Tariff (Trans-Pacific Strategic Economic Partnership) Amendment Bill — In Committee 
Tariff (Trans-Pacific Strategic Economic Partnership) Amendment Bill — In Committee 
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Tariff (Trans-Pacific Strategic Economic Partnership) Amendment Bill 
In Committee 
DARREN HUGHES (Junior Whip—Labour) 
: 
 I seek leave of the Committee for the Committee stage of this bill to be taken as one debate across the five clauses with one question at the end of the debate. 
The CHAIRPERSON (Ann Hartley) 
: Leave is sought for that. Is there any objection? There is not. 
Clauses 1 to 5 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 We would normally focus on each of the clauses of the Tariff (Trans-Pacific Strategic Economic Partnership) Amendment Bill in the Committee stage consideration of the bill and I think we should therefore give some scrutiny to the bill even though we are taking it as one question. 
Of course the title of this bill gives some understanding of the significance of the bill. The bill does not simply talk about a four-way free-trade agreement it talks about a trans-Pacific strategic economic partnership. I think members of the Committee should be aware that this bill is actually of strategic significance. If we look at the detail of our trade with the particular parties that are involved in this trade agreement namely Singapore Brunei and Chile we see that we already have a free-trade agreement with Singapore so there are no tariffs to be dealt with in respect of Singapore. In the year ended June 2004 we exported $36.6 million of goods to Chile and paid $2.2 million of import duties. In the same year we exported $3.5 million of goods to Brunei and the duties were estimated at $52000. 
So it is quite clear that this bill is not about saving New Zealand massive amounts of duty on huge quantities of products that we export to Chile and Brunei. As I say we already have a free-trade agreement with Singapore. This bill is about strategic issues which is captured in the title and in fact also in the purpose clause. It asks how New Zealand really has impact in the Asia-Pacific region on liberalising trade because liberalising trade is of crucial importance to New Zealand. 
What I think successive Governments—because this concept commenced under the last National Government—have decided is that we have to move in a strategic way that helps bring some real momentum especially to APEC. Members will note that all four members so far of the Trans-Pacific Strategic Economic Partnership Agreement are members of APEC. The whole idea is to establish a framework such as this that other APEC members in our region can join. If they want to get involved in this trade liberalisation effort this legislation provides for the Governor-General to add by Order in Council other countries to this strategic agreement. That is what is so important about it—it is strategic. We started simply with that little trade agreement with Singapore which built into this strategic development. I hope as we look ahead that other nations will see fit to join this agreement so that APEC members can move towards achievement of the goal of free and open trade for at least the developed countries by 2010. 
The final point I want to make on this legislation is that it is unfortunate that New Zealand’s undertaking in this agreement extends our own elimination of tariffs beyond our APEC commitment of free and open trade by 2010. There was absolutely no need for that. This Government could have agreed to New Zealand’s phase-out of our tariffs. We set leadership in APEC to the effect that we would stick to our commitment to the Bogor goals of free and open trade. We could have had our framework here and got rid of tariffs for countries that join this strategic trade agreement by 2010. There is no reason why we could not have done that. It is a tragedy that the Labour Government has given a signal to the rest of APEC that it does not really care about the Bogor goals in APEC of free and open trade by saying in this agreement that it is prepared to allow tariffs to drag on here in New Zealand beyond 2010. 
I ask the Minister in the chair the Hon Ruth Dyson what sort of signal she thinks it sends when the tariff phase-out schedule has New Zealand going beyond our Bogor commitment when we could easily—because it does not affect any other members of this strategic agreement only New Zealand—have said that we are prepared to stick to a phase-out by 2010. That would be totally consistent with the Bogor goals of APEC New Zealand would be showing leadership and the strategic value of the Trans-Pacific Strategic Economic Partnership Agreement which is what it is all about would be so much greater. I would appreciate the Minister’s response to that. 
ERIC ROY (National—Invercargill) 
: 
 I would like to take a call on this bill and to say that I think the Committee has done a good thing in agreeing to have a wide debate across the whole bill. The bill is after all only five clauses but it is a significant piece of legislation as the speaker before me the Hon Lockwood Smith has pointed out. The issues that he raised about strategic opportunity cannot be understated. I mentioned that the bill is only five clauses but if we look at the commentary it is some 60 pages which gives members some idea of the complexity and the issues that surround putting in place trade agreements. 
In the National Party we believe very clearly that trade is a positive thing. It is the lifeblood of an international community and if we want to continue to live in a world that has a peaceful outlook I point out that it is when we start limiting opportunities through trade that we create the first opportunity for dissension which can escalate into areas that we are not happy about. We are members of planet Earth and we are particularly members of the Pacific. This bill points in two directions. It points into Latin America with the strategic alliances with Chile—the first free-trade agreement with a Latin American country that New Zealand will have had—and it points to Asia cementing in the importance of Asia that we see in the region and the significance of the opportunities for New Zealand. Trade is not a one-way ticket. It is beneficial to both parties. New Zealand is a trading nation. There is no other way to refer to us. We are a trading nation; we produce much more of many goods than we can possibly consume in New Zealand. So it is in our interests not only to create free-trade agreements but also to pick up on the point made by the Hon Lockwood Smith to show leadership and that we are encouraging other companies to knock down the barriers and increase opportunities and we are all winners in that respect. 
I alert the Minister in the chair the Hon Ruth Dyson to something that I would like an explanation on if she is able to. I see that the bill is to come into force on 1 May 2006. I wonder why we have chosen that commencement date. Quite often on these sorts of things we say that it will come into force after the Royal assent. This particular agreement is dependent on signatories. If we look at Appendix B which refers to the date proposed for the binding treaty action it states: “… provided at least two signatories have ratified by that date.” Can the Minister inform us whether that will have happened by 1 May and why 1 May has been chosen as the date for commencement? I am not opposing it but this is a significant issue. We in the National Party are keen to see this measure go ahead and if there is some reason why we are delaying until 1 May I am not sure what signal that sends. Also it is very hard to read what the House business is over the next short while. Although we are in the Committee stage and I would hope we will be through all stages well before 1 May should something intervene I am not sure what the plan for the third reading is. If the Minister could take a call and respond to that I would be grateful. 
I again affirm the importance of this bill. It sets up a framework for dealing with strategic issues. New Zealand can only be a winner as we seek to improve trading relations with our strategic partners both within APEC and the Pacific. This bill sets some very strong planks in place. Good work has been done in order to get to the table with Chile Singapore and Brunei Darussalam to get us to an agreement and to have something that can be ratified. It requires us to affirm it by passing this bill so I commend it to the Committee. The National Party stands solidly behind trade and the opportunities that presents particularly in this area. 
DIANNE YATES (Labour) 
: 
 I thank the previous speaker Eric Roy for his comments and I also look forward to members of the Foreign Affairs Defence and Trade Committee speaking on the bill because some of those questions could be answered by the members of the select committee who realise that it was agreed at the beginning of this year that 1 May would be the day when the Trans-Pacific Strategic Economic Partnership Agreement would be signed by the parties involved. That is why the select committee has been focused on getting the bill back to the House in a timely fashion. 
I point out that the commentary is actually only one paragraph long. The commentary on the national interest analysis is pages long and that is what the previous speaker was talking about as being quite bulky. The national interest analysis was compiled after extensive consultation throughout New Zealand with parties interested in this particular agreement. Because the consultation was so good and held over a considerable period of time the select committee that looked at the national interest analysis could deal with the bill so quickly. I thank the members of the committee for getting the bill back to the House in a timely fashion. 
As we have said the bill is about only two pages long. It amends the Tariff Act of 1988 to enable the Trans-Pacific Strategic Economic Partnership Agreement to come into law. It is the final part of the complete agreement stage that we are now dealing with prior to the final signature. Once again I thank all the parties and members who were involved—those who were involved with the national interest analysis those who were involved with the consultation those who made submissions to the select committee when we looked at that analysis and the select committee members for working together across parties so satisfactorily. 
KEITH LOCKE (Green) 
: 
 The Green Party as members probably know already is critical of this bill. We are a bit like Lockwood Smith we do not look at the Trans-Pacific Agreement in isolation just in terms of what is happening to the four countries that are part of the agreement—New Zealand Singapore Chile and Brunei. As Lockwood Smith has rightfully said it is seen as a strategic partnership that other countries can be added to and that is what we are worried about. Lockwood Smith talked about free trade by 2010 for at least a number of players. As we know countries like China are part of APEC. One of the Green Party’s real concerns is that China will come into a free-trade agreement that includes New Zealand that will disadvantage so many New Zealand producers because it is not a level playing field. 
Eric Roy said that everybody wins. The realities in this world of trade and competition mean that not everyone does win particularly when one is up against countries with lower wages. Chile’s wages are a bit lower but of course China’s are a lot lower again. One of the arguments is that New Zealand will compete at the high end and we might have to give away some of the products that are produced by cheap labour in China. The implication is that those products are lower quality and our producers will keep markets at the high end in both domestic and overseas markets. The only problem there is the way countries—China in particular—are developing. They are putting in a greater technological infrastructure than we are at the high end. So if we rely on just high-end products we will not necessarily succeed. 
The other problem with the bill—particularly in the section on Chile—is that it implies that if we remove the tariffs in Chile then somehow the New Zealand producers will get more returns. But it does not necessarily work out that way. We know in New Zealand that when we have taken off tariffs prices have dropped and we have got cheaper products. If the prices in Chile drop equivalent to the drop in tariff then there is no extra money for the New Zealand exporter. It may mean that New Zealand can expand its volume of exports and gain that way but there are no guarantees that just dropping tariffs leads to a good result for New Zealand exporters. 
The other thing that comes through in the national interest analysis and other talk around the bill is that it is largely helping out our dairy companies—and Fonterra within that. But one should be careful about identifying the interests of New Zealand with the interests of Fonterra. Fonterra is becoming a big player and that is admittedly an advantage to New Zealand to shareholders in New Zealand and to dairy farmers but it is getting involved in a lot of strategic partnerships. For example it is involved with Nestlé particularly in Latin America. Those partnerships do not necessarily use New Zealand as the originating source for milk product. We just do not know how that will go. It will not necessarily be totally in the interests of New Zealand. It is not the equivalent to America when they used to say: “What’s good for Ford is good for America.” That was not necessarily true and it is certainly not the same with Fonterra here.  
The other problem when talking about competition—as Lockwood Smith rightly said—is that other countries will be added to the agreement. Looking at it in terms of those four countries one might say that we have a reasonably competitive advantage in certain sectors say with Chile and Singapore although Singapore is not so much a producing nation but rather a trading centre. As more countries are added—and I mentioned the case of China but even other countries in Latin America—it could be disadvantageous to us. It will not necessarily go our way. We must realise that at the moment we have got a record $7 billion trade deficit. We are not necessarily a winner in the way that trade has evolved with New Zealand moving to drop all our barriers. 
CHRIS AUCHINVOLE (National) 
: 
 I rise to speak in support of the bill. It is a Government bill yet it fits well with National Party policy so it deserves our support. Once passed into law the bill will enable the conferral of preferential tariffs in accordance with the Trans-Pacific Strategic Economic Partnership Agreement. 
I was saddened to listen to the previous speaker as he— 
Keith Locke 
: I’d have thought you’d have been delighted. 
CHRIS AUCHINVOLE 
: Well delighted if the member likes but it would have been nice to hear a more enthusiastic encouraging response from someone who has already been on the Foreign Affairs Defence and Trade Committee and who has been party to the discussions. That speech seemed to lack any resilience or hope. Goodness me! Trade does not have to be ugly. Trade does not have to be evil. New Zealand will not get far in the world if we seek perpetually to be sheltered all the time. From my 20 years of exporting experience I know that New Zealanders are actually very good at exporting. Unfortunately I believe that only about 4 percent of our country’s companies are involved in exporting. I say to Mr Locke that the saddening bit for me was that I do not think that anyone would be encouraged to try exporting after listening to his cautious approach. 
Once passed into law the bill will enable the conferral of preferential tariffs in accordance with the partnership agreement. I found an excellent consequence of the purpose and an excellent outcome to the bill in the explained advantages to New Zealand. There will be an immediate elimination of the 6 percent tariff on coal. I am delighted to find that and even more enthused than I would otherwise be owing to my living on the West Coast of the South Island and having a caucus responsibility as associate spokesperson on energy (mining). Ten days ago I was a participant in the induction safety course at Solid Energy’s Spring Creek Mine on the West Coast. The safety aspect of the occasion was not without significance as there had been a recent tragic mining accident in a mine close by. Mining is an old profession and miners have special expressions to describe their work. They talk of “winning” the coal—they “win” it. The bill will enhance the return for coal sent to Chile and could well result in additional export sales. The cost of coal is the cost of extraction. The free trade bill will enhance the efforts of those who bravely work underground to win wealth for our country often at expense to themselves personally. 
Beyond the elimination of the tariff on coal there are other advantages in the bill. Free trade is a benefit to all in that it reduces a huge amount of tedious detail that otherwise clutters international trade. It makes it very complex indeed I say to Mr Roy. During my period of exporting into the Pacific I remember going to Tahiti on one occasion. The people there listed the tariffs duties and costs associated with importing our splendid UHT milk which was actually not Fonterra milk but Dairy Board milk in those days. I do not agree with Mr Locke’s concerns over the dairy industry. We do that very well too. But to reduce the clutter involved in the transaction of goods can only be good for New Zealand and for the other party. Free trade is free and it is free from complications. 
It is fitting that I stand to support the bill in conjunction with my colleague Dr the Hon Lockwood Smith as both of us at one stage worked together in the dairy industry and we were both involved in exporting to various parts of the world. The Opposition side of the House is well equipped with people who have been involved in exporting and in primary production. Speaking for all of the people who have that experience we commend the bill and the way it has been put together. 
JOHN HAYES (National—Wairarapa) 
: 
 I rise in support of the bill despite the fact that it has cost a huge amount of money to negotiate and is really going to deliver very little benefit other than possibly strategic benefit to our community. I have calculated from the national interest statement that there will be less than a 40c return per capita each year from this huge effort. Furthermore unlike the West Coast where the coal industry will benefit my people in the Wairarapa who produce wine and timber products will be exposed to greater competition. 
Nevertheless I am particularly interested in the title of the bill: the Tariff (Trans-Pacific Strategic Economic Partnership) Amendment Bill. The interesting thing is that it does not include any Pacific Island nations. We need to deepen cooperation and integration with our Pacific Island countries and to establish where they and we might gain most through pooling Government resources aligning our policies and allowing our Pacific Island countries to come into our trading arrangements. 
 This sort of endeavour may take us well beyond current levels of regional cooperation and into a new phase of regional integration—a Pacific union perhaps at this time of unknown dimension. We need to transform our Pacific into a dynamic and progressive region capable of meeting the challenges of modernity and we need to do this by creating wealth through free trade. We may not have a common trade and economic base in the way that Europe has nor do we have the same historic context. We are not as compact as the Caribbean either. But as Pacific Island communities we do share certain values which have an important bearing on the way our societies operate and the way we interact with one another when we do interact. We share the world’s biggest ocean—which covers a third of the Earth’s surface—under international law and through our exclusive economic zones. The forum region has stewardship of the living and non-living resources of the Pacific Ocean. 
I think we have a similar outlook across our Pacific Island nations we have strong cultural values that we share and we have strong cultural links to the ocean and the land. I think that there is huge scope for expanding this agreement to include our island people. In the past we have never allowed existing conditions and restrictions to stop us from dreaming or seeking out new horizons. Otherwise we would never have populated the place. 
In terms of a real trans-Pacific agreement I think we could look at the European Union which started on a limited scale through small cooperation before moving to deeper integration. I think that Australia and New Zealand also began the process of closer economic relations by developing free trade in goods. Then we moved to free trade in services and then to a more thorough process of harmonisation and joint activity. It was the second series of steps that gave the trans-Tasman relationship its extra dimensions. I know there are a range of views about just how close and how integrated the relationship should be but the point is that few predicted 30 years ago where we would be today. I think we need to think about this and that the time has come to take the first step and to give serious consideration to broadening this agreement to include our Pacific Island neighbours. I am particularly pleased to note that the amendment proposed to section 7 of the principal Act will allow us to do this with relative ease. National supports this bill. 
TIM GROSER (National) 
: 
 I rise also to support the bill. The mood in the Committee tonight is understandably a little lethargic but I would suggest that that is actually something that from a broader perspective we should welcome because it just reflects the fact that there is broad consensus politically. It is not complete consensus—we have heard the Green Party’s view once again—but it is very broad consensus in New Zealand society on the bill and on the principles and philosophy that underlie it. 
I am sure that many members at least of my generation will know that had we had this debate which envisages comprehensive free trade into New Zealand 25 years ago we would have had anything but a lethargic debate. In fact it would have been a very bitter debate and we might well have found once again the two main parties agreeing with each other but for precisely the opposite reasons for which we stand here tonight. 
I am new to Parliament and I was a little surprised when I got to work this morning to find a message from the whips saying that I was expected to speak on the Trans-Pacific Strategic Economic Partnership Agreement. I thought that maybe they had the date wrong because I gave a speech last night. I thought: “Well I have two options.” One ignores the whip at one’s peril of course. 
Hon Member 
: A terrifying whip. 
TIM GROSER 
: Oh a terrifying whip. One option was to give the same speech which would bore everybody but most important would bore my own self to death. The other option was to try to find a new twist to it. 
I have been provoked. I have just received an anonymous note. I know where it comes from—it is not from my side of the Chamber. It states: “Are you going to subject us to heavy foreign policy thinkers every Wednesday night?”. So I have been provoked into that and if this brief analysis is a little abstract or a little pointy-headed that is my justification—I have been provoked into this. 
I talked about the strategy last night. Tonight I want to talk about the political and economic theory behind the strategy. 
Dianne Yates 
: Oh no! 
TIM GROSER 
: Yes—I have been provoked. The first thing to recognise is that these agreements—there are some 300-plus around the world—are actually a relatively modern phenomenon. If we go back to 1980 we find that essentially there was only one important agreement of this type and it was the European Union. 
We in New Zealand and Australia had another deeply flawed agreement the New Zealand - Australia Free Trade Agreement which I talked about last night but that type of agreement was not the weapon of choice as it is today. The reason for that is that all countries and most important the United States were firmly wedded to the theory that the multilateral option was the best way. There were two underlying principles of political economy behind that calculation which are quite valid in fact. One was the economic theory of trade diversion and the other was the political theory of discrimination. 
Of course New Zealand as a very small country would always want to source its imports from the lowest-cost source which is the issue of trade diversion. And as a small country with very little political leverage internationally we would also be very concerned about this type of mechanism in terms of discrimination because if we were not invited to the party we might not be invited to dance. But in the 1980s that changed abruptly when the United States sick of the lack of progress in the multilateral arena said it would no longer refuse to enter into bilateral agreements. 
The process has accelerated from there and in the meantime the European Union which in its original form I would categorise as having been the most pernicious of all of those agreements is in the process of radically reforming itself into a much more multilateral-friendly policy instrument. When we look at the original community we see that it was a political vision inspired by those two great thinkers Jean Monnet and Robert Schuman who wanted to stop the European tribal wars which had involved this country. We paid twice for those tribal wars. We paid in blood in 1914 and in 1939 and then we paid afterwards in terms of our trade. Although special arrangements were made for New Zealand they were vastly inadequate to protect us from the flaws in an agreement of that type—admittedly a customs union but not a free-trade area. 
We have moved in the last 15 years towards somewhat better alternatives. The bill is an example of those and we very much support it. 
ERIC ROY (National—Invercargill) 
: 
 I was totally enthralled by my colleague Tim Groser’s comments. We are indeed fortunate to have in the House one of the foremost negotiators in the world not just from New Zealand— 
Hon Paul Swain 
: Stop crawling Eric. That won’t get you into Cabinet. 
ERIC ROY 
: I know the member is interested. I can see that he has woken up. I would encourage him to take another call and continue from where he was interrupted by the bell. For myself I am happy for us to get on with this. But I was somewhat incensed I guess or challenged by the comments made by the Green Party member Mr Locke. I took the liberty of reading the Green Party minority report. I assume he wrote it; it is somewhat anonymous. Is this his? 
Keith Locke 
: I was a member of the committee and— 
ERIC ROY 
: I thank the member for his confirmation. I know he is a pacifist but if he were ever in the army someone would say: “Why isn’t everybody marching in step with Mr Locke?” because I am sure he would be out of step with the rest of the battalion. 
In the Green Party minority report Mr Locke says he believes that the Government has not demonstrated an overall benefit to New Zealand. Yet everybody else on the Foreign Affairs Defence and Trade Committee identifies a huge number of benefits some direct and some indirect. The first objective on page 7 of the agreement states: “A fundamental objective of New Zealand’s trade policy is to expand the opportunities available to New Zealand by removing barriers …”. 
 If we are to thrive as a community then we have to get rid of barriers. Barriers can apply in all sorts of forms. The most visible way is by tariffs where a country we want to access puts on a cost. In this particular case Chile is identified as having a 6 percent tariff on almost everything. That is nowhere nearly as prohibitive as in a lot of other places. Some of our Asian trading partners have 30 percent tariffs and that is a significant barrier. 
But why would we want to prevent trade? I would like the member to take another call and tell me why. Why would he not want New Zealand to have an opportunity? The member said words to the effect—I do not want to take it out of context—that we have a problem with countries that have a wage structure lower than ours. That is the point he made. Several questions can be raised about that. Why do we have a problem? With wage structure normally goes technology and we have some significant advantages in the area of technology. My question to someone as altruistic as Mr Locke is to ask: why lock in people who are in a low-wage structure so that they stay in a low-wage structure by preventing them from partaking in trade? I want him to take a call and explain that because to me it makes no sense. 
In terms of a country where workers are in sweatshops National members are saying they would like those workers to enjoy some of the market opportunity in our country but Mr Locke is saying that those workers cannot do that because their wage structure is lower than ours. I am saying the workers should do that and we should invite them to come in. We want them to grow their opportunities for several reasons. Firstly we do not like where they are at. Secondly when we grow them by sharing trade they will become wealthy and they will become a market for us. So we gain and they gain. 
That is what knocking down barriers is about. It is clearly spelt out in the report—in all parts of it apart from the minority report—that we need to engage with our neighbours. This period that we are in now the last half of the 20th century and the first part of the 21st century is the longest period of global peace for four centuries. Yes there have been skirmishes around the world but in reality that is what is happening. Globally that is the case. 
DARREN HUGHES (Junior Whip—Labour) 
: 
 I move  
That the question be now put 
. 
KEITH LOCKE (Green) 
: 
 I have been challenged to answer a few questions so I thought I should take the call. It is not often that one is the centre of the debate in this way and I welcome the serious questions that have been asked. Of course the Greens are for good trade opportunities and for giving poorer countries the opportunity to trade. The member presents the Green position as being somehow very far out of step but I outline arguments that as Tim Groser rightly put it were popular a few years ago. 
I am not saying necessarily that all the arguments the National Party and Labour Party argued in the 1970s or early 1980s—if that is what Mr Groser was referring to—were correct but there was quite a consensus then that we could have trade expanded trade and expanding trade alongside a level of tariffs. The level of tariffs would be set to suit one’s own society and it would take into account relative advantage and disadvantage with other countries. 
One of the factors for relative disadvantage is the lower wage rates in other countries. In China of course wages are much lower than in New Zealand so a certain tariff imposed on products from China does not necessarily stop an expansion of trade from China to New Zealand particularly as that country becomes more efficient in producing its products as it has done. 
One of the problems is that if tariffs are dropped too rapidly or major free-trade agreements are entered into one starts hollowing out one’s manufacturing base. That has happened in New Zealand and it is one of the reasons why we have a record $7 billion trade deficit. It is why many good New Zealand clothing companies and leisure product companies are now sending their production to China. We are hollowing out our skills base in manufacturing particularly in the clothing textile and footwear industries. So our great fashion designers who are major exporters to the world now—not necessarily in dollar terms yet but they are exporting significantly for a growing industry—sometimes cannot find the skilled people who would have been available years ago to sew up their clothes in the way they would like. The skills base has dropped. 
That is all that the Greens are arguing. It is not a particularly radical position. In some ways it is a conservative position to go back to Tim Groser’s analysis. Rather than having an ideological position—that is the free-trade position where we just wipe the tariffs and everything will be all right and everyone will be winners—our position is a practical one that looks at what can expand our trade and the trade of countries like China in a way that suits the interests of both countries. That is all we are proposing. 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 I would like to take up this debate exactly where Keith Locke has left off and remind him of a couple of facts. In the mid-1980s a Labour Government wiped the support around the agriculture industry in New Zealand. It was tough but New Zealand agriculture is many times stronger today because of that. In the mid-1980s the tariff protecting the wine industry in New Zealand was eliminated. The 40 percent tariff was just wiped and New Zealand wine producers had to compete internationally and we can look at where New Zealand wine producers are today. They now command in London the highest average price of any country that produces wines in the world. That is because when a country is no longer competing on the cheapness of the labour supply and when that country goes to the top of the market there is far more profit and future development. I say to Keith Locke that he should open his eyes about what trade liberalisation does for countries. I hear Japan arguing the sort of arguments he is making in relation to why it protects rice. Of course the economic consequences of that are equally as bad for Japan. 
I come to the issue that I put to the Minister earlier on in this debate. This is a strategic agreement and because of that it is important for APEC that it is a model agreement and shows leadership. My question not answered by the Minister asks why when it is such an important strategic agreement New Zealand has chosen—and this is totally New Zealand’s choice—to have our phase-out for the removal of our tariffs for products coming into New Zealand from Chile and Brunei extended beyond 2010. 
New Zealand had made what I believed was a good-faith commitment to the other members of APEC that we as a developed member of APEC—unless under Michael Cullen’s stewardship as treasurer New Zealand has slipped from being a developed member of APEC—would have free and open trade by 2010. I know that the Labour Government is negotiating the Thai free-trade agreement—or closer economic partnership as I think it is called. In that agreement New Zealand’s schedule for eliminating tariffs has been kept beyond 2010 but why has that been done in this important strategic agreement? There is absolutely no need to do that. Why did New Zealand not show leadership on making sure that the schedule for the elimination of our tariffs complied with our commitments? I thought this was a serious commitment—it was when I was the Minister for International Trade. If New Zealand has abandoned that commitment there is no hope of APEC ever achieving free and open trade because we are one of the leaders on trade liberalisation. 
 I would appreciate the Hon Lianne Dalziel the Minister in the chair—if she understands what I am talking about—telling the Committee whether that is so because we deserve to know. If New Zealand is breaching a major commitment like our commitment to the goals of the Bogor declaration of APEC we should know why the Government has chosen to do that. I would appreciate Government members getting on their hind feet and telling us because it must have been a conscious decision by the Government. Why did it not make sure that the phase-out schedule was completed by 2010? Why did it allow the schedule to go beyond that and breach our commitment in an agreement like this that is strategic that shows leadership and that is meant to bring some real life to the trade liberalisation process and APEC—why has New Zealand chickened out? We should know why and we deserve to know why. 
The Minister in the chair is doing her best to ignore everything I am saying and she is taking absolutely no notice of the debate. I suspect that is because the Minister in the chair knows absolutely nothing about this legislation and nothing about— 
Darren Hughes 
: It is just personal. She does not like you much. We’ll listen to the next speaker—you’re an old man. 
Dr the Hon LOCKWOOD SMITH 
: I am relaxed about that. The junior whip reckons it is personal and she does not like me. If she does not like me that is no problem but she owes this Parliament and New Zealand an explanation as to why New Zealand is abandoning its commitments to those Bogor goals. 
Hon Lianne Dalziel 
: We haven’t. 
Dr the Hon LOCKWOOD SMITH 
: Well can she explain to me why tariffs under this legislation will continue beyond 2010? 
Hon Lianne Dalziel 
: We haven’t decided that yet. 
Dr the Hon LOCKWOOD SMITH 
: I thought the information from the Ministry of Foreign Affairs and Trade itself pointed out that for certain phase-outs tariffs will continue beyond 2010. 
TIM GROSER (National) 
: 
 I was unaware until recently of course that there was a brand new procedure when we moved into the Committee stage whereby one could take a second call—I am like a kid with a new toy. I was explaining before that I was goaded into making a presentation on the strategy and on the intellectual foundations of the theory behind the strategy. When I saw Michael Cullen come into the Chamber a distinguished New Zealand economic historian I was goaded for the second time to want to take the floor and carry on in that theme. 
In respect of the first of the landmark departures from the multilateral process the European Union used a customs union rather than a free-trade area approach. The European Union set the whole strategic concept off on the wrong footing from the very start for precisely the reason that it incorporated the concept of the community preference as the very foundation stone of the European Union. If one goes back to the mid-1980s the period when Margaret Thatcher would arrive in Europe waving her handbag and demanding her money back— 
Darren Hughes 
: Why don’t you ask for your handbag back? 
TIM GROSER 
: No I never ask for my handbag back. I am quite comfortable in the space I am in actually. 
One must remember that in the mid-1980s the European Union was not much more than a shonky system of agricultural subsidies. Approximately 70 percent of the entire budget for the European Commission was spent on agricultural subsidies. I recall very well that at that point the Europeans would ask people like me what else we could expect and say the subsidies were the glue that kept Europe together. In a sense they were correct. Twenty years ago that was all that the European Union was. It depended entirely upon a shonky system of agricultural subsidies to hold together a fledgling European Union. 
The main point is that it has moved on from that point. From about 1988 and 1989 when the European Union moved into the European economic space when it came across the concept of the single economic market and when it adopted the euro and put aside the German mark and the French franc—monetary instruments that had stood for 1000 years or more—it was in a position to move forward with the economic agenda in a far more comprehensive way than previously. Therefore it was not nearly as dependent on what I said before was “a shonky system of agricultural subsidies”. The reform of the Common Agricultural Policy which was initiated in its first serious form by Fritz Gundelach and followed through by a series of commissioners subsequently was in fact made possible by those broader shifts. 
So now we are now seeing—and this is a very important strategic function of agreements of this type—the most important agreement of them all the European Union return to its original political origins which were to be an instrument for peace and democracy. As the union spreads from the original six to nine 12 15 and now to 25 members I see that as being a very positive force for New Zealand. I think we will see in the future an environment that will suit New Zealand’s interests both politically and culturally— 
Eric Roy 
: Take another call. 
TIM GROSER 
: I am being encouraged to take yet another call which I will certainly try to get away with. The future that lies ahead of us in terms of our relationship with the European Union will be a very much happier one than it was in the past quarter of a century. What does that mean for the whole concept of free-trade areas and customs unions? Well I wish to run the clock down here so I will try to be as extensive as I can. The main point is that the United States started to shift its policy into those reciprocal free-trade agreements and closer economic partnerships. 
I have a small problem with the term “closer economic partnership”; it is a Labour concept that is politically correct. We are not allowed to have wives—we have partners—so we are not allowed to have free-trade areas. 
Darren Hughes 
: That is not what the member’s biography states. 
TIM GROSER 
: I have specialised a little in that area myself and I think one or two Government members have not been far from me in it. The point is that there is a substantive point behind the term “partnership”. It is not just about frontier policies that we are trying to harmonise and move forward together; it is also about a series of policies that lie behind the frontier. The new-model trade agreements—and this is a reasonably good example of one—are very well suited to exploiting further advantage from those economic cooperation agreements. 
Hon MARK BURTON (Deputy Leader of the House) 
: 
 I move  
That the question be now put 
. 
Motion agreed to. 
A party vote was called for on the question  
That clauses 1 to 5 be agreed to. 
Ayes 109 
New Zealand Labour 50; New Zealand National 48; New Zealand First 7; United Future 3; Progressive 1. 
Noes 10 
Green Party 6; Maori Party 4. 
Clauses 1 to 5 agreed to.