Goff Phil: Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill — First ReadingText is incorporated into the Bound VolumeGoff Phil: Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill — First Reading[Sitting date: 16 June 2015. Volume:706;Page:4408. Text is incorporated into the Bound Volume.]Hon PHIL GOFF (Labour—Mt Roskill): I rise on behalf of the Labour Party; we will be supporting this legislation. It amends the Tariff Act 1988 basically to give preferential tariff rates to the Republic of Korea—that is South Korea—which is necessary in order for this country to ratify and bring into effect the free-trade agreement that has been negotiated between our two countries. Korea is an important trading partner for New Zealand. It is our sixth-biggest trading partner and the two-way trade is somewhere in the vicinity of $4 billion.It was really necessary to bring this treaty forward. We began the process under the last Labour Government when I was the Minister of Trade and I was deeply aware that with other competitor countries like Chile having already achieved a free-trade agreement with Korea our exporters in a number of fields—for example in kiwifruit—were losing their competitive advantage. Subsequently the Americans and the Australians have moved to get a free-trade agreement and to not have an agreement of this nature would leave our exporters in an invidious and deeply uncompetitive position. So Labour will be supporting this. I want to congratulate our senior negotiator Martin Harvey. Martin was also my senior negotiator in the free-trade agreement that we negotiated with the ASEAN countries so I know from personal experience he is a competent and committed negotiator and I think he would with the support of his Minister have got the best deal that he could from the Koreans.Having said that I think I would share with Martin and his team and with the Minister our disappointment that there were some areas in this free-trade agreement where we did not get the progress and the comprehensive nature of the free-trade agreements that we negotiated earlier with China and with Taiwan. We have got some areas where tariff barriers will remain in place indefinitely under the provisions of the treaty and this bill that brings it into effect. Important areas like the export of frozen squid are not brought in to the deal and the tariffs remain on them. Unprocessed deer velvet—I think that is 60 percent of our deer trade with South Korea—is not covered by the agreement. There are some horticultural products that are left out of it; and importantly for milk powder—milk powder being our single biggest export outside the tariff rate quota—those tariff rates will remain. So there were disappointments in the treaty but the problem that New Zealand faced in this negotiation as with so many is that we have very little negotiating coin because we have very few export barriers to for example trade from Korea coming in. We do have the ability of course to facilitate Korea’s entry into something like the Trans-Pacific Partnership and I am sure that that was used to give leverage to our negotiators.The good thing about this agreement is that it eliminates over time most of the $229 million that our exporters pay in tariff rates to the Koreans. Of our current exports it removes tariffs on 98 percent of them. That figure distorts the reality of the picture. Because milk powder tariffs remain in place and that is not a high current export because of that tariff barrier the agreement is not quite as good as it seems on the surface but it is certainly worth having. For example for the kiwifruit exporters they were paying 45 percent tariffs. Chile by now has tariff-free entry into Korea. It is our major competitor so that was an important gain and that will come into effect in 5 years. On beef exports we are paying 40 percent. That will be eliminated in 15 years. On sheep meat 22 percent and that will be eliminated in 10 years. We will largely achieve duty-free forestry exports into Korea over 10 years and cheese and butter exports in 14 years.I think every party in the House that was on the select committee doing the treaty examination acknowledged there is a real net benefit to New Zealand in this treaty. The Greens certainly acknowledged that and so did New Zealand First. But I think it is very hard to acknowledge that you are getting an important net benefit and that you will suffer quite serious competitive disadvantage if you do not sign the treaty and then vote against the bill. I guess the other Opposition parties on the select committee are making a symbolic gesture because there are aspects including the investor-State dispute settlement procedure that they do not like but I think our position is to be honest: if New Zealand is going to benefit from this deal then we cannot vote against it. It is illogical to vote against it if it is important for New Zealand and we get a good benefit from it.I want to touch on the investor-State dispute settlement because that was the area in the treaty examination that really drew the flak. It was not about Korea. I do not think anybody thinks that Korea is going to take us to the investor-State dispute settlement procedures any more than China or the ASEAN countries would. They have been in place for 6 years; nobody has taken us through the investor-State dispute settlement procedures and Korea is extraordinarily unlikely to. But what happened with this bill when we heard evidence on the treaty examination is that it was used as a stalking horse for the Trans-Pacific Partnership agreement. The concern that people had and I think it is a genuine concern was that the United States is a litigious country and it might make use of that procedure so those members of the select committee started their opposition to it under the Korea agreement. Even though we are not really against the Korea agreement that fires our shots across the bow of the Trans-Pacific Partnership should it go ahead.I think the select committee procedure on the treaty examination was really useful and well conducted and I acknowledge the chair and I also acknowledge the officials because it brought out the reality rather than the hype and rather than the scaremongering. The reality is that in some trade agreements—the North America Free Trade Agreement probably being one of them—the wording for investor-State dispute settlement procedures was pretty loose. There have been cases taken that people have interpreted as being a United States corporation being able to sue for example Canada because it has put environmental protection in place. Well the reality is slightly different from that.Any country has the right to put in place environmental protections but when it does so it has got to make sure that it is non-discriminatory between the nationals in that country and those that are trying to trade into the country such as Canada. We found in examining some of those decisions and I think looking at the minimum standard of treatment provisions that have been used by corporations to sue countries—Bilcon and Canada was a prominent example—that a North America Free Trade Agreement investment tribunal explained in its decision what the standard of the problem of the grievance had to be in order to succeed when an investor-State dispute settlement procedure was invoked. The actions of the Government needed to be “arbitrary grossly unfair … [lacking in] due process leading to an outcome which offends judicial propriety—”. That is not a low standard; that is a very high standard.So I am satisfied and I think the officials satisfied everybody on the committee that they have built into the wording of the investor-State dispute settlement procedure sufficient safeguards that enable New Zealand to retain its sovereign right to legislate for the public good. For example in public health areas like plain packaging of cigarettes I would not support an agreement that took away our sovereign right to stop tobacco companies promoting a product that causes death among 50 percent of New Zealanders who use those products. So I think there are safeguards built in there.I want to reiterate the concern from David Parker who raised it that the one area that is not covered would be the sale of residential land to overseas buyers. The Overseas Investment Act is protected. It is exempt under annex II of the free-trade agreement. That means that we can continue to stop—if the Government had the will to stop that is—the sale of farm land but the officials were ambivalent about whether we could legislate to stop the sale of residential properties. Right now we have got house prices going through the roof and there is no New Zealander who believes that foreign investors wherever they come from buying up and speculating in residential housing is helping the problem. It is making the problem worse and unfortunately the officials could not give us assurance that under this legislation we would be able to expand the Overseas Investment Act to cover residential housing. The Australians have done that; they have made that a provision of their negotiation with Korea. I think the Government was remiss in not providing for that in relation to residential property sales under this legislation and this particular treaty.With that exception this is a bill that we can support. This is a treaty that will benefit New Zealand. We will be supporting that but I think the Government is going to have to try harder to make sure that in every aspect of where we should maintain our sovereign right to legislate we are able to do so.