Trade (Anti-dumping and Countervailing Duties) Amendment Bill

Members, when we were on the first reading of the Trade (Anti-dumping and Countervailing Duties) Amendment Bill, Mojo Mathers had the call, and she has 2 minutes remaining if she wishes. Does the member wish to take it? No. Very good.

I am proud to rise on behalf of the New Zealand First Party and my colleague Fletcher Tabuteau to speak to the first reading of the Trade (Anti-dumping and Countervailing Duties) Amendment Bill. This bill seeks to introduce a public interest test to New Zealand’s anti-dumping and countervailing duties regime in a provision allowing for the duty to be deferred in cases of natural disaster and other emergencies. Dumping is a practice, for those of you who are not aware, where goods are sold at below cost, primarily as a means to drive local competitors out of business. Interestingly, it was Canada that first introduced such measures to counter US intrusions into its domestic market in 1904.

I will try to give a very simple example for those members of the public who are watching or listening at home, or perhaps even driving in their car, tuned in and listening to Parliament tonight. If another country produces too much of a material such as concrete and offers it to New Zealand, where we have a small concrete industry trying to compete within the domestic market, that concrete would flood our domestic market at a reduced price. Therefore, this could be seen as being an anti-competitive practice, especially for the example I have just provided, which is the small domestic concrete market.

How would this bill be considered to provide domestic industries with assurances that they can be protected against dumped, subsidised, and injurious imports?

💬 Simon O'Connor: Is this what they call a concrete example?

In international trade, dumping often has the effect of endangering the financial viability of manufacturers in the importer nation. You can still laugh, Mr Simon O’Connor. New Zealand First will always stand up in this House to protect local manufacturers and local businesses. We are the only political party with true conviction in our first belief that we must put New Zealand and New Zealanders first.

💬 Hon Paula Bennett: Oh, please.

It is interesting—if you did not know it then, you know it now, Mrs Bennett. It is interesting, is it not, this world of politics—it really is.

Today I wish to extend my wholehearted congratulations to Minister Coleman on the speed with which he and his Cabinet have pushed this bill to its first reading. What an accomplishment. It was only this month that that Cabinet agreed in principle to the bill, and here, tonight, we see it right before our very eyes, like the speed of lightning. Some may call this efficiency; others may call this something else. If this does not make us celebrate how efficient Minister Coleman is, it makes us worried about the motivation behind the how and the why this bill got to the House so quickly.

Anti-dumping measures are designed to limit or, ideally, prevent a company from selling goods below cost to drive local competitors out of business. The World Trade Organization has recognised that heavily subsidised markets overseas can undercut New Zealand businesses in the market place. Theoretically, having driven the domestic manufacturers out of business, large multinational companies are then free to use their mighty market powers to fleece the domestic customer. As you can imagine, New Zealand First is adamantly opposed to this tactic. The wider implications of this bill are of huge concern to us. The Minister talks about a public interest test, but this is limited, and we will seek to expand on this conversation further throughout the select committee process.

We agree, again, that the anti-dumping and countervailing measures are accepted devices in trade treaties. However, New Zealand First warns the Minister that unless applied in a considered and consistent approach, this could actually do more to repress competition and could actually encourage inefficiencies, despite what the Minister asserted in his speech. But, done right, our domestic producers can move forward, assured of the countervailing measures. The public interest test is, of course, imperative, and this supports a commerce and consumer affairs Minister whose stated outcome is to support New Zealand business. But the question mark still exists, as the explanatory note of the legislation describes the public interest test as involving “an assessment of the extent to which the cost, to New Zealand downstream industries and consumers, of imposing a duty would materially erode the benefit,”.

New Zealand First agrees that the test should allow for broader public interest elements such as competition and consumer welfare, so the question mark is the stand-alone provision empowering the Minister to defer, to not impose, to terminate, or to suspend. Clause 8 amends section 3 and provides a new definition of “emergency” that allows the Minister to trigger these self-appointed powers.

Again, another question mark is in relation to the public interest test. The Minister must consider only the cost to New Zealand downstream industries and New Zealand consumers—there is the first issue. Actually, that is a real issue, and it is huge. If the Minister considers it appropriate, the Minister may consider the domestic industry of a relevant third country.

Make no mistake, our support is for only the first reading of this legislation. It is imperative that the select committee process is able to take place. We reserve our final decision upon feedback from the New Zealand public and the experts in this space. Thank you.

I am very pleased to follow a call here. I will wait for counter-heckling. I am very pleased to talk on this Trade (Anti-dumping and Countervailing Duties) Amendment Bill. I am very pleased to hear that New Zealand First is supporting this to first reading. I think—and I assume, like all members of the House, actually—I am looking forward to the select committee process. We are engaging not only with the public at large but particularly with those in manufacturing who will be able to come in and speak to us, for us in turn to be able to hear and make some decisions.

I am not going to belabour the points around this bill; they have been well traversed by colleagues before me. The long and the short of it is that this is an attempt to put in a public interest test when it comes to dealing with dumping and duties. The long and the short of it is that at the moment our law, basically, allows duties to be put on to, obviously, protect manufacturers—rightly and understandably so. But there are circumstances and times where it is felt that the wider public good needs to be taken into account. One only needs to think of issues around housing, particularly residential housing, where we note that a number of products, actually, in New Zealand are relatively expensive. So this bill, amongst other things, is an opportunity for the Minister to be able to take a slightly wider view, and not simply view the placing or replacing of duties from a manufacturing point of view but to also look at what is good for the public.

What has not been touched on so much is a smaller but not unimportant provision, within the bill, and that is around the whole natural disaster aspect. The long and the short of that is that at times of natural disaster in this country provisions would kick into place, if this bill becomes an Act, where duties can be removed to, ultimately, allow produce and materials to come in to help us rebuild. But, as I said, I do not intend to belabour this. This is a relatively simple bill in terms of its intentions, but I certainly acknowledge that how it becomes expressed introduces a number of complexities, and I, like others who have spoken, am looking forward to the select committee process. I commend the bill, on its first reading, to the House.

I call David Clendon—5 minutes.

I am pleased to take a short call to reaffirm the Green Party’s opposition to the Trade (Anti-dumping and Countervailing Duties) Amendment Bill, as has been flagged earlier by my colleague Mojo Mathers. As we have heard, dumping is a practice whereby a quantity of goods or products, be they primary produce or manufactured goods, whatever they might be, gets dumped into a country from some other place, usually below the cost of sale in the country of origin. I guess our fundamental objection to this legislation is that it further weakens the protection for New Zealand producers, New Zealand manufacturers—the people who actually produce things and make things and employ New Zealanders here in New Zealand. I think those protections are already weak.

We know that we are one of the least subsidised countries in the world, particularly in areas like primary production, and that in a sense is something to be proud of. Certainly, I was pleased to be at the Ballance Farm Environment Awards last week—the national finals after a series of regional finals. There is some pride within our primary production sector in the fact that it is not subsidised to any significant extent and yet it manages to compete very well against producers who are. So our belief is that this introduction of a new consumer interest criterion will simply lead to a reduction in the protection afforded to our already quite exposed producers.

That is OK—New Zealand producers and manufacturers expect to compete, but the Greens have long argued that fair trade is different from free trade. Free trade is basically open slather. It is a race to the bottom. It is about price compared with value. We think that fair trade is actually a much broader and a more structured position to take, and I think that this legislation will take us away from that notion of protection of our producers and our manufacturers—who can compete, but they must be in a position where they compete fairly and on something like an even footing. Dumping obviously counts very much against that.

The central debate is whether we protect local industry and jobs or allow allegedly greater consumer choice, increase competition, and provide cheaper goods. All of those latter three might on the face of it appear OK but it is about short-term or long-term thinking. Yes, if we allow some country to dump a quantity of goods here, whatever they might be, then, yes, in the short term it means the consumer buys a product at a lower price than they would otherwise. But what about the supply chain locally? What if some primary produce is dumped in New Zealand and it, effectively, means that 1 year’s harvest from our local providers suddenly does not have a market or at least a market at a price that assures even a reasonable return—a recovery of costs to the producer? That could be sufficient to send producers out of business.

We know that primary production is not a place for the faint-hearted. A bad season due to weather or whatever, then suddenly the dumping of goods on our market here could be enough to undermine the integrity, the investment, and the employment opportunities of a given production, of a given supply chain. Similarly, with the notion of competition, New Zealand companies and primary producers can and do compete, but it is important that they be able to compete fairly. How can New Zealand producers compete on price when they are obliged to meet the cost of the regulation that we in Parliament impose on them?

Minimum wage requirements, health and safety requirements, environmental waste management laws—these sorts of things all impose costs on producers and manufacturers, and that is as it should be. How and why ought our manufacturers and our producers be obliged to compete with producers who are not constrained by labour laws, by health and safety laws, or by appropriate environmental regulation? We see the weakening of the protection of our local producers and manufacturers that would emerge almost inevitably from this bill, because it is a reflection of short-term thinking. It is about grabbing a cheap price now rather than thinking about the long-term consequence. It is about a cheap price, rather than addressing issues of value. We will continue to oppose this bill.

I call the Hon David Cunliffe—5 minutes.

It is a pleasure to take a short, 5-minute call in support of this bill and thus join with most members around the House. I will just run over the arguments, which I think are being validly raised, of the member who has just resumed his seat, David Clendon, on behalf of the Green Party.

Let us firstly acknowledge the definition of what dumping is. Dumping is when country A sells goods or sometimes services into county B at a price that is lower than they are domestically available for in country A. As the regulatory impact statement that accompanies the bill says, that is not technically illegal in itself in most countries, but it has been, first under GATT and then the World Trade Organization rules, subject to anti-dumping levies or countervailing duties from country B, the recipient country, if country B feels it is harming its domestic industry.

For New Zealand this has quite a long history. It is a type of provision that, historically, we have relied upon to protect some of our exports in third markets, where we might be country C. Let us say it is a market for milk in the Middle East. Country A—let us say it is a European country—dumps milk powder into a Middle Eastern country that we export to. We, of course, do not like that practice because we do not want to see our products undercut. So there are real downsides to dumping, and that is why the world trade rules allow for both anti-dumping duties and countervailing duties.

What does this bill, then, do to change that framework? This bill allows a discretion to the Minister, and sets out criteria by which the Minister will apply the discretion, to allow the suspension or the non-intervention of countervailing or anti-dumping duties for the purpose of benefiting consumers in the recipient country. The classic example of this—in fact, it is the reason that is stated both in the Cabinet paper and the regulatory impact statement—was the building and construction industry in Christchurch. I see we have a few Christchurch colleagues around the House. There was, I think, legitimate concern by the Government that a very concentrated market for importation and goods supply chain meant that prices were way higher than they should have been. This legislation is one of a number of measures that I think were rightly introduced to seek some downward pressure on those prices. I think that we on this side of the House would say that that is a legitimate goal. We want people to be able to rebuild their homes and their lives after the Christchurch earthquake without undue profit margins going to just a couple of supply chain companies. That is fair enough.

The issue here—and this is where we acknowledge the argument the Greens have raised, but we do not agree with it, at least not at this stage—is that this is a good place to start to have the interests of consumers at heart. Otherwise, you often reinforce monopolistic behaviour by producers. So we like the consumer interest test and we agree with the idea that the Minister should have to weigh up the pros and cons of the national interest, the consumer interest, and the precedent that is set by allowing a dumping practice. I think there is a reasonable quality of cost-benefit analysis in the Cabinet and the regulatory impact papers, and in some cases, such as building products, they come out on the side of saying that there would be a good pro-consumer case for not imposing duties.

We think that we should pass this bill. We think, however, that we should be carefully monitoring how it is applied and the effects that it has.

Just to sum up, dumping is where one country sells or exports goods to another country at a price that is lower than they are available for at home. When that occurs it is technically called dumping. It is not technically illegal under world trade rules, but it does give the recipient country the right to respond, if it feels it is being harmed, by imposing an anti-dumping levy or a countervailing duty. Cabinet—and we agree that in this case there is a probable cause—has brought this legislation in to give the Minister a discretion to suspend or not impose those duties in some cases where the national interest benefits. The example given was building products supply for the Christchurch earthquake. Let us give the Minister the discretion, let us see how it is used, and let us carefully monitor the results.

Thank you for the opportunity to speak on the Trade (Anti-dumping and Countervailing Duties) Amendment Bill’s first reading. New Zealand is a signatory to many World Trade Organization agreements, and this bill addresses one of those—which is where, according to the World Trade Organization agreements, anti-dumping duties and countervailing duties can be imposed if New Zealand feels that there is a dumping of some products. The Government wants to ensure that New Zealand has a competitive market where consumers get the best value for money. As a counterpart, we also want to protect our manufacturers so that the products that are produced overseas cannot be sold under value in New Zealand.

The bill introduces a test to the anti-dumping regime that will better balance consumer interest with those of the manufacturers threatened by unfairly priced imports. By introducing a public interest test, the regime can now consider whether consumers are benefiting from the lower price, and greater choice, availability, and quality, and whether this outweighs the effects on the industry. It is very important because we have got a very small manufacturing base in New Zealand and we want to protect that. We also want to protect that consumers should get the best-quality product at the cheaper price. We need to understand that these are the things that affect our economy.

The example that most of the speakers have given is of construction. You might remember that some time ago the Government asked for this study to compare the pricing of construction products in New Zealand and Australia, and it was found the Australian products were much cheaper than New Zealand. That is why the Minister at that time recommended that we should reduce the duty on imports of construction materials so that construction in New Zealand could be competitive and the pricing of housing—which was skyrocketing—could be controlled. These are some of the measures that the Minister can do with this bill’s introduction. Once the select committee process is over and the bill is passed through Parliament, the Minister will have more tools to ensure that there is the right competition in the market. With these words, I commend the bill to the House.

It is my pleasure to take a call on this Trade (Anti-dumping and Countervailing Duties) Amendment Bill, and, as my colleagues have signalled, Labour is supporting this legislation. We are keen to see this legislation go to a select committee so that some of the questions that have arisen in this debate and, I am sure, others that will be raised by submitters can be teased out.

As speakers before me have outlined, the purpose of this bill is to introduce a public interest test into New Zealand’s anti-dumping and countervailing duties regime, and essentially this changes laws to allow goods into the country without duties being imposed on them if it is considered that consumers will benefit. That is the critical part of this legislation. It is about getting that balance right—about balancing how a consumer will benefit from these changes against the need to protect local industries—and that is the debate that we are hearing in this House. We are saying that we do not want to see our local industries destroyed but we do need to put in place a regime that sees that consumers will benefit, and that is what the public interest test that is going to be introduced under this legislation will do. It will give us the tools to weigh up whether or not there is a public interest in this—whether or not ordinary people, when they go down and look to purchase certain goods and materials, are going to benefit from this.

There is a more general ability to do this, and my colleague David Cunliffe spoke about that in his contribution, but there is specifically pointed to in the legislation an ability to do this in the period following a natural disaster. I think that we do need to think about what happens to a supply chain when you have a rapid increase in demand and there is just no way that the local suppliers can meet that demand, and that is what we have seen in the case of the Christchurch rebuild.

I think it is worth going back and thinking about the genesis of this legislation. We know that the bill came out of the Productivity Commission’s 2012 report on housing affordability and that that is where this idea first came from. This is a report that was presented to the Government in 2012, and here we are in 2016 debating this measure. Some could say that it is a little bit too late and it is no wonder that we have not done the things that we need to do to address the really real and critical issues of housing affordability, because this is 4 years on from the Government being alerted and this is a measure—it is not a silver bullet, but it is a measure—that could have been introduced to address some of those issues.

There was the report to the Government. It directed the Ministry of Business, Innovation and Employment to undertake a market-level study into the construction sector to identify barriers to improved housing affordability. The regulatory impact statement that sits alongside this bill explains that the ministry identified tariffs and anti-dumping duties on residential construction materials as two barriers to competition and productivity, and it went on to give some specificity around those claims. So this is legislation that is born out of a particular need in our country at the moment.

But after that report it came through that there was another phase of some consultation, where the public did have a chance to have their say on some measures that were going to be introduced under this legislation. One of the things that came through really clearly in that public consultation, which was carried out throughout 2014, when the discussion paper was released, was that there was a range of opinions. Twenty submissions were received on the discussion paper. Thirteen submitters expressed support for the status quo, while seven submitters supported the adoption of the public interest test. A range of questions were raised in these submissions, whether it was the people who were supporting the status quo or the submitters who actually did want to see the introduction of a public interest test, and they are questions that the select committee will need to consider when this legislation goes before that committee.

One question will be around the limits of the test: what are the parameters that we are putting in place, and whether it is fit for purpose in order to address the issues that have been spelt out, which the legislation is trying to address. What we learn from the legislation, in terms of when the imposition of a duty is being investigated as to whether it is in the public interest, is that the chief executive of the relevant Government department that administers the bill must investigate the following issues. They must look at “the effect of the duty on the prices of the dumped or subsidised goods:”. They must look at “the effect of the duty on the prices of like goods produced in New Zealand:”, so this is very much having a look at what the impact of making these changes will do to our local industries. They must look at “the effect of the duty on the choice or availability of like goods:”. They must look at “the effect of the duty on product and service quality:”. They must look at “the effect of the duty on the financial viability of the domestic industry:”, so we can see that many of these tests are there to ensure that we do not destroy our domestic industries in the process. They must look at “the effect of the duty on employment levels:”, and this is going to be a critical test. We do not want to see goods coming in without the proper thought given to what it does to jobs here in New Zealand. They must look at “whether there is an alternative supply … of like goods available:” and any other factor the chief executive considers might be important.

So these are going to be really important criteria for the select committee to consider, and I am sure that the submitters who will submit on this legislation will address those. Are these the right criteria that we are putting in place for making these decisions? Are these the things—or are there more—that should be considered when deciding whether or not to apply this legislation? It will also need to be considered how this legislation, and how allowing these goods in, will fit with our international obligations. This was something that was raised when there was the call for public submissions in the discussion document, so I am sure something the select committee will need to consider is how this fits within other trade agreements and with the other objectives of the World Trade Organization, of which we are part, and how New Zealand is seen to fulfil its obligations there.

As I have mentioned many times, one of the things I am sure the select committee will turn its mind to and give good consideration to when the bill appears in front of that group of parliamentarians is the impact on local industries, and that will be something. One of the other issues—and there will be many, but another issue that I picked up from the regulatory impact statement that was raised in the initial round of consultation on the discussion document was the complexity in administering the rules that are put in place. Are we making a set of rules where it is possible for them to be administered and for them to be checked that they are being applied in a fair and even-handed way?

So these are all questions that the select committee will turn its attention to and I am sure that it will give due consideration to them because these are really important questions that do need to be addressed, and I think that everybody knows that. But we do have to ensure that we are getting that balance right between making sure that our consumers are getting a fair deal and making sure that our local industries are also receiving a fair deal.

I think we have a number of case studies where we can have a look at what happens in a place after a natural disaster, like Christchurch, where you do have the normal demand and supply mechanisms severely upturned. But what we do have to realise here is that this legislation, although it seems sensible—and Labour is always happy to consider sensible trade legislation, and consider it at a select committee. We are more than happy to do that, but we cannot kid ourselves that this is the big idea that we need in terms of how we grow our economy and how we provide the kinds of incomes that we need so that all New Zealanders can get a fair deal. This is not the big ideal that will get us exports reaching the Government’s goal of 40 percent of GDP. This is tinkering around the edges.

We are happy to support this. We think there are questions and fishhooks that need to be addressed at a select committee, and we certainly will play our part in that.

I rise to take a call in this first reading of the Trade (Anti-dumping and Countervailing Duties) Amendment Bill. As the previous speaker, Dr Megan Woods, has been talking about, this is not the big ideal. Well, we would agree. This is not the big ideal. This is one part of a comprehensive plan.

If I focus on this bill in particular, there have been lots of comments in regard to the construction industry, obviously. There was a study that was conducted in 2013, in fact, it was the residential construction sector market study, and Cabinet papers clearly indicate that after that study was considered—it was in 2014 when Cabinet considered this—Cabinet considered suspending the tariffs that were in the construction industry. That was important. So there was some comment about why it has taken so long. That period of 3 years is quite critically important. Any cost-benefit analysis has to be done over a period of time, hence the reason for that period of 3 years from when that was considered in 2014.

The other thing is when we think about the construction industry and we think about, I suppose, the cause and effect of the removal of the tariffs at that time. One of the things that is of concern when we think about housing and construction is the way that the removal of tariffs is quantified in cases both here and abroad. In particular, if we think about Australia, to give an example, it is costed and quantified per square metre. At that time the averages were around—so, for instance, in Australia the average build, from design to build, to a code of compliance and completion, to handing over the keys to the new owners, the average cost is around about $1,200, given the exchange rate for us, as well.

If we think about what the comparative cost of that is in New Zealand, it is around about $2,500. If you were to do the sums, the average house of 150 square metres would cost around about $375,000. That is just to build and complete. We know with that costing there had to be some means in there for us to be able to try to capture that cost and try to reduce it so that our consumers could benefit from this—hence the reason for reducing those tariffs was quite critically important. There have been a lot of lessons that have been learnt from that.

The previous speaker, Megan Woods, talked about the regulatory impact statement, which talked about that. One of the things that did come out of that was that although costs had been reduced, when we think about certain building requirements that were there—in fact, in paragraph 34 of the regulatory impact statement, it talks about that. It is talking about reinforcing steel and coil, plasterboards, nails, and so forth. They were just part of a test to see the reduction that that would have.

But one of the things that did come out of that, hence the clause in this bill, which is critically important, is the public interest test in the regulatory impact statement. They call it the “BPIT”—better public interest test—and that is to ensure that consumers would benefit. So although we can reduce tariffs, and for the manufacture and the supplier there may be an added benefit, what was not clear was seeing how the consumer was also benefiting from the reduction of the tariffs.

So we are happy to hear that the support is across the House, bar the Greens. We think that actually at the select committee we will hear from submitters from the sector. We will hear from those who are consumers. We think that will give us a good indication about the direction that this bill is taking. We think the discretion that has been afforded to the Minister is important to that as well. So we support this bill in its first reading to the select committee. I commend this bill to the House.