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

It is a great pleasure to take a call in the Committee stage of this Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill and to convey, again, Labour’s strong but somewhat qualified support for the bill. Mr Chair, in the time that you allow me I intend to, firstly, recap on several of the principles that my colleague the Hon Phil Goff has attested to, to note the substance of the deal, firstly, in terms of the tariff reductions on goods trade, and then to touch briefly upon services and investment issues. I want to dig into the investment matter both in its own right and in comparison with the China free-trade agreement, and, finally, I want to look at the investor-State dispute settlement provisions as they relate both to this bill and to the sequence of events in the relationship between the China agreement/disagreement and the current Trans-Pacific Partnership agreement negotiations, so far as we are able to be aware of them.

In terms of the principles, let me restate what my colleague the Hon Phil Goff has just said. Very clearly, Labour is an internationalist party. We have a strong and proud tradition of supporting free and fair trade. It was Labour that initiated and negotiated the China free-trade agreement, for example, and we have, throughout, supported the Government’s work in this negotiation and in other free-trade agreement negotiations. I think that that is a very important and national interest - driven position, as well as a principle-driven position, for us to underline, particularly when we get to a later debate about the Trans-Pacific Partnership agreement, because we attest that that is not just a free-trade agreement but a behind-the-border economic and governance agreement as well, and for that reason a broader debate is necessary.

Let us turn briefly to the advantages of the bill to New Zealand. In doing so, can I acknowledge the work of the officials and the quality of the national interest analysis that has been provided, which, although not long, is nice and specific and quantitative—and not all national interest analyses are—and this one is useful. For example, the reduction of goods tariff shows that tariffs on 48 percent—or $793 million—of New Zealand’s current exports to Korea will eventually be eliminated. There is a time-scale where over the first 5 years, 67.4 percent will become duty-free; over 10 years, it is 79-odd percent; and at the end of 15 years, 97.8 percent of current exports to Korea will be duty-free. That is clearly of value to New Zealand. It is of real, bankable value to our exporters, not only in agricultural goods such as dairy, meat, and fruit and horticulture but across a wide range of products.

There are reservations; there are hold outs. It is not perfect—no deal ever is—but it is our contention that this is a deal worth having, and we commend the work that the Government and its officials have done in that regard. Of course, there are obligations on New Zealand, and they are not exactly symmetric. We start from a different position. We had lower tariffs from the get-go, so we, therefore, have less to reduce. Therefore, it is not illogical that the time frame for that reduction is shorter, with a maximum of 7 years.

There are various protocols and cooperation agreements that have been negotiated to provide some assurance to our Korean friends that the process of liberalisation will be measured, will be methodical, will be accountable, and will not be unduly disruptive. We do not think that those provisions are irresponsible. So, overall, turning to the trade and services provisions, we think that, although not complete, they are worth having, and the investment measures are where we have some qualifications.

Can I note, though, that there is a cost-cutting issue in respect of the measurement of services and investment flows that the Labour Opposition has repeatedly highlighted to the Government, which is that our department of statistics does not capture these in sufficient granularity. An example that is relevant is the Singapore closer economic partnership agreement, where it was postulated that New Zealand would benefit greatly from the services and investment flow gains, but may, in fact, in the short term at least, lose in terms of the goods trade balance, with the difficulty being that it was difficult to tell because our services and investment data—Mr Chairman, I am anticipating your finger poised on that—[Bell rung]—and right I was. Thank you for the opportunity to complete this speech.

The importance is that if we want to know net-net whether the New Zealand economy and the New Zealand taxpayer are benefiting, it is important that we modernise our statistics and capture the newer sectors, the high-tech sectors, the services sectors, and the spin-offs of the investment flows, including their externalities, as well as the relatively easy to measure flow of goods trade, which is volume times value minus the change in tariff level.

Let me turn now to the investment issues. In its minority report, the New Zealand Labour Party drew attention to a potential weakness here that we were not sufficiently assured by officials on. Although it is clear that the existing restrictions that we have to be able to limit, for example, the sale of New Zealand farmland or sensitive land can remain under the agreement, what is not clear is whether it would be possible to introduce new restrictions, for example, on the sale to non-resident foreign investors from the Republic of Korea of residential real estate—either a ban or a stamp duty, both of which occur in Australia.

There is mixed opinion about this. It is our strong hope that the Government will be able to do some form of clarifying instrument, such as a side letter. I ask the Minister, if he would, please, to perhaps take a brief call on that matter and provide some indication, firstly, of the Government’s understanding of the position—because this is important in relation to other potential trade agreements—and, secondly, whether it has in mind to undertake any form of clarification, to the extent that the Government agrees that there is some lack of clarity. It is important for our sovereignty, particularly where we have something like a tremendously overheated Auckland property market—

The CHAIRPERSON (Lindsay Tisch): Order!

—and high levels of actual inbound migration, that we are able to manage the investment flows such as could be liberalised under this agreement. We need to preserve the opportunity for future regulation.

That brings me to the third major area of debate. It is not sufficient to cause us to withdraw our support from this agreement, which overall, although not perfect, is one worth having. I repeat that, and we repeat our commitment to free and fair trade. But, as my colleague Phil Goff said, we are concerned about the use of investor-State dispute resolution mechanisms. That, in common language, is where a corporation can sue the New Zealand Government in some form of tribunal that is not a Government forum and that is outside the normal rule of law in the partner countries. It is Labour’s contention that those investor-State dispute settlement—ISDS, as they are called—provisions can have some value where we are trading with, for example, a developing country that does not have a well-developed system and where New Zealand companies are not assured of the rule of law. So we are not saying we are opposed to investor-State dispute settlement in all cases. However, we do not believe that it was necessary here because, frankly, the Republic of Korea does have a well-developed legal system, and the risk of extralegal appropriation of New Zealand property rights we would deem to be pretty low.

Why that matters is that there is a sequence of negotiations that started with the China free-trade agreement, where we had a much cleaner and more robust investment provision and where there may have been more cause for investor-State dispute settlement, and we are now embarked on the Trans-Pacific Partnership agreement negotiations. I know that you are counselling me to stay within the confines of this bill, Mr Chairman, albeit all parts are being taken as one, but I do believe that it is a highly relevant matter to Labour’s support of this bill that we have considered whether we could still support it because of concerns that both the investment chapter and the investor-State dispute settlement provisions could be read in such a way as to tilt the Trans-Pacific Partnership agreement outcome to a point where we could not support it. That, in such an important call, would be important.

I do want to just set down the balance that we have struck between support for this agreement and our very important set of five bottom lines around the Trans-Pacific Partnership agreement: that Pharmac must be protected—

The CHAIRPERSON (Lindsay Tisch): Order! The Trans-Pacific Partnership agreement is not part of this debate.

I take your guidance, Mr Chairman, and I will narrow the scope, but in doing so let me repeat that we had to consider—

I want to take a brief call, really, of a political nature while there are senior Labour Party members in the room to record my personal appreciation of the really constructive approach that they have taken. As they would know from many private conversations I have had with the senior members of the Labour Party and the Labour Opposition and also from a series of public comments, I have been assiduous in recognising the huge contribution previous Labour Governments have made to the promotion of New Zealand’s getting a fair deal in the world, and I will not change that position.

At the same time I recognise—because we have a very, very tough Chairman here I will not refer to the elephant in the room—that we are looking through this debate to a much bigger debate that we will have. Out of respect for the Opposition, I am taking nothing for granted. I do appreciate that in some corners of the constituencies that you represent there are reservations of quite a serious nature on aspects that are being debated—in my opinion, often with wild exaggeration—but it is part of the political process.

So I am not making any assumptions here, but I do want to record the Government’s appreciation for the very constructive position Labour has taken on this. I will not go over the little argument we are having over whether or not any measure that, not this Government, but a future Government may take in respect of residential property would or would not be ruled out. I think there is some ambiguity here between our readings of the agreement that is unlikely to be clarified any time soon.

That aside, I do want to acknowledge that this is not a perfect agreement. I do not imagine New Zealand will ever negotiate a perfect agreement. It is a complete paradox to me that somehow New Zealand has been able to get higher-quality agreements negotiating by itself than it has when it has had the ostensible support of much, much more powerful countries. It is simply not explicable by any rational political logic that I have ever understood, but it is a fact.

When you look at the high-quality agreement the previous Labour Government achieved in China, although it is not perfect—there are still quotas on wool, and there is a safeguard mechanism that, had the negotiators and the Ministers of the day, Mr Jim Sutton and Mr Goff, been able to see with perfect clarity, maybe we would have got a slightly different deal, but nevertheless, the China deal is an excellent-quality deal. In a very unique set of circumstances, the comparable arrangement that our representatives—I am choosing my words with great diplomatic care—were able to negotiate with Taiwan is, again, an extraordinarily high-quality agreement, and yet in both cases we have tiny New Zealand doing it by itself, up front, ahead of the pack.

It is a very interesting political thing to reflect on: why we have got what is still a good agreement—there is no doubt in my mind that this is a good agreement—but it is not of the same pristine quality that the China and the Taiwan deals were. The reason is that we were following in the political wake of very large countries that, for a set of reasons it is probably not sensible to speculate on in public, seem to have a somewhat different and less rigorous approach to these negotiations. So there we are.

I think this agreement will hold us in very good stead, but I do want to emphasise one aspect of agreements, of which this is one. When, finally, we got this over the line, after 5 years of literally tortured negotiations at every level—prime ministerial level with the Presidents, two or three of them; ministerial; and our senior officials, who are absolutely world-class negotiators—I was always conscious that the happiest people in New Zealand were the kiwifruit producers. I think it deserves—as I reach the 6 o’clock deadline—just a second of reflection on why, because it does have a broader application, Mr Chairman, and I will be very careful to watch your admonitions.

It is not only a question of new opportunities, which this country will need for the generations that will succeed us, but it is also about protecting existing trades. There is no doubt that had we not finally managed to break this impasse and get this agreement through on kiwifruit—I forget exactly how important a market Korea is, but it is a very important market for New Zealand kiwifruit—those trades would have been thrown out of that market. They were under massive pressure. So the one thing I would ask members of the Committee to recall when they sit down and look at this agreement or future agreements is this: you have to consider the costs of staying outside. Thank you.

Sitting suspended from 6 p.m. to 7.30 p.m.

Thank you for the opportunity to speak on the Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill. I just want to take this initial opportunity to speak to a suggestion from Mr Goff that New Zealand First members, amongst others, must explain themselves on their stance on opposing this legislation. I say to Mr Goff that the first and foremost reason for opposing this legislation is consistency. New Zealand First has been consistent on the position of investor-State dispute settlement from the start. This is a piece of legislation that would enable the enactment and the agreement of the free-trade agreement between New Zealand and Korea, and in that trade agreement there is the investor-State dispute settlement provision. For some reason the Labour Party has decided for this one it is OK but for the Trans-Pacific Partnership agreement it is not. I say that New Zealand First has been consistent.

The Minister of Trade himself spoke about this trade agreement having need for the arising of this legislation, and spoke about the lack—or not so much a lack, but the fact that this was not the finest work of the negotiation team. He acknowledged it, but he said it was the best that they could do. But in the discussion highlighting some of the issues that Mr Goff raised, the Minister spoke about the ambiguity of the readings of the parts and the interpretation of the schedule of exclusion and the appendices. So I just want to raise that point because just between the National Government and Labour there is ambiguity about the interpretation of the trade agreement. If you have it here, imagine if you have international corporates looking for ambiguity in this legislation and trying to use it to create a rort for their own benefit. They will find confusion.

We know, and we have consistently said—and we have not done so in isolation—that this is an issue for much of the trading world. The investor-State dispute settlement is a mechanism outside justice, outside New Zealand’s legal system, outside the World Trade Organization system, for example, and outside the jurisdiction of the international corporate’s home jurisdiction. What I am saying there is the tribunal arising from investor-State dispute settlement exists outside mainstream legal systems. That is why it is called a tribunal. The process of passing this legislation tonight enables these international corporates to use investor-State dispute settlement, an undemocratic principle outside legislation. It enables the rorting of democracy.

I just go back to what the Minister said about it not being a quality agreement. I just want to raise the point that this is a catch-up trade deal. We did not go in with the first-mover advantage. This National Government has been in catch-up mode with trade in South Korea for its entire term. It does not seem to have wanted to do anything about it until now. There have been a few years of negotiation, I acknowledge, and now we are at this point. But what we seem to have created in this process, in terms of a languishing process, is that for some reason it has now become appropriate to accept lesser terms of trade, and I point to the trade of milksolids as the prime example. I am talking about our primary industries, where you are talking 65 percent or 64 percent of the New Zealand economy. You are talking about a significant portion of our exports overseas, and milksolids being a significant portion of that.

We are told by this National Government that this trade agreement is a good one and that, therefore, we need this legislation to enact it, but the reality is that it applies after approximately 20,000 tonnes of trade. I acknowledge that that will be adjusted over time, but after that current figure, which is a small figure—it is a small amount of milksolids being traded to South Korea. It was spoken of before as one of the reasons why it was not a high-quality agreement. You are talking about a 176 percent tariff being introduced on a fundamental component of our exports with the rest of the world, and especially South Korea. So it is very, very hard for anyone to stand up tonight and say that this is a good trade deal.

Another part of this agreement was around seafood. The reality is you are talking about 33 percent of our seafood industry being tariffed at approximately 15 percent, essentially in perpetuity, as with the milksolids. New Zealand First has said from the start that just because we are in catch-up mode, just because we were not a first mover and this Government has languished in terms of discussions around trade deals, that does not mean that we should have given those trade parts away for our core industry. It is not really acceptable.

The other part of this trade agreement is that in agreeing to this, Labour—I have said it before—and this Government are allowing investor-State dispute settlement to become part of another trade agreement around the world with New Zealand in our trade with member countries. It is a rort. Europe is now investigating this as an issue. The Minister himself has spoken about wanting to now begin discussions with the EU, and I highly commend him for that. What the first part of the discussion should be is—because I would suggest to the Minister that we should be part of the first discussion around removing the investor-State dispute settlement provision from those multilateral or bilateral trade agreements, whatever the case may be, in that particular instance. We know, in that instance, that that trading partner, which we would love to trade with, is absolutely dead keen itself to remove the investor-State dispute settlement provision from its trade agreements also.

The Minister spoke about investor-State dispute settlement being necessary, as did Labour in this case. We have had reports out from the business community of late speaking about how they are not an attack on the sovereignty of our nation. They spoke about Third World nations and the need for protection when we trade, but they failed to respect the fact that Germany is hardly a Third World nation and Canada is hardly a Third World nation, and right now they are being sued under investor-State dispute settlement provisions with their trade partners that would presume to tell them that they cannot remove nuclear power from their countries or presume to tell them through legislation and legal suit that they cannot protect their environment. So the analysis is flawed. It does not acknowledge very real issues with investor-State dispute settlement, and the members on both sides of the Chamber need to acknowledge the very real threat that is investor-State dispute settlement. Thank you.

It is a pleasure to speak to this amendment bill. I would like to speak briefly to a few points that have been raised by the Opposition—a few points that were mentioned by Mr Tabuteau here just a moment ago. He commented on the apparent loss of sovereignty, with Germany being unable to address its sovereign desire to change its nuclear position. I think that needs some clarity. Germany is in a dispute with Vattenfall, which is a Swedish company. Vattenfall is a party in the Energy Charter Treaty. Germany is also a member of the Energy Charter Treaty; we are not. That is a multinational arrangement to manage energy and power, predominantly for Europeans.

As I said, New Zealand is not a party to the Energy Charter Treaty, but the United Nations Conference on Trade and Development, in its February 2015 issue, speaks about investor-State dispute settlement tribunals and the fact that the greatest number of complaints or disputes now is against the Energy Charter Treaty. It used to be the North America Free Trade Agreement, but now it is the Energy Charter Treaty.

I think we also need to remember that the German Government is being sued, and being sued does not mean that the company is going to win. In fact, if we look at 356 cases that had been concluded through investor-State dispute settlements, there is only a 25 percent success rate. I would also comment that the Energy Charter Treaty, which Mr Tabuteau is alluding to, has a specific sovereignty clause in it. It is part IV, “Miscellaneous provisions”, article 18: “Sovereignty over Energy Resources”, and that clause states: “The Contracting Parties recognize state sovereignty and sovereign rights over energy resources.”

The second point I would like to talk to is the discussion around investor-State dispute settlements. It is about fairness—fairness that we expect to be able to demonstrate to people who work in our business environment, but, certainly, fairness that we want in return. For our people who are working in overseas foreign environments, we want fairness too. It is about fair and equitable treatment. “Fair and equitable treatment” through case law, through the tribunals, has several characteristics that have been defined. It must be consistent with international law, non-discriminatory, and non-arbitrary. That is what fair and equitable treatment talks about.

Some of the rulings have hinged on being “grossly unfair, unjust or idiosyncratic,”. That is not us. That is not the sort of environment we work in. This is from another case study: “Conduct that is arbitrarily grossly unfair, discriminatory, and exposes the claimant to sectional or racial prejudice.” That is not our business environment. New Zealand’s view on this is that the treatment should amount to “an outrage, to bad faith, to wilful neglect of duty, or to an insufficiency of Government action that is so far short of international standards that every reasonable and impartial person would readily recognise its insufficiency”. It is solely a fairness issue, and we include it in this agreement because we are fair to the Koreans and we expect them to be fair to us as well. I have no issues with it. Thank you.

I am pleased to take a call on the Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill. Remember that this is not the treaty itself; this is the legislation we need to put through in order for this free-trade agreement to come into force.

I want to just pick up on a couple of points that have been made earlier. I want to start, rather unusually, with where Tim Groser left off when he was speaking before, which was to look at what we miss out on if we do not enter into these free-trade agreements. It is one thing to say that we should not be part of a free-trade agreement with Korea because it is not the perfect free-trade agreement—and it is not the perfect free-trade agreement; it is a very good one, but it is certainly not the perfect one—but the point is, what do you miss out on?

Let us take a good look at some of those things that we would miss out on. The 45 percent tariff would not come off kiwifruit over a period of 6 years. If I was an MP residing in Tauranga or around the Bay of Plenty, for example, I would have thought that was a pretty important sort of thing to get through for the farmers in Tauranga. Or, if I happened to be the MP for Northland, where a lot of kiwifruit are grown up there as well, I would have thought that that was a pretty important tariff to have removed so that those kiwifruit farmers are able to sell their kiwifruit into Korea without having to pay a 45 percent tariff. That means that the price does not have to be discounted at the expense of the farmer, but, over a period of 6 years, effectively, profit would increase. There is a second important point, because without that tariff going down it would mean that we would not be able to compete with Chile. Chile has had an agreement with Korea for a long time and it is able to sell its kiwifruit—an inferior product—into Korea and undercut New Zealand producers.

So if we do not have this free-trade agreement, those farmers in those areas will miss out on that funding. I would suggest, Mr Tabuteau, that that is particularly important if you happen to be living in the Bay of Plenty area or you happen to be the MP for Northland, which your leader is. So that is the first thing I would say.

The second thing relates to butter. The tariff goes off that—89 percent of the tariff goes off that over 10 years. That is an immediate benefit to dairy farmers throughout New Zealand. Thirty-six percent comes off cheese, 10 percent comes off wood products, 20 percent comes off salmon, and we could go on and on. If you have the industry representatives who came in and met before our Foreign Affairs, Defence and Trade Committee, you would hear from them that this has meant millions of dollars to those producers that will flow through their industry and will benefit thousands of workers—or, in many cases, a hundred thousand workers—directly from that. It is not the perfect agreement, but it is certainly a very good one.

There are some problems and they have been referred to—milk powder, for example. On some dairy products such as cheese and butter, the tariff rate will fall, but on milk products it is not as good as we would like. Likewise, with frozen deer velvet and with some seafood products. Why is that? This is a pretty difficult free-trade agreement to negotiate—and I want to acknowledge some of those negotiators who are here in the Chamber with us tonight—but when you add up the benefits to New Zealand, let us see why it is so difficult. Let me give you sort of an indication. What does Korea get out of this free-trade agreement? Well, we are the 41st - most important trading partner of Korea—the 41st - most important. You know, that is not exactly what you would call being in the top 10. For us, Korea is the fifth - most important trading partner—more important than the United Kingdom now, for example. Korea is a fast-developing country. It is just below us in the GDP rankings, but it looks set to overtake us in the coming years.

So what does Korea get out of this? Well, it gets a tariff reduction on Korean goods coming into New Zealand of $4.5 million—$4.5 million it gets in savings. How much does New Zealand get? Well, New Zealand gets $229 million. You are looking at that and you think: “Who’s getting the better deal here?”. Well, there is no doubt as to who is getting the better deal. New Zealand is getting the better deal, and that might perhaps hint at why this free-trade agreement was a little more complicated to get through and a little more difficult, quite apart from the fact that the Koreans are particularly—I do not want to use the word “obstinate”, but they are certainly difficult to deal with when you are conducting these negotiations. So the balance of benefits is firmly on the side of New Zealand, and I think it is partly because we are a leader in free-trade agreements and we are such a strong proponent of free trade that we were able to hold some of the moral high ground when it came to negotiating this particular agreement.

This agreement is very important to New Zealand. It is very important to us. There are some issues that have been mentioned, and I want to touch on those that I think are issues as well, and one of those refers to property rights. This was raised by Professor Kāwharu from Auckland University, who is one of New Zealand’s experts in free-trade agreements. She pointed out that under this free-trade agreement it will be very difficult for us to be able to, basically, stop foreigners coming in and buying residential land up, if we chose to regulate that. I think that is an issue that we need to be very cognisant about, and it opens it up, under the most favoured nations status, to other countries that we might have deals with, as well.

Lastly, I want to mention the investor-State dispute settlement provisions, because I think we have to put this in perspective. We have never been taken to a tribunal. We have never been brought in front of the World Trade Organization. The bar for this is incredibly high, as was just pointed out by Dr Reti. This is an aspect of the free-trade agreement with Korea that is highly unlikely to come into play because Korea has very good judicial institutions, and so does New Zealand. It would be likely that if there was any disagreement, it would be played out within the respective courts of either New Zealand or Korea. It is highly unlikely that it would end up in an investor-State dispute settlement tribunal, and even if it did, the chances of us losing that case are very, very low—84 percent of all cases taken against an OECD country have found in favour of the nation, rather than the private corporation.

I just want to say, in conclusion, that there are some issues around free-trade agreements and, certainly, as we look at the possibility of the Trans-Pacific Partnership agreement being signed, we must try to keep these in perspective in terms of the risks and the benefits—and the foregone risks, if we do not enter these free-trade agreements—to those producers and the manufacturers in New Zealand who will not gain access to markets and, as a result, will not add to the prosperity of New Zealand. I do think there needs to be a much better and more informed debate in New Zealand about free-trade agreements. I do believe that it is largely the fault of the Government for not exciting and, certainly, promoting that debate. I wish it could do more because we definitely need it when we hear the rather ill-informed comments and debate that we are hearing now, albeit with the greatest intent, and certainly the wish that they do the best for New Zealand. But I do think we need to have some balance in that debate.

With that, I would like to conclude my speech this evening by just saying that this free-trade agreement will go through tonight. As a result of that, there will be, effectively, a double whammy of 2 years added together and, as a result of that, a lot of producers around New Zealand will be a lot better off, as will a lot of New Zealanders.

Kia ora, Mr Chair. I want to just take a short call. I happened to sit in on the Foreign Affairs, Defence and Trade Committee when the negotiators came to brief the select committee on the workings of the Korean free-trade agreement, which the Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill will enact—will enable. I want to stand and support Fletcher Tabuteau’s contribution with regard to New Zealand First’s position. I acknowledge the contribution by Mr Shearer. It is a trade agreement and it comes down to what you are prepared to trade off to gain access to a market.

What was most interesting to me, when the negotiators were there giving us a briefing at that select committee—I asked them a very direct question. I asked them what Korea had asked for, because, as Mr Shearer just pointed out, there are an awful lot of bits and pieces that New Zealand will see go into the South Korean markets but, as Mr Shearer—he put a figure of $4.-something million as compared with $200-something million for New Zealand. I asked the negotiators what it was that Korea had asked for, seeing as they got virtually nothing out of it. They got nothing compared with what New Zealand had been able to gain. The single thing they asked for was an investor-State dispute settlement clause. You have to ask yourself why would a nation, when we are 41st in their list of trading partners—we are not important to them necessarily, no matter how important they might be to us—ask for one single thing? They asked for an investor-State dispute settlement clause and then they gave us all these other little bits and pieces.

How can other members of this Parliament stand up and say that this bill, which enacts that agreement, has no effect—that trade agreement would have no effect—when Korea obviously sees the investor-State dispute settlement clause as vitally important? It is the single thing they asked for. I understand completely why Labour members stand up to support this agreement, because they could not argue not to. They placed an investor-State dispute settlement clause inside the China free-trade agreement and that agreement will be updated upon the application of this one. Upon the passing of the bill and the application of the Korean free-trade agreement, the China free-trade agreement will then be updated. Although we have had no problems at this stage with the investor-State dispute settlement clause inside the China free-trade agreement, now this one updates it. It updates the China agreement under the most favoured nation status.

So those things are important. Those are the reasons why this is what New Zealand First is standing for. Dr Reti may say that 356 cases have been taken to international courts under the investor-State dispute settlement clause and only—we are not sure where they get their numbers from—25 percent were won by the people taking those cases, but how much money was spent defending them? How much money was spent by nations defending themselves and their own laws and their ability to make their own laws in their own nations, let alone whether they win or not? How much did it cost? Because that is the point—that is the point. That is why New Zealand First will not support this bill. We will not support a bill that enacts a trade agreement that has an investor-State dispute settlement clause.

The fact that Labour members stand and support such a bill while at the same time carrying placards up and down streets against the Trans-Pacific Partnership agreement boggles the mind. How is that possible? How can the Labour Party stand and say that they are against one thing because of an investor-State dispute settlement provision and, at the same time, support this bill, which will enact the Korean free-trade agreement and will update the China free-trade agreement? So I hope that in this contribution I have made it very clear why New Zealand First—

💬 Jami-Lee Ross: They’re not irresponsible like New Zealand First.

—will stand against this bill, because what you trade off is just as important as what you trade for, Mr Jami-Lee Ross. It is a basic premise of accounting. It is the basic premise of accounting: what are you giving away for what you gain? From our perspective, this Government, supported by the Labour Party, is actually giving away more than New Zealand can afford in the future for a few crumbs from Korea and from China. Kia ora.

Speaking in the Committee stage of this bill, I certainly agree with my colleague David Shearer that we need to keep this discussion in perspective. The three main comments that I would like to frame my first contribution around in the Committee stage on this bill are, first of all, to acknowledge that there were concerns—and they were the concerns of the submitters—and that there were genuinely held concerns. I also acknowledge the concerns being expressed by other Opposition parties in the Committee tonight. Concerns from submitters included those of the New Zealand Medical Association, the Council of Trade Unions, and academics. Those concerns did focus on the loss of sovereignty, especially in relation to investment rules and the investor-State dispute settlement clause in this agreement.

The one point that I would make on that, although there are other issues that I want to canvass tonight, is that this is a bilateral agreement, but the Trans-Pacific Partnership agreement is a multilateral agreement with a lot of other players, where those issues become much, much more important. That is an important point to make. I think that during my previous contribution on this bill I made the point that Labour will not blindly support free-trade agreements, as this Government seems to do, but we also will not blindly oppose them. What this party has previously done in Government is negotiate good free-trade agreements and point out the flaws, if necessary, where we oppose them.

I want to reference an article in the Australian Financial Review of last Thursday, which was the day after the new Australian Prime Minister appeared on the scene. Our Prime Minister John Key was interviewed by the Australian Financial Review. It was in reference to the Chinese free-trade agreement that has been negotiated over there. Mr Key waxed lyrical on this and said that although he thought that Australia should sign an agreement, it would be in New Zealand’s competitive interests if it faltered. He said that the benefits of the New Zealand trade deal with China were greatly understated before it was signed in 2008. He said: “I am a massive proponent of free trade, and the benefits of our free-trade agreement have been 11 times greater than the most optimistic estimates.” He went on and on. I would just like to point out that that agreement was negotiated by Labour and by Labour’s then Minister of Trade, Phil Goff. That is an important to point to make—that it was a Labour Government that negotiated the Chinese free-trade agreement and that Labour is sensible about free-trade agreements and in its approach to free-trade agreements.

There are problems with this bill. We do believe that there has been a botch-up around future Governments being able to introduce, for example, legislation relating to stamp duty on the purchase of land by foreign buyers. We, however, do say to the Greens that they are not right in saying, in their argument, that this free-trade agreement prevents us from banning in the future the sale of land through the Chinese free-trade agreement.

One of the other points I want to make is around the lack of engagement with civil society. Something that this Government needs to learn is that if you do not engage with civil society effectively and properly during these processes, then you are buying a fight and you are buying into a set of circumstances that is unnecessary. It creates consternation throughout the land. It can be dealt with in a much more trustworthy way that involves transparency and honesty and bringing along with you groups that can understand what it is that is being negotiated and why, rather than having them feeling as if they are being cut out of the process.

That is why Labour has clearly set down those five bottom lines, which we consider to be the most important when negotiating free-trade agreements, and that our support for the Trans-Pacific Partnership agreement is contingent on. Those are that Pharmac must be protected, corporations cannot successfully sue the Government for regulating in the public interest, New Zealand maintains the right to restrict sales of farmland and housing to non-resident foreign buyers, the Treaty of Waitangi must be upheld, and meaningful gains are made for our farmers in tariff reductions and market access.

I also want to turn to a provision in the Korean free-trade agreement that is before us tonight. It is around audiovisual co-productions. That seems like a sensible and interesting and good thing for New Zealand, around the ability for there to be more uniformity internationally among film and television co-production agreements. New Zealand already has a number of co-production agreements or arrangements with other countries. We have got them with Australia, Canada, Denmark, France, the United Kingdom, Germany, Singapore, Italy, Spain, Ireland, India, South Africa, and China—for feature films only—and Chinese Taipei. Since 1988 there have been 60 official co-production projects under these agreements. So there is potential for there to be greater arrangements with Korea around co-productions for audiovisual productions.

What I want to say is that we have got to be able to look after our own export industries and we have to be encouraging them in order for there to be trade happening. One of the concerns that I have got is around the lack of care and knowledge and investment in parts of our information and communications technology industry, and particularly around the video-gaming industry. This is one of the fastest-growing parts of our economy, with $78.7 million in revenue. Last year 83 percent of that was digital exports, which is incredibly high. There are high-value jobs, but there is very little investment inside New Zealand into that industry.

My question to the Minister in the chair during the Committee stage is whether, with this audiovisual co-production part of the bill before us tonight, the video-gaming industry is considered to be part of that. If so, should it then be eligible for the 20 percent rebate on visual effects productions completed in New Zealand under the Postproduction, Digital and Visual Effects scheme, which is the scheme that our movie industry is entitled to seek rebates on? The creative industries, of which video gaming is one, are one of the fastest-growing parts of our economy. Are they considered to be part of this part of the free-trade agreement? Are we considering that as being an important part of our economy that we should be encouraging co-productions on? If not, why are we not encouraging more growth behind our own borders? Why are we not giving that part of our economy access to a rebate? I would like to hear from the Minister on that.

Thank you for the call to speak on the Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill. As the Committee has heard, Labour supports this legislation because it will substantially reduce the tariffs faced by New Zealand exporters to South Korea. Korea is our fifth-largest export market, so it is an important trading partner for New Zealand. The bill may be short, but its effects are wide and it sits upon some analysis—85 pages, in fact, of national interest analysis.

Labour is pro-trade. We recognise that free trade is vital to the growth and success of a small economy such as ours—one that suffers under the so-called tyranny of distance. In a globalising market place, we must fight for every advantage we can for our exporters and for our country’s future. Labour acknowledges the opportunities, and that there are some risks that free-trade agreements like this can bring. We are very proud, as the Labour Party, of the free-trade agreements that we previously negotiated—for example, the one with China.

Korea is a significant trading partner for us, and we have been on the back foot as exporters to Korea. However, the agreement under this bill will substantially reduce the tariffs currently faced by our exporters to South Korea, and it will put New Zealand on a more level playing field when competing with sellers to South Korea from other countries that have been paying substantially lower tariffs than us because their earlier trade agreements have already reduced their tariffs.

My electorate of Manukau East in South Auckland is a city at the epicentre of a housing crisis of monumental proportions right now. Thousands of young New Zealanders, particularly, and low to middle income groups of all ages, increasingly are tenants in our own country. Māori and Pacific people are the worst affected, but Kiwis of all ethnicities are indeed struggling to get into homes. Families are living in garages and cars because of escalating rents, and are descending into a spiral of poverty. Non-resident foreign buyers, especially in Auckland, are fuelling housing demand, which is pushing up prices to levels most New Zealanders cannot afford. It is essential that the housing situation and the dangers of the bubble we are in is acknowledged and that the heat is taken out of the Auckland housing market as effectively and as efficiently as possible.

However, I have some concerns about the effect that this free-trade agreement with the Republic of Korea may have on the ability of future New Zealand Governments to establish controls on the purchase of New Zealand residential land by overseas buyers, and on its ability to bring in a stamp duty on purchases of land by overseas buyers, for example. The Government has not done well by New Zealanders over this part of the agreement. The Government is potentially ruling out a way of dealing with the crisis. It has accepted terms that are out of step with free-trade agreements in place between Korea and Australia, for example.

A side letter should be considered for the free-trade agreement, to clarify the effects of certain provisions of the free-trade agreement with Korea. In our minority view, Labour noted that significant groups making submissions on this bill expressed very real concerns about the loss of New Zealand sovereignty, especially in relation to investment rules. There has been limited engagement with the wider public about the concerns raised in some of the submissions on this bill, which is quite disappointing. New Zealand must not trade away its sovereignty when signing up for free-trade agreements, and the public needs confidence that these deals are, indeed, in our country’s best interests. Thank you.

Thank you very much for the opportunity to take a call on this Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill. I want to start by picking up a point that the Minister of Trade, Tim Groser, made when he was in the chair earlier on in the debate. He was, I guess, raising the concern that Phil Goff raised in his earlier contribution as well, which is that although this is an agreement that the Labour Party supports and it is an agreement that undoubtedly has benefits for New Zealand, it does not, in the language Phil Goff used, meet the test for a high-quality and comprehensive trade agreement. The Minister was—although supporting the agreement—also reflecting that in his contribution when he bemoaned the fact that when we look at the agreements like the one that New Zealand has with China and also the one with Taiwan, we see agreements that, although not perfect, are closer to that ideal of a high-quality and comprehensive agreement.

The Minister posed the question as to why it was that an agreement such as this one with the Republic of Korea had not reached those heights. He was suggesting that it was because we were following on from larger countries in our negotiations with the Republic of Korea. He did not name them—he was actually quite careful not to name them—but it is in the national interest analysis, so I am not going to be creating a diplomatic incident by noting that it was Australia and the United States and others we were following on from. Mr Groser said it was a paradox of trade negotiations. I would suggest that this is a major issue for us as we look ahead to what happens for New Zealand in the negotiation of trade agreements. We were certainly fortunate at getting in first, as it were, with China. It meant that we were able to put the imprint of New Zealand trade negotiations on that agreement. I see in the agreement that we are dealing with today that we see elements of that New Zealand style. So the fact that there are side agreements on labour and the environment—very good side agreements on labour and the environment, which are part of this deal—is a sign of the New Zealand way of saying that it is about market access and it is about access for our providers of services but it is also about the issues that sit around the outside of that: how we treat workers in our workplace, what role we give to environmental standards in the way that we go about the businesses and industries that become the exporters that sell into these markets.

So I think New Zealand has a way of doing those sorts of negotiations that I think helps create good quality agreements, but it is a major issue for us—and I know the Chair will not want me to talk at any length about the Trans-Pacific Partnership—as we enter into these larger multilateral or plurilateral agreements that we ensure that their quality remains high. I think, from a New Zealand point of view—particularly, for instance, if we look at an agreement with the European Union, which is certainly one that we want to see happen—that we take into those negotiations the spirit of the way New Zealand does these agreements, rather than allowing ourselves to follow on from where there are different kinds of interests at play. Ultimately, let us be honest, when the United States enters into a free-trade agreement discussion, there are all kinds of interests at play in the background, which is different from the, I guess, “New Zealand Inc.” approach that New Zealand takes to these things. So I do not have an answer for the paradox that Mr Groser has posed, but what I know is that for New Zealand, if we behave in a New Zealand way, take a “New Zealand Inc.” approach, and have that broader set of issues built around our agreements, that helps to build higher-quality agreements.

Ultimately, we know that for New Zealand a large-scale global multilateral agreement is what would be the best thing, but we are miles away from that. So then we go looking for regional agreements, because that is the next step down. We are seeing, with the Trans-Pacific Partnership agreement, how difficult that is. So bilateral agreements—high-quality, comprehensive ones—are going to be significant and important for New Zealand, and we should continue to support those. Mr Chair, I want to pick up two or three things, and if you are gracious enough to give me another call after this one, I will get through them all. But one of the things I want to do is pick up the question of land sales and note the Labour Party’s concern, which was driven by advice that the Foreign Affairs, Defence and Trade Committee got about whether or not new categories of land could be added to the existing restrictions on the sale of farms and other sensitive land. This is not just about the fact that the Labour Party happens to believe that we should be, as my colleague Jenny Salesa just talked about—

I move, That the question be now put.

A wise choice, Mr Chair. Picking up Jenny Salesa’s point about sensitive land, it is not just that the Labour Party does believe that we do need to apply tighter restrictions to non-resident foreign buyers—and we do, because we believe that that is a major factor in the house price inflation that is pushing New Zealanders out of being able to buy their house—but it is more, in this agreement, the principle that the Foreign Affairs, Defence and Trade Committee could not be sure, in its deliberation, that a new Government could introduce those restrictions, or, indeed, as Jenny Salesa said, a stamp duty.

We as a Parliament need to be very careful about passing through, in this case, a free-trade agreement that would limit a future Government from being able to do that. This is a legitimate area of public policy where there is a particular problem and a particular solution being proposed. We are very disappointed that the National Government did not heed the calls of the Labour Party members of the select committee and others that we take more note of giving the ability for a future Government to be able to make that kind of law and pass that kind of restriction.

On this side of the Chamber, we want to make it clear that it is our view that the Government should be able to do that. It is important, in terms of building public confidence in free-trade - type legislation, that we do not allow it to be portrayed as restricting a future Government from doing something that many, many New Zealanders today would want the Government to be able to do.

I want to say something about the whole way in which this agreement has been created in terms of relationships with civil society. On this side of the Chamber, you have heard from all of the speakers that the Labour Party remains committed to free and fair trade and that we understand the place of New Zealand as a trading nation. I think one of the ways in which this Government has completely dropped the ball is that it has failed to build any constituency in the public for that. It has let that go. Part of the reason for this is that Mr Groser is a very active trade Minister, to put it in a nice way, in that he travels the world, so he does not have a lot of time to spend in New Zealand talking to people about trade. But, actually, it runs much deeper than that. It runs much deeper than that.

The National Government has finally managed to get a free-trade agreement to the House. Woo hoo! Good on it. It finally got there with South Korea. The Minister of Trade mentioned that it was a torturous negotiation. Well, I am sorry that it was a torturous negotiation, but that is the extent of the achievement now—we have got this one agreement. But, in the meantime, public understanding, public confidence, and public trust in what we are trying to do with trade has dissipated.

The Trans-Pacific Partnership agreement is a whole different matter. When you read through the national interest analysis in this agreement, the Korea agreement, it is about market access. It is about services and the access of our services that is provided. It is core trade activity. The Trans-Pacific Partnership agreement is much bigger, much larger, than that. But the failure of the Government to engage properly with civil society on this really is very disappointing. We will not as a country go forward with a national consensus around trade in the absence of that engagement. We know from the Trans-Pacific Partnership agreement that there are strong concerns from groups like the Council of Trade Unions, which previously has been quite involved in the way in which we have gone about our trade negotiations, that they simply are not being talked to and the matter is not being discussed. We need a much better model for engagement with civil society so that we build confidence in trade.

Trade matters to New Zealand, yet the Government does not seem to want to spend any time engaging with the public about how those agreements work, what things should be in, and what things should be out. It is disappointing to note in the minority view put forward by the Labour Party that the advice from officials was that there was very limited engagement with civil society. That is simply not good enough in terms of what is such an important issue for New Zealand.

So the Labour Party will support this legislation. On balance, it is good. It does reduce significant tariffs. There are industries that will be able to flourish—kiwifruit being one of those in particular—out of this. It is not perfect. We are following on and getting not as good a deal as some of those other countries we are following on from in some areas—like services, for instance—and we need to look again at the way we go about that negotiation. But, fundamentally, this kind of trade agreement is one that is easier to support because it is clear about those benefits. The Government needs to take a good, hard look at itself and the way it has mucked up the Trans-Pacific Partnership agreement.

I move, That the question be now put.

I rise to take a call on the Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill. The Greens are not supporting this bill. We would like to see fair trade rather than free trade. We have got a number of concerns with the free-trade agreement. There is no opportunity for Parliament to vote on the free-trade agreement itself. This bill is only the legislation around it. It deals with legislative changes such as the tariffs and there are a number of questions around those tariffs.

What really motivates me to get up is that every free-trade agreement that we seem to be involved with deals out some New Zealand producers, some New Zealand businesses, and some New Zealand wage earners because it is not even. If it was fair, it would be fine. It is good to see that there are labour and environmental provisions in this agreement, but they do not go far enough. It is still not an even playing field for New Zealand producers of those products that we may bring in from Korea, and that has been the case time after time after time. It is good that there are benefits—and I acknowledge that—for my friends in the kiwifruit industry, my beef farmer friends, and some in the dairy industry. But some of those—kiwifruit I think is one of the better ones—get the full benefit, I think, in about 5 years. Beef and dairy are light years away before they get the real benefits of this.

I notice that in 5 years’ time 67.4 percent of the things we are exporting are benefited by the agreement, in 10 years it is 79.3 percent, and in 15 years it is 97.8 percent. We are nearly there in 15 years. For Korea it is the other way round, and she is all over, Rover—a lot of it is already—in just 7 years. Then we have a number of product-specific rules, and I note that for rice and processed grains we had to accept more restrictive provisions for certain whole foods and products made from them. There are people in New Zealand who want those products. Why are we not getting the same deal as the US and Australia? I think we have sold out rather too easily, and I am concerned that our producers of products that we will allow in from Korea do not have to meet the same environmental or labour standards. Why should they not have to match that? Why are we not putting up our tariffs and things to make sure that our producers of the very same goods have an absolutely equitable playing field?

I was very concerned to hear that this bill updates the China investor-State dispute settlement provisions. Just wait and see as those provisions do bite us in the butt in time. We may not have a record of being sued just yet, but we all share the neighbours—like Australia, our friends in Europe and elsewhere, and South America and other countries—that have been subject to those provisions by the various corporates. Yes, this does not seem to be maybe quite as bad as what we can expect under the Trans-Pacific Partnership agreement, but it is still heading down that same track.

I note that there is quite a delay before beef gets the full benefit from any tariff reductions, and I wonder whether that is because we have got a bit of a bad track record selling beef over there. We had a shipment sent back when they found endosulfan residues in beef, and we nearly lost another one, and we then decided to get rid of endosulfan off the shelf. Would it not be good if the environmental provisions meant that we were actually producing the best product possible—organic-type products without any risk of residues in them? We would not need to be going out and selling ourselves into a weak outcome because we would have product that was absolutely top class and in demand as being the best in the world, the most favoured stuff, which is genuinely clean, green, and 100 percent pure. We would be getting good deals, and not because we have a track record of some rubbish that has been contaminated because we are a pesticide-focused country. This Government is doing nothing in this agreement here about making sure that we do not get residues back the other way either, but we are not doing anything else to make sure that we have got the best possible product and are getting the best, most favourable deals because we are absolutely at the top of the play in our primary production.

The Greens will be opposing this bill, but we really look forward to getting some fair trade in the future, rather than these free-trade agreements that are not actually fair. Thank you.

It is a pleasure to take a further call or, if you will permit me, Mr Chairman, two calls to try to round off some of the arguments on this very important piece of legislation. I wish to touch on the arguments that have been raised by the Green Party and several arguments that have been raised by the New Zealand First Party, and to revisit a couple of points that I made in my earlier intervention in respect of investment and investor-State dispute settlement issues.

Firstly, the argument from Steffan Browning, the member who has just resumed his seat, seems to be that a deal that is not perfect is by definition neither fair nor free. It is, I guess, axiomatic or inevitable that in any trade negotiation neither side can get 100 percent of what it wants. There must always be some concession to the other side because both sides have got things they want from the other, so there must be some process of trading.

I was privileged some years ago to visit Korea three times, and I have always enjoyed the sense of enterprise in that country. It has been very clear that the Korean Government made a decision that Korea was going to become a technology power and it was going to move its economy upmarket, with higher levels of knowledge and technology. So we have Hyundai, Samsung, Kia, and many other leading global brands that are either sophisticated industrials or technology leaders. Having made that decision, it became clear, I believe, to the Korean Government that it was to its advantage to lower the costs of some of its input materials, including soft commodities from New Zealand, and our government—with a small “g”—across successive parties in power has encouraged the Republic of Korea in that direction. From that understanding, this trade negotiation was born.

Did we get 100 percent? No, but we went into this negotiation with fewer tariffs up there to start with, and so, given that Korea is reducing its tariffs by more, it is not unexpected that it may take a little longer. So I disagree with our Green colleagues. I do not necessarily think that that means it is a bad deal. It is a deal worth having, and, I said earlier, the national interest analysis is specific enough to make that clear on the facts and on the numbers.

I would further like to say that it is easy for us politicians to call into question a negotiation of which we have not personally been part. Whoever is in power, I think there is a degree to which we have to rely on our professional negotiators to do the job that they are expert in. Several colleagues in this Chamber—Kennedy Graham, Grant Robertson, and myself—have all had direct experience in those roles. I do want to acknowledge officials who are here. It is probably not appropriate to mention them by name, but I am severely tempted. I will, I think, note the presence of Mr Martin Harvey, who I think played a key role in these negotiations and, in my experience, is a very able official indeed.

I am not prepared to say that this agreement was not a good deal. I think it was a very reasonable deal to have struck. However—and it is a big “however”—it does raise two important issues of principle and precedent that as I mentioned earlier, are germane to us as we conclude a broader and more complex negotiation around the Trans-Pacific Partnership agreement.

Let me turn firstly to the investment issue. It is common ground that the Australian Government probably has a more robust position in respect of preventing or restricting non-resident foreign purchases from Korea of domestic real estate. Australia has both a stamp duty and restrictions as to quantum and process. We do not have that, and there is—I think it is common ground—at best, ambiguity around how this agreement deals with that problem.

I would like to acknowledge Minister Groser, who spoke earlier, for turning his mind and his comments to that matter. It is possible, based on his take on it, that having reached the position that we are in, the Government believes that it is in a position to impose restrictions, at least in theory, and a more mechanical solution would not be in our interests in respect of other trade agreements. We hear that argument, but we do believe, and I think my colleague Jenny Salesa has expressed it very eloquently, that there are substantial—

I move, That the question be now put.