiators, because I think they did a good job.

As the last speaker, Jono Naylor, said, New Zealand exists from trade. We do not have a huge internal market like the United States. Trade is enormously important for us. Exports are enormously important for us, and enabling our exporters to get their goods into countries without having tariffs imposed is, obviously, of great benefit to New Zealanders. Just imagine what $229 million, effectively, can get to and give to those industries that are going to be benefiting from that. That is the first thing.

But the second thing is—and let us use the example of kiwifruit—right now our kiwifruit exporters are paying about 40 percent in tariffs to get into Korea. Our main competitor, Chile, is paying nothing, because it already has a longstanding free-trade agreement with Korea. If you are competing against Chile with zero tariffs and your price is being hiked up by 40 percent, you can see the difficulty and the amount of money that we are not making as a result of that competition.

This free-trade agreement will not only give us benefits immediately but it will enable us to be able to get our products like kiwifruit into this market and have them more widely sold at a reasonable price that Koreans are willing to pay, because our quality—certainly in kiwifruit—is better. The same thing applies to beef, where the tariff is 40 percent, and to lamb, where the tariff is 22 percent. They all, over time, reduce to zero. So, once again, we get immediate benefit from those tariffs going down, but we have longer-standing ongoing benefits because we get to compete against the European Union, the United States, and others that have no tariffs on their goods whatsoever—a good deal.

There are some “buts” though—some exceptions. I do not think we did as well as we would have liked in the area of milk powder, in particular; milk and dairy products; and, possibly, in deer exports as well, even though the deer exporters group came and saw us and they still favoured the deal that we have got in front of us.

There were some areas where we did not get quite as much as we would like, but let us look at Korea in the whole. Korea is a country where we have a two-way trade of about $4 billion. It is not as important as Japan, but it is just below Japan. Korea is certainly more important than the UK, and it is a nation that is growing its wealth. In GDP figures it is the country that is immediately behind us, and catching up fast. I would expect its GDP per capita to surpass ours in the coming years. So this is a country that we strategically should have an agreement with as well.

The other “but” that I would like to have, and this is something that my colleague David Parker talked about at length in his contribution in both the first and second readings, is that we have left ourselves open to the issue of not being able to legislate about foreign buyers coming in and buying residential property in New Zealand because of this free-trade agreement.

This free-trade agreement enables Koreans to come in and trade in residential property freely in New Zealand. Unlike Australia’s free-trade agreement with Korea, we did not close that particular door. That means we cannot say no to foreign buyers coming into New Zealand to do that. We may be able to do other things, but we certainly cannot do that.

Sadly, because there is a most favoured nation status clause in the free-trade agreement, which means that if we extend a benefit to one country then other countries that we have done free-trade agreements with as well also benefit from those benefits, that will also enable it to be opened up to some ASEAN countries, and certainly to China.

Mr Key said that was Labour’s fault for signing the free-trade agreement with China. Well, that is absolute nonsense because we actually closed the door with China, but we have left it open with Korea. So that is an issue. It was brought to our attention by an expert in the field from Auckland University, and the Government, up until now, at least, has not provided a very good explanation of why that was not closed off, because it seems pretty blatant and pretty obvious to us.

I just want to say a couple of other things about this free-trade agreement. There was a discussion from both New Zealand First and the Greens about free-trade agreements. The Greens said that it supported free-trade agreements. I have yet to see any free-trade agreement that it has agreed to. With the one that we signed with China, our exports to China have gone from $3 billion to $10 billion in the space of about 6 years. That was signed by Phil Goff and it was carried on by this current Government in the same spirit. It meant that during the financial crisis, when the rest of the world was suffering badly, New Zealand, because of the increasing access that we had to the Chinese market, was actually pretty well safeguarded. If we did not have that, we would have been in a much worse state than we are today, certainly. So I am very pleased that we had the free-trade agreement with China, despite the fact that the Green Party voted against it.

New Zealand First’s opposition to this in terms of saying it is a bad deal—for the life of me I cannot see the logic in it. I can understand some of its reservations around the investor-State dispute settlement parts of the bill, but I certainly cannot understand how this is a bad deal. We give up $4 million to Korea and we make $229 million overnight. That, to me, is a pretty good deal. That is $225 million we end up ahead rather than behind, and that is before we are able to compete better with some of those other countries that have already got in and got those free-trade agreements before us.

So the deal is a good one. There is some concern, but I will say that we had a very good select committee process, and I commend all members of the select committee and Mark Mitchell’s chairing of it. We asked the Ministry of Foreign Affairs to go back and reply to some of the reservations that we heard from submitters at least three times, to give us fulsome advice in response to the issues that were raised. I think that the investor-State clause that we have, and we have it in this New Zealand - Korea free-trade agreement—we insisted on having it in the New Zealand - China free-trade agreement. Why did we insist? Because we were concerned that our companies trading in China might not get the legal representation that they would need in order to safeguard our interests.

In the case of Korea I do not think that is really a big issue. Certainly, our legal framework is in the top three or four in the world—the Koreans are ranked at about 12th, or 13th or 14th and so that is certainly a robust legal system—so we could do it through our domestic courts without having to resort to the investor-State disputes resolution. That, I believe, is unnecessary. However, the Koreans wanted it to go into their free-trade agreement and we agreed to it. New Zealand has never come before the courts there, and I do not expect it to have to in the future either. Thank you.

Following on from David Shearer in this debate, can I just say thank you to the Labour Party for the constructive approach that it takes in the Foreign Affairs, Defence and Trade Committee to trade matters.

💬 Hon Nathan Guy: That’s right. Looking forward to TPP support.

Yes. As Minister Guy just pointed out I am looking forward to a similar constructive approach to the Trans-Pacific Partnership. Once it is finalised and implemented by Minister Groser and once it comes to the committee, I am looking forward to a similarly constructive approach being taken by the Labour Party. I wish all parties on the select committee took such a constructive approach, but, sadly, that is not the case.

As has been pointed out in this debate, this agreement is very good for New Zealand. Korea is our sixth-largest export market with about $4 billion worth of exports going to Korea—having a free-trade agreement is good for New Zealand. Immediately, in the first year, we see a $65 million benefit for New Zealanders who are exporting to Korea, and right now $229 million in tariffs are being paid by New Zealanders exporting, so seeing those reduced over time is very good.

I just want to make a point to the House. It is quite ironic that many of the people out there at the moment who are opposed to free-trade agreements like to say that Parliament, the people’s House, never gets to consider these free-trade agreements because they are signed in secret by those evil Governments. Well, I think this is the second or third debate we have now had in this Parliament on this free-trade agreement. This House does consider free-trade agreements. There is a thorough select committee process that they go through in the Foreign Affairs, Defence and Trade Committee. For Government, for Parliament, and for New Zealanders to implement any decisions taken in a free-trade agreement, we have to have enabling legislation, and this is what we are debating right now and will be voting on in a few minutes’ time. New Zealanders, through their representatives in Parliament, do get a say on these issues—they do get debated thoroughly, and they do get examined thoroughly—and they should not be afraid of that.

People also should not be afraid of investor-State dispute settlement mechanisms, one of which is in this agreement. As Mr Shearer pointed out, we require it, as do our trading partners that have these free-trade agreements. We require it because it actually protects New Zealanders. It protects New Zealanders so that they can have confidence when they are investing in foreign markets. We should also not be afraid of the potential implications of these agreements, because, firstly, New Zealand has never been challenged, and, secondly, there are over 3,000 agreements out there in the world that have these mechanisms in them. The State typically wins more often than it loses, and only 25 percent of cases are settled in favour of the investor. So should we ever be challenged, there is a high likelihood we will win, provided we have good-quality Government policy. We should not be afraid of that because it actually, overall, helps New Zealanders and gives them protection. This bill is good for New Zealand and it should be supported at its second reading.