India Free Trade Agreement Legislation Amendment Bill

Thank you, Madam Chair, and thank you, Minister, for being available for the consideration of this bill. When we’re looking at Part 1, “Amendments to Dairy Industry Restructuring Act 2001”, I first have a series of questions specifically around the quota for albumin. I want to start with clause 4, “Section 5 amended (Interpretation)”.

I guess my first question, which might be an obvious question for the Minister for Trade and Investment, is about the reduction in tariffs. First of all, when it comes to “quota”, I’m assuming that part of the quota is to do with the reduction in tariffs, when we’re looking at albumin. We know there is an immediate 50 percent reduction, starting at 1,000 tonnes per annum and growing to 3,000 tonnes by year five. Can I check with the Minister: is that growth progressive, year on year? I’m seeing a nod. Good; that’s my first question.

Would that, then, potentially require any updates or changes in legislation, in terms of the way that that particular quota would be looked at? No? It does not.

Finally, when it comes to this particular one, would the Minister be able to, I guess, elucidate for the committee on how the quota would be allocated with existing dairy farmers, in the context of this particular bill? I’m looking at things like “albumin designated market”—or anything that’s related to clause 4(5) of this bill.

Thank you very much, Madam Chair. Indeed, going to Part 1, “Amendments to Dairy Industry Restructuring Act 2001”, this is arguably the most important and most contentious part, I guess, of the trade agreement. The Minister for Trade and Investment might have quite a bit of information to provide to us.

We export many, many products—and produce many, many products—from milk in this country, from a dairy industry that is arguably one of the most innovative in the world. The question to the Minister: why did we get only albumin? Why did we get only one product as of right into a market that is incredibly knowledgeable and appreciative of dairy products?

Maybe the Minister can answer or explain to us the process that left us with just one product, and then maybe he can explain the process of elimination that saw all of those other potential products knocked out of the agreement.

Just if I might—because I want this to be as interactive as possible—to the Green member Dr Lawrence Xu-Nan, it is not farmers who will benefit from this part of the agreement and the issuing of quota; it is, of course, processors and exporters that do. Farmers supply them, and they go from there. Actually, the Dairy Industry Restructuring Act (DIRA) legislation that is already in force dictates how quotas are shared out. There is no change to that; the legislation merely adds India and this quota to the DIRA legislation. As with the EU agreement or the UK agreement, and many others, and so on, where we have quotas for dairy products, there is no change other than it being added.

To the Hon Damien O’Connor, the legislation that we have before us is very, very specific as to this quota only. I think probably the questions that he is raising are out of scope. I’m happy to talk to him afterwards. Of course, this is the legislation to meet obligations—in this case, to make sure tariff rates come down, and then, secondly, that New Zealanders can benefit from the quotas we have received. When we did the full treaty examination, previously, before this legislation was put in place, I think many of the issues he has just raised now, and that many others may wish to cover, were discussed in great detail by the House.

CHAIRPERSON (Maureen Pugh): Before I take another call, I’ll just remind members that we are not debating the free-trade agreement per se, just the legislation that sits alongside it. It is quite tight. I did give the Hon Damien O’Connor some latitude, hoping he would get to it, but it is out of scope.

Thank you, Madam Chair. Like my colleague the Hon Damien O’Connor, I am on Part 1, clause 4(5). This is the definitions—two questions from me. The first one: obviously, we have the agreement, and then we have legislation that brings into force those parts of the agreement that require legislation to bring them into force. No doubt the same is true of India. Do the definitions sync, in terms of India’s legislation, and is that a conversation the Minister for Trade and Investment had with his counterparts to ensure that definitions like “albumin designated market” are consistent across both jurisdictions?

The second question: within that definition—“albumin designated market”—it says, at the end of that particular paragraph, “including any amendment or any successor to that annex”. That’s a reference to an annex of the free-trade agreement itself. I have a question about whether it is ordinary practice to allow for that flexibility, for part of a trade agreement to be renegotiated and then a piece of legislation to automatically apply to that new standard, or whether this is new. I would expect that, ordinarily, if there were changes, new annexes, changes to existing provisions, those changes would need to come back to the House in terms of changes made to legislation. I’m just wondering whether it’s ordinary practice, and also, whether the Minister is anticipating that there will be changes to what constitutes an albumin designated market?

Thank you, Madam Chair. I know that we’re focusing, currently, primarily on clause 4(5), around some of the definitions. I think, while we’re discussing albumin in particular—albumin is in Part 1 of the bill because it is part of what we see in the New Zealand - India free-trade agreement as part of the tariff reduction. That is why we’re seeing it here. My question to the Minister is: if albumin being a big aspect of the tariff reduction is why we’re seeing it in Part 1 of this bill, I’m curious to know why there are, then, no clauses in Part 1, particularly under clause 4, around the fact that we also received a tariff reduction for bulk infant formula, and also dairy peptones.

One would at least assume that, in this clause, alongside “albumin”, dairy peptones would also have specific paragraphs. I mean, I’m looking at the fact that we’re getting an elimination of the 20 percent tariffs on peptones over seven years. Is it because it is not currently in effect? When it is in effect, are we expecting an amendment to this Act that will add additional definitions for dairy peptones—if the Minister for Trade and Investment wouldn’t mind clarifying that.

Thank you very much, Madam Chair, and taking your guidance, of course, of sticking to the more technical side of it, I will indeed attempt to do that.

The allocation of quota, and the definitions here under clause 4(5), “albumin designated market means the tariff quota for albumins of New Zealand origin”— one of the questions I have for the Minister—because we do have a number of core components, including albumin, coming into New Zealand from Europe for infant formula manufacture. I’m just asking the Minister about the “country of origin” definition—I know it’s included here—just to ensure that that doesn’t allow any crossover from some of the imported product.

Then, in terms of the allocation process for export quota, on the basis of the existing quota or the existing total volume, that’s reasonably small to my knowledge, so maybe the Minister can explain whether they considered the growth in this market and whether there had to be a new system of quota allocation from what we’ve traditionally done into markets like the UK, EU, or the US. So there are a couple of questions in there.

The other one is about the “eligible reserve albumin participant”, of course. If someone can apply for some of that reserve—which is 10 percent of the total volume, as I understand—why is it limited to 50 tonnes or less? It would be good if the Minister can answer those questions at the moment.

This is just a question for the Minister around the economic cooperation and technical assistance chapters or sector. Quota management remains quite tightly connected to these action plans under this agreement. We would really like to know how our action plans—which include cooperation for cultivar transfer, seeds, albumin, peptones, and so on—are going to be affected if there is any kind of situation where New Zealand has actually not performed its agreements or commitments under the cooperation that we have agreed to through the action plans.

Thank you, Madam Chair. While I see that the Minister is seeking advice, I do acknowledge that because this is quite a technical bill, there might be chances where the Minister needs some very specific advice and guidance from the officials. Just following on from what my previous question is, now, the reason I asked the previous question is that, currently, the tariff reduction we get for albumin is 1,000 tonnes in the first year, which becomes 3,000 tonnes, as the Minister said, in five years’ time. According to the national interest analysis, the 3,000 tonnes is just slightly above the average of what we’re exporting right now, which means that although 1,000 tonnes in the first year will get that enjoyment of a tariff reduction, presumably the other 2,000 tonnes won’t. I want to check with the Minister—and maybe there’s a simple explanation for this—when we look at the definition of “albumin reserve portion”, how would a reserve work, and then what then would an eligible reserve albumin participant, in this case, need to do to be able to be a part of that reserve?

There are a few questions I want to ask the Minister regarding the definitions of “albumin reserve portion” and “eligible reserve albumin participant”, but I want to start with: it seems like only one-third of our current export amount will enjoy the tariff reduction, so which one-third will we, again, expect the reduction to be—unless I got it completely wrong?

I’m very happy to answer some of those questions. The first one was around albumins and the definition in the legislation. Anything that countries trade across borders has a name, but it also has a tariff clarification, and it is a tariff code. That code starts small. It can go out, depending upon the greater amount of detail. In effect, “albumins” is the name that we use, but in as far as the agreement is concerned, if one goes to the back—and I recommend members do that; there are 500 pages of all these lines and so on, so I won’t tell you where in the 500 pages albumin is, but we’ll have a test later on to see if you got to it. I can tell you it’s either just before or just after page 250, possibly. But the point that I’m making here is that that is very clearly defined and, therefore, there is no misunderstanding. On the questions around whether India is lining up their understanding the same as ours, it comes to that tariff clarification. So that is the case.

Secondly, it is for each country to inform the other that they’re able to meet their obligations. When India says they’re able to do that, as we do, it is accepted on either side; it’s not for the lawyers to go and cross the i’s and dot the t’s or, in this case, dot the i’s and cross the t’s.

To Damien O’Connor—can product be imported for re-export as part of this quota, and will the rules of origin in the agreement cover that? They are very, very clear. Generally, the answer would be, no, it’s not the case. This is purely from New Zealand, but the rules of origin dictate what we’re able to export if there has been any transposition of value added. But, in this case, to answer your question, it would be no. The reason that it only talked about albumins and not infant formula and other things is that there is no quota required for infant formula exports; there is no quantitative restriction; there is only a reduction in tariff rate. The reduction in tariff rate for infant formula goes to zero, but it’s over a period of time of—seven years or 10 years?—seven or 10 years. We’ve got at least seven years to get an answer. But the point of that is: it doesn’t need to be in here, because there is no quota over it.

There is a reserve of 10 percent of the quota—whatever the quota may be in the first year. It’s 1,000 tonnes, it goes up to 3,000 tonnes over that period of time. There is a reserve of 10 percent of that so that any manufacturer or exporter who is not exporting at the moment and may want to in the future or who is not manufacturing now but may want to the future wants access to that market is able to do so. But it is the Dairy Industry Restructuring Act (DIRA) legislation that controls how that takes place, not this this piece of legislation.

Then, finally to the question of the quota with tariff reduction and how that applies, well, ultimately, DIRA decides that. Companies will make an application enabled through DIRA, set out through regulation, and they then will have the opportunity to receive some of that quota and export as part of that. This is no different to what happens in any other quota that we have going in many other parts of the world.

Damien O’Connor asked why, of the 10 percent, there was a 50-tonne maximum. That lines up with what we do with beef exports to other countries around the world. Ten percent is reserved. In the case of the first year, 1,000 tonnes would be 100 tonnes. Those who are bidding into the 10 percent reserve can get a maximum of 50 tonnes so that many others could have access to it. In the case that one company bid and got the 100 tonnes, as an example, then no one else would be able to get in there. In this case, for the 100 tonnes, at least there would be two. My expectation, though, is that those who want to bid in would be at the lower level to start with.

Thank you, Madam Chair. Further on the question of reserve albumin export licences, I wonder if the Minister can share with the committee what annual export value he expects that the access provided, or allowed for, under these provisions will generate. It would be interesting to have even a—

💬 Hon Todd McClay: It depends upon the value of the protein by tonne that’s exported.

Would the Minister put a ballpark dollar figure per year that we’re talking about?

💬 Hon Todd McClay: I have to stand up and answer, so I’ll wait till you’re finished.

OK, that would be interesting to know. Under new section 26AB, which allows for reserving 10 percent of the licences for small and emerging exporters, that option is discretionary, and I wonder if the Minister expects to activate that reserve in the first quota year. If not, what would smaller or emerging exporters have to demonstrate before he would activate it?

My colleague Damian O’Connor asked about the 10 percent reserve. I wonder whether or not the Minister or his officials have got an estimate of the number of New Zealand businesses currently expected to qualify as Eligible Reserve Albumen Participants.

New section 26AB also requires evidence that reserve participants will be able to use the licences. How will the Minister assess that without setting such a high evidential standard that genuine new entrants might be excluded? It also requires him to consult existing albumin licence holders about creating the reserve. I wonder how he expects that his department will ensure that the views of incumbents don’t outweigh the interests of potential entrants.

Thank you, Madam Chair. The question does go—given that we are talking about quota for albumins, and it’s a component of infant formula, and elsewhere in the agreement, the Minister and the officials have negotiated access for dairy products for re-export from India, I’m thinking that albumins would be part of that process. So the question is: why, indeed, do we have a quota and weren’t we given unlimited access for albumin, given that it could go into infant formula, huge volumes of which could be exported from India? So the question is: was it negotiated in that way so the quotas that we are talking about here and the reserves, of course, which will be 10 percent of that total quota, is that volume—why was it limited when, in fact, our understanding of the agreement is that anything for re-export was unlimited?

Just going through this. As far as the reserve, it is my expectation that the reserve will be used in the first full year. Consultation on reserve has already taken place, and we’ve received feedback, and that was part of the reason to establish it. The way it will be governed is the same as with the EU and other agreements, and it’s governed by the Dairy Industry Restructuring Act, not by this bill. As far as value is concerned, it depends upon the value of the protein by tonne, but an early estimate as of today—plus or minus when fully enforced—is maybe up to a $6 million tariff saving on what is the full amount.

To Damien O’Connor, again, different issues, but ultimately there is albumin exports to India already. They are paying tariffs at the moment—this will be a reduction. I would assume that those who are exporting this product or in India importing it—wanting to buy it—would only pay the 11 percent tariff if they were going to keep it in India, as opposed to re-exporting it, because the member is correct that any dairy product imported to India for re-export is a zero tariff rate. So it wouldn’t make sense to use this for re-export when you can have a zero tariff rate available to you straight away without any quantitative restriction. As I understand it, this will be used for product that will remain in India, as opposed to being re-exported. This is a very high-value concentrate protein. It is sought after because of the high quality of what we have in New Zealand. So it is my expectation that the quota will be filled each year, as well as a significant amount of other product going to India for additional value being added for then re-export.

Thank you, Madam Chair. In regard to that process, can I ask the Minister who will be responsible for ensuring that albumin, if it goes in for re-export at zero tariff, won’t end up in the domestic market, and therefore put us at risk? So is that our obligation here? Or is it, indeed, that of the Indian Government to ensure that there’s no crossover? Indeed, it won’t be the Government’s intention, I know, but like everything in law or regulation, there does have to be some kind of policing arrangement to know that we don’t get caught out through such a deal.

Thank you, Madam Chair. Thank you, Minister McClay, for your response before. I actually did just have a look at the agreement. Can I just check, because one of the questions I had before was around a progression from the 50 percent reduction in tariffs and the progression of the quota, which we’re covering for under this particular bid. I asked if the progression from 1,000 tonnes to 3,000 tonnes is progressive or 1,000 for year 1 and 5,000 in year 5. But it does look like there is a progression of a 500-tonne increase per year, based on the free-trade agreement. Which means that if we’re looking at a 10 percent reserve, potentially, each year, for the first year there will be a 100-tonne reserve up to a 300-tonne reserve in year 5 progressively. Would that be a correct interpretation of that?

💬 Hon Todd McClay: 10 percent of whatever the quota is.

Yep. Then, in that case, when we were looking at the eligible reserve albumin participant, this clause 4, amended section 5(1)(b)(ii), when we are looking at someone with equal to a volume of less than 50 tonnes of albumin for the quota year, if that’s in year 1 that the reserve is 10 percent, could we potentially then be looking at two or maybe even three eligible reserve albumin participants? Would that be, in that case, a possibility? In that case, what is the process to determine what those two or three eligible reserve albumin participants are going to be?

Now, the next thing is I did ask the Minister is regarding the definition of albumin. Going through the agreement, as well, we’re looking at people having to hold an albumin export licence. Can I just confirm with the Minister that an albumin export licence and the definition of albumin in this case according to the agreement, then, would also include albuminoidal substances, albuminates, and albumin derivatives, because those three are three different terms that have been used within the agreement. I just want to make sure that this bill captures all three potential interpretations.

Now, I did ask the Minister questions around the reserves. I do want to move on to clause 7, new section 26AB, in terms of the reserve albumin export licence. I do want to check, because the 10 percent reserve is secondary legislation. It will be done on the basis that subsection (3) of new section 26AB is going to be met. I guess my first question for this section, and I’ll leave it at that for this contribution, would be: how likely, then, would that secondary legislation be made? Because while we can talk about the albumin reserve, etc., my assumption is that that wouldn’t be a thing if that isn’t being given affect by secondary legislation. Can I just check with the Minister for new section 26AB(2), how likely is it, and has the Minister considered any time line of when, that secondary legislation will be commencing?

Thank you, Madam Chair. To the Minister, Hon Todd McClay, I noticed you were otherwise engaged from my last question, so it would be very nice if that was addressed. But related to that, the Joint Agriculture Productivity Council to oversee industry cooperation under the Agriculture Productivity Partnership I think is directly related to quotas and tariffs. In so far as these action plans around kiwifruit, apples, and honey outlined, the delivery of New Zealand’s performance obligation in relation to these action plans is directly linked to these things. India has made it clear its expectation that cooperation activities under these plans start prior to entry in force of the free trade agreement. Second question: have they started? First question: what affect may the Joint Agriculture Productivity Council or the Committee on Economic Cooperation and Technical Assistance have due to underperformance on our part and the penalising actions that may be taken by India in that regard if that were to happen, which are outlined?

Quick questions around the process for different products being imported to India. Some will be in quota, some won’t have a quota, some will have a reduced tariff rate, others won’t. The case for export for a zero tariff rate, it is in the interest of both Governments to have a better understanding of this. This legislation deals with, in the case of albumins, the quota, and setting up the process linking it to other legislation so it can be issued, and therefore those exports under the quota, the certificates issued, will benefit from a tariff reduction.

It doesn’t deal with things that will go in where there isn’t a need for a quota. However—and I’m happy to help the member—in the case of import for re-export and whether there is a zero tariff rate, India has agreed to set up a single desk, or a special desk, and only New Zealand has this. It’s in the agreement through the free-trade agreement to manage the product that comes in so that we can ensure that it can reach those who want to import it for re-export. We also, of course, have received a commitment from India that goods that are perishable are to clear their customs within 24 hours. That is a significant benefit to our exporters. However, the bits I was speaking of don’t feature as part of this legislation. This legislation that we’re speaking about now is merely to set up the quota system for wherever there is a quota and the reduction of the tariff rate amongst that.

As far as the 10 percent quota is concerned, ultimately, what we’ve said is a maximum of 50 tonnes per exporter that wants access to the reserve quota. As to how many there will be, that will depend upon those that want to export. If 100 exporters in the first year, as the quota will be 100 tonnes, want to export one tonne each, I guess it could be 100 exporters; but there could not be only one with the full amount in that case because of the reserve. How that is governed is the same as other quotas we have when there’s a reserve. The European Union and UK legislation, remember, in beef, we’ve set that up as well so that anybody that is not currently exporting to that market but would like to has the ability to get some quota to get an establishment in that market at a lower cost. This isn’t new. It’s happened a lot of times before. It’s very fair and transparent, and the sector is aware of this.

As far as performance, this legislation doesn’t deal with the issues that the member raised. This is merely about how we govern the quota and share it fairly for export, but in the case of the question around, has the cooperation started already—the industries themselves are responsible for that and many of them have been up there—the answer is yes, it has.

CHAIRPERSON (Maureen Pugh): Before I take the next call, can I just please ask members to refer to the clause that’s being spoken to please?

Thank you, Madam Chair. I’m referring to those clauses about albumin in Part 1, and we’ve been canvassing them quite extensively. I just want to get a direct answer, if the Minister for Trade and Investment is able to give it, on my colleague Phil Twyford’s question on the value of this albumin tariff reduction, because it’s clear from the national interest analysis that we’re currently exporting around 3,000 tonnes already to the country, and it’s envisaged that, by year five, all 3,000 of those tonnes will be without the tariff.

💬 Hon Todd McClay: No, that’s—

Yeah? If you can correct me on that, that’s great. But I wonder if you can give us clarity on what the value of that will be. The importance of this is in us understanding what the overall purported value of the free-trade agreement will be to us as against what the potential costs and risks will be.

CHAIRPERSON (Maureen Pugh): I explained before, this debate is not about the free-trade agreement; this is about the legislation that enables it.

Sure. Madam Chair, can I just ask for clarification on that? So we can’t ask about—

Tim van de Molen: Is this a point of order or not?

Yeah. Point of order. Can we not ask about the value that this bill brings into being through it making the free-trade agreement come into effect?

CHAIRPERSON (Maureen Pugh): No.

Point of order. Thank you, Madam Chair. Can I just get a piece of clarification because, usually, when we do discuss other bills as well, there will be things like an accompanying regulatory impact statement that we can actually ask about when it comes to policy-related questions as well. Now, when it comes to international treaty examinations, or even free-trade agreements, we actually don’t have regulatory impact statements, but, in the same way, what we do have instead are things like national interest analyses, etc., so it probably is important, when we’re looking at how the overall package of this bill in relation to the agreement—

CHAIRPERSON (Maureen Pugh): So your point of order is?

My point of order is that the agreement itself is actually integral to the analysis we’re able to do in some of the questions.

CHAIRPERSON (Maureen Pugh): I think I understand what you’re saying. The value was debated in the first reading, and so now we are debating the parts in the legislation that relate to the implementation. I don’t want this debate to drift into the value of the free-trade agreement because we are not debating that. We are debating this legislation.

Speaking to that point of order. I completely understand where you are coming from. We’re not debating the value of the free-trade agreement; it’s the value of the tariff reduction that was the question because we didn’t get a chance in the first reading to actually ask Ministers questions around the values or specific aspects of what this bill would entail. But we will make sure to keep it quite concise and related to a particular clause.

Madam Chair, in as far as the 10 percent quota is concerned, or the reserve or the full amount, it is not possible to answer the question directly. The reason for that is that it would depend upon the value of the commodity at the time. All I can say—

💬 Steve Abel: You must know that.

Well, that’s because if it’s $10 compared to $1,000, the 11 percent would be different. But the point that I guess I’m making is that I did answer that fulsomely earlier. I mean, I don’t want to take any time of the Committee, but if the Greens are indicating that their support for the legislation depends upon this answer and they may finally support a free-trade agreement, then I’d be happy to go and have a coffee and talk about it later.

I move, That debate on this question now close.

CHAIRPERSON (Maureen Pugh): That’s very well read, Minister. I think there is probably a little bit of room if we are prepared to move on, but we have thrashed clause 4. I’m happy to take some new material but this is quite a restricted—OK, you got it?

Absolutely, Madam Chair, as always. As always. New section 26AB, inserted by clause 7, and it is on the allocation of reserve albumin export licences, and new subsection (2) says, “The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations that reserve 10% of albumin export licences…”—quite a critical area—and then we go down to new subsection (3)(a) where it says, “Before making a recommendation…the Minister must be satisfied that—(a) there is demand for reserve albumin export licences from eligible reserve albumin participants;”.

Look, there are some cynical people around this place that say we have the “Ministry for Fonterra and Trade”. It’s not. It’s the Ministry of Foreign Affairs and Trade. Can I get an assurance from the Minister for Trade and Investment that he won’t be subject to what will be—it may be a legitimate argument from Fonterra that we have to consolidate, not disaggregate the albumin allocations. And so, the Minister has to reassure us, and he can in the chair, that, in making a recommendation to the Governor-General that there is demand for it, he’s not subject to some legitimate pressure from some of the big players that eliminate some of the smaller and innovative exporters who may have found or may want to develop a market opportunity for this. The question comes down to: what is the ability for us to check on that and ensure that the allocation of, not the quota but the reserve quota, which is 10 percent of the total quota, that that is going to be allocated on a fair and innovative system?

Thank you, Madam Chair. I’m on the same clause as my colleague. This is clause 7, inserting new section 26AB, and it’s a question about the Minister for Trade and Investment’s decision not to allow the transferring of export licences. New subsection (4) says that an eligible reserve albumin participant who is allocated reserve albumin export licences effectively cannot transfer them. Now, section 28A of the Dairy Industry Restructuring Act allows the Governor-General to essentially approve secondary legislation that allows the transfer of other licences, essentially for the purpose of ensuring or expediting exports.

The question is why that’s not allowed in this case and, if it’s intended not to be allowed more generally, why the Minister wouldn’t consider a more narrow allowance for the transfer of licences—for example, where someone had already held one of these reserve albumin export licences in the past, allowing just the transfer of an existing licence to those former licence holders, pursuant to section 28A of the Dairy Industry Restructuring Act. Thank you.

I can help move us through this quite quickly. The approach is identical to that in the United Kingdom free-trade agreement we have, where I think a reserve quota was set up in a number of areas, including beef. It was a smaller one—it might have been about 3.5 percent. Therefore, it will be governed exactly the same.

Can I give an assurance that it will be done properly and fairly? Absolutely, we will. The reason a reserve quota is set up—we don’t have to; it’s not in the agreement—is to allow those who are not already exporting to that market to have the ability to establish themselves—to get a small foothold, should they want, with a reduced tariff rate to grow their business. Without that reserve, they could still export there, but they wouldn’t get a reduction of the tariff rate. In the case of some products—mānuka honey is an example: it is a significant reduction for high value mānuka honey—it would be hard for them to get into the market. This would allow some of them to have a foothold there.

In the case of albumins, look, it varies, but there is only one export of any significance from New Zealand. Do we want more to, should they choose to put effort into processing this product? The answer is yes; we do. They will have a small reserve that they can ask for if they meet the conditions, which are very similar fare to what we have for other quotas we share around the world. They would at least be able to start building a business export relationship in that market.

Thank you, Madam Chair. I thank the Minister for that explanation.

I just want to move to—still “clause 7” but—clause 7A. It was an insertion made in the Foreign Affairs, Defence and Trade Committee to deal with the issue of the commencement of the free-trade agreement. There’s some uncertainty, so my question to the Minister is: when does he foresee this being brought in? If this legislation is passed under urgency, then an Order in Council is required to bring the FTA into force. We’re wondering about that—that’s the first question for him.

💬 Then: I guess the commitments here are to ensure that we have, basically, a pro rata system—depending on when the Minister decides, or the Government decides. If we, presumably, pass this legislation within the next week—or soon, I think, under urgency; it might be even today or tomorrow—then when does he see the Order in Council bringing this agreement into force, and what will that mean for new section 26C in clause 7A, the insertion here?

Has there been a calculation done—because I know he did this with the EU FTA—that bringing it in sooner will give tariff relief for some exporters? What’s the approximate value of us facilitating this, as we are—we’re trying to scrutinise but facilitate the passage of this legislation, and then there’s an Order in Council required. The question is: can that be done before Parliament lifts, and when might this FTA be brought into force?

Parliament hasn’t voted on the legislation yet, so I don’t want to pre-empt the support of the House to see whether the bill enters into force. But I can assure the member that it is the Government’s intention for the FTA to enter into force. We will meet all of our obligations in both directions. The legislation allows us to pro rata, as was the case with the European Union free-trade agreement, and the amount of the pro rata—and, I suppose, value—will depend upon the amount of the quota which is left. It’s based upon a 12-month period. If there were two months left, it would be two-twelfths or one-sixth of the quota. But it is my expectation that before the free-trade agreement enters into force, the secondary legislation would be in force also.

Thank you, Madam Chair. I note that my colleague is mixing up questions for clauses 7 and 7A, but I do want to move on to clause 13, which is Schedule 1.

Now, there are quite a few questions I have over here, but for the first one—this is an interesting schedule because it’s rules for allocation of export licences to multiple participants; I’m assuming this is still on the basis of the NZ-India Free Trade Agreement—I want to hone in specifically on clause 3 and when it comes to what we are defining in terms of eligible participant and submitting their export volume history.

I want to check with the Minister why it would then be relevant for an eligible participant in the New Zealand - India Free Trade Agreement, when it comes to dairy or, specifically in this case, albumin, to have to declare—this is clause 3—for the Japan prepared edible fat market and the European Union dairy processed agricultural products and high protein whey market. Would the Minister be able to just clarify why those two markets, and having the export market volume history declared, be relevant to be an eligible participant for the New Zealand - India Free Trade Agreement.

Thank you, Madam Chair. I want to speak to clauses 8 to 11, which extend the existing information, audit, and disclosure powers to albumin participants. I wondered if the Minister could say what guidance and compliance assistance MPI will give, particularly to the smaller exporters who will be covered by this.

Under section 29G, a participant or their employee or agent cannot refuse to answer a question merely because the answer may incriminate them, and I wonder what protections apply to information obtained through compelled answers in this context.

Also, how will commercially sensitive information supplied by applicants or obtained through such an audit be protected; and who may receive information disclosed under section 42, and are there any restrictions which apply to its subsequent use?

CHAIRPERSON (Maureen Pugh): I’m looking for new material. We’re starting to get down into the weeds.

Thank you, Madam Chair. I’m still waiting for my questions around Schedule 1, but I do want to continue on with questions for the Minister on Schedule 1.

We did discuss a little bit when it comes to—I believe it’s called—the reserve portion, but I do want to check, because in clause 5 of replacement Schedule 5B in Schedule 1 it does talk about what happens in the event of an excess or shortfall in reserve export licence applications. I do want to check with the Minister—because the example that is given here is interesting—based on the existing exporters of albumin into the Indian market, how many licences would the Minister expect would be covered under the quota and in general? We did discuss a little bit about the reserve portion, but I think that is an important question again when it comes to excess or shortfall in reserve export licence application.

If the Minister has given the reserve export licences and then those licenced participants didn’t meet their expected quota within that, what then would happen? Would the reserve portion be then opened up again for tender? How would it be communicated with potential exporters that they can now bid any potential shortfall in that reserve export licence?

Thank you, Madam Chair. I have a very brief question in regards to clause 9. This is the power to require information. I’m quite interested in the fact that it overrides section 60 of the Evidence Act, which is the portion of the Act that provides the non - self-incrimination provisions, both in terms of the criminal law but also in terms of the civil law. It’s an explicit decision to override that, which section 60 does allow.

My question is, really, how this compares to other comparable provisions in terms of the power to require information and whether like provisions also explicitly override section 60 or whether this is more of a novel provision that the Minister has decided on. Thank you.

CHAIRPERSON (Maureen Pugh): We’ve got five minutes.

Madam Chair, thank you very much. I’ll try and move through these quite quickly.

The ability to compel to provide information is not unique. It is in other free-trade agreements, and indeed the last ones that the House passed have similar quota systems in them. The European Union, and, before that, under the previous Government, the UK agreement had similar abilities or powers in there. The reason for that is, as the House has decided on a number of occasions—the ability to export is easy; if you want to take advantage of a quota that you have been given as opposed to someone else having it, then you need to provide information, and should you not be meeting the requirements of that, we have the ability to get the information to ensure that we are meeting our obligation to the country we’re exporting to.

In as far as the 10 percent in the reserve is concerned and how it’s managed and all these other things, I think I’ve answered that on a number of occasions now in the House during this part of the discussion or debate, and that is that is the same as we have in other situations. The way it is governed and managed is to be fair and open and transparent. It is to allow new entrants to a market who might not be there already, but we will approach this in the same way we do with the EU free-trade agreement (FTA) and the UK FTA, and, in the case of acquisition, the access we have to a number of other countries, including Japan.

A party vote was called for on the question, That Part 1 be agreed to.

Ayes 93

New Zealand National 48; New Zealand Labour 34; ACT New Zealand 11;

Noes 29

Green Party of Aotearoa New Zealand 15; New Zealand First 8; Te Pāti Māori 4; Ferris; Kapa-Kingi.

Part 1 agreed to.

Committee of the whole House

Part 2 Amendments to Overseas Investment Act 2005 and Overseas Investment Regulations 2005, and Schedule 2

CHAIRPERSON (Maureen Pugh): We come now to Part 2. This is the debate on clauses 14 to 24, “Amendments to Overseas Investment Act 2005 and Overseas Investment Regulations 2005”, and Schedule 2. The question is that Part 2 stand part.