Regional Comprehensive Economic Partnership (RCEP) Legislation Bill

The question is that Parts 1 to 3, and clauses 1 and 2 stand part.

Can I just start by thanking all those engaged in processing the Regional Comprehensive Economic Partnership (RCEP) Legislation Bill so far: from members of the Foreign Affairs, Defence and Trade Committee, members of Parliament, and the civil society and business representatives. Your engagement has been a very critical part of this process.

It’s no secret that the international trading regime is under enormous pressure, a trend that has intensified as a result of the COVID-19 pandemic. New Zealand businesses, and exports in particular, have been facing challenging times, but we have also seen how resilient they have been. Our Government recognises how important it is to support these businesses, and RCEP is part of that. It is an agreement which reduces trade barriers, facilitates trade, and provides new market access. RCEP is important in supporting our trade-led recovery from COVID-19. RCEP is also critical to our engagement internationally. Joining RCEP ensures that we will be at the table where decisions affecting our interests will be taken and it reinforces our place in the region and sends a very important signal of New Zealand’s continued openness to trade and the importance of rules-based trade. Most of the obligations under RCEP are met through New Zealand’s existing legal frameworks and policy regimes. The RCEP bill makes a small number of legislative amendments that are needed to ratify RCEP.

The bill was introduced in the House on 4 May 2021 as an omnibus bill that amends the Tariff Act 1988, the Tariff, and the Customs and Excise Act 2018. Broadly, the bill will enable the application of preferential tariff rates under RCEP. It will enable the application of transitional safeguard measures under appropriate circumstances on imports originating from RCEP parties and the issue of New Zealand certificates of origin in respect of goods for export to the RCEP parties. RCEP will also be implemented through regulations which will amend the Tariff to enable the application of preferential tariff rates for imports originating from RCEP parties and the Customs and Excise Regulations 1996 to give effect to the rules of origin applicable to imports into New Zealand that originate from RCEP parties. The Foreign Affairs, Defence and Trade Committee extensively examined the bill and received submissions from the public, civil society, and business representatives. The select committee recommend that the bill proceed without any amendments.

So why is it important that we are ratifying RCEP? Firstly, it is a mechanism to create new opportunities for international trade for New Zealanders, contributing to and improving the wellbeing and living standards for all New Zealanders. Although RCEP does not offer the same level of tariff liberalisation as some previous free-trade agreements, bringing the broader region into a single rulebook covering all 15 markets will significantly reduce complexity and therefore compliance costs for exporters. This is a substantial achievement. Services investments are where big gains will be made, but there are also advancements in addressing non-tariff barriers. As the Minister of Customs, I must also highlight the benefit RCEP brings through enabling trade behind the border. This includes setting expectations for perishable goods like our seafood to be released within six hours of its arrival, even when outside the usual business hours of customs administration. These procedural changes will create a significant benefit for New Zealand’s perishable goods exporters. These trade benefits are material. About half of New Zealand jobs are from the tradable sector, and independent modelling predicts that once the agreement is fully in effect, New Zealand’s annual GDP will be between 0.3 percent and 0.6 percent larger as a result. That amounts to $1.5 billion to $3.2 billion in annual GDP.

But RCEP’s importance is more than what it achieves in terms of outcomes for our economy. It demonstrates New Zealand’s commitment to cooperate with other trading economies, our commitment to ASEAN and to the wider Indo-Pacific region. RCEP demonstrates even in challenging times that Governments are able to come together, make compromises, and strike deals that will lift each other up. RCEP is more than a sum of all its parts.

So in closing, RCEP demonstrates that New Zealand does not pursue trade cooperation just for its own sake. RCEP will enable future cooperation between RCEP parties across trade and economic matters and it preserves the rights that New Zealand holds close: the right to regulate for legitimate public policy purposes and to uphold our Treaty of Waitangi obligation. This bill will enable New Zealand to ratify RCEP, be part of the agreement, and to see the benefits from it.

Thank you, Madam Chair. Can I acknowledge the Minister for the role she has played with her customs portfolio. Obviously, it will have ongoing importance to future trade deals and the trade of goods and services.

The Minister has acknowledged the importance of trade to New Zealand, and we know over 600,000 jobs are directly involved and we can feed and clothe 40 million people around the world so it’s essential we do have deep and enduring trade agreements around the world in order to get that product to markets; we certainly can’t eat and wear it all ourselves.

To the Minister, this Government, through this COVID response, our debt is looking at about $100 billion and climbing. The Minister’s talked a little about the economic impact that the Regional Comprehensive Economic Partnership deal will have on New Zealand economy, but I’m sure that any traders, exporters, producers, and manufacturers sitting and potentially listening to this—I’m sure they’ve got better things to do, but just in case they are—could you give some more details?

In a Government statement it said that this agreement would create more market access opportunities, especially for services and investment into China and ASEAN members’ states. Minister would you please give us some details on those, and what does the Government mean, exactly, by “less red tape for exporters and more streamlined trade”?

Can I thank that member for that question. In the opening remarks, obviously with most trade agreements, and which the Regional Comprehensive Economic Partnership is doing, I do understand that there are 14 parties to this agreement. There are some bilaterals that already exist with them, but your specific question around how, I’m looking to my official so that I can actually answer that question, so could I please come back to that member with some more specificity—as far as I can—around the opportunity. Specifically, I think you’re asking around with China, I think that’s right, so if you would bear with me, I will ensure that I come back and answer that more appropriately.

Would the Minister agree with the sentiment expressed by former Minister for Trade, my colleague, the Hon Todd McClay, that we are only as good as the last deal we signed, and is it the Minister’s view that the Regional Comprehensive Economic Partnership is as good as it could be?

Thank you, again, to that member for that question. Absolutely, and I think in my opening statement I talked about the coming together of 15 parties in a region that is really significant to New Zealand. I think we shouldn’t underestimate the importance of getting 15 parties to agree. Of course, there were opportunities, as advised in reading the report back from the select committee, where there was more push from our end and, obviously, we didn’t get exactly what we wanted. I would draw member’s attention particularly around the environmental chapters, which I think we pursued.

But your questioning around opportunities, of course, like with any trade agreements—this is first step. We’re presenting this legislation so we then can pursue the opportunities that it will unlock. It’s a bit like saying, “How long is a piece of string?” I think we all agree that trade agreements are really important for our producers here in New Zealand, and I’m pretty sure that we can, perhaps—in my opening speeches, I talked generally about growth to GDP of somewhere between, I think, $1.5 billion and $3.2 billion per annum in GDP. So that’s where the benefit’s going to lie for exporters. And, like I said, I’m sure we can push those opportunities further once this agreement is ratified through this piece of legislation.

To the Minister, I’m sure our sheep and beef producers sitting at home would want to know about market access tariff reduction quotas. Can the Minister please give some detail around what actions the Government is taking to promote the growth of New Zealand’s agricultural sector, and can you break down that promoted growth in market for dairy, horticulture, red meat, fish, and wool that this Regional Comprehensive Economic Partnership agreement will enable?

Again, a very good, detailed question. I think the bill that we are presenting—I’m presenting—to this House for ratification, for agreement, obviously, addresses or enables our exporters to pursue additional markets to what we currently have. I think the question that the member’s posed about specific sectors, had I had those questions in advance, more than happy to have provided that to her. But this bill will enable, like I said in my introductory comments, the opportunity for our producers, be it in the red meat sector, be it in our seafood sector, be it in our forestry sector, to explore and pursue more markets through this agreement. But in terms of specificity, I think the bill touches on enabling that. I don’t have the figures in front of me, but I do know that we are investing and working very closely with the sector that she has mentioned.

The bill acknowledges an approximately 97 percent reduction in tariff elimination, but it doesn’t give much detail around the 3 percent where there isn’t an eradication of tariff. Can the Minister please outline what that will encompass, who it will impact, what products, and what is the lost opportunity to New Zealand exporters?

I have got some responses around the earlier question—and I’m sorry I’m going back to your earlier questions around market access, examples of what can be achieved for some of our exporters. Can I just report back to the House and that member that one of the examples is that New Zealand goods exporters to Indonesia will see tariff elimination on a number of primary products, including sheep meat, beef, fish, liquid milk, cheese, honey, and avocadoes. So the earlier question that the member—some specificity around helping our producers in those areas.

In terms of investment, under the Regional Comprehensive Economic Partnership (RCEP) a number of parties will provide investment market access commitments to New Zealand for the first time, in particular ASEAN countries that are not party to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and China, and RCEP will reduce barriers to investment and facilitate the navigation of complex regulatory systems by establishing a consistent framework and a single set of rules for the RCEP region. And like I said earlier, bringing 15 countries and having a single agreement I think will be beneficial for our New Zealand producers as we grow our markets internationally and particularly with these 14 other countries.

So therefore, what actions is the Government taking to encourage India to rejoin and what meetings or communications has the Minister had with other RCEP trade Ministers on this topic?

To that member, as you will see in the report-back to the House by the Foreign Affairs, Defence and Trade Committee, unfortunately India did leave the discussions. But what I can report to that member and the committee is that the door is left open for India to return should it wish, and an obligation, as I understand—reading the advice I’ve got—to facilitate a fast-track of India’s return should they choose to come back into the agreement.

I thank the Minister in the chair, Meka Whaitiri, for her response in as far as India is concerned, but is she aware that New Zealand wine exporters to India can pay hundreds of percent in tariffs over the export price? Our kiwifruit producers that want to sell Kiwifruit into India pay a very, very high tariff. Does she think it’s good enough to New Zealand producers to say, “Well, India left—it’s a shame, but the door’s still open to them.” Is that what she means by the Regional Comprehensive Economic Partnership (RCEP), that New Zealand’s trade policy now is: where a country doesn’t want to talk to us, they can come back if they want to, but in the meantime our exporters actually are not competitive in those markets and they can’t do well? If that’s the case, this would be one of the worst trade policies this House has ever seen.

Remiss of me to say that we continue to engage with India on our aspirations to improve the economic and trading relationship at a bilateral level. So we have not departed from engaging with India. I can report that the Indian Government has been signalling in recent months, in line with its self-reliance campaign launched in May 2020, that it will prioritise partnerships and in the long run grant preferential market access to those partners making significant contributions to its development, including through foreign direct investment. As such, key New Zealand companies in India have been exploring how New Zealand can expand its investment footprint in India. Like I said, the door for bilateral agreement remains open should India choose to remain outside the RCEP.

Just to the Minister, again, further to my previous question, as I don’t know whether it was covered. Outside of any discussions with other regional comprehensive economic partnership trade Ministers, what direct communication is the New Zealand Government having with India to advance a free-trade agreement?

Madam Chair, let me just get the answer to that question momentarily, please.

Sorry to interrupt the member, but the time has come for me to leave the Chair for the dinner break. This debate will resume at 7 o’clock this evening.

Sitting suspended from 6 p.m. to 7 p.m.

Thank you, Mr Chair. To the Minister in the chair, Meka Whaitiri, just a resumption of the questions prior to the dinner break, if you wouldn’t mind. I was just reading through an ANZ benefits analysis of the Regional Comprehensive Economic Partnership (RCEP) agreement, and it reports that the manufacturing sector will be worse off. I just wondered what knowledge the Minister has of that assessment, and could you outline any details for any mitigation plans?

To the member that’s just resumed her seat, and through the chair, I think I’ve indulged the member prior to the dinner break in terms of her questions going outside the gambit of the bill. The bill has three parts, the title, and the commencement. I am more than happy to answer questions that relate to the bill in terms of the three parts, the title, and the commencement, and I look forward to the member’s questions in relation to the bill.

To the Minister, then, could you please detail the reduction of non-tariff barriers—which member States and on what products?

As I said in my opening remarks, I described what this piece of legislation is attempting to do, which includes reduction of some tariff barriers to member States who sign up to this. It also, in terms of preferential tariff rates—I’ve also mentioned transitional safeguard measures under appropriate circumstances. I’ve also mentioned the issue of New Zealand certificates of origin in respect of goods for export to the RCEP parties. I’ve also indicated that through this piece of legislation—the implementation through the legislations, which will amend the tariff to enable application for preferential tariff reports for imports, and I’ve also indicated the amendment to the Customs and Excise Act 2018 to give effect to the rules of origin. I think, in my opening statement, I have addressed those questions.

To the Minister, my understanding is when this bill is passed, we will be the sixth member State to ratify this agreement. Could the Minister outline her understanding of what progress is being made by Australia and South Korea towards ratification?

I understand that in the bill we indicated, as discussed at the Foreign Affairs, Defence and Trade Committee, the commencement date, which goes to the heart of the question around particular countries that are part of this agreement. We suggest that it goes in Order in Council, simply to recognise that different countries will be at different timelines in terms of utilising their domestic processes. And so, in terms of the countries that we have got signed up and countries that are still working on their internal ratification processes, I am more than happy to get that note from officials and give that to the member.

To the Minister, could she outline the Government’s programme of works to enter into force this RCEP agreement?

Members, the question is that the Minister’s amendment to clause 2 set out on Supplementary Order Paper 71 be agreed to.