Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill — Second ReadingText is incorporated into the Bound VolumeTariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill — Second Reading[Sitting date: 10 September 2015. Volume:708;Page:6565. Text is incorporated into the Bound Volume.]Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment BillSecond ReadingHon TODD McCLAY (Acting Minister of Trade): I move That the Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill be now read a second time. I would like to thank the Foreign Affairs Defence and Trade Committee for its consideration of this bill and the good work that it did not only in consulting with the public on the earlier draft of the national impact assessment but also in the detail of this legislation.This is an extremely important piece of legislation for the House and for the country because it amends New Zealand law to implement our obligations under this free-trade agreement. It is a free-trade agreement that will help to level the playing field for so many New Zealand producers and exporters to Korea who work very hard to send goods there and are at a disadvantage because of tariff barriers that are in place when their goods arrive at the border in Korea. But more than that they are at a disadvantage compared with some of the countries that we compete with for production of these goods that also export to Korea. That is whysuccessive Governments—and I hope the bipartisan approach of good trade policy to help New Zealand business and industry is still shared by parties across the House—have worked so hard in this area: to level the playing field for hard-working diligent New Zealand companies and of course the people who work for them.So the bill will particularly amend the Tariff Act 1988 and will add the Republic of Korea to the list of preferential countries that we trade within note 3 of the Tariff. It also provides transitional safeguard mechanisms contained within the trade remedies chapter of the free-trade agreement so that they are applied appropriately under the circumstances.I want to touch on just a few of the issues I think are important in this bill at least in the agreement and what the bill will implement. The first is this: why is Korea important for us? Well it is our sixth-largest export destination for goods and services and our eighth-largest import source of goods and services. Two-way trade between New Zealand and Korea in 2014 stood at $4.5 billion. That is significant for New Zealand and New Zealand businesses.The free-trade agreement is a significant development in our bilateral relationship with Korea and what this does is it means that New Zealand companies are able to sell more produce to Korea and more goods and more services to Korea. They become more productive. These barriers that some around the world have when we look at the restriction of trade when it comes to tariffs we would say restrict trade. Traditionally when we look at the evolution of trade around the world that is what they were there for.Many years ago the significant barriers that were in place with the European Union were to protect local industry which we know can stifle innovation and to restrict access for goods from others who produce well as New Zealand does. Well this levels that playing field as far as our relationship with Korea goes.New Zealand exports currently are constrained by these tariff barriers. Without the agreement in the Korean market our exporters currently pay approximately $229 million of duties every year—$229 million of duties on our goods that go into Korea. None of that is returned to the New Zealand economy or these New Zealand businesses. So on entry into force of this agreement duty-free access will be bound in and tariffs eliminated on approximately 48.3 percent of exports. That is a saving of $65 million in duty in the first 12 months alone. In the first 12 months of the entry into force of this agreement negotiated by Minister Groser with Korea $65 million of duty will be reduced. That makes our producers more competitive; that makes them more productive; that returns more to them to invest in their businesses and to invest in their workforce.Under the agreement approximately 98 percent of tariffs on New Zealand’s current exports to Korea will be progressively eliminated. That means 98 percent of what we currently export to Korea will go in without a tariff upon it—without any barrier around cost when it arrives there. Extremely important—but that is only what we export at the moment. As you will see with other free-trade agreements particularly the China agreement—under that agreement our trade with China has grown significantly. Under the economic agreement that has been put in place with Taiwan we have seen our trade grow significantly—and $4.5 billion of trade with Korea is already significant. I expect with this free-trade agreement entering into force we will see trade from New Zealand to Korea also grow significantly.There is one aspect of trade agreements that is not often spoken of and that is what happens when you do not have one. Let us take the situation with Korea where others have entered into an agreement with Korea before we have. What this means is we still have the same access and the same relationship but some of these goods that we compete against actually get in there at a preferential rate compared with New Zealand. What that means is we end up competing on a platform that is less than fair. It means our access is eroded because of the preference of others.It is as simple as this: let us take the kiwifruit industry and their trade with Korea. Korea is a very important market for New Zealand kiwifruit. The kiwifruit industry has faced tariffs of about 48 percent from memory into that market. Other countries of the world—Chile for example from memory also produces kiwifruit—export there at a much lower rate. From memory it is around about 10 percent. So those countries have our producers in New Zealand at a disadvantage straight away. The cost of our kiwifruit when they get to the border is competitive but when the tariff rate is applied that competitiveness is no longer as obvious.Under this agreement we will see a significant reduction over a short period of time of the tariff rate against New Zealand kiwifruit to zero—right down to zero. At the same time for countries we compete with that also trade with Korea that will not be the case. So our producers now have an advantage over some of those others and that is a very good thing. That will be worth on average from memory $12500 per kiwifruit grower in New Zealand—cash in hand in respect of the erosion or the taking away of this tariff. So that is really important.But the main point I am making here is that actually without these free-trade agreements without us entering into them without us moving forward with them without us making sure that we remain competitive of two others when our competitors who are trading into markets that are important to us get a preference that we do not—for instance if there is an agreement that we do not sign but they do—then over time and it does not have to be a very long period of time our companies in New Zealand our producers are hampered. They are held back. Their trade is eroded based upon price. Well the good news here is that this agreement with Korea does not do that. In fact it goes in the other direction. It gives us some advantage.Finally I will speak on some of the substance of the agreement that this bill enacts through changes to legislation—a number of wide-ranging measures to help us to facilitate trade both in goods and services and to also assist with investment flows and to encourage cooperation in areas that we must work in together.Investment flows in both directions. So the first around this is that there are improved rules of origin—sanitary and phytosanitary rules are very important for agricultural production in New Zealand—our recognition of standards technical regulations and customs procedures. Procedures—these are not tariffs but these are all barriers that can have the same effect as a tariff. If it makes access more difficult it puts cost upon New Zealand businesses. So us moving forward with this is a good thing for New Zealand.The agreement includes a modern high-quality services framework and commitments that will mean greater service opportunities in both countries. I think there are a number of very good New Zealand businesses that can take advantage of that. A most favoured nations provision means that should Korea give better treatment to other similar nations it must also extend that to us so that is in as far as negotiations that others will have in the future a very large degree of futureproofing.The agreement also includes commitments to facilitate the movement of business people between New Zealand and Korea. I think that is another important aspect. It is often overlooked in new modern responsive free-trade agreements and their negotiation. It is actually not just about tariff lineany longer; it is about facilitating business and giving New Zealanders better treatment when they go into other countries.I will finish by saying that we are a very fair nation. We do not have that many tariffs in place for goods that come into New Zealand. But we are a country of very able producers. We are a country of traders. As a Government and with other members of this House we need to make sure that we look at the very best way to ensure these great producers and traders in New Zealand have at least the best chance at a level playing field in other parts of the world. There are still far too many countries that have significant barriers in place that we view as unreasonable and unfair. That is the reason I commend this bill to the House and this free-trade agreement which is good for New Zealand. Thank you.Hon DAVID PARKER (Labour): This is the only piece of legislation that comes before the House in respect of the New Zealand - Korea free-trade agreement. It is the only opportunity that we as politicians have to talk about the pluses and the minuses in the agreement and I propose to do so.Labour shares the ambition of National to grow our trade and we think that reducing tariff barriers to the entry of our exports into other countries is an important part of the Government’s agenda to improve trade. Sadly the need for these tariff reductions and the need for better export performances are laid bare by the current statistics for the New Zealand economy where exports as a percentage of the economy have dropped from 30 percent of GDP when the Government took over to 28 percent now and they are projected to drop further still. That should be contrasted with the Government’s ambition to lift exports. Its target was to lift exports from 30 percent to 40 percent of GDP which it is plainly failing on because its economic settings are wrong.This legislation is supported by Labour because for once National has it just about right—it is not perfect but it has got it just about right—so we can support this piece of legislation. Indeed as the Acting Minister of Trade correctly records tariffs that are currently paid by New Zealand exporters that are going to be reduced in the first year alone amount to about $65 million which will mean that the net proceeds of sale that are received by New Zealand exporters selling into Korea will be higher because they do not face those tariff bills and therefore more of the sale price will end up in their pocket.That is good for the New Zealand economy because it means that more money will come into the New Zealand economy we will be able to afford to buy more things from overseas as a consequence of the things that we export and those businesses will be more competitive and will be able to expand and afford higher levels of cost including over time higher salaries and wages. That is how an economy like New Zealand’s grows in value and prospers.That is the reason why the Labour Party is clearly pro-trade as evidenced by the most important trade agreement that we currently have which is the New Zealand - China free-trade agreement which was negotiated by the Hon Phil Goff who will take a call in this debate. That agreement shows how important trade agreements can be to growing trade. I do not agree with some of the other parties in this House that say that free-trade agreements are irrelevant to our trading prospects. They most certainly are relevant.One of the reasons why we find it easy to agree to this agreement is that other than this amendment to the Tariff Act there is no change required to New Zealand’s legislation. There is no change required to our tax legislation to our environmental legislation or to our labour laws. All of them remain as they are and can be properly changed in the future. We had good advice from officials in the earlier part of this process that confirmed that we could for example properly regulate for public health and safety for environmental laws for labour laws or for tax laws. All of those things are unaffected by this free-trade agreement. So the sovereignty of the New Zealand Parliament to govern in the interests of New Zealanders is not undermined in those ways.There is a problem with this agreement that we have highlighted already—and I was surprised that the Minister did not address it in his second reading speech just as he did not address it in his first reading speech—which is the mistake that the Government has made in respect of what can be controlled in terms of South Korean investment into New Zealand. At the moment the New Zealand Government is able to change what it screens for. It can say for example that it wants to ban the sale of New Zealand’s houses to overseas buyers. This agreement constrains that ability and Labour says that that is wrong. Labour also points out that this is poor negotiating by the National-led Government because the Australians were able to protect that same right. Australia does control who can buy its existing houses. It does so including in respect of South Korea and is able to do so under its free-trade agreement that was negotiated in recent years with South Korea—between South Korea and Australia. So I have got no doubt in my mind that if the Government had wanted to retain the right to control who buys New Zealand houses in its agreement with South Korea it could have done so.Why did the Government not do it? It did not do it because it does not care about that. It does not think that a future Government should be able to ban the sale of New Zealand houses to overseas buyers. That was made clear by both Minister Groser and the Prime Minister John Key respectively about a month ago speaking on The Nation and Q+A. They both said: “Well we don’t want to ban the sale of New Zealand homes to overseas buyers notwithstanding the fact that other countries like Australia do.”We in the Labour Party think that we should be able to. It is proper for National members to disagree with our position. It is not proper that they curb the sovereignty of a future Government’s ability to do so and that is our complaint with this. Our request that we made at the time of the Foreign Affairs Defence and Trade Committee report was that the Government clarify this by way of a side letter or renegotiation of this aspect of the agreement and it has to all appearances not done anything. It has not responded to the select committee. It has certainly given no signal that it is trying to do that.What are the consequences of this? The Minister made reference to the most favoured nation clause in this agreement meaning that if South Korea does something more favourable to another country New Zealand gets the benefit of it. What he did not say was that most favoured nation agreements do not actually apply to goods so they could have different tariff rates and that would not flow through but they do apply to investment protocols. I find that somewhat inconsistent but that is as it is in a number of other agreements.What is the effect of that? Well the effect of that is the same as it is under prior agreements. The most favoured nation agreement under the Chinese free-trade agreement applies to things that are given away by the National Government in the South Korean free-trade agreement. So by the action of National not retaining the right to screen for new categories of investment i.e. to ban the sale of New Zealand homes to South Koreans the most favoured nation provision in the Chinese free-trade agreement means that that flows through to the Chinese free-trade agreement. The effect of this is that New Zealand could not have a future ban on land sales that exempted South Korea but applied to China because that would put us in breach of the Chinese free-trade agreement. So the effects of this flow through to other trade agreements. The current Government is putting future Governments in the position that if they wanted to ban the sale of land to foreigners—we have the position that if you have got the right to live here you have got the right to buy here—we would have to renegotiate the South Korean free-trade agreement in order to avoid breaching the Chinese free-trade agreement.We have five bottom lines for free-trade agreements. This is true in respect of the proposed Trans-Pacific Partnership agreement and it is true in respect of this agreement. Those conditions are that Pharmac has got to be protected and corporations cannot be able to successfully sue Governments for regulating in the public interest—I have talked about that. We would actually prefer in agreements with First World countries not to have investor-State dispute resolution clauses. The officials told us this time that they could not have had an agreement with South Korea because that was a bottom line with the South Koreans; they needed investor-State dispute resolution clauses from their perspective. We think that New Zealand has to have the ability to control who buys our farmland and our houses the Treaty of Waitangi must be upheld and we have got to have meaningful gains in tariff reductions for our exporters.All of those conditions were met in the Chinese free-trade agreement. All but one the land one that I talked about are met in respect of the South Korean one. We do not yet know what is happening in respect of the Trans-Pacific Partnership agreement but we know that at the start of the process Minister Groser Prime Minister Key and Bill English all said that they were going to be huge reductions in tariffs such as those that have been achieved in the Chinese free-trade agreement and to a similar extent in the South Korean free-trade agreement but we do not yet know.With those comments I reiterate that the Labour Party recognises that we are a trading nation. We have got a proud record in favour of free and fair trade and for those reasons we are supporting this bill.Dr SHANE RETI (National—Whangarei): It is a pleasure to stand and talk to the Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill. I would like to start by acknowledging the Foreign Affairs Defence and Trade Committee and the chairmanship of Mark Mitchell and other colleagues. I would also especially like to commend Labour members for their support of this bill. I think this bill is better with the additions and the support that has come from clearly very strong trade people: the member David Shearer the member Phil Goff and we had the observer the member David Parker as well. I would like to commend them and thank them for their contributions to this. Indeed there was a sort of bipartisan murmur of “the sooner we do this the sooner our exporters will benefit”. I think that was a rule of thumb that was well applied.I will crystallise some of the key points of this bill. New Zealand receives import tariff revenue of around $4.2 million and that is from Korea from where we import refined oil cars electronic equipment and machinery. Officials tell us that lower import costs on these factors of production will actually lower many New Zealand firms’ costs and improve their international competitiveness. Consumers may also benefit directly from cheaper products. On the other side of the equation we actually pay export tariffs of $229 million to Korea. We export industrial goods forestry products dairy beef lamb kiwifruit and squash. On entry into force we get immediate benefit. On entry into force nearly 50 percent of New Zealand export tariffs will be eliminated immediately. Those are export tariffs on $793.7 million which will become duty-free. If we look at 5-yearly increments—this roughly changes every 5 years—immediately there is a 50 percent reduction in export tariffs. By year 5 that reduction is approximately two-thirds by year 10 it moves to three-quarters and by year 15 there is nearly a 100 percent reduction in export tariffs which become duty-free.The obvious immediate benefactors from this agreement includes the kiwifruit industry. We had Zespri people present to us and they told us that they have $1.4 billion of sales worldwide and that they are projecting to double the volume particularly of gold kiwifruit in the next few years. The South Korean market is well-suited to New Zealand gold kiwifruit because they appreciate quality and they are actually prepared to pay for quality. As has been mentioned we have an incumbent competitor in Chile kiwifruit. They actually have a tariff of close to zero percent and we are paying close to 45 percent. So here is our immediate benefit to the kiwifruit industry.I think we are paying a lot of attention as we must to the fiscal and economic benefits of the free-trade agreement but I would like to focus on some of the indirect benefits that come to us as well. These are the strategic benefits of having good relationships with a significant regional country which will also carry through to all our international dealings with South Korea. If we have a look at some of those indirect benefits a large part of them are relationship benefits. Let me talk about some of them.The indirect benefits from enhanced trade with Korea—as well as offering direct economic benefits the free-trade agreement advances a number of New Zealand’s broader strategic interests. New Zealand and Korea are both members of the World Trade Organization. Trade reform and liberalisation through negotiations at the World Trade Organization remains New Zealand’s primary trade policy objective. Entering into a comprehensive free-trade agreement with Korea which has relatively high tariff barriers particularly in agriculture contributes towards New Zealand’s wider goal of multilateral trade liberalisation. New Zealand and Korea also work together on trade and economic issues—The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! [Interruption] Order! When I stand up the member sits down. Thank you. The member is now reading something very directly. Is he quoting to the House? I did not hear at the beginning whether he gave the source of the quote. I think if he is going to read out a report like that he had better give the source of the quote. Otherwise it will look like it is just part of his speech and then he would be reading it.Dr SHANE RETI: I would like to quote from the national interest analysis that was presented—The ASSISTANT SPEAKER (Hon Trevor Mallard): Well can I say that reading out the national interest analysis which is available to all members of the House I think does not actually—having an odd quote from it would be all right but reading out paragraphs of it is not an appropriate use of a member’s time. Otherwise members could just totally waste the time of the House and read the whole thing out and pretend it was their own words.Dr SHANE RETI: Thank you. I was anticipating three sentences and I am coming to the last line if I may. The last sentence here is: “A government-to-government agreement of this nature has further value beyond the rights and obligations negotiated under the FTA.” This is the point I was making—that there is a strategic benefit here that is hard to give tangible dollar value to on top of all the economic benefits that we are talking about. So I just wanted to comment on those indirect benefits.We received a few submissions on the amendment bill having previously received 3582 submissions on the free-trade agreement itself. Most of the submissions on this amendment were positive and supportive. One made the case that it was not a good bill because it would lower New Zealand’s standard of living to that of Korea’s. We challenged that quite vigorously and department officials reported back to us saying that that was not correct—that roughly we have the same standard of living as South Korea—so we could put that to rest.I think there are many protections in this free-trade agreement—protections around sovereign authorities—so I take some issue with what the member Mr Parker is saying. There is a disputes resolution to tribunals of three people—one whom we select one whom the others select and one whom we agree on. There would seem to be some intrinsic fairness in that. Let us remember that we also through an agreement like this get reciprocal protection for our investors in South Korea. So against this background is New Zealand’s strong history of fairness and success in any World Trade Organization disputes process that we have been involved with.I would like to congratulate our negotiators on this body of work and I would like to commend this bill to the House.Hon PHIL GOFF (Labour—Mt Roskill): I would like to support the Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill. The bill is necessary in order to bring into effect the free-trade agreement negotiated between New Zealand and Korea. I want to set out the reasons why I think it is important. It is not a perfect free-trade agreement by any extent. There are some major omissions in this free-trade agreement but the conclusion that I come to is that New Zealand is better off for having it than not having it—and by a significant margin.We did not spend a lot of time in the Foreign Affairs Defence and Trade Committee looking at this particular bill because we had previously examined the national interest analysis on the free-trade agreement when we reported to the House on the free-trade agreement. What interested me was that every party represented in the select committee agreed that on balance we need to have this free-trade agreement which is why I do not understand why two parties in the House are going to oppose it. I hope that when New Zealand First and the Greens get to their feet they will explain why they would vote against this agreement when there are clear and worthwhile benefits for New Zealand in supporting it which they acknowledged I think quite fairly because they were conscientious in the work that they did looking at the national interest analysis. I think that when it comes to trade we try to make sure that we do what is right for the country first and foremost. Over a long period of time there has been an endeavour to have a bipartisan policy in this House on trade agreements.Why does Labour support this agreement? Well first of all we have a long track record of being a free-trade party. I remember that under my predecessor Jim Sutton we negotiated the P5 agreement which is a high-quality and comprehensive agreement. I was the Minister responsible for the New Zealand-China Free Trade Agreement and the ASEAN free-trade agreement. Both of those agreements met the highest standards in terms of eliminating tariff barriers on all of our major products and of being comprehensive. I am proud of both of them. I am particularly proud of the China free-trade agreement which helped alleviate what would have been a much more severe recession for New Zealand if we had not had that free entry into China and if we had not had the track record that we had in building up that relationship.I also take some responsibility for the initiation of the New Zealand - Korea free-trade agreement and I say that on the basis of a study that we initiated between the New Zealand Institute of International Research and the Korea Institute for International Economic Policy. In 2007 we got a report from that study group and that report said that New Zealand and Korea had a strong and complementary relationship that a free-trade agreement was feasible and that there were mutual benefits for both countries in negotiating a deal. That was in 2007. Well we are now in 2015. So the negotiation took some time. I am not casting aspersions on the Minister of Trade. I think that Tim Groser did the very best he could. He has worked on itconscientiously and the agreement that we have got is worthwhile. But it is also fair to say as Russell McVeagh has said in its analysis of the free-trade agreement that those expecting similar results to China are going to be disappointed. There were some disappointing results in that analysis.First let us talk about why this agreement is important. It is important because we were not first in line. We were first in line with China; we were not first in line with Korea. Korea already had free-trade agreements with the United States Australia Canada China the European Union India ASEAN Chile and some others. What that meant for us was that our inability to get the agreement meant that our exporters were disadvantaged. The clearest example of that was with our kiwifruit exporters. We were paying a 45 percent tariff to get into the Korean market while Chile our major competitor in this area had tariff-free entry. Our people were placed in an impossible position. So this free-trade agreement was a catch-upin many respects. It does not give us advantages over those who have already negotiated free-trade agreements but it removes the competitive disadvantage that we could not possibly have tolerated our exporters continuing to face. For those who oppose this agreement explain to the beef industry how it could have competed with the United States when the United States was going in tariff-free or to the Zespri people who are having to pay the 45 percent tariff.Obviously there are some good aspects to this agreement. Wine—15 percent tariffs gone overnight. We have kiwifruit which I have mentioned already. Those tariffs will be phased out over 6 years. We will still have a disadvantage for the next 6 years but if we get this bill in we will get the first cut by the end of this year. Butter—89 percent tariffs; they will go over 10 years. Cheese—36 percent tariffs; they will go over 12 years. Wood—10 percent tariffs; they will go over 10 years. And salmon—20 percent tariffs; they will go over 4 years. There are some winners. Let us acknowledge the good things in this bill.There are also losers. Milk powder is one of our critical exports. The 176 percent—176 percent—tariff on milk powder remains. We get an expanding tariff-free quota but we are still faced indefinitely with that huge tariff on milk powder. Seventy-five percent of our deer velvet exports are frozen. They will have an ongoing 15 percent tariff barrier. For pāua and frozen squid there is a 22 percent barrier. So we did not get comprehensive tariff reductions and I am disappointed in that. I know that the Government will be disappointed in that. I still say that what we did get is worth having and we should not walk away from it.Why is it important to have the deal? Well Korea is our fifth-biggest export market. Up to the point of the free-trade agreement it has been growing by about 10 percent a year. The purchasing power of 51 million Koreans has been going up. They are the thirteenth-biggest economy in the world. They are the eighth-largest trading nation in the world. We needed a free-trade agreement with Korea and again I say to my colleagues who share the Opposition benches with us: with such an important trading partner you cannot walk away from having a free-trade agreement that is so important. The trade agreement eventually eliminates $229 million worth of tariffs. It helps not only in the agricultural areas but also in areas like medical devices like aviation like marine and like precision engineering. There are benefits for us in those areas and in services like education legal and professional. My key point is that the benefits outweigh the disappointments in this agreement and we should do it.So why were people opposed to it? Well most of the submissions came on the national interest analysis of the free-trade agreement and they were using Korea as a surrogate for the Trans-Pacific Partnership agreement. In particular they were opposed to investor-State dispute settlement. Personally I would not have cared if we had not had the investor-State dispute settlement with Korea. Korea is a country with the rule of law. We did not need an outside disputes procedure if there was a fight over some investment deal. But the fact was as officials advised us the Koreans insisted on it. We would not have had the deal the officials said without the investor-State dispute settlement and we were not going to walk away from this deal. The fact is that the wording in the investor-State disputes procedure is pretty much the same as what I put into the China deal and it protects our sovereign right to legislate for the public good. So I am not blaming the Government for having it there except for one thing. I will make excuses for the Government for the things that it could not get in to it but one thing that the Government could have kept out of it was the automatic right for Korean investors to invest in our residential property.I want to talk about the dishonesty of the Prime Minister. He said: “We’ve put this in there and because Labour has the most favoured nation clause in its free-trade agreement with China China will get it too.” John Key knew that. He knew it at the start. He knew that the most favoured nation clause goes into every trade agreement which is why you do not set a precedent like this Government has set a precedent on the sale of residential property. In Auckland we know that foreign investment is driving up house prices. We know that it is making it impossible for Kiwi first-home buyers of whatever ethnicity to get their own homes. So my question to the next National speaker is: did you allow that to go through deliberately instead of carving it out like the Aussies did or was it incompetence? Those are the only two explanations that you can have. Was it deliberate to allow that in which would extend to everybody that we have ever had a free-trade agreement withthe right to buy residential property or were you incompetent and just not noticing it when it went through?By and large this is a good deal. I give credit to the Minister of Trade for working hard on it. It is not perfect but it is as good as he could have got. But he should have dealt with maintaining our sovereign right to protect residential housing against overseas investors who are pushing prices up.DAVID BENNETT (National—Hamilton East): From the first Labour speech there you would think the Labour Party was actually a party in favour of trade. From the second speaker from the Labour Party Phil Goff you actually would have thought for the first 8 minutes that he also was in favour of trade. I respect the past history of Mr Goff but the last 2 minutes of his speech were just rubbish.Mr Goff negotiated the free-trade agreement with China. When that member negotiated the free-trade agreement with China did he put in a rule saying that Chinese cannot buy property in New Zealand? Did he put that in there? Did he do that? Is there a rule stopping Chinese purchases in New Zealand? Chinese purchasers can purchase in New Zealand can they not Mr Goff? A Chinese national can purchase in New Zealand can they not? That is the truth of the matter. That is allowed under the New Zealand - China free-trade agreement. There is the ability for a Chinese resident to purchase in New Zealand. And yet when we do a South Korean agreement the Labour Party wants to have a different rule. It wants to make sure—Hon Phil Goff: No it’s the same rule.DAVID BENNETT: No no no no it is not. It is not actually.Hon Phil Goff: It’s your fault.DAVID BENNETT: The reality is—no no no no Mr Goff. A Chinese resident can purchase in New Zealand and you are saying that South Korean residents should not be able to purchase in New Zealand. That is what he is saying in this House tonight. That is what Mr Goff is saying here and it goes back to the Labour Party around free trade.The Labour Party does not know where it stands on free trade. Its members are coming into this House and supporting this free-trade agreement voting for this free-trade agreement and looking at the Opposition parties that are against it and tearing strips off them. But the reality is does Labour support the Trans-Pacific Partnership? No it does not. The Labour Party does not support the Trans-Pacific Partnership—The ASSISTANT SPEAKER (Hon Trevor Mallard): All right order! We are now 2 minutes into the member’s speech. I think it is fair to say that he has been attacking members in a way that if they had taken a point of order they would have had some support. The member will first of all stop shaking his head like that and secondly he will address the bill.DAVID BENNETT: Well the bill is the trade agreement with Korea and a big part of that trade agreement is looking at where the political parties stand. Labour members have said that they are voting for this bill. They have mentioned in their speeches the Trans-Pacific Partnership agreement as well and they are speeches that have come from the Labour Party.But the Labour Party will not support free trade in general. It will not support it. That is the problem in the Labour Party at the moment. On one side of the Labour Party we have people like Mr Goff and Mr Parker who came here and spoke about free trade. They said that it was a good thing. But then you have got Mr Little who is there only because of the unions. He was not voted in by his members—The ASSISTANT SPEAKER (Hon Trevor Mallard): Order! The member will resume his seat. The member will now address the bill. There is nothing in this bill on the area that he is currently speaking on. If I have to interrupt him again his speech will be terminated.DAVID BENNETT: The members over there want to know what the bill is about. Well it is about free trade. Look at New Zealand First and the Green Party. They are against this bill. The most bigoted party in this House is against this bill because it does not believe that New Zealanders should have free-trade agreements. The New Zealand First Party does not believe in free trade—Chris Hipkins: I raise a point of order Mr Speaker. I appreciate the comments were not directed at this particular party but I am pretty sure it is unparliamentary to refer to a member or parties or a collective group of members as bigoted.Richard Prosser: I raise a point of order Mr Speaker. I appreciate the comments from the Labour senior whip. I did hear the term and if it is necessary to note an offence on behalf of the House we will do that but in actual fact my colleague and I did not regard the member’s opinion as being worthy of taking offence to.The ASSISTANT SPEAKER (Hon Trevor Mallard): Well I think the first thing we will have is that Mr Prosser will withdraw his last comment.Richard Prosser: I withdraw.The ASSISTANT SPEAKER (Hon Trevor Mallard): Mr Bennett will withdraw and apologise.DAVID BENNETT: I also withdraw and apologise but the New Zealand First Party goes—The ASSISTANT SPEAKER (Hon Trevor Mallard): Right order! The member will now resume his seat. The member’s speech is terminated. The member knows that he does not say “but” after withdrawing and apologising. Dr Russel Norman.David Bennett: I raise a point of order Mr Speaker. I never used the words “but after”. I started with the next part of my speech so I request the Assistant Speaker—The ASSISTANT SPEAKER (Hon Trevor Mallard): The member will now resume his seat. Dr Russel Norman.David Bennett: I raise a point of order Mr Speaker.The ASSISTANT SPEAKER (Hon Trevor Mallard): I am warning the member. If he is going to dispute the ruling that I have made terminating his speech after two warnings and I think a deliberate contravention and continuation of something that I had indicated he was to stop—if he does it again then his speech will not only be terminated but so will his presence.Dr RUSSEL NORMAN (Green): I rise on behalf of the Green Party to speak to this bill which implements a very small part of the New Zealand - Korea free-trade agreement. Of course these free-trade agreements have very large-reaching consequences but only very small elements of them actually require legislative change. This bill implements those small elements.What these trade agreements are really about is what kind of global governance we want to have. The Green Party supports global governance. We want global rules around climate change emissions for example. We want global rules around protecting people from cluster munitions for example. The question is when we implement these kinds of trade agreements—the New Zealand – Korea free-trade agreement in this case—we are implementing a series of global rules in this case bilateral but in some cases multilateral and in some cases plurilateral. These kinds of rules determine the way that the global order is to be rolled out.In these kinds of agreements and in this agreement in particular there are the investor-State dispute settlement elements. It is part of this trade agreement that this bill is implementing a part thereof. These trade agreements and these investor-State dispute settlement clauses what they do is that they restrict the ability of Governments to regulate and of parliaments to pass laws. They restrict the scope of action of democratically elected parliaments.If you were to think “Well what are the kinds of rules for global governance we’d like to have in place?”—should for example Governments be allowed to eliminate nuclear power if they decide it is unsafe? I think that is a legitimate question of global governance. Should Governments and parliaments be allowed to decide that they no longer want to have nuclear power? I think that is a legitimate question and in my view we should have a set of rules of global governance that enables and allows parliaments to decide to eliminate nuclear power. I just think that that is what the global rules should allow.The problem with investor-State dispute settlement clauses which are part of the New Zealand - Korea free trade agreement is that if you try to do that you will be sued literally for billions of dollars. The reason why I can state that so confidently is that right now at this very moment the German Government is being sued for billions of euros because it passed a law in its Parliament to phase out nuclear power. It is being sued under exactly these clauses the investor-State dispute settlement clauses that are in this trade agreement. The German Government is currently being sued by Vattenfall which is a nuclear power company because the German Parliament dared to pass a law to phase out nuclear power.So the question is this: should the global governance rules that we establish enable democratically elected parliaments to phase out nuclear power? My answer is yes. This bill’s answer is no. And that is what it comes down to. Let us have another question. Should Governments democratically elected parliaments be allowed to restrict tobacco advertising by legislating for for example the use of plain packaging for tobacco? Should you be allowed to do that? Should the rules of global governance allow parliaments to pass those rules? I say yes; this bill says no.This bill implements the New Zealand - Korea free trade agreement which includes investor-State dispute settlement clauses. What those clauses say is that if I remove the right of Philip Morris a tobacco company to use its intellectual property which is its brand it can sue me under the investor-State dispute settlement clauses. The reason we know this is because Australia is currently being sued by Philip Morris under one of these clauses in a Hong Kong - Australia bilateral investment treaty that has one of these clauses in it. So why would we support clauses that implement global governance rules that restrict our right to protect human health from tobacco companies? Why would we do that? I do not support that.Let us take another example. What about if you wanted to restrict the sale of land to offshore buyers? I would say that a democratically elected parliament should be allowed to pass a law to restrict the sale of land to people from offshore. It is not xenophobic; it is simply saying we want to control the price of land in our country so that the people who live here can afford to buy it. This bill before us right now is part of a trade deal that will prevent this Parliament from passing a law that restricts the sale of land to offshore buyers.That is what this bill does right now. That is exactly what this bill does not only in respect of Korea but China as well because unfortunately the previous Labour Government stupidly signed a free-trade agreement that had a most favoured nation clause in it which meant that any following Government like the one we have at the moment that implemented really stupid trade agreements like this one would have all of the impact of that pushed backwards on to the New Zealand - China free-trade agreement. And that is in fact what this bill does.I am shocked that the Labour Party is voting for this bill. I am shocked that the Labour Party is voting for a bill that it knows will mean that we cannot place restrictions on—Hon David Parker: The member should listen to the debate.Dr RUSSEL NORMAN: —the sale of land in New Zealand to offshore buyers. I listened to the debate Mr Parker very closely. It was because the Labour Government put a most favoured nation clause in the New Zealand - China free-trade agreement and then this Government introduced clauses that remove our right to stop offshore buyers of land—right? That right in this agreement the one right before us gets taken back into the New Zealand - China one because the Labour Government put a most favoured nation clause into that agreement.So anyone who votes for this bill in Labour and National is voting to prevent this Parliament from passing a law that says that New Zealand land has to stay in the ownership of New Zealand residents and citizens. That is what it means. In my opinion good global governance leaves the space for democratically elected parliaments to say that the land in this country will be sold only to New Zealand residents and New Zealand citizens. I believe that they are good rules. Good global governance rules say that if a parliament wants to do that it should be allowed to do that. What this treaty does and what this bill which implements it does is it removes that right. I think that is bad global governance. That is why we are not going to be voting for it.I want to address—there are so many elements to this thing. Let me just talk about that particular part of it. There is a lot more to it. But that is all about restricting the ability of Parliament to prevent sales of land to offshore owners. If you wanted to eliminate nuclear power if we had it we would be prevented from doing that. If we wanted to restrict tobacco advertising we would face big problems if we tried to do that—because of this agreement which those parties Labour and National are going to vote for tonight in this bill.Let us talk about the China deal because that has been brought up as an example of a great success. There is an old saying in statistics that correlation is not causation. It is true that after the passage of the New Zealand - China free-trade agreement the sale of dairy milk and logs to China increased very significantly. There is no question about that. The question is: was that caused by the New Zealand - China free-trade agreement? Is there a causal connection or is it just a correlation?One way to examine this would be to say: “Well let’s look at other countries who were also selling products particularly commodities into China over that period that did not have free-trade agreements.” What about Australia Brazil and South Africa—also big commodity exporters? What happened to the commodity exports from New Zealand Australia Brazil and South Africa after the passage of the New Zealand - China free-trade agreement? None of those other countries had free-trade agreements during that period. If you look at the exports from those other countries they also dramatically increased after 2007-08. They did not have free-trade agreements. So if the cause of the big increase in New Zealand’s exports to China was the free-trade agreement why is it that those other commodity exporters also had dramatically larger increases in exports? New Zealand had roughly a $4 billion increase. Australia had a $50 billion increase in terms of its exports into China. Brazil had a $10 billion increase. South Africa had a $30 billion increase.Hon David Parker: A lower percentage though.Dr RUSSEL NORMAN: However you measure it as a percentage or just in basic numbers all of those commodity exporters had a dramatic increase in their exports of simple commodities into China and it had nothing to do with the free-trade agreement.China needed commodities because it had a booming economy. It is really simple. That is why our exports of simple commodities into China increased. That is why all countries like us who exported simple commodities to China over that period had a huge growth. All of us had exactly the same experience. So yes free-trade agreements matter. Do not get me wrong. Tariffs are a problem right? I agree with that. But we should not have to sign up to removing all of our democratic rights to implement bad global governance in order to reduce tariff barriers. I do not agree with that.I think that that is a real problem because it restricts our democratic rights in the future and it creates real obstacles at a time when we need to take really coordinated action—to reduce greenhouse emissions clean up our waterways a whole bunch of environmental problems that we face not to mention what is going on with the Auckland house prices—and when we need Parliament and Government to have the tools in order to take that action. This Parliament if it votes for this is voting to take away those tools and that is why the Green Party is not going to support it.FLETCHER TABUTEAU (NZ First): I would first like to address a comment from Dr Reti whom I respect as a fellow member on the Foreign Affairs Defence and Trade Committee. He talked about this bill as a relationship builder and it is the first time that that argument has been raised in relation to this bill.What I would like to point out is that Dr Reti and I actually had dinner with the South Korean Government contingent when they came to New Zealand. I told them very openly that New Zealand First could not support the trade deal and I told them it was because of the investor-State dispute settlement. I said actually that it was a bad trade deal and that they had got the better of the bargain. They nodded and they acknowledged and they agreed—the point I am making is that you can disagree with friends and you can carry on and build relationships. This opposition does not compromise our relationship with the rest of the world.But what I really want to point out to this House especially after the attack from Mr Bennett and some of the rhetoric from the National Party is that New Zealand First is a party that in its founding document in its policies and in its manifesto—our principles have not changed for 22 years—we absolutely endorse trade. We say that the export of New Zealand products and goods overseas is an absolutely essential necessity to our small regional economy—it is absolutely essential.But New Zealand First opposes this trade agreement and the alteration to the legislation in support of it for two main reasons. The first one is the investor-State dispute settlement that I have mentioned. The second is that it is actually a bad trade deal. New Zealand First agreed completely with the Minister when he spoke about New Zealanders being fine exporters and about how important the work of our primary industry is in the main in terms of the growth of this country. What he did not acknowledge and what he should have acknowledged is that most of that comes from our regions.New Zealand First adamantly debates and contests that this Government has a policy that results in essentially absolute apathy with regard to—well actually the whole economy but specifically to our regions. The Northland by-election result and the resulting uproar from other regions around New Zealand saying “You’re not taking notice you’re not taking us seriously and you have no policy.” created a real uproar and the Government took notice. As I have said already today what we are seeing from this Government is a beautifully written song sheet with wonderful lyrics but its actions belie its true intent and in this case there is no substance. We are not seeing anything meaningful from this Government.We are told by our trade negotiators that the investor-State dispute settlement provision was actually the only part of the Koreans’ counterargument to the trade agreement. We have such an open economy already—we already have pretty much open borders for the rest of the world—so what could the Koreans ask of us? The only thing that they asked of us was for the investor-State dispute settlement tribunal process to be included in this trade agreement and this is perhaps the main reason that New Zealand First cannot support this legislation.It is imperative that I remind the House why. I say to the Government: what price sovereignty? We are told about the tangible benefits of the trade of tangible goods but I say it again: what price sovereignty? There are no calculations done on that. There are no estimates done on the compromise that we give away—the undermining of this nation’s right to rule our own nation.New Zealand First abhors the investor-State dispute settlement provision because it enables an international foreign corporate to sue a Government not in a court but in a—deliberately named—tribunal. It is not a court; it is a tribunal. That tribunal is closed usually at the request of the international corporate so we do not know what has gone on in the proceedings. It costs millions of dollars whether we win or lose in those proceedings. It is run by three corporate lawyers—no judge but three corporate lawyers—and because its results are in secret we do not know how it came to the decision that it has made.What is really important here for the other side of the House to note is that because it is a tribunal and not a court there is no right of appeal. If New Zealand were to be sued under the investor-State dispute settlement by a foreign corporate it could not look at the text of the proceedings and it could not go back and contest it and ask: “By what right did you make this decision? Under what terms did you consider the actual provisions in our trade agreement?”.I will point out for the members opposite that there are far too many examples now of trade agreements with investor-State dispute settlement provisions in them where it has been proven that the investor-State dispute settlement tribunal has ignored the very provisions of the trade agreement and has decided in favour of a corporate despite robust and comprehensive clauses in these agreements.Debate interrupted.