Tariff (Malaysia Free Trade Agreement) Amendment Bill — Second Reading In Committee Third Reading 
Tariff (Malaysia Free Trade Agreement) Amendment Bill — Second Reading In Committee Third Reading 
[Volume:664;Page:12113] 
Tuesday 22 June 2010 
( 
continued on Thursday 24 June 2010 
) 
Tariff (Malaysia Free Trade Agreement) Amendment Bill 
Second Reading 
Debate resumed. 
RAHUI KATENE (Maori Party—Te Tai Tonga) 
: 
 I was pointing out before the break that one of the Maori Party’s concerns about free-trade agreements is that a consequence of the global market is that businesses and workers including Maori may be forced to produce their goods at the lowest cost by taking production offshore resulting in job losses at home with people buying overseas goods rather than those made in New Zealand. It should not be forgotten that in April of this year we had some 20000 Maori job seekers who could have benefited from employment opportunities. Unemployment creates stress on the whanau and relying on benefits for income diminishes the ability to manaaki. Yet on the other hand Maori enterprises increasingly want to play their part as a significant export earner for New Zealand. We know also that more support is required that would increase the capability for Maori taking their assets to the world. Presumably Dr Sharples’ mission to Shanghai will help to achieve that. 
We question how workers in both New Zealand and Malaysia will be treated with regard to workers’ rights and minimum standards on labour issues. I ask whether the free-trade agreements will comply with our basic employment law and our moral code. For Maori the expression of manaakitanga towards others means that we ensure respect for the health and safety of all workers yet we cannot ignore the fact that there are opportunities for Maori to leverage their assets to increase economic prosperity internationally. Every economist will tell us that the transfer of assets following Treaty settlements continues to build a platform for iwi-led economic development. 
The Maori Party has been genuinely conflicted about free-trade agreements. We are concerned about their impact on the situation for Maori and on the sovereignty of the nation in the wider sense. We are concerned to see that low work standards and low wage rates are not introduced into New Zealand. We worry about what the agreements mean in the larger context of human rights and indigenous rights. We will be scrutinising the effects of free-trade agreements upon the environment but we also recognise the significant opportunities that might emerge for Maori to utilise their resources expertise and knowledge to open up opportunities in the international market place. 
Accordingly although we initially opposed this bill at its first reading for the subsequent readings of the Tariff (Malaysia Free Trade Agreement) Amendment Bill our votes will represent the diverse viewpoints that both characterise our constituents and should be considered in further debates. Thank you. 
Dr KENNEDY GRAHAM (Green) 
: 
 I listened last night to the debate on the Hong Kong free-trade agreement and the ensuing debate on the Tariff (Malaysia Free Trade Agreement) Amendment Bill with considerable interest. Members may recall the comments I made last night on the Hong Kong agreement where I critiqued the format of the national interest analyses that the Government currently produces when it addresses free-trade agreements. I challenged the Government to I would say come clean on the impact on free-trade agreements on imports and the New Zealand domestic economic sector particularly the manufacturing sector. I called on the Government to drop the euphemisms that it employs such as negative adjustment effects when it really means company failures and job losses. I asked the Government to be more specific in its national interest analyses in the future to drop the ideological fixation and to acquire a certain new-found objectivity. 
I appreciated the response that my remarks elicited from particularly Maryan Street which I thought was very thoughtful and constructive but also Mr Su’a William Sio’s acknowledgment of those concerns. I actually recall in the 2009 debate on the ASEAN free-trade agreement similarly constructive comments from Pete Hodgson. It is clear I think that Labour unlike National shares to some extent the Green Party’s concerns over free-trade agreements at least as they are currently structured and promulgated. I note also of course the Maori Party’s position. As we have just heard from Rahui Katene the Maori Party is literally split over the issue of free trade and I sympathise. 
It is clear to us I think that National however is regrettably mired in a neoclassical orthodoxy. Most of its members prove unable to emerge into the sunlight of a new economic model. A few of them would not even recognise a new model if they tripped over it—and I say that more in sorrow than in anger. I invite Tim Macindoe to prove me wrong within the next few minutes. Labour on the other hand is caught between a legacy and a hard reality. The legacy is a commitment to liberalise the economy from the 1980s—the shadow of Rogernomics still shades its world view. The hard reality is recognition that all is not right with globalisation as it is currently prosecuted and promulgated. So Maryan Street calls for rejigging of the Foreign Affairs Defence and Trade Committee procedure and greater transparency. The Green Party appreciates that and thinks it is a very constructive proposal. I call upon the Foreign Affairs Defence and Trade Committee chairman to respond equally constructively. 
So what do we need? I would suggest we need at least six new things. The first is an examination by the select committee of the structure of the national interest analyses themselves as they are currently used by the Ministry of Foreign Affairs and Trade. The second is agreement that in the national interest analyses and in the submissions equal attention should be given to the import sector as to the export sector. The third is that there should be greater transparency in the New Zealand Government’s negotiating process with the Ministry of Foreign Affairs and Trade reporting to the committee during the negotiations rather than after them as a fait accompli. The fourth is the adoption of a longer time frame for negotiations so that New Zealand’s domestic economic interests have more time to make a proper input into the committee’s deliberations and for that matter the negotiations themselves. The fifth is a more detailed analysis of the effect of “negative adjustment processes” on the manufacturing sector. The sixth is equal attention being given to the effects of free-investment provisions and to the free-trade provisions and there should be separate sections in the national interest analyses to that end. 
The Green Party submitted a minority view in the report of the Foreign Affairs Defence and Trade Committee on the Tariff (Malaysia Free Trade Agreement) Amendment Bill as members know. We advanced three critiques of the agreement. First the underlying theory on which the Government rests its commitment to free trade is misguided in the sense that it is not necessarily the case that both parties to such an agreement will benefit even in comparative terms let alone in absolute 
terms. Secondly the resulting skew towards economic growth is injurious to our medium-term employment stability and also to our long-term economic resilience. Thirdly free-trade agreements are misleadingly named. They should be called free-trade and investment agreements. 
Our submission to the committee’s report was a shortened version of our written views. I have here a longer version setting out in more detail our critique of free-trade agreements as currently pursued. I seek leave to table this document for the benefit of the House. Is that possible? 
The ASSISTANT SPEAKER (Eric Roy) 
: The process for doing that is that the member raises a point of order then seeks leave. My advice would be that he should do that at the conclusion of his speech. 
Dr KENNEDY GRAHAM 
: I shall do that. I conclude by assuring the House that the purpose of our party’s critique of trade policy is not to be perennially negative as ACT is wont to assume from time to time depending on which ACT members are sitting there; the purpose is to generate a reasoned debate over New Zealand’s trade policy and the place of the country’s trade policy in the global economic context. I recall the ASEAN free-trade agreement debate last year when the Green Party made it clear that we were not against trade per se just against the current manifestations of it under the current agreements. It seems the Labour Party to some extent at least shares those concerns. The Green Party will give an undertaking that if we can start afresh with a new look at trade policy we will be very constructive in cooperating on the committee with not just Labour and the Maori Party but indeed National as well. 
I seek leave of the House to table the longer version of the Green Party’s minority report on the Malaysian free-trade agreement. 
The ASSISTANT SPEAKER (Eric Roy) 
: Leave is sought for that purpose. Is there anyone opposed to that course of action? It appears not. Leave is granted. 
Document by leave laid on the Table of the House. 
CHRIS TREMAIN (National—Napier) 
: 
 It is a pleasure to rise this morning to debate the Malaysian free-trade agreement. I will not be taking the approach that my learned colleague Kennedy Graham took in discussing neoclassical orthodoxies. I have to say that most New Zealanders around the country are not particularly focused on neoclassical orthodoxies— 
Hon Maryan Street 
: It’s neo-liberal not neoclassical. 
CHRIS TREMAIN 
: Regardless whether it is neo-liberal or whatever most New Zealanders do not work in that sort of league and really understand things at a much lower level. Once the Green Party starts to understand that and speak at a level that most New Zealanders understand they will be in a far better space. But far be it from me to advise the Green Party on how to run its politics. 
I will bring the debate back to a context that most New Zealanders understand—to delivering on promises in elections. That is what National is doing. We made a big commitment to this country when we stood at the election on having a strong growth agenda. We had six levers that we were going to pull extremely hard to ensure that that growth agenda came through. 
The first lever was a tax system that encouraged Kiwis to get out there and work hard. We are delivering on that and that is fantastic. The second lever was an investment in infrastructure to provide a framework for businesses to work under to grow and to provide jobs. It is businesses that provide jobs in our economy and the other side does not understand that. We are pulling very hard on that second lever to make sure that we deliver jobs and growth to the economy. 
The third lever was an attack on compliance costs and bureaucracy. We saw that with the aviation bill yesterday with which we are reining back compliance costs. We are making cheaper the cost of running businesses and getting our product to market. Again that is another fantastic example of National delivering on its election promises. 
The fourth lever was controlling Government spending and focusing on delivering efficiencies and value for money in the Government sector. This Government is delivering really well on that I am proud to say which is fantastic. The fifth lever that is part of our vision and strategy to grow the economy was lifting the standards in education. Throughout the country we are seeing standards throughout primary and secondary schools and tertiary education lifting and growing. 
But the area I want to focus on today is the sixth lever and that is innovation and trade. We have seen in this urgency debate two examples of trade bills coming through firstly in respect of the Hong Kong free-trade agreement and secondly in respect of the Malaysian free-trade agreement which is before us on the table today. It is a big part of our trade agenda and is supported by the Opposition and most parties within this Parliament with the exception of the Greens. Most parties understand that exporting is the key driver of our economy. That is what will grow businesses and grow jobs and it gives us options within government to collect more tax over time and deliver better education and better health services. That is how it works I say to Mr Graham. 
Rather than focusing again on neo-liberal orthodoxies I really want to give voters out there a really good example of what this means at the coalface. I will use the example of Zespri whom Maryan Street mentioned yesterday when talking about the kiwifruit industry. I will give members an exact example of how this free-trade agreement will work for New Zealanders and for Kiwi business using a green product with a low carbon footprint which is the kiwifruit industry. Zespri is a company that is getting behind this Government’s agenda. It has set a growth projection for their industry of taking kiwifruit sales from $1 billion to $3 billion by 2025. It is absolutely fantastic to see what they are doing. If we compare the growth in the kiwifruit industry with some of our other industries we can see what an industry like the kiwifruit industry can do when it gets its whole plan together and goes well. 
Right now the kiwifruit industry is up there at 9.88 percent growth annually year on year even ahead of the dairy industry. We would not think that but dairy is at 9.71 percent growth. The kiwifruit industry is even ahead of the meat industry at 5.62 percent. So the kiwifruit industry is getting behind this Government’s agenda is really on board and is taking it ahead. 
The key points that Zespri spoke about which will ensure that they can grow and achieve that $3 billion is maintaining a single point of entry. That is something other industries around the country particularly the meat and wool industries need to have a strong think about if they are to grow their own industries and utilise the free-trade agreements that we are bringing out. If we have a look at those growth figures I was talking about before we see that the wool industry in particular has not grown at all in the last 10 years; in fact it has gone backwards. It has to have a long hard think about how it will take its industry to the wider market to utilise the free-trade agreements. 
If we think about an industry that has a green sustainable product then it has to be wool. There has to be a story to tell there. There has to be a way that farmers can drive more revenue into their profit/loss accounts and balance sheets. They can use wool to grow jobs in this country so I think they have a lot of thinking to do there. 
In terms of Zespri a big chunk of driving the growth to $3 billion is through using these free-trade agreements. In their document they are fully behind this Government taking their industry to a $3 billion level. I think that that is to be applauded. With the free-trade agreements we are in a great space. I am proud to be supporting the bill at this point in time. Thank you. 
JACINDA ARDERN (Labour) 
: 
 I am very pleased to hear from the senior Government whip that the Government is in a good space! But I have to say that I felt like that speech was a somewhat patronising contribution which is a shame. I do not think those Kiwis out there watching the debate in the House today necessarily tuned in to hear the senior whip tell them what they would and would not understand of the Green Party’s contribution. I think members are perfectly entitled to raise issues in whatever language they choose and people will judge that on its merits as they will judge the previous speaker’s speech. 
I rise to talk briefly on the Tariff (Malaysia Free Trade Agreement) Amendment Bill in the second reading. Obviously Labour supports this bill because it was the good work and steerage of Jim Sutton and the Hon Phil Goff that saw the majority of this agreement fall into place. That demonstrates as well that some of these negotiations started as early as 2005. Now we are looking at supporting these measures which will allow the Malaysia - New Zealand Free Trade Agreement to be ratified. 
To give a bit of background which has probably already been mentioned by some of my colleagues I tell members this deal expands on the New Zealand - Australia Free Trade Agreement signed in February 2009 and it essentially cuts the trade barriers between Malaysia and New Zealand. 
I will talk a little bit in greater detail about the issue of an export-led recovery because it is something that we have heard a lot about from the Government and it is relevant to this debate. In all of these debates we hear the upsides and the downsides of free-trade agreements. I will talk about the merits of the Government talking solely about an export-led recovery without talking about the framework that exporters are working within because I believe that is relevant. I think it was on 8 September 2009 that Bill English said: “We’re looking for how to make sure we get a sustainable export-led recovery.” This agreement in my view is only part of a solution in that regard. Sadly the National Government has failed to look beyond free-trade agreements at other measures to assist New Zealand exporters. For instance—and this is probably the most important measure I want to speak to—National’s refusal to even consider examining monetary policy will I think limit the extent to which new potential exporters will enter into the fray. John Key and Bill English have both said that they think we have the best monetary policy in the world but if they took the time to speak with struggling exporters who see their gains wiped out by very volatile exchange rates I think they would see the issue a little differently as Labour does. 
For those with an interest in this issue I really recommend their looking at the speech that the Hon David Parker made on this issue recently and also the one made earlier on this year by Phil Goff when he said—and it was quite a historic move on our part—that the consensus on monetary policy was over and for good reason. We have a relatively low level of exporters in New Zealand comparative with the number of industries and entrepreneurs that we have in this country and it is time that we start asking questions about that. 
National’s closed mind on monetary policy has not only been challenged by Labour; it has been challenged by the IMF which I always quote with a few disclaimers. It recently issued a report that stated that inflation targeting was a necessary tool but not a sufficient tool for economic stability. If indeed the National Government’s sole focus was economic stability through controlled inflation one would think it may have taken that into consideration when looking at the forecasting Treasury delivered to it over the increase in inflation that would be generated via its latest Budget. This forecasting predicts some of the highest levels of inflation we have seen in some time—5.9 percent from memory—which will have a significant impact on many New Zealand householders. But that of course is an ongoing debate. 
The IMF actually advocated additional use of monetary tools including the exchange rate and limiting the amount banks can lend against the value of property. That suggests that other tools are available and that perhaps we should be looking more broadly at some of them. 
Paul Quinn 
: Stick to what you know best; it’s certainly not economics. 
JACINDA ARDERN 
: I look forward to hearing Paul Quinn’s contribution on this debate. He obviously wants to give the House a diatribe on his view of economics. 
But before he does that I will talk briefly about the foundations that need to be laid at the same time as a free-trade agreement is signed. I do not think it is just a matter of the Government facilitating these kinds of agreements and then stepping back. In fact I think the agreement with China was a very good example of how we can aid our exporters to enter into a massive and difficult market with success. We did that in 2008 by running a nationwide China roadshow and also launching a Government website with information on the free-trade agreement and assistance on doing business in China. I think that was an incredibly important move towards assisting our exporters in that regard. Given that we are such a small market I think it takes the Government to invest in some of those measures. 
What is National doing to help New Zealand businesses make the most of opportunities in Malaysia? I guess one of the best indicators we have is what measures have been put into the Budget and I have to say that not only is there very little but actually the Government is scaling them back. In the 2009 Budget for instance National cut funding to New Zealand Trade and Enterprise by $101 million over the following 4 years. That is another example of where a cut in investment in the long term will lead to a reduction in New Zealand’s potential growth so it is a short-term band-aid fix that sets us back for very minimal savings. There have also been budget cuts to New Zealand’s Market Development Assistance fund. That stands in direct contrast to what was quite a considerable investment by Labour in this area. In fact in its last term the Labour Government increased the funding for Market Development Assistance for New Zealand Trade and Enterprise from $6 million to $54 million—again in recognition that collectively investment in this area would reap even greater gains. 
Investment in this area is one thing; it is also incredibly important to make sure that New Zealand has an appropriate brand to trade on. We have several significant exporters who can of course trade off their name. Zespri is one of them. One of Zespri’s successes has been the fact that it has been able to trade as a single export desk. It does not have a multiple range of exporters all marketing different brands of kiwifruit for instance and that is something we have to keep an eye on; it is something that is under threat. In the same way New Zealand’s brand becomes a brand across a whole range of products for small exporters. They capitalise and trade off our brand because in and of themselves they may not be significant enough to trade solely on their own brand. This means that brand protection around New Zealand is incredibly important. Not only has the National Government depleted some of its investment in the marketing on behalf of our exporters but also it has done some damage to New Zealand’s brand. 
I reflect briefly on the three recent issues in which New Zealand has made national headlines—I will make that four as there may have been some redemption in regard to the All Whites. That one I am proud of. The All Whites have got us into the international headlines. The second most recent one is the Prime Minister’s vasectomy—not something I personally wish my country to be known for. That made international headlines on the world stage. Then there was the lack of respect the Prime Minister showed by making cannibalism jokes at an inappropriate time—again not something that I would wish my country to be known for. Finally there are the proposals from the Government for the mining of parts of New Zealand’s most precious conservation estate. Again that was noted in the  
Economist  
and the  
Guardian 
 as undermining our brand. These things do not help the New Zealand brand and they do not as a consequence help our exporters. I do not think they help any of us as individual citizens who might be proud of our record and of our reputation. 
I extend a challenge to the National Government and say that it is not just about signing free-trade agreements; it is about supporting our exporters and making sure the appropriate statutory framework is in place for them to be a success. That means reviewing our monetary policy. It is also about our brand. 
Dr CAM CALDER (National) 
: 
 It is a pleasure to rise and speak briefly on the second reading of the Tariff (Malaysia Free Trade Agreement) Amendment Bill. It is the sinews of trade that bind the world together and the sinews of trade that allow countries to have a relationship that means they are likely to maintain friendly relationships rather than unfriendly relationships. An ability to communicate between countries is enhanced by trade between those countries. 
It was a source of great surprise to me that in the world’s best economic conditions under the last administration—conditions unsurpassed in decades—the tradable sector declined year after year after year. This means that in terms of the goods we sell overseas to allow us to provide the services we need here at home for our people to protect our most vulnerable and to provide world-class services in medicine and education we were not doing as well as we could. 
This bill the Tariff (Malaysia Free Trade Agreement) Amendment Bill will boost innovation and improve export access to one of the key markets in Asia to which New Zealand exports. This agreement with Malaysia is an important part of National’s focus on free trade and on improving access for our exporters to world markets—a priority that the Prime Minister mentioned in his speech to Parliament in February. It is only as I said before by lifting our economic performance through selling our goods and services overseas that we can create jobs boost incomes and improve living standards here in New Zealand. 
More than 70 percent of New Zealand’s trade is within the Asia-Pacific region and at this stage I pay tribute to the excellent work done by our Minister of Trade Mr Tim Groser who has been travelling all over the world and opening up markets for our products all over the globe. There will be greater certainty and opportunity— 
Hon Tony Ryall 
: Tireless and relentless. 
Dr CAM CALDER 
: He is tireless and relentless as another extremely well-performing Minister Mr Ryall has observed. 
There will be greater certainty and opportunity for New Zealand businesses in future trading and investment in Malaysia. There are potential longer-term gains from regional integration. I give just a few details: 95 percent of New Zealand’s exports to Malaysia will be duty-free from day one—95 percent. On full implementation this agreement will amount to duty savings of over $10 million a year for our exporters. I commend this bill to the House. 
GRANT ROBERTSON (Labour—Wellington Central) 
: 
 It is an honour to rise in this debate today. The first thing I will do in debating the Tariff (Malaysia Free Trade Agreement) Amendment Bill is to welcome the Minister of Trade back to New Zealand from his successful foray into supporting Australian politicians. 
Hon Tim Groser 
: I wasn’t consulted! 
GRANT ROBERTSON 
: Ha ha! I am sure as the day evolves we will be able to see the impact of the Minister’s triumphal visit to Australia on the fortunes of the Australian Prime Minister. 
Hon Maryan Street 
: Where are you going next? 
GRANT ROBERTSON 
: Yes! Some colleagues have suggested that Mr Groser’s visa for the United States has been revoked by Barack Obama for fear of what might happen to him while Mr Groser is over there. In all seriousness I congratulate Mr Groser as the Minister of Trade and indeed in his role in his former career on the work he has done on free-trade agreements; he has had a bit to do with this one in particular. I also congratulate former Labour Ministers Phil Goff and Jim Sutton who played a key role in the initial development of the Malaysia - New Zealand Free Trade Agreement and the many foreign affairs officials who work on these agreements. An awful lot of work goes on behind the scenes not just it might be said from trade negotiators but also from those who manage the overall relationship between New Zealand and countries like in this case Malaysia. The trust that is built up over time lies behind an agreement like the Malaysia - New Zealand Free Trade Agreement. We are not able to make these kinds of high-quality agreements if we do not have high-quality diplomats and foreign affairs officials working overseas and negotiating for them. I offer my congratulations and thanks to those foreign affairs officials and indeed to the officials from other departments and agencies who have been involved in this particular agreement. 
This agreement is highly significant. It is also a high-quality agreement as well as free-trade agreements go. Malaysia is a significant country for New Zealand trade as other speakers have noted. Between 2004 and 2008 there was an 80 percent increase in New Zealand exports to Malaysia and in 2008 our exports were worth nearly $1 billion. It is a significant trading relationship for New Zealand and one that is obviously growing. It is a high-quality agreement in the sense that 95 percent of the tariffs that are being reduced will come into force on the day of agreement. That is excellent. It will be 99.5 percent by 2016. That is 5 years earlier than for the ASEAN free-trade agreement so that is an improvement in quality. It is a step forward in terms of how our trade agreements are progressing. 
A conservative estimate would tell us that there is a benefit of probably $10 million per annum just in the tariff changes. This agreement will really benefit exporters. It is of high quality. It has the elements of a free-trade agreement that we are used to. It takes into account services as well as goods and I do not think we always give as much attention to the importance of the services side of these free-trade agreements. A lot of successful New Zealand businesses are involved in the services sector perhaps as well as in the exporting of goods but this is a high-quality agreement in terms of services as well as in terms of our core exports. 
I think my colleague Maryan Street has already talked about the importance of the kiwifruit sector and clearly the removal of the tariff there will make a huge difference for Zespri. I know that Zespri and some of our other large exporters have also played a key role in this agreement. The agreement also binds in the existing duty-free access for New Zealand dairy products. Dairy products are usually a problem for us in our free-trade agreements but it is good to see that we have managed to put a situation in place in this agreement where we bind in what is already a good situation and hopefully improve on it as we go ahead. 
I will talk about two elements that sit around this agreement having now outlined the fact that obviously Labour supports this bill. We support the free-trade agreement and we recognise the quality of it. Free-trade agreements need to be seen as part of our overall economic approach. I think my colleague Jacinda Ardern has already addressed the question of monetary policy and the fact that it is important to talk about what we can do better in terms of monetary policy. We have had a consensus in that area but the question many exporters raise with me and with other colleagues is whether that balance of monetary policy is right in terms of supporting the exporters who are a key part of this free-trade agreement. Those exporters are worried about the volatility of exchange rates. They are concerned that our current monetary policy focus is too narrow. I think that when we look at free-trade agreements we need to look at them alongside the rest of what we are doing. 
We also need to look at them alongside domestic policy. We need to look at how we are encouraging and supporting exporters; at what kinds of regional development plans we have; at what the plan for growth and jobs in New Zealand is; at whether we are creating the skilled population the productive population that will be able to take advantage of an agreement like this; at where the Government’s skills strategy is; and at why the Government is not encouraging more people into tertiary education rather than shutting the doors on people going into tertiary education. Free-trade agreements are fantastic and give a deliverable outcome to New Zealand but if New Zealand is to take advantage of those agreements it needs to have the infrastructure behind it. We need the infrastructure behind that in terms of how the economy is organised. We need to ask how we can have a skilled and productive workforce and how innovative ideas are able to be supported and taken forward. The Government is very proud of this bill as it should be but we need to ask where is the overall economic plan to deliver high-quality jobs to support the people who have the skills and to give people new skills to make sure they can contribute to this free-trade agreement and to growing the New Zealand economy. 
The other element I will raise relates to what I call the side agreements to this free-trade agreement. In particular in this case as has been the case in a number of recent free-trade agreements there is an environmental cooperation agreement and a labour cooperation agreement. These have become a feature of recent bilateral free-trade agreements for New Zealand and I think that is an extremely positive thing. For some time since around the beginning of the century the Ministry of Foreign Affairs and Trade and others were very reluctant to negotiate environment and labour cooperation agreements and some of our partner countries were also clearly reluctant but they have now become a regular feature. They offer a very important alternative and a very important different track for our relationships with these countries. 
I have just come back from China with a Wellington City delegation and one of the main things being raised with us as a delegation was the question of how we could work together in terms of environmental cooperation. The Chinese—and I am sure the Malaysians as well—are very interested in renewable energy. They are very interested in freshwater management. They are very interested in a range of environmental issues such as air quality where New Zealand has some expertise and knowledge and where they also obviously have a great deal of expertise and knowledge. 
I believe that these environmental cooperation agreements in particular are a real opportunity for New Zealand. I hope that the Government will not see these agreements just as a tack-on that has been put on to the end of a free-trade agreement to placate people but rather as an opportunity to actually grow our relationship with countries that are developing at an enormously fast rate which is putting huge pressure on their environment. Here is an opportunity for us. We have the framework; let us use it. Let us make it a key part of our relationship with Malaysia in this case and with all the countries that we have free-trade agreements with. 
The same goes for labour cooperation agreements. The labour cooperation agreements have sometimes been even more controversial because they cut to labour standards issues such as issues about wages and about health and safety. In China those are major issues at the moment. Foxccon faces huge issues with its workforce. It has massively increased the wage bill but it is still having major issues. We have a lot to offer countries with regard to a cooperative model of labour relations and the importance of health and safety. I just urge in closing that this is a high-quality agreement but there are also side agreements that offer a huge opportunity for New Zealand to broaden and deepen our relationship with Malaysia in this case and our relationships with other countries that we have a free-trade agreement with. 
I am happy to support this bill. Free trade is not the be-all and end-all of our economic relationships but it is an important part of driving our economic growth and improving our relationships with the countries in our region. 
JOHN BOSCAWEN (ACT) 
: 
 I did not take the ACT call in the normal order when the Tariff (Malaysia Free Trade Agreement) Amendment Bill came up late last night but I will do so now. I have listened with interest to the debate over the last half hour or so and it is interesting that Grant Robertson concluded his speech by saying that free trade is not the be-all and end-all of raising economic aspirations but that it is a very important part. I agree with him. 
I was particularly interested to hear the contribution of Rahui Katene this morning. She talked about the competing concerns within the Maori Party caucus. She talked about the fact that when this bill is enacted it will reduce the tariffs that apply to imports from Malaysia and it will introduce greater competition for products manufactured in New Zealand. However the benefit of course is that it will reduce the price of products and goods purchased from Malaysia and as such it will raise the living standards of New Zealanders. If New Zealanders can buy those same products cheaper then their money and their spending power goes further. As Rahui Katene said it enables the Maori iwi Maori interests to leverage their assets to look for trading opportunities in Malaysia to export products into Malaysia and also to build on Maori development and Maori employment. 
Then the debate became quite wide ranging. Chris Tremain used the opportunity to outline the six key planks that the National Party stood on in the last election campaign. In particular he focused on the growth of Zespri. Jacinda Ardern then took the opportunity to speak about the Labour Party’s policy in respect of monetary policy and she suggested that the Government should be looking beyond simply facilitating free-trade agreements. 
But the contribution that interested me the most was Mr Cam Calder’s contribution. Cam Calder made the point that 70 percent of what this country sells is sold to Asia—70 percent of what we sell. Asia is our future; Asia is where we are marketing our products. I think that is a very important issue. 
Jacinda Ardern talked about four headlines. She talked about the four headlines that New Zealand had achieved on the international stage in the last couple of months. We will make another headline and it will come on 1 July. It will have a huge impact on the welfare of New Zealanders and our exporters. I refer of course to the emissions trading scheme. 
On 1 July we will introduce the most comprehensive emissions trading scheme in the world. We will introduce the first emissions trading scheme outside Europe and it will be the most comprehensive scheme. How do I know that? I listened with interest to the speech of the Hon Dr Nick Smith the Minister for Climate Change Issues when he spoke in the first reading debate of the National Government’s amendment bill. What did Dr Smith say? On 24 September last year—not 5 years ago when Dr Smith was in the Opposition but 6 months ago when he was the Minister for Climate Change Issues—he said that this emissions trading scheme would be the first for any country outside Europe and that on 1 July 2010 it would become the most comprehensive scheme by including transport industry and energy emissions. To all of the New Zealanders who listened to Dr Smith when he was travelling up and down the country trying to minimise the damage that this emissions trading scheme will do to New Zealand exporters and New Zealanders I repeat that Dr Smith told this House on 24 September last year that it will become the most comprehensive scheme by including transport industry and energy emissions. 
I will bring it back to the issue of our free-trade agreement with Malaysia and to Cam Calder’s comment that 70 percent of what we sell we sell to Asia. Dr Smith is very fond of saying that 29 of the 38 developed countries that signed the Kyoto Protocol—the annex 1 countries—have an emissions trading scheme. The countries that Dr Smith refers to are the countries of the European Union plus Norway and Switzerland. Eighty percent of what those countries sell is sold to themselves—80 percent of their exports are to other countries within Europe. Only 20 percent of their exports leave Europe. If we contrast that with our situation we see that we sell 15 percent of our exports to Europe so by definition we sell 85 percent to countries outside Europe. 
By Dr Smith’s acknowledgment we are selling 85 percent of our exports to countries that do not have an emissions trading scheme. As Mr Cam Calder reminded the House this morning of that 85 percent of exports 70 percent goes to Asia. Seventy percent of what New Zealand exporters are selling goes to countries that do not have the extra cost of an emissions trading scheme—85 percent in all. For the National Government to go up and down the country trying to convince New Zealanders that the emissions trading scheme is good for our exporters is an absolute disgrace. Europe has exposed 20 percent of its exports outside Europe and is competing with countries that do not have that cost but we are exposing more than four times that number of exports. 
Trade is very important. The ACT Party probably more than any other party in this House is concerned about the need to raise New Zealanders’ prosperity and is interested in implementing policies that will do something about that. 
I noticed Rahui Katene commented that she was concerned about the impact of the free-trade agreement on workers’ conditions and wages and in particular on unemployment among young Maori and I dare say among young Polynesians and all other young people. We had a chance to do something about that earlier this year. The House could have supported the legislation of my colleague Sir Roger Douglas on youth wages that would have given 16 and 17-year-olds the chance to gain employment by being employed on less than the minimum wage. What choice would an employer make between a young 35-year-old who possibly has a wife or a husband and two young children and who needs reliable employment and a 16-year-old? I suspect that if an employer had to make a choice between a 35-year-old with commitments and a young person the employer would choose the more mature person all the time. Young people are being denied the chance to get employment. 
The ACT Party will be supporting this bill. We support free trade. We support the opportunities that it gives our exporters and businesses. We support having the opportunity to try to raise New Zealand’s prosperity and living standards. Only by creating employment and investment will we create a more prosperous country. 
If Jacinda Ardern is concerned about world headlines then I suggest that all the parliamentarians in this Parliament should hang their head in shame. On 1 July we have an emissions trading scheme—I think Mr Groser is laughing. I invite Mr Groser to explain how he thinks it can be good for those who sell 85 percent of our exports to be exposed to trading with countries that do not have the extra cost of an emissions trading scheme. 
Mr Groser may not think that is important but Meat and Wool New Zealand has stated that the cost for the average dairy farmer from 1 July this year will be $3900. Those farmers will pay that. That is 3c a kilogram on milk fat. It is $75 a week for the average dairy farmer. It is about $35 a week for the average beef and sheep farmer. Parliamentarians in this Parliament may like to laugh about that but if we are really concerned about raising New Zealand’s prosperity our livelihoods and our incomes then we need to be doing a lot more than trying to penalise exporters in the way that the emissions trading scheme will do. Thank you. 
TIM MACINDOE (National—Hamilton West) 
: 
 About half an hour ago speaking more in sorrow than in anger—I think those were his words—our Green Party colleague Dr Kennedy Graham invited me to dispel his and the Green Party’s fears over free-trade agreements. I suspect that the huge number of Green Party members and supporters in the Chamber and the gallery at this moment and the thousands more glued to their broadcasts on TV and radio at home as I rise to take this call on the Tariff (Malaysia Free Trade Agreement) Amendment Bill are sadly probably fairly unshakeable on this topic. Nevertheless I will have a go; the challenge was extended so earnestly and so thoughtfully in the best inter-party spirit of neo-liberal orthodoxies and I do appreciate it. 
Perhaps the first topic I could explore that might appeal to my Green Party friends and supporters at home in Hamilton West is the environmental aspect. This agreement that we are steering into the statute book is Malaysia’s first bilateral treaty on environmental cooperation to be negotiated in the context of a free-trade agreement. 
Dr Cam Calder 
: The first? 
TIM MACINDOE 
: The first I tell Dr Calder. It establishes a set of shared trade and environmental principles to promote sound environmental practices and sustainable development. That is surely worth a celebratory bowl of lentil soup and a burst of morris dancing at the next Green Party regional conference. 
Another aspect that may see the Greens treat themselves to an extra pumpkin and herb muffin is the continuing appeal of New Zealand’s education system to Malaysians. The strengthening economic and cultural ties reflected by this agreement stand to get a further boost and are very significant especially at a tertiary level. I am sure that will appeal to the previous Labour speaker Grant Robertson who is the new spokesperson on tertiary education and who is I understand especially excited and inspired by events unfolding across the Tasman as we speak this morning. It is worth noting that between 2003 and 2008 the number of fee-paying Malaysian students in New Zealand increased by more than 70 percent. 
Hon Member 
: What percent? 
TIM MACINDOE 
: More than 70 percent; it is a popular statistic this morning. That made Malaysian students New Zealand’s third-largest source of international fee-paying students. It is worth noting also that international full fee-paying students are worth over $2 billion a year to our economy. 
The final point I make is just very quickly to reiterate the benefits of that to some of our major exporters. The Malaysia free-trade agreement eliminates Malaysian tariffs on 99.5 percent of New Zealand exports within 7 years of the agreement’s entry into force. Specifically—just looking say at the kiwifruit industry—this means that exports that currently incur a 15 percent tariff from Malaysia will become duty-free by 2012; based on the latest figures New Zealand’s exports to Malaysia have grown already by 173 percent since 2007. There are great benefits for the milk industry as well. 
There we have it; I do not have a lot of time. Those are three great benefits. This agreement is another great step forward from a great Government. It is enough to make Dr Graham and his supporters green with envy. 
A party vote was called for on the question  
That the Tariff (Malaysia Free Trade Agreement) Amendment Bill be now read a second time. 
Ayes 110 
New Zealand National 58; New Zealand Labour 42; ACT New Zealand 5; Maori Party 3(Flavell Sharples Turia); Progressive 1; United Future 1. 
Noes 11 
Green Party 9; Maori Party 2 (Harawira Katene). 
Bill read a second time. 
In Committee 
JO GOODHEW (Junior Whip—National) 
: 
 I seek leave of the House for this debate to be taken as one question—a wide-ranging debate with unlimited calls. 
The CHAIRPERSON (Hon Rick Barker) 
: Leave is sought for that purpose. Is everybody clear? Is there any objection? There is no objection. Leave is granted. 
Clauses 1 to 5 
Hon MARYAN STREET (Labour) 
: 
 I will highlight in the Committee stage some particular aspects of the Malaysia - New Zealand Free Trade Agreement. Last night and again this morning we spent time talking about the general impact of this free-trade agreement on the New Zealand economy with some reference to specific sectors. I will continue some of the analysis of the specific sectors and then talk a little more about additional provisions contained in this free-trade agreement. 
I spoke last night about kiwifruit in particular but also our other primary products which will benefit immediately that this free-trade agreement is passed and ratified by this Parliament. Last night I spoke about kiwifruit in particular. Kiwifruit will benefit by millions of dollars immediately on implementation of this agreement and also will our meat wool dairy fish and forestry products. But today I will talk a little about some of the manufactured goods that will benefit from this free-trade agreement and give some numbers. As we know the tariff reductions follow a progressive sliding scale over a period of time through to 2016 when all but 0.5 percent of tariffs on our exports will have been reduced to zero. This is an improvement on the ASEAN free-trade agreement not only in speed but also in absolute numbers. 
For example steel is one of our manufactured products. That industry in particular currently bears a 50 percent tariff on exports into Malaysia. A 50 percent tariff is a very high charge. By 2016 at the latest that charge will be eliminated. Under the ASEAN agreement if I remember correctly some residual tariff—some 10 percent I think—will still apply on steel products but into Malaysia it goes to zero. 
It is similar for paints and varnishes. We often hear about kiwifruit dairy produce meat wool and all of those primary products at which we excel in New Zealand. But here we have a relatively small proportion of our manufactured exports into Malaysia which currently carry a 25 percent tariff. That tariff will be eliminated by 2016. Another area is plastic products. Currently plastic products out of New Zealand bear a 30 percent tariff into Malaysia—again a huge expense and something that really places obstacles in front of the New Zealand plastics industry as it looks to increase its exports. But in the case of plastic products these tariffs are eliminated in 2012. That is in very short order. We are at 2010 now and within 2 years there will be no tariffs on our plastic products going into Malaysia. There are gains for profits from our manufactured goods as well as from our primary produce. They are very tangible gains and these achievements in this free-trade agreement actually mean more profit remaining in New Zealand. 
I will draw attention also to some other features; I may come back to this one a little bit later in this part of the debate. The rules of origin in this Malaysian free-trade agreement are in fact as I understand it the most liberal of any free-trade agreement. That is a cause of some celebration or congratulations to the officials who have worked in this area. Rules of origin have often been a complex and difficult area to arrive at agreement on. I congratulate the Minister and the officials on achieving a very liberal rules of origin regime. 
I go to another thing that is very important. Members of the Government and the National Party like to cast Labour members as people who know nothing about business; who do not understand the contribution that business makes to the New Zealand economy. Well they may like to live in that outdated and outmoded perception of Labour but we are busy forging ahead. Phil Goff’s record in promoting sealing and initiating free-trade agreements recognises and demonstrates absolutely that the Labour Party understands fully the contribution of the business sector to the New Zealand economy. 
So apropos of that we have agreements in this free-trade agreement with Malaysia that impact specifically on business flows. Let me take a couple of examples. If we look at goods for a moment we can see there is an agreement that New Zealand goods will be cleared by the Malaysian customs department within 48 hours. Now that is hugely helpful especially in a small country like ours that is dependent on primary produce. We do not need our kiwifruit to languish even in refrigerated containers in a city a terminal a port a receiving area in Malaysia for any longer than they absolutely have to. So a guarantee that our goods will be cleared by Malaysian customs within 48 hours is extremely important. In fact Malaysia has never agreed to that before. This is new for them but it gives New Zealand exporters a potential edge over their competitors and that is to be welcomed. 
Another point in this free-trade agreement that relates to business and making business happen more easily into the Malaysian market is around business people so this agreement includes a recognition that people seeking to trade in goods and services—and investors—will be treated equally in Malaysia. There are provisions to enable New Zealand business people who seek to work in Malaysia to be able to stay and visit there for up to 10 years; there is no such provision as that in the ASEAN free-trade agreement. This agreement makes it easier for New Zealand business people to get a foothold to remain in Malaysia and to promote their business and New Zealand products into those markets in the Malay Peninsula for a period of time. That will allow for consistency and the building up of relationships which are necessary in order for that trade to happen smoothly. In addition the agreement includes a provision to facilitate those temporary entry applications of business people within 40 working days. 
So at every point this agreement has attempted to facilitate New Zealand business and business people operating securely and with certainty into the Malaysian market and all of those provisions are to be welcomed. Members on this side understand how important it is for business people not only to have access to foreign markets but to have reliable rules and provisions that allow them to trade and work securely and with certainty so they can plan that there will be some kind of longevity to their enterprise in those foreign markets. I welcome those provisions. 
STUART NASH (Labour) 
: 
 We have heard some very good speeches on the Tariff (Malaysia Free Trade Agreement) Amendment Bill which is one of those bills on which all parties agree. 
Dr Kennedy Graham 
: Wrong. 
STUART NASH 
: We do not necessarily agree on the philosophy of how New Zealand companies are best going to take advantage of this bill— 
Dr Kennedy Graham 
: Wrong. 
STUART NASH 
: I apologise to Kennedy Graham; the Greens do not agree on this bill which is a real shame because we need to look at what is best for this country going forward and how we will grow our economy in a truly sustainable manner while not really abdicating any of our global responsibilities. I think that these free-trade agreements do a perfect job in that respect. 
I think of our past trade Ministers the Hon Jim Sutton and the Hon Phil Goff. Last night in the Chamber I said that Phil Goff will be New Zealand’s next elected Prime Minister. He will be a very good Prime Minister because he will be the only Prime Minister who has actually worked on the ground negotiating with New Zealand’s partners on free-trade agreements. Phil Goff knows how the world operates; he knows what it takes to grow this economy. When John Key was on the 18th floor trading New Zealand’s currency Phil Goff was on the ground floor out there making it work for New Zealand exporters. That is a huge difference and it will make a great difference to this country next year when Mr Goff is sworn in as our Prime Minister. 
We need to concentrate on the economic benefits of this free-trade agreement. It has been mentioned and it is important that Malaysia is New Zealand’s eighth-largest export market which was worth almost a billion dollars in 2008. Between 2004 and 2008 our exports to Malaysia grew by 80 percent and a classic case of that growth is the education market. Malaysia is a very important and growing education market for New Zealand providers because between 2003 and 2008 the number of Malaysian students in New Zealand as mentioned by my colleague Mr Grant Robertson increased by over 70 percent. Malaysia is New Zealand’s largest source of fee-paying university students and the second-largest source of PhD students. At least one country in the region understands the value of education. Imagine if our Government put the same value on tertiary education as the Malaysians did! Mr Robertson would have nothing to say. He has taken over a shadow portfolio that is full of problems and holes but he is making a great deal of it; I feel sorry for Mr Joyce actually. Education is a major export earner for New Zealand in terms of this free-trade agreement. 
This agreement will eliminate tariffs on 99.5 percent of New Zealand’s current exports by 2016. The remaining 0.5 percent is excluded on the basis of religion and safety so we are talking about alcohol. We have to remember that Malaysia is a Muslim country so alcohol is really the only product of significance in relation to our exports to Malaysia. That product is worth about $1.6 million per annum. In the way our wine marketing is going at the moment we have to get a lot slicker but China is soaking up a lot of our surplus wine. 
The percentage of estimated duties that New Zealand exporters would have to pay will be reduced by 86 percent by 2016. That is about $10 million per annum in duties—not an insignificant factor at all. Malaysia currently has import taxes on over 10000 products it imports from New Zealand. Again the Malaysian market is not insignificant by any stretch of the imagination and it is growing. Let me give another example. New Zealand Steel lines currently face 50 percent tariffs; by 2016 those will be tariff-free. That is a great example of how this free-trade agreement will grow this country’s economy in the niche products we produce. 
Let me tell members a little bit about Malaysia. It has a population of 28 million people so it is quite a big market. Its parliamentary system is very similar to our own; it is based on the Westminster parliamentary model. Malaysia is renowned for its international trade and manufacturing as key sectors of its economy. I think my colleague Maryan Street mentioned that we all understand the potential for our manufacturers to suffer because of this free-trade agreement so manufacturing industries in this country that may be affected have been the last to have phase-out provisions which is very good. 
I do not know whether any member recalls this but Malaysia was severely hit by the 1997 Asian economic crisis; foreign direct investment literally ran out of the country. Share values on the stock exchange dropped by over 75 percent. Malaysia devalued; in fact it pegged the exchange rate. The Finance Minister was sacked and Malaysia started reform. 
When I read that about Malaysia I thought: “Goodness me—sacking the Finance Minister and starting reform—that’s not a bad way!”. I tell Cam Calder that I think he should take that on board. I think he should do a reform and do what Australia has done. National members cannot tell me that Mr John Key is as popular as all that; we can look at what he is doing to ordinary New Zealanders on the ground. People who live in Napier and who are on the medium wage will find that after the Government’s tax cuts they will get $3 more a week. There will be a revolt. I think that this is an opportunity for Cam Calder to shine and to organise to do what they are doing in Australia. He should have a look at the model and then be in. Anyway Malaysia got rid of the pegged rate. It was abandoned in 2005 and Malaysia is now on a managed floating system. But the Malaysian economy has really grown out of that crisis. It sorted itself out; it reformed. It really took off and it is in great shape at the moment. 
Malaysia is now one of the region’s leading education and health care providers which reminds me of quite a funny story. I was in Taiwan earlier this year with three of my colleagues. Taiwan also has a brilliant health care system. One of the features of a lot of these Asian countries is that they really look after their people with health care. Again that is something else we could perhaps learn from. But the Taiwanese were extolling the virtues of their cosmetic surgery sector over there and saying what a wonderful industry they had and how safe it was. They were suggesting that I went back and sampled it. I did not quite know how to take that so if members see me heading over to Taiwan in the next 6 months and I come back with a slightly straightened nose—it was dented by an errant rugby boot about 20 years ago—they will know what has happened. I am only kidding; I am not quite that vain. Maybe that is where John Key is at the moment? 
Coming back to Malaysia I tell members that the statistics about Malaysia and in fact about the whole of Asia show what an important region it has become to New Zealand’s economic growth and prosperity. As Mr Boscawen kindly pointed out before only 15 percent of New Zealand’s exports go to Europe. What a change that is! I do not know whether anyone here remembers the history but we almost went into a state of panic when it was announced that the British Isles were entering the European Economic Community. We thought: “What the hell are we going to do about this?” because we were so inextricably linked to the UK with our exports. We had to have a complete philosophical change in relation to how we viewed the world and I suppose to how we viewed what were then the seeds of globalisation. So we have moved and what a long way we have come. 
However working in Asia and in markets like Malaysia brings its own challenges. There is a different language a different religion a different culture and different customs. We can compare doing business in Australia or England to doing business in a foreign country like Malaysia. In Australia and England we can go along and talk about rugby or cricket go out for a beer and hand over some All Blacks jerseys. We have a lot in common from a cultural sporting and heritage background. But I suggest that doing business in Malaysia is a completely different kettle of fish. I would argue that this free-trade agreement—as with the free-trade agreement with China and a lot of the others we are debating such as that with Hong Kong which we talked about last night—is incredibly important. The real challenge we face as a country is how to really optimise our advantages and our opportunities in this market. My concern is that although this is a very good bill New Zealand companies just do not have the tools to take advantage of it. 
Cam Calder spoke about how the tradable economy has declined and I would like to elaborate on that a little bit. That statistic is brought up a lot and it is a very important statistic; we all have to take a step back and say that that is the case and ask what we are going to do about it. I think what has happened is that as we have changed focus our companies have not had the tools to put marketing in place. As I mentioned 97 percent of our companies are small to medium sized enterprises that employ 19 people or fewer. They do not have the resources to employ full-time international market development managers to go and locate themselves in China Malaysia India or any of those other emerging economic markets that will be so important to our future. 
The previous Labour Government understood the value of marketing and it realised that we needed to do something. That is why Labour increased New Zealand Trade and Enterprise’s funding for market development assistance from $6 million to $54 million. Now there is only $10 million in that international growth fund so I agree with Cam Calder. This is a serious problem but the National Government has cut $110 million I understand from New Zealand Trade and Enterprise. I ask how we will help our country’s companies to take advantage of the opportunities that these free-trade agreements bring. Fonterra is fine and Fletcher Challenge can operate on its own; they are huge multinationals with the resources to do that. But the other 97 percent of New Zealand companies are the ones we really need to lift up and help. New Zealand Trade and Enterprise needs to be our international eyes and ears on the ground but this Government has not provided the funding for that. 
GRANT ROBERTSON (Labour—Wellington Central) 
: 
 I want to make a couple of contributions to this wide-ranging debate on the Tariff (Malaysia Free Trade Agreement) Amendment Bill. The first is to talk in a bit more depth about the tariff changes that are being brought in to force. Perhaps later in another call I will talk about some of the issues around services. 
It is important to acknowledge again the quality of this agreement. This is a high-quality free-trade agreement. We see a lot of free-trade agreements coming before this House and this one makes advances on previous agreements. Mr Hayes and others on the opposite side of the Chamber who have experience in these matters know that the optimal agreement for all of us is a comprehensive World Trade Organization or WTO agreement that gives us global rules that are fair and take into account the special and unique circumstances of particular countries. I see Dr Graham nodding in agreement. I think it is important to say at the outset that from a Labour Party point of view we are aiming for a global agreement. The Doha development round is in difficulty and it would be good to see it make more progress. It should still be New Zealand’s highest priority in trade negotiations. But in its absence regional and bilateral agreements remain important and this bilateral agreement demonstrably will lead to benefits for New Zealand. 
To go back to the tariff elimination process on entry into force as well as confirming the outcomes from the ASEAN deal the agreement binds in Malaysia’s level of openness on $821 million worth of exports—that is today before the agreement is even signed. Those exports encompass butter milk powder cheese wool kiwifruit apples and some manufactured products. It is a significant achievement on day one on the agreement’s entry into force. To eliminate tariffs on those key export areas for New Zealand is extremely significant for those exporters and extremely significant for the New Zealand economy. As a number of other speakers have already stated it amounts to 95.1 percent of our current total exports to Malaysia. For a bilateral agreement that is a very significant amount on its entry into force and once again I pay tribute to the officials and the Ministers involved for getting such a good outcome on day one. 
In the 2011-12 period tariffs will be removed from $27.9 million of current exports. They include electrical parts fibreboard chocolate and some other manufactured products. A further 3.2 percent of our exports to Malaysia will be covered. That means that by the end of 2012 98.3 percent of our current total exports will be duty-free. So there is another step forward in the next 2 years. Finally in the period 2013-16 tariffs will be removed from a further $10.2 million of current exports. They include paper products plastics paints whiteware iron and steel. That will bring us as has been previously stated by 2016 to 99.5 percent of current exports being duty-free. That is an achievement worth celebrating and it is in advance of the ASEAN deal. 
It is worth dwelling briefly on the fact that this deal brings things into force ahead of the ASEAN deal. It is difficult when we make a trade agreement at a regional level to then go back to a bilateral partner and say that we would like to make further progress to make faster progress. To be able to do that on so many fronts in this bill is excellent. I mentioned in my second reading speech some areas where that will happen. In terms of paints varnishes and plastic products this agreement is well in advance of the deal with the ASEAN countries. In 2016 they will be duty-free for New Zealand; under the ASEAN deal they will be duty-free in 2020. It is significant that under this particular deal those tariffs will be removed more quickly. It means that this agreement is a high-quality agreement. 
I am sure that some people in the Ministry of Foreign Affairs and Trade—some of Mr Hayes’ Mr Groser’s and my former colleagues—will be deeply concerned that the 0.05 percent of tariffs remaining were not removed. As Mr Nash has already said they are mainly tariffs on alcoholic products but also on tobacco firearms and tyres. My personal view is we need to respect the fact that there will be countries we negotiate with that have reasons why they do not want to go there. One of the nuances of free trade that I think is important to highlight is that being an absolutist in free trade does not take into account the experiences and the different cultures of other countries. We need to respect that when we sign these agreements. We need to negotiate hard and we need to ensure that we get the best possible benefit for our exporters but we also need to remember the overall context of the relationships that we have with those countries. Alcoholic products are the obvious ones that we can highlight and say that they have to do with religious practices and we should be prepared to be somewhat flexible on that issue. 
I certainly come from the school of thought that holds that for a long period of time New Zealand’s free-trade policy although delivering considerable benefit to New Zealand was a little bit like playing a lay-down misère hand in a game of five hundred. We said to the rest of the world: “Here we are. We are prepared to give you absolutely everything we have and hopefully you will give us a little bit back.” That approach to free trade did not work as well for us as it could have and perhaps it left us with fewer cards to play in later trade agreements. My having said that this agreement is a high-quality agreement but it gives us some pause to reflect that from time to time we need to be flexible that we do not need to be absolutist and that we have the ability to take into account the circumstances of other countries. 
I want to refer to services which my colleague Stuart Nash has already dwelt on. I note that the services sector will benefit significantly from this agreement not only in the area of education but also in the area of environmental services. As I said in my second reading contribution this issue relates to the so-called side agreement on environmental cooperation. It is not actually a side agreement and I am very pleased that a lot of the literature that the Ministry of Foreign Affairs and Trade has produced recognises that those environmental and labour cooperation agreements are treaty-level agreements. In the parlance of diplomats that is significant. It gives status to those agreements and it means that the free-trade agreement and the two cooperation agreements can be seen as part of a single entity in terms of our relationship and can be worked on together. The services area is where it comes together because environmental services such as waste-water management air quality management noise abatement services and nature and landscape protection are areas where New Zealand has expertise areas where there is a lot that we can take to other countries and indeed receive in return. In the services sector there is the chance for leverage off the environmental cooperation agreement so that we can maximise the benefit to all New Zealanders. 
The area of education has been discussed at some length but export education is a vitally important part of what we are doing. We have a good history with Malaysia in that area. I know that the university I attended the University of Otago had a significant number of Malaysian students over the years including people who have risen to the heights of being Government Ministers which obviously has a flow-on beneficial effect for New Zealanders as we go ahead in the education area. As I said earlier the services sector is not an area that we often highlight because it is easier to highlight the actual products that we are exporting but this agreement delivers a number of important opportunities for New Zealand exporters. 
Another services area that has not been talked about much today is information and communications technology services—ICT services. Here in Wellington we have a number of newer start-up software companies that I know have been developing their markets in Asia and Malaysia is a huge opportunity for them. As Mr Nash said that is an example of our exporting some of the fantastic ideas that New Zealanders come up with but we need to continue to generate those ideas and to support the people who generate them. 
The services sector is vital to New Zealand because it builds on the comparative advantage we have of a strong schooling system and a tradition of innovation but we put that tradition at risk if we are not prepared to invest in the innovators if we are not prepared to put money into tertiary education and into assisting researchers to commercialise their opportunities and develop export markets. Information and communications technology is another services sector that under this agreement can offer great potential for New Zealand. 
It is important to be able to see the balance within this agreement of goods and services. It is a high-quality agreement but as Mr Boscawen picked up earlier I do not believe that free-trade agreements are the be-all and end-all and there is further opportunity for development. 
Dr KENNEDY GRAHAM (Green) 
: 
 This debate on the Tariff (Malaysia Free Trade Agreement) Amendment Bill is proving to be arguably the most interesting free-trade debate that we have had in my time here. We have had debates on the free-trade agreements with the ASEAN countries and yesterday Hong Kong although the debates on the Hong Kong and Malaysian agreements have merged into one debate in a way. We are joined in a genuine dialogue and I thank my colleague Tim Macindoe and others even Chris Tremain for responding to my comments and for responding to members on the Labour benches as well. I may have a bit more to say about that to continue the dialogue in the third reading. This is not the place to do that here. 
I would now like to address the Minister in the chair and to take the opportunity to pay my personal respect to Tim Groser for his skill and devotion to the task. I hope he understands that the critique that the Green Party advances on trade policy in no way reflects any diminution of the high regard that we have for him or for that matter for his colleagues. I take the opportunity to ask the Minister a number of factual questions on which I may perhaps stand to benefit from his answers. They are advanced in a positive spirit. There are five or six of them and I hope I do not get too confused in my own thoughts. 
Question No. 1 has to do with the description in the national interest analysis of the benefits of the free-trade agreement to New Zealand. It is divided into basically two dimensions: one is the static benefit and the other is the second-order net benefit. It was explained to us in the Foreign Affairs Defence and Trade Committee and this is in the committee’s report that the term “static benefits” means the initial shock—the immediate competitive shock—to an economy through trade liberalisation. My question is whether as we are told that “The removal of a tariff encourages exporters to improve their competitiveness by allocating their resources more efficiently and increasing their market share.” we can have evidence of the greater efficient allocation of resources. I ask whether we can have evidence in a specific sense obviously not in terms of the Malaysian agreement because we are discussing that but let us say in terms of the China agreement and perhaps the ASEAN agreement so that we can understand the effect in practical terms. I am often criticised and I enjoy the criticism for being excessively theoretical. What we want is a practical example of the static benefits. 
The second-order benefits we are told include innovation and technology. The definition I was given in the select committee stated that second-order benefits meant the dynamic productive gains over the longer term through investment competition and adjustments of scale. The committee’s report states that the agreement’s second-order benefits “include innovation and technology transfer which lead to increased exports and access to new markets. These effects should lead to an improvement in New Zealand’s economic performance including the creation of new jobs.” My question relates to the fact that those second-order benefits through innovation and technology presumably apply to Malaysia as well as New Zealand. I think it is an example of the inherent bias and slant that we bring to bear on our so-called objective analysis in the national interest analysis when we trumpet the benefits to New Zealand exporters through all this but remain silent or mumble when it comes to New Zealand imports and the effect of an agreement on our own domestic manufacturing sector. So my question is initially theoretical but I assure members it will quickly become practical. If the second-order benefits were equally distributed then presumably there is no net economic benefit to New Zealand. Is that correct or is it wrong? 
I come to my second question. I note the lament in the so-called disadvantages section of the national interest analysis that the agreement’s principal disadvantage is that it did not go far enough. There is the 0.5 percent that Mr Robertson was lamenting although he was gracious broad-minded and globally-minded enough to issue a caveat and say we should be flexible and not 100 percent absolutist about this. I could phrase that differently. We are told there that “New Zealand would have preferred an even more ambitious goods market access outcome.” notably so that it could export—wait for this—alcohol tobacco and firearms. 
Well New Zealand wine is very nice and probably not very many of us are teetotallers. However I advance the suggestion that it is cultural insensitivity of the highest degree to lament in our national interest analysis that another country with another religion and a different culture from ours and with which we have cordial relationships and a degree of mutual understanding is to be criticised by implication for not importing New Zealand firearms and tobacco. Never mind the alcohol although that is an issue! What are we doing here? It is hubris and it has slid into our national interest analysis in the name of so-called objectivity. These analyses are not objective documents; they are creeds. What manner of cultural insensitivity drives us to insist that those people accept those exports from us? Have we no shame in this respect? I am sorry; I meant that to be a factual question so I will look to the Minister to answer it in a very low-key deadpan rational way. 
I turn to question No. 3. The national interest analysis talks about the negative adjustment effects and it goes as far as to identify a few sensitive sectors: “margarine clothing footwear carpets … steel plasterboard and most wooden furniture.” Yet when I asked in the select committee whether any study had been done in New Zealand by the Government or by academia about the effects on those sectors of previous agreements the answer was no New Zealand had not done any studies. New Zealand we are told looks to the study done by the Asian Development Bank about the effects of free trade on Europe and the United States. My suggestion is to ask whether we are 100 percent convinced given the different scale of those economies from that of New Zealand’s economy that that study applies ipso facto to our economy or might we just stretch our 4.2 million population capacity to undertake a study of our own? If we have not done such a study—and I am told we have not—then we should do so. That is another question to the Minister: should we take that on? 
I will now ask question No. 4. We are constantly told that the Green Party can start morris dancing again on the grounds that because there are environmental protocols in the agreements we can be happy and go home. I have a question for the Minister to answer factually. I have asked about this and the answer as far as I can understand it is that there have been no meetings yet in relation to any free-trade agreement under the environmental protocols. I will be happy to stand corrected on that but could I please have details of any meetings held under the environmental protocols of any free-trade agreement: details of when and where the parties have met and a transcript of the meetings. 
Finally question No. 5 derives from the earlier comments: has a review of the effects of free-trade agreements on New Zealand’s domestic manufacturers ever been done? If not should we take that on in this country? Never mind the Asian Development Bank—there should be a New Zealand Government study or a commissioned academic study of the effect on New Zealand’s companies. Which companies have suffered economically? Which domestic manufacturers in this country have suffered economically in terms of both revenue and employment—jobs lost within their own companies? If we do not have the courage and the integrity to take on that kind of study then we should. Thank you. 
Hon MARYAN STREET (Labour) 
: 
 I will talk about some additional items that have not been covered so far in this debate on the Tariff (Malaysia Free Trade Agreement) Amendment Bill. I acknowledge the comments of the previous speaker Dr Kennedy Graham and say that last night when I spoke for the first time on this legislation I made reference to the 0.5 percent of tariffs that will remain including those on wine and pork products which are clearly exceptions made on the grounds of religious and cultural custom and practice. That will always be the case and should always be recognised by New Zealand. 
I will talk about a couple of things. One thing that has not been mentioned so far which I think is a good feature—and this free-trade agreement I think is not the only agreement where such a thing has been put in—is the establishment of a free-trade agreement joint commission. That instrument can be used in the future to assess and amend the impact of this free-trade agreement. The purpose of the joint commission is to review the implementation and operation of the free-trade agreement and to recommend any amendments to it so this particular construction makes this free-trade agreement—along with others but we are talking about only the Malaysian one at the moment—a dynamic agreement. It means that we can look at the agreement again in a year’s time—because the requirement is that the free-trade agreement commission should meet within 1 year of the free-trade agreement entering into force and after that as often as the parties agree—to assess whether improvements can be made to the free-trade agreement. The joint commission will be established and it has in its brief a number of committees that will look at the trade in goods the trade in services technical barriers to trade the sanitary and phytosanitary measures in the agreement investment and economic cooperation. 
I will link this debate to some comments from the Maori Party earlier. In the consideration of this agreement I will next go into the labour and environment treaty-level agreements. My colleague Grant Robertson has pointed out that these agreements are indeed binding treaty-level agreements. But the connection with the Maori Party’s comments earlier goes to the labour cooperation agreement. The Maori Party has expressed concerns about the rights of workers and the treatment of workers and that party is absolutely right to do so. We must be clear however that a free-trade agreement does not prescribe for any country how it might run its internal industrial relations or indeed its labour market system. We would resent it if Malaysia started to tell us how to run our industrial relations and our protections for workers so Malaysia would be rightly offended if we intruded into its domestic policies in that regard. 
Two things are important about the labour cooperation agreement. Let us be very clear to start with that these are Malaysia’s first such agreements and that Malaysia has not had labour and environment agreements with other countries before now. So we could say for the Maori Party’s benefit that New Zealand has brought those agreements to the table in that regard which is a very constructive thing to have done. But two things are of significance in my mind as a Labour member of Parliament and are important in the labour cooperation agreement. The first is that no domestic labour policies may be used for protectionist purposes. In other words both countries agree that they will not drive down the wages of workers in order to secure some economic advantage that prohibits or inhibits New Zealand exports into their market. They will not apply domestic policies that will be used for protectionist purposes. That is important. The second important thing is that there is an agreement to pursue the principles embodied in the ILO Declaration on Fundamental Principles and Rights at Work and its follow-up in 1998. This is no effort for New Zealand but it is significant that we have that agreement with Malaysia. Both countries are bound into ILO principles and declarations and that becomes important. 
The shared objectives of this labour cooperation agreement are that we have a goal of promoting working conditions and improving and advancing the quality of life for workers. In addition there is a 90-day time frame in which to resolve any issues arising out of this agreement. If we think something is going wrong with this part of our free-trade agreement—the labour cooperation agreement—we can actually raise the matter and seek to resolve it and there is 90-day time frame for resolving such issues with Malaysia should they arise. That includes even the involvement of Ministers. So this is a significant addition for Malaysia and it is a significant aspect of this free-trade agreement that we should not lose sight of. 
Similarly the environmental cooperation agreement will address all sorts of things again establishing a framework for cooperation with the intention of working together across a whole lot of environmental issues including environmental expertise and technology waste management wetlands management ecotourism and environmental remediation—the list goes on. That also becomes a significant piece of this apparatus and therefore subject to the same provisions for resolving any disputes that arise out of it even to the level of Ministers. 
I will have the pleasure and privilege of meeting with the Malaysian Foreign Affairs Minister on Friday as he is visiting this country and I will have this discussion with him. This is a good moment for us to be passing this Malaysian free-trade agreement legislation through all its stages and I too add my acknowledgment of Minister Tim Groser for his part in advancing and concluding this free-trade agreement. We have a Minister who understands not only the mechanisms but the detail of such free-trade agreements exceptionally well and that has been an advantage to New Zealand. 
Services are also included in this agreement and the primary one which I will use my closing moments to speak on as it is of real significance is education. Malaysia has long had a relationship with the New Zealand education system. At the time of accompanying the Minister on his gracious invitation to the signing of the free-trade agreement in Kuala Lumpur if I heard about the Colombo Plan once I heard about it a gazillion times. I was almost tired of it. However it is part of our historical connection with Malaysia—a connection that was founded in education and educational exchange. Malaysia is keen to upgrade the quality of its universities. It does not rank highly in the world’s assessment in terms of its universities and it is very keen to benefit from New Zealand in that regard. Thank you. 
Hon TIM GROSER (Minister of Trade) 
: 
 I want to answer some of the questions that have been raised particularly by Dr Kennedy Graham. They have also been touched on by Grant Robertson. In doing so I want to issue a consumer welfare warning. Three of us are of course former Ministry of Foreign Affairs and Trade employees. I am speaking on behalf of the centre-right faction of the ministry. There is serious danger of this developing either into a university-style seminar or even worse an internal Ministry of Foreign Affairs and Trade discussion which is what drove me out of the institution in the first place. 
Hon Maryan Street 
: I’m the exception; it is all right. 
Hon TIM GROSER 
: Ms Street is indeed the exception; she has made some very interesting points and I will address some of the substantive points that she and others have made in some comments during the third reading. But I do want to respond now to the direct questions. 
First of all in respect of the distinction between static and dynamic effects of trade agreements—and I remind members of my warning about turning this into an academic seminar—the question was asked as to whether there is any evidence for that and in particular whether there is any evidence that the removal of tariff rates has actually brought some of these benefits. I want to put on the record the fact that I have been for 30 years a deep sceptic close to the point of being an opponent of econometric measurements of the benefits of trade agreements ever since the early phase of the CER negotiations when I was an economic official in Canberra for the New Zealand Government in the 1970s. The then IAC the Industry Assistance Commission which is now the Productivity Commission of Australia estimated that the effects of entering into a free-trade area with New Zealand would be equivalent to 0 point something 1 percent of GDP and therefore was not worth the trouble. 
Of course the problem with these econometric measurements is that they are arithmetical approximations of reality. There is a huge amount of literature about x-efficiency gains and second-ran dynamic effects which no economic model can capture. I have no time for these models whatsoever. For example if we look at any modelling done on the removal of tariffs in the 1980s and import licensing on textiles and clothing we would see a sector that structurally in New Zealand was based upon the import substitution model and that was trying to compete on price with the added advantage of massive frontier protection. No model would have picked up Jeremy Moon for example. No model can ever pick up an operation like Icebreaker. All the models showed at the time the complete destruction of the clothing and textile industry of New Zealand because that was the model on which the existing structures were based. 
It is a matter of record and a matter of obvious sympathy for the people in the 1980s who suffered the consequences of liberalisation because they were moving out of uncompetitive industries but we are now seeing the upside for the first time. We are seeing a company like Icebreaker specialising in design—innovative high-cost high-value products. The argument that we could never export T-shirts to China is factually wrong. We can except that they are at the absolute top end of the market. Mr Moon once told me in Beijing a couple of years ago when I went there with the then Prime Minister Helen Clark for the signing of the China free-trade agreement that it had taken him 6 years to build Icebreaker to a million-dollar revenue—goodness knows how he and his family and employees managed to survive during that period on such a low turnover—and another 5 years to go from $1 million to $100 million. The way he did it of course was to take advantage of the global supply chain. No model could predict that. No model ever will be able to predict that and there is a vast amount of literature to support that theory. Frankly my view in terms of economic theory is that one is better to rely on Economics 101 than on high-class econometric analysis. That is a personal view but it is a very strongly held view and it is a view that I have applied over 30 years of practical experience in this area. 
The second question was on benefits to Malaysia. The question I wrote down—please forgive me if I have slightly mischaracterised it—was: “In the event that the second-order effects were equally beneficial and assuming that the benefits were shared would there be any net economic benefit?”. The answer is that absolutely there would be because trade is not a zero-sum game. This is not a division of spoils of war that we are talking about in respect of Malaysia or any other trade agreements. This is a provision to allow both Malaysian people and New Zealand people who live and work in their respective workforces to raise their productivity raise their real wages increase the trade between the two countries and benefit mutually. 
Given the pressure of time and my strong interest in facilitating the work of this House I will not carry on at great length but I want to address an issue that Dr Graham raised about cultural differences in respect of for example the exemption for liquor firearms and tobacco. I say that I completely agree with Maryan Street and Mr Grant Robertson and implicitly I think with Dr Graham that we should respect cultural differences. Free trade is not a religion—I completely agree with their observations on that. Free trade is a pragmatic means of enhancing the welfare of people in New Zealand and in the countries we trade with. We should and we do respect cultural differences. This has been reflected in almost all trade agreements from GATT 1947 onwards and while I have the privilege of being the Minister under the current Government I have continued to exercise flexibility and respect for other peoples’ cultural differences. 
With regard to wine in particular the issue I think is best handled in the following way. We understand that different societies have different cultural practices on alcohol and I agree with Mr Robertson Ms Street and others who have said that we should continue to do that. On the other hand—and I am sure members would agree; I do not want to caricature their positions in any way—it is very important to protect a billion dollar - plus industry in New Zealand from discrimination in those markets with regard to other exporters of alcohol. I think the balance here—and I suspect that members would be fairly comfortable with this—is to try to ensure that in agreements like this where countries for cultural and social reasons do not want to enter into internationally legally binding trade agreements we secure side understandings that say “In the event that your policy were to change in the event that you grant tariff concessions to other exporters of wine or alcoholic beverages we would expect equivalent treatment.” So it is based on non-discrimination but it still leaves the importing country which will often be an Islamic country in this context the full freedom of action to apply their own standards in terms of their societies. I think that is a perfectly reasonable position and that is the position I have adopted and will continue to try to adopt in the future. 
Just briefly on one of the last questions Dr Graham put as to whether there have been studies of the economic effects of removing tariff protection there have been a truckload of studies done by both previous Governments and many academics and institutions like the New Zealand Institute for Economic Research. Fundamentally they show that we have suffered adjustment effects out of uncompetitive industries. That has been difficult for the families of the people who have been displaced. But equally we have seen a huge growth in exports from industries that never would have arisen had we tried to freeze the structures of industry in place 25 years ago and never made any change. 
DAVID SHEARER (Labour—Mt Albert) 
: 
 I will start by acknowledging Tim Groser’s input on this bill and also the explanation that he just gave as well. Having somebody with that sort of experience in his field is clearly of benefit to the country and is able to build on the work that has been done on the Malaysia - New Zealand Free Trade Agreement which the previous Labour Government initiated in 2005. Obviously many people have said that a bilateral agreement like this is less favourable than a more wide-ranging global trade agreement or even a regional trade agreement. But nevertheless I think New Zealand has been very successful and adept at being able to forge and to be a vanguard in pushing forward bilateral free-trade agreements to its advantage. Ultimately with such a small internal market we are an exporting nation and we rely absolutely on our export growth in order to prosper. On that I will touch on a point that was raised earlier regarding being sensitive to cultural aspirations of the countries that we forge agreements with. The same can be applied in reverse in the sense that the agreements we have signed have also acknowledged the Treaty of Waitangi. So we receive reciprocity from other countries in terms of acknowledging our particular cultural areas of sensitivity and the importance they have for us. 
This free-trade agreement—and I am very pleased to hear that the Malaysian Minister of Foreign Affairs is coming tomorrow because I think it is particularly appropriate that we are discussing this in Parliament the day before he arrives—will inevitably bring about an increase in the export activity that is currently under way between Malaysia and ourselves. I notice that between 2004 and 2008 export growth grew by 80 percent. If we look at our free-trade agreement with China we see that in a very short period of time a couple of years our export growth has risen by over 60 percent. Although we are not necessarily expecting the same with Malaysia it could quite easily see big increases in exports particularly in milk with the duties and the quotas eliminated; steel products where 50 percent of the duty on that is removed; kiwifruit where 15 percent of the tariff is removed; and so on. There will be an estimated $10 million of savings annually. 
Something Maryan Street brought up is important too: to put into this agreement the effects on the environment and on labour—the environment in particular. Our ability to sell high-value goods and commodities in the world is dependent on the way we are seen as being an ethical environmentally responsible producer of those goods. That is fine from our side but not so long ago I think just a few years ago there was definitely some discussion about the environmental standards for example in logging and forestry in Malaysia. If this free-trade agreement can in any way assist in the environmental standards and not denigrate or degrade those standards in Malaysia then I think it is also in that respect a positive move. 
I want to touch on the fact that although we are at the vanguard of free-trade agreements I suspect we are not keeping up with some of the other parts of our economy that can really push and further our export growth. The importance of for example monetary policy being much more predictable and far less erratic is something that comes up invariably over and over when I go around to talk to exporters particularly but not necessarily in the high-tech area. They start off with an assumption that the New Zealand dollar might be at an exchange rate of 66c but they find that a little while later it is at 75c and then it drops down to a figure that is much less than that. This gives them an extraordinarily difficult time in trying to predict their profitability and therefore the actual life of the company. 
We have relied very much on inflation control measures to balance this. I notice that the International Monetary Fund recently stated that it is probably foolish for us to rely on a single tool with which to modify our interest rates. I believe there is scope for lateral thinking on that. We may not want to go as far on the issue as Singapore does which has banded its exchange rate but nevertheless as we enter these free-trade agreements and this one with Malaysia I think we need to look at some of the other aspects of our exports that are perhaps not getting the attention that free-trade agreements like this one are getting. 
My colleague Stuart Nash mentioned the drop that New Zealand Trade and Enterprise is going to receive through a cut in funding of $101 million. That does not inspire a huge amount of enthusiasm or hope that we have a Government that is really committed to exporting across the board. It cannot just be in freeing up markets it has to be in all the aspects behind that to ensure that we are able to put our goods into markets. 
On that note again I say that this free-trade agreement with Malaysia will largely—not wholly—benefit the production of our commodities. Another recurring theme that is coming through in pretty much every analysis I have read is that our commodities over time have actually declined in real value. If we look for example at comparably sized countries like Denmark like Finland we see that where they are getting the additional value in their economy and in their commodities is not in the lightly processed commodities that they send overseas but in their high-value manufactured goods both in terms of their labour productivity and also in terms of their ability to export real value. Sixty-six percent or more of our exports come from commodities. 
I was reading just the other day an interesting account of a seminar series called the Waipuna seminar series that Mike Moore the former Prime Minister had conducted in 1993. Actually Clayton Cosgrove was one of the principal authors of that book. Exactly the same issues in that seminar series are the issues we are facing today. We are exporting commodities that are declining in value despite the increase in dairy products despite all the optimism that there will be a protein shortage around the world. Those are declining and we need to be diversifying and adding value to our exports. The challenge is how we do that. 
We can rise to challenges. We did rise to challenges in the early 1970s when 75 percent or more of our exports were going to Britain and to Europe and suddenly 10 years later it was less than 20 percent. We are able to adapt. We are able to move our exports in a different direction. We have not been able to adapt in the export sector as successfully as we would like. Despite the $6.5 billion worth of exports in the high-tech sector—nearly 80 percent of that $6.5 billion is exported; it is an incredibly valuable highly productive sector—we have not been able to grow that. Other countries around the region are doing that Malaysia being one of them and Singapore being another as well as Taiwan and Korea 
GRANT ROBERTSON (Labour—Wellington Central) 
: 
 I will take a brief call on two or three matters. The first is my response in part to Dr Graham’s comments particularly in relation to the question of how the national interest analysis discusses the missing 0.5 percent. I appreciate the Minister’s explanation about those issues and indeed I understand the point particularly about alcohol. I am not sure that we could make quite the same point about firearms and tobacco but I endorse Dr Graham’s comment about the way in which the national interest analysis raises this matter. I think that something for future thought is the fact that the language and phrasing in the analysis does not pick up the spirit of the Minister’s comments and indeed of others in the House about showing our respect for other cultures and our belief—and I was perhaps diplomatic in my language earlier—that we do not need to do that. We do need to respect and understand other countries and the limitations of these free-trade agreements and I think that some of the language in the national interest analysis on that issue perhaps left a little to be desired. 
The second point that Dr Graham raised that I will respond to concerns the importance of environmental cooperation agreements and the actual discussions that take place as a result of them. One agreement I know a little about was with Chile in the Pacific Three Closer Economic Partnership which is now morphing its way into being the Trans-Pacific Strategic Economic Partnership Agreement. I know that significant work was done there with a number of meetings particularly in the eco-tourism area. A lot of information was shared about how to grow that sector but also about how to ensure that the effects of tourism were mitigated on the environment. There was significant exchange. The Ministry for the Environment in New Zealand was actually the lead agency. It brought in a number of eco-tourism operators who were able to share their experience but they heard equally from the Chilean side. In fact in talking to a number of the eco-tourism operators who were involved in that I discovered that they felt they learned as much from the Chileans even as the learning went the other way. That is the advantage of those agreements. 
That brings me to the point that I will raise to build on Maryan Street’s comments about the environmental cooperation agreements. Those agreements were seen as I said in my second reading speech somewhat as tack-ons. I think it is important that in this House we make clear that the expectation of parliamentarians is that those agreements are much more than that. They are treaty-level agreements that are of significance to us. They round out our relationship with countries so that it is not just about free trade and tariffs it is actually about building a stronger and deeper relationship in which environmental cooperation has leveraging possibilities for services. But it is more than that as well. It is in fact a sign of our values and that is why the labour cooperation agreement is significant and important as well. 
There are obligations in the agreement to set up committees and to have those committees meet and I implore the Government to continue to see those parts as important parts of free-trade negotiations. It is true that in the early years of this century a number of other countries were reluctant to have those parts but New Zealand has pushed on. As Maryan Street said we have in fact led the way in those agreements. We are the ones who have said no those must be part of our free-trade agreements. I think we now need to back that up with further action and ensure that they are meaningful. 
I do not believe I say to Dr Graham that such agreements are a sign that the Green Party should recommence morris dancing—in fact nothing should encourage the Green Party to recommence morris dancing—but they are a sign that there is an understanding of the importance of environmental cooperation the importance of labour cooperation and the fact that as Maryan Street said we are referencing International Labour Organization agreements and the outcomes of the Rio Earth Summit. That is important. It gives great stability to those agreements to have international agreements alongside them. I think it is important to note that environmental cooperation agreements and labour cooperation agreements are rising in their importance that their status has been increased by being at a treaty level and that they are now a very important part of free-trade agreements. 
Dr KENNEDY GRAHAM (Green) 
: 
 I am saddened to hear the discouragement from Mr Grant Robertson about the morris dancing. I now have to advise the House that no invitations will be issued to anybody for that. I add that from time to time there is a touch of Handel and Fauré in there between bouts. 
I will not take up much of the time of the Committee. I have just two queries to make if I may and I address them to the Minister in the chair the Minister of Trade. I thank him very much for his answers. He missed one and Grant Robertson touched on it a moment ago: the environmental and labour protocols. I ask the Minister to forgive me if it has been provided in the past; I have not noted it. Could we perhaps please have from the officials for the benefit of members of the Foreign Affairs Defence and Trade Committee a list of the meetings held under both environment and labour protocols under each free-trade agreement since the beginning of each agreement with details of when they met where and if possible transcripts or at least a report. 
My second and final point is that he mentioned that truckloads of studies were done within New Zealand about the effect of free-trade agreements on the domestic economy. I would have intuitively assumed that to be the case. I just offer the view that I made two inquiries on the number of studies. One inquiry was with a senior economist from a university. He consulted with his colleagues and the answer was none. That came as a surprise to me. The second time I asked was within the committee. I asked officials and I was told no but there was an Asian Development Bank report pertaining to Europe and the USA which is why I mention the comments. If there are such studies specifically—it may be a matter of definition—on the effect of free-trade agreements on the domestic economy in New Zealand then on a purely factual basis I personally and perhaps other colleagues would benefit if the Minister and his officials would be good enough to give us a bibliography. I certainly will explore it. Thank you. 
Hon TIM GROSER (Minister of Trade) 
: 
 Very briefly on that point there certainly have been specific studies on the CER which was our first free-trade area agreement. Off the top of my head I cannot give Dr Graham references but most certainly I have written some myself and read many others. In respect of more recent free-trade agreements there was a long period between drinks; our second free-trade agreement after the one with Australia in 1982 was the one with Singapore and I recall that it was concluded in 2002. I doubt whether it is profitable to try to examine the near-term effects of any specific free-trade agreements because they will be bound up in a general analysis of the impact of removal of tariff protection. The removal of tariff protection comes from a variety of different sources: from Uruguay round commitments from unilateral liberalisation and from free-trade agreements with Singapore Thailand and eventually—when this bill is passed and we assume the House will pass it—Malaysia. I think it would be impossible for any economist to disaggregate the effects of the removal of tariff protection. The studies will show the effects on the New Zealand economy of the removal of it but I think it is highly unlikely that we will see a disaggregated analysis other than in respect of the CER agreement with Australia firstly because of the significance of that agreement and secondly because of the longevity of that agreement. 
STUART NASH (Labour) 
: 
 I enjoyed Tim Groser’s contribution to the debate. There is no doubting his competency experience and ability to represent New Zealand’s best interest when overseas and that is very good. But I would like to ask the Minister of Trade one political question. There were advantages in having a Minister of Trade like Phil Goff sit round the Cabinet table because Phil Goff understood the politics of politics. He knew when to push hard he knew when to pull back he knew whom to talk to he knew whom to massage and he knew when to get money. 
I will bring up again what I have mentioned a couple of times. Although the agreements we have debated today and last night and also the China free-trade agreement are no doubt exceptionally good for this economy I have some slight concerns that we do not have the processes in place to allow the 97 percent of small to medium enterprises that may have the ability to scale up and look at export markets to do so. I am worried that we do not have the tools in place to allow that to happen. As mentioned our whole trade focus has changed. It used to be Eurocentric and now it is pretty much focused on Asia. Fifteen percent of our exports now go to Europe but it used to be nearly 100 percent. Mr Groser knows those figures a hell of a lot better than I ever will. 
In the 2009 Budget National cut the funding of New Zealand Trade and Enterprise by $101 million over the next 4 years. As Mr Groser will be aware the Labour Government increased New Zealand Trade and Enterprise’s funding for market development assistance from $6 million to $54 million and it is now just under $10 million. Although I do not doubt Mr Groser’s absolute ability skill and competency around the trade negotiation table I ask whether he feels that he has the confidence of his caucus colleagues or the skills and experience round the Cabinet table to now stand up and fight for the money that is necessary for our companies to take advantage of these free-trade agreements. What I would have liked to see in the Budget was not a cut to the funding of New Zealand Trade and Enterprise or to anything related to trade development; it would have been great to see a massive increase in funding because as the Minister of Finance has said New Zealand is an export-led economy and he hopes that New Zealand will drive its sustainable growth through export growth. So the rhetoric does not quite match the action. 
I do not know whether the Minister has time or is willing to answer those questions but that is a concern I have. 
Hon TIM GROSER (Minister of Trade) 
: 
 I say very briefly and not in the spirit I am sure in which the member asked the questions yes I am afraid shock waves are going through the New Zealand Public Service as a result of the election of the National Government because the truckloads of money that have been pouring through the front door in the last 9 years leading to an increase in core Government expenditure of some $30 billion has stopped. Public servants are now experiencing the shock waves caused by having to be asked to do more with less. In respect of the idea that we do not follow up on these free-trade agreements because New Zealand Trade and Enterprise has somehow switched off I will be sure to make a point of personally inviting Mr Nash to the next New Zealand Trade and Enterprise - Ministry of Foreign Affairs and Trade seminar on free-trade agreements. I opened two seminars last week in which we did exactly as Mr Nash was proposing. 
A party vote was called for on the question  
That clauses 1 to 5 be agreed to. 
Ayes 110 
New Zealand National 58; New Zealand Labour 42; ACT New Zealand 5; Maori Party 3 (Flavell Sharples Turia); Progressive 1; United Future 1. 
Noes 11 
Green Party 9; Maori Party 2 (Harawira Katene). 
Clauses 1 to 5 agreed to. 
Bill reported without amendment. 
Report adopted. 
Third Reading 
Hon TIM GROSER (Minister of Trade) 
: 
 I move  
That the Tariff (Malaysia Free Trade Agreement) Amendment Bill be now read a third time 
. I want to respond to the interesting debate at previous stages of this bill. I thank all the members of the Foreign Affairs Defence and Trade Committee for their work. I thank all members for their contributions in this debate. I acknowledge the support of the Labour Opposition for the bill. Of course as members opposite have made us aware in several of their interventions it is part of a broader pattern by which we have moved quite consciously and quite deliberately to take this issue out of the partisan arm wrestle. In the context of this bill I want to emphasise the importance of that in a very real and practical sense for New Zealand. 
For other reasons that I will not go into the fact that my mum has just passed away became a matter of wide public comment in New Zealand. I was going through her papers a week or two ago and like all mothers and grandmothers and all fathers and grandfathers she had proudly cut out articles about things that her children and her grandchildren were doing. One article she had cut out was an article written by me congratulating the previous Prime Minister Helen Clark and the then Chief Executive of Hong Kong Tung Chee Hwa on initiating the beginning of a Hong Kong - New Zealand free-trade agreement. It is a matter of public record that this negotiation failed in its first iteration—or in its second iteration to be frank. Prior to that when I was working in the Ministry of Foreign Affairs and Trade and was the principal economic adviser to the ministry I had negotiated in principle an earlier attempt to have an agreement with Hong Kong and that too failed in the sense of not working at that time. Only on the third attempt to implement the strategy did we actually succeed. As Ms Street will recall she and I went up to the signing ceremony in Hong Kong a month or so ago and finally New Zealand nailed this agreement. 
A couple of interesting lessons that are applicable to this bill have emerged from that. One is the importance of consistency of strategy and the second is the importance of flexibility in tactics. Our first two attempts failed but the strategy behind them was correct. In respect of consistency the reason why we eventually nailed this agreement with the separate customs territory of Hong Kong and Macau was that we were able as a small country with a population the size of that of Sydney to maintain a completely consistent policy approach. I repeat: it is very important for this country with so little material power to have a consistent policy that can sustain itself over the phase of the electoral cycle and then to have complete flexibility in tactics. In respect of Hong Kong what we were trying to do of course was push the door open to China. In the event our tactic did not work. It proved possible only to go right to Beijing and do the real deal with Beijing first then come back and open the Hong Kong door. So our tactics were not right in terms of the flux of international politics at the highest level—because this is serious stuff internationally—but the strategy was right. That I think is a lesson New Zealand needs to bear in mind in dealing with the outside world remembering that we are 4.5 million people and 0.2 percent of world trade. 
The Malaysia - New Zealand Free Trade Agreement follows exactly this pattern. I recall having launched the Singapore - New Zealand free-trade agreement under the then National Government in the 1990s being invited up for “secret talks” in Kuala Lumpur. At that stage the idea of Malaysia doing a free-trade agreement with New Zealand was highly controversial. Now 13 years have elapsed to the point where we are now able to address this matter in a formal parliamentary sense and I celebrate New Zealand’s success once again. But the story is the same. The strategy must be consistent and the tactics need to be completely flexible because we need to adjust to the political realities of the major trading countries which are much larger countries than ours; otherwise we will fail. We were able in the case of Malaysia to begin a dialogue when its policy structures were not sympathetic to moving this forward. We were then able to move it forward in the context of AANZFTA—the ASEAN-Australia-New Zealand Free Trade Agreement—negotiations which are only now being phased in since the beginning of this year. The lesson once again is consistency of strategy and flexibility in tactics. 
It is only when we look back that we can see how far we have travelled. New Zealand has travelled a great distance on these issues. New Zealand is a country that I have always argued suffers more than any other country in the developed world from lack of access to markets. Numerous econometric studies—putting aside my own distaste for econometric studies—and other more rounded economic studies indicated that in the 1980s the impact on New Zealand which was then suffering from an acute lack of access opportunities for our traditional products in a relative sense was more negative than that on any other developed country. 
In that context I might take up one point that was made by Mr Shearer in his remarks about commodities. I share his frustration as I think most members of the House would at our relatively slow progress in taking advantage of higher-value products moving up the value-added chain. The way I would express that concept these days—because we as a country have been debating it for 30 years—is to participate in the global supply chain. And it is a big challenge for us. The global supply chain is where the action is. According to the latest OECD study 58 percent of the world’s trading goods are intermediate goods. In other words we do not have vertically integrated production with everything made in New Zealand then exported; if we want to gain entry into the really sophisticated features of modern international trade we produce components or bits of the global supply chain. This requires a shift in our thinking as a country and it is quite challenging for some people who still think in traditional terms—that everything must be 100 percent produced in New Zealand. But if we as a country want to move up the value-added chain if we want to participate where the real action is I agree with Mr Shearer that that is where we have to go. 
I do not know whether I am disagreeing with him but I draw his attention to the point that these free-trade agreements address one aspect of that. I will introduce the technical term for it for a minute. It is called tariff escalation. The problem for New Zealand historically in getting out of the commodity trap has been the cost issue of tariff escalation. That means that countries have wished to import our raw commodities whether they are wood wool or dairy products and then put higher and higher levels of protection around the further processing of those goods. It confined us to being a hewer of water—I have forgotten the familiar biblical phrase. 
Chris Auchinvole 
: Drawer of water hewer of wood. 
Hon TIM GROSER 
: I thank the member. It was not because we did not want to move into the higher value-added areas; the structure of tariff protection in our markets prevented us from gaining access. So these free-trade agreements do help to address the issue that Mr Shearer was concerned about. 
In the brief time I have available I want to reinforce the points made about the labour and environment cooperation agreements because I think we need to understand what we are trying to do here. I assure members who have spoken on them that they are more than just clip-ons. I have strongly pushed them forward. I am working with the Opposition in the context of the TPP or trans-Pacific partnership. Maryan Street will recall that she Phil Goff as Leader of the Opposition Helen Kelly as the president of the Council of Trade Unions and I went to see the president of the American Federation of Labor and Congress of Industrial Organizations or AFLCIO and we have been able to carry forward this agreement. In my brief remaining speaking time I want to give assurances to members that it is not just some cynical exercise. We are taking it seriously. In respect of the environment agreement it is exactly the same. I do see significant opportunities for New Zealand. I am not quite sure whether it is public knowledge yet so I will be cautious but there is an extraordinary new opportunity in China involving a pilot project of very significant standing which will potentially be a massive gain in terms of cleantech and will have New Zealand involvement. 
I strongly support these free-trade agreements. I strongly support their voluntary nature. I think we have to work with developing countries that are sensitive to compulsory models. I think we have a great future. 
Hon MARYAN STREET (Labour) 
: 
 It gives me great pleasure to rise and speak in the third reading of the Tariff (Malaysia Free Trade Agreement) Amendment Bill. Although it gives me great pleasure I am sure that it will give Lain Jager and Carol Ward of Zespri Group even greater pleasure to know that the third reading of this bill is now before the House. And so it will pass in a matter of minutes. 
I make the reference to Zespri because as we have traversed in the second reading and Committee stage the benefits of this free-trade agreement—and will continue to do so in the third reading—it is clear that as far as the exporting of goods is concerned this is indeed a very high-quality free-trade agreement. Within very short order in comparison with other free-trade agreements we will see almost all tariffs eliminated from our goods exported into Malaysia. By 2016 99.5 percent of our goods will be tariff free. Better than that at the moment of implementation there will be a benefit instantly for kiwifruit and for other primary production items. In the case of kiwifruit we will see the elimination of a 15 percent tariff on exports. 
That is a multimillion-dollar deal for one of our horticulture industries. That multimillion-dollar deal means that profit will be retained within New Zealand and it will not carry the cost of the tariff that has applied until this moment. As I think mentioned in the second reading along with our other primary products that are exported into Malaysia—butter cheese honey wool apples milk-powder and increasingly now liquid milk as well—with this free-trade agreement we will see an improvement in the profit margins for all of those industries because of the elimination of the tariff cost. 
We have talked quite a lot about the benefit for trade in goods. I now take the opportunity of this third reading to focus a little on those things that I have not had time to speak about in my previous contributions. I want to talk a bit more about the trade in services which is particularly significant in this free-trade agreement. The services referred to in this free-trade agreement are substantial. The one of particular interest is education. Education is New Zealand’s single most important services export after tourism. Tourism attracts very few barriers but that sector and the education services sector stack up very very favourably as the most important services export sectors. What has been achieved in this free-trade agreement is that access for the education services sector has become New Zealand’s highest priority for the negotiation of services in this free-trade agreement. We have a very good deal—a very good arrangement—that includes primary secondary and higher education plus additional training particularly English language training. Making that education available on very favourable terms in Malaysia will boost our education exports here. 
Malaysia has agreed to provide New Zealand with most favoured nation treatment in private education. It means that education providers will enjoy the best treatment that Malaysia gives any of its competitors from other countries. Having a most favoured nation status in respect of education exports will make things easier for our very qualified and very capable education sector. I made reference earlier to the fact that Malaysian universities are keen to improve their performance and that the Malaysian Government is keen to improve the performance of Malaysian universities. With the research and teaching record in our tertiary education sector we can assist in that area and that also benefits New Zealand. 
I will say a couple of other things about this agreement in general. I have spent some time talking about the binding treaty agreements on labour and the environment that are a part of this free-trade agreement. I reiterate the fact that these agreements remain dynamic as does the free-trade agreement. Should any disputes or issues arise out of the maintenance of labour standards according to ILO declarations and principles or any application of domestic labour policies that are used for protectionist purposes there is a process to resolve those issues right up even to ministerial level. 
I look forward to additional clauses I suppose being added into such free-trade agreements in future because it seems to me that this will be the way of trade in the future. If we do not care in a cooperative way for the fragility of this planet then it does not matter how good we are at producing high-quality exports because there will be no orderly productive and sustainable means of continuing trade. I cannot overstate that point. In the end it remains the most critical basis on which we engage with other countries. Either we have a sustainable planet or we do not and if these agreements can be used to enhance cooperative arrangements for sustainability sustainable production and sustainable trade arrangements then so much the better. The world is better for it. 
This free-trade agreement is significant. When we were in Malaysia the Minister of Trade talked about it being the icing on the ASEAN free-trade agreement cake. It is just much better in its terms and timing than the ASEAN free-trade agreement which is a significantly beneficial agreement on its own. We have a long history of engagement with Malaysia particularly on cultural and educational matters. It is fitting that this House passes this legislation without further delay and that the free-trade agreement with Malaysia proceeds forthwith. Thank you. 
JOHN HAYES (National—Wairarapa) 
: 
 I rise in support of the third reading of the Tariff (Malaysia Free Trade Agreement) Amendment Bill. It is great to be in a waka with 121 paddlers where all but 11 of them are paddling in the same direction. 
This bill will give us new market opportunities. It will help exporters and it will help service providers. It will provide transparency and certainty. Malaysia is our eighth largest export market. It is bigger and more important to us than Germany India and Canada. In the period between 2004 and 2008 our exports to Malaysia grew at a rate of 80 percent which is double the rate of growth of New Zealand’s exports to the rest of the world. Our investment in Malaysia has grown by 77 percent since 2003 and it now sits at about half a billion dollars—or it did in 2008 which are the last figures I have seen. That means that our investors have confidence in the integrity of Malaysia’s systems particularly its justice system and in the integrity of its private sector law. 
The Green Party contains nine paddlers who are facing the back of the canoe not the front. I will respond to Dr Kennedy Graham’s request for some practical examples of why the Greens’ understanding of life is in a practical sense different from that of the other paddlers in this waka. The Green opposition to the bill is set out in a minority view in the Foreign Affairs Defence and Trade Committee’s report back to Parliament: “It wrongly assumes that the two trading countries will both be better off as a result.” of signing up to this agreement. How wrong can those members be? How muddled can their thinking be? 
I think that the Greens may be using computers. If that is the case I invite them to type the word “Ricardo”—R-I-C-A-R-D-O—into Google which is a search engine. Then they should read what it says about Mr Ricardo. His insight is that trade barriers—whether they are subsidies to farmers regulations prohibiting clothing or textile imports or taxes—will make us and Malaysia worse off. Ricardo argues that it does not matter whether Malaysia is better at making things than New Zealand. He says that each country should stick to what it does best and should stick to producing whatever its economy is best at turning out. Ricardo argues that even if New Zealand was worse at producing everything than Malaysia was we should still stick to what we are least bad at producing. 
Dr Kennedy Graham asked for some practical examples; I will try to give him one. I have a company in Dannevirke called Metalcraft Industries. Let us say that it produces an electric drill in half an hour. It can also—it has very good people working there—produce a flat-screen television in about an hour. But a Malaysian worker can produce an electric drill in 20 minutes and a flat-screen television in 10 minutes. So if New Zealand and Malaysia do not trade which is the outcome Dr Graham wants nothing will change. It will take us 90 minutes to work to produce a flat-screen TV and a drill while in Malaysia the TV and the drill can made in half an hour. So if we follow the Green Party way of looking at the world nothing will change. But if we get rid of the trade barriers as this bill aims to do both countries can trade and both countries can be better off. The Malaysian worker can make two televisions in 20 minutes and the Dannevirke worker can make two drills in an hour. If we trade one drill for one TV then both New Zealand and Malaysia will be better off because they save at least one-third of the time involved. 
Contrary to Green belief it is simply not possible for trade to destroy all of the jobs in New Zealand. It is also impossible to import everything from abroad and export nothing. If we did that—if we followed this Green utopia—we would have no cash with which to buy anything. It may surprise the Greens but goods and money do not just appear and disappear; they are interconnected. No one beyond New Zealand would accept a New Zealand dollar in payment for some other good or service if we were not exporting products like milk cheese wool and timber so that our dollars can be used as a basis for paying back other countries. 
Having gone down this road with Ricardo my second suggestion is that “Dr Green” and his paddlers going in the wrong direction could type into “Mr Google” the words “Abba Lerner”—A-B-B-A L-E-R-N-E-R—and read what is arguably the most important theorem of trade theory. In 1936 before even Dr Kennedy— 
Chris Auchinvole 
: Dr Kennedy Graham. 
JOHN HAYES 
: —Dr Kennedy Graham was born Abba Lerner said that a tax on imports is exactly equivalent to a tax on exports and he proved this. 
Finally we could think about the practical examples Dr Graham asked for. We can think about countries that are restricted like North Korea and we can think about countries that are open like South Korea. I then leave it to Dr Graham to determine who is the better-off from that openness of economy. We can think about Austria and we can think about Hungary. We can also think about our recent experience in signing the free-trade agreement with China. As I said in the House last night in the year to April 2010 our exports to that country increased by $860 million. That is an increase over a 12-month period. That increase is virtually the same size as us finding another export market the size of Indonesia. Opening that free-trade agreement with China has helped every person in this country and to some extent it has insulated New Zealand from the recession that we find ourselves in. 
Finally I say that this is a good bill. It is a good bill for the people of Dannevirke; it is a good bill for all of the people in the Wairarapa. It is good for all New Zealanders and it is good for all Malaysians. It has my absolute support. Thank you. 
STUART NASH (Labour) 
: 
 May I be the first member in this House to offer my congratulations to Julia Gillard the new Australian Prime Minister. I understand that she won the vote. [ 
Interruption 
] Sorry Kevin Rudd stood down and she put herself forward. I understand that she is also the first female Australian Prime Minister. 
Chris Hipkins 
: And the first ginga! 
STUART NASH 
: She will not be the last so congratulations to Julia Gillard. I must admit that I tend to agree with John Hayes in the sense that countries around the world must concentrate on their areas of competency. Having said that—and this is sort of true free-market policy; Michael Porter as we know came out about 20 years ago to New Zealand and suggested such—I also take on board Dr Kennedy Graham’s comments. I think my colleague Grant Robertson and maybe even Maryan Street mentioned this as well. We cannot put trade in front of absolutely everything else. There are areas of national interest or of great importance where it makes sense to have certain barriers in place to protect them. If we look at the national interest documents for any free-trade agreement there are areas that are protected because they are considered more important than a complete and open free-trade agreement. 
I do find it slightly rich that National is lecturing the House on economic policy because the Budget showed that its economic philosophy is outdated. It dates back to last century. I think this is probably the only Western democracy that is following the economic philosophy of the Regan and Thatcher years. I think National would find that the philosophies followed by the Americans the Brits the Canadians and certainly this Labour Party are based on much more updated and relevant economic policies that put money in the pockets of every New Zealander and are all about sustainable economic growth. 
Although as I said I tend to agree with John Hayes that this bill is by far the best for all New Zealanders there are risks involved. We acknowledge those risks; we understand those risks. However I am supporting this bill because I think that it is in our national interest. 
This free-trade agreement was signed in Kuala Lumpur on 26 October 2009. It provides New Zealand exporters service providers and investors with new market access opportunities and greater certainty and transparency in Malaysia. It builds significantly on the platform provided by the recently signed agreement establishing the ASEAN-Australia-New Zealand Free Trade Area. As has been noted Malaysia is New Zealand’s eighth-largest export market. Currently it is more important to New Zealand than for example Germany India or Canada. As has been mentioned in this House during this debate it reinforces the fact that our traditional trading markets of Europe have now been replaced by the more dynamic and closer Asian economic block. 
The commercial significance of the free-trade agreement is underlined by the robust and growing trade relationship between New Zealand and Malaysia. For an example between 2004 and 2008 New Zealand goods exported to Malaysia grew by over 80 percent—more than double the rate of New Zealand’s export growth to the world over the same period. In 2008 New Zealand’s exports were worth almost $1 billion which is not insignificant by any stretch of the imagination. New Zealand’s service exports to Malaysia have continued to grow in a range of sectors including private education which we talked about it. They provide the highest numbers of overseas PhD students to our universities information computer technology and engineering. 
At the same time New Zealand investment in Malaysia has grown albeit off a relatively low base by an annual rate of 77 percent since 2003 to almost half a billion dollars in 2008. It is a very important market but I will outline again my concern that I mentioned a couple of times—that is that this Government has not provided the companies that are in a position to take advantage of these free-trade agreements with the tools needed to do so. When I asked the Minister about this he gave some sort of smart answer saying that he is asking people to do more for less. I do not think that actually works. One cannot ask people to do significantly more for significantly less. In this House—and I am assuming this bill is going to be passed because the vast majority of us agree with it—in the last 24 hours we have passed a free-trade agreement with Hong Kong and with Malaysia. Recently we passed one with China. These markets are incredibly different from New Zealand. They have a different legal system a different culture a different way of doing business and different religions—in fact everything is different—yet 97 percent of our businesses are small to medium sized enterprises and simply cannot afford to employ an international marketer or an international market development manager. 
Mr Groser said he would like to invite me to the next meeting with New Zealand Trade and Enterprise and the Ministry of Foreign Affairs and Trade. Well I would like to go along to that. I would relay a story. There is a New Zealand exporter who is a very good friend of mine; I am very happy to provide the Minister with his name. He turned up at a pre-arranged time at a New Zealand Trade and Enterprise office for a meeting that had been arranged in New Zealand only to be told that he should go to the equivalent office of the nation that he was in. He turned up there a little bit annoyed—as one would if one has flown halfway across the world only to be told that one cannot be seen by New Zealand Trade and Enterprise—only to be told by those people that the reason New Zealand Trade and Enterprise did not want to see him was that that was the day of their Christmas party. How professional is that? We want to send a message out there that New Zealanders are professional we are competent we know what we are doing and we know how to do this. 
I saw a recent survey; I think it was presented by either the outgoing Minister of Trade or someone who came to the Labour economic caucus. We hear from a whole range of people; members would be surprised at the people who would like to talk to us because they are a little disillusioned with what is happening. The perceptions of New Zealand business people overseas are that we are unprofessional and we do not quite know what we are doing. We are a little bit lax and there is this old No. 8 wire mentality that all we have to do is turn up hand out a couple of All Black jerseys give out a couple of bottles of wine and maybe a pottle of manuka honey and the deal is done. Then we sit down and we get pissed with them. No longer is that good enough in the 21st century. No longer is that sufficient to get the deals done. In this day and age of globalisation we are competing with everyone. This free-trade agreement levels the playing field. Malaysia has free-trade agreements with Japan and ASEAN and it is negotiating a free-trade agreement with the United States etc. This is not the first as it is with China. We are not the first to get in there and make it happen; this is just levelling the playing field. 
We need to be incredibly professional and diligent in the way we handle our international business. Quite frankly having a New Zealand exporter turn up to a New Zealand Trade and Enterprise office only to be told that he cannot be seen because it is the office’s Christmas party just reinforces the stereotypes that a lot of overseas business people have of New Zealand and it has to change. It has to change if we are to take advantage of these free-trade agreements. That is why I have great concern that this Government has cut over $100 million from New Zealand Trade and Enterprise’s budget over 4 years—$100 million. That is not about doing more with less; it is about cutting services. It is about cutting essential services at a time when we are looking to develop markets into a whole new region. This is not about doing business with Australia or the UK where rugby jerseys and sport are part of the local vernacular; this is about getting there and proving that New Zealand businesses are the most professional and can do the deals. Cutting $100 million from New Zealand Trade and Enterprise is not the way to do that. I would love to come to one of these meetings I say to Mr Groser and I would love to relay that story. 
Hon Clayton Cosgrove 
: He won’t listen. 
STUART NASH 
: The member is dead right. I would love to see the response of New Zealand Trade and Enterprise. I said to my friend when he told me this story that he should not worry about Tim Groser. He is a very good trade negotiator but he has no weight around the Cabinet table which has been proven by how much money has been cut from his budget. My friend should take his story to the Prime Minister. John Key would be absolutely annoyed if he heard that that is the way that officials are dealing with New Zealand businesses. I tell members that if Phil Goff who has spent a considerable amount of time negotiating free-trade agreements on behalf of New Zealand heard a story like that he would be ropeable—absolutely ropeable—because that is not the way we treat New Zealand businessmen and businesswomen who are going overseas to take advantage of these free-trade agreements. It is hard enough as it is let alone with that sort of carry-on. 
I support this free-trade agreement. As I said I take on board Dr Kennedy Graham’s concerns but having read the national interest analysis having gone through the costs and the benefits and understanding where New Zealand has to position itself I have come to the conclusion that the benefits outweigh the costs of this free-trade agreement. I support it and I congratulate Mr Groser on getting the ball across the line so to speak. But also I very much acknowledge that Jim Sutton and Phil Goff did the vast majority of the grunt work for this free-trade agreement. Thank you very much. 
Mr DEPUTY SPEAKER 
: Before I call the next speaker I say that the member made an unparliamentary remark earlier on. I do not know whether he realised it but I just ask the member to be very careful with some of the language. I did not pull him up at the time but I just mention that. I am sure it was unintended and I am not asking to take it further. 
Dr KENNEDY GRAHAM (Green) 
: 
 I appreciate the comments of the previous speaker my colleague Stuart Nash in acknowledging the concerns of the Green Party. In fact I think that both the debate on the New Zealand - Hong Kong China Closer Economic Partnership Agreement and all the stages of the debate on the Tariff (Malaysia Free Trade Agreement) Amendment Bill have been with the singular exception of the contribution from John Hayes very constructive indeed. I welcome that from all other National Party colleagues not the least of whom is Chris Tremain. I make the point however that nothing I have heard—and I have listened very closely to everything that has been said in the debates on both the Hong Kong and Malaysian agreements—changes our view with regard to the current manifestation of trade policy. 
In the second reading John Hayes simply said China’s exports have increased by $860 million and that is fantastic. We recognise that that is a significant thing but it is not everything. Chris Tremain admonished me to steer clear of theoretical models and I appreciate that. I assure him that I shall not do that but that I shall add a touch of practicality now and again to it to satisfy him and his constituents. But after Chris Tremain offered that admonishment he basically spoke in tones of awe—and we can speak in tones of admiration but not of awe—about Zespri. That was his contribution. Cam Calder said the free-trade agreements boost exports create jobs and increase income. That is true but it is not the total story. Tim Macindoe mentioned the environmental protocols morris dancing and Asian students in his electorate. I know that very well having been to Waikato University recently and spoken to students at the Pacific college. Tim Groser said that free trade is not a religion though he none the less spoke in papal tones and now and again unctuously. 
I just make the point that everything that the Government members have said is focused on exports. At no stage did they really address the issue of the effect on the domestic New Zealand economy which is only one of the things that we are trying to get this House to focus on. The Government is being either blind or wilful and it is not focusing. 
On the point of style I just say that at least my colleagues Tim Macindoe Chris Tremain and others offered their derision in tones of good humour; that is appreciated. That cannot be said for John Hayes whose patronising attitude was rendered in supercilious tones. It was quite different from the attitude of the other speakers. I will not reduce the dignity of the House any further by responding in kind though I could. 
On the note of whether we are going to competitively Google—or be Googly competitive—on this thing I just offer the response that I actually studied Ricardo back in the 1960s; John Hayes and I are much the same age. I know Ricardo’s theories very well indeed; in fact we can go from Ricardo through Smith Mill Malthus Marshall Jevons Keynes Samuelson Hicks and Friedman—yes Friedman—to understand the theory of economics and the theory of trade. I suggest that John Hayes goes through all of those people as well. It does not stop with Ricardo; it only began with Ricardo. 
And in fact having completed that stony pilgrim’s path John Hayes should then by invitation from me investigate the whole theory of ecological economics which is where the Green Party is coming from. If we recognised each other’s theoretical framework with dignity and explored it perhaps we could have a reasoned dialogue. I think that every member except for the chair of the Foreign Affairs Defence and Trade Committee will be prepared to do that. I invite members to study these people whom they can Google: Tim Jackson Herman Daly Peter Victor Robert Costanza and J R McNeill. Then they will understand ecological economics—both the domestic dimension of it and the free-trade dimension. 
All of that is simply to say the Green Party having just been misrepresented requires a reiteration of its policy. The Greens are not against trade which is what Mr Hayes was misrepresenting. We are against unsustainable trade; we are against unfair trade. The Government’s trade policy rests on a commitment to a neo-liberal—yes neo-liberal—free trade. Globalised free trade is the manifestation of the problem of the globalised economy. The case for free trade rests on the assumption that trade is voluntary. This is getting at what Mr Hayes suggested we do get at. Both parties must be better off than before the voluntary act. When trade is based on the absolute advantage enjoyed by the countries in terms of the commodities in question this is self-evident. But the Ricardian theory of comparative advantage also justifies trade even when one country may have an absolute advantage over another in all goods. The theory is that the combined production of all countries trading is greater than if they produced separately and each country stands to gain individually even if not to the same extent. That is the Ricardo theory. This theory derives from the fundamental tenets of neo-classical economics I say again for the benefit of Mr Tremain. 
The Green Party considers those tenets to be dangerously obsolescent requiring refinement with a new approach that reflects the economic conditions of the 21st century. Specifically let me make a number of points. First the extra combined production from free trade cannot in fact be achieved without extra resource inputs. There is also the increase in the depletion rate of the natural resource base from which the product is made. What trade economists mean when they say no extra resources is simply no additional labour or financial capital. Neo-classical economics omits natural capital from its theories. 
Second the extra transport costs associated with free trade are not included in the theory. International transport is energy-intensive often subsidised. Its external costs are omitted from the pricing. Sea trade emits 0.8 billion tonnes of carbon dioxide 3 percent of anthropogenic emissions. That is expected to grow threefold by 2050. The same is expected of aviation and surface freight. 
Third free trade assumes the cost of specialisation to be negligible. But in fact it requires retraining and perhaps physical relocation. As specialisation shrinks the economic sectoral breadth of the country’s job choice narrows. This comprises a loss to human welfare. The invisible hand has narrowed the freedom to choose. 
Fourth although free-trade agreements have withdrawal clauses such that New Zealand can theoretically opt out if trade becomes disadvantageous this assumes that specialisation is reversible. But in fact the retraining and relocation of a furniture maker to enable that person to become a dairy sharemilker apart from being socially traumatic may be irreversible for social communal reasons. 
Fifth the specialisation resulting from free trade bequeaths a narrow range of sectoral products country by country making each country vulnerable to the vagaries of the global economy. Taking the argument to the extreme if New Zealand were to narrow its sectoral breadth—and that is what Mr Hayes and perhaps even Mr Groser are suggesting—to become a national dairy farm surrendering its capacity to maintain our other economic activities it would become a milk colony to the global economy. 
Finally much international trade is pursued in the name of choice to ludicrous lengths. When marginally different varieties of ice-cream biscuits and crackers pass east and west across the Tasman in the night such activity not only defies consumer rationality but also in an age of climate change defies basic common sense. 
There are both theoretical and very practical moral and environmental reasons not to pursue free-trade agreements in the current form that they manifest. For that reason the Green Party will oppose this bill. 
JACQUI DEAN (National—Waitaki) 
: 
 The Malaysia - New Zealand Free Trade Agreement represents significant opportunities for New Zealand and although it is my pleasure to follow on from the contribution of the Green member on green economics I have a slightly different view. That might be because I am a rural-based MP who represents the farming sector. 
Here is my take on this free-trade agreement. Dr Kennedy Graham gave us three to four points so I will give a couple. First New Zealand is a small country in a large world. Second New Zealand’s economy relies on exports. 
Dr Kennedy Graham 
: No it doesn’t. 
JACQUI DEAN 
: Yes it does. Third New Zealand’s primary produce makes up a huge proportion of total New Zealand exports. Fourth about half of those exports go into the ASEAN region. So for me at least it follows that free-trade agreements—and this one in particular since we are speaking to the Tariff (Malaysia Free Trade Agreement) Amendment Bill—represent significant opportunities for us in New Zealand. 
This agreement follows on from the free-trade agreements with China and Hong Kong. Those bills were debated and passed in the House last night. They represent a huge opportunity as well as do free-trade agreements with ASEAN countries for primary producers of New Zealand. 
Specifically speaking to New Zealand’s major goods that are exported to Malaysia I mention kiwifruit. It has been spoken of often in this debate but I believe that it bears mentioning again. Currently kiwifruit exports incur a 15 percent tariff from Malaysia. That tariff will go and it will become duty-free by 2012—only 2 years away. That is only one and a half growing seasons away. If that is not exciting for the kiwifruit growers of New Zealand then I do not know what is. I think it is exciting. Based on the latest figures New Zealand’s kiwifruit exports to Malaysia have grown by— 
Hon Member 
: Heaps. 
JACQUI DEAN 
: The member opposite just said the word “heaps”. That was the kind of simplistic term used by Labour members. However we can be slightly more precise. Members opposite may say that New Zealand’s kiwifruit exports to Malaysia have increased “heaps” but I think it bears repeating that it has increased by 173 percent to be more precise. That is very impressive. Meat wool dairy—that excludes liquid milk—fish and forestry retain their duty-free access as products and are bound in so that Malaysia cannot reapply tariffs on New Zealand agricultural exports. 
Speaking as a representative of a rural electorate where agriculture is incredibly important I can only repeat my congratulations to the Minister of Trade Tim Groser for his good work in negotiating this free-trade agreement with Malaysia which was not easy. Again it represents huge opportunities for New Zealand. We should be grateful to the Minister and grasp this opportunity with both hands. With those few words I commend this bill to the House. 
JACINDA ARDERN (Labour) 
: 
 It is my pleasure to have another opportunity to speak to this bill in its third reading. In my second reading speech I touched on not only the elements of what makes a successful free-trade agreement but also the context under which they are then for want of a better word operationalised. For me obviously the first starting point for a successful free-trade agreement is that it is well negotiated and that we work through some of the many and varied complications that these free-trade agreements present. We see in the detail of this one in particular some interesting issues arising out of margarine at some point. Also there were exceptions in the free-trade agreement around the trade of alcohol and there were cultural and religious issues. So these are very complex free-trade agreements that are being negotiated and their success revolves around the prowess of our negotiating teams. 
Secondly I also had an opportunity to touch briefly on the environment under which our exporters operate generally in New Zealand and the economic framework and monetary policy we have in New Zealand. It has a significant impact on them as exporters particularly the volatility of our exchange rate. I issue a challenge to the Government to consider that issue if we are truly going to have the export-led recovery it claims. That is the second point I wanted to raise in relation to free-trade agreements generally. 
Thirdly once a free-trade agreement has been agreed as Stuart Nash and others have pointed out in this debate it is not a matter of allowing that free-trade agreement to then sit on the table and just exist. There is a lot of investment that can go into making a free-trade agreement a success for our New Zealand exporters by supporting them and boosting our investment in New Zealand Trade and Enterprise to support them appropriately. We can also do that by making sure that we maintain our brand and trade on our brand appropriately off the back of these free-trade agreements. There are other elements that we may not be debating directly as a consequence but that are still incredibly relevant to our success as an exporting nation. 
Before I go on to talk about some of the economic benefits of this free-trade agreement I briefly want to touch on my disappointment at the way Government members in particular have responded to the challenges put up by the Green Party today. I think they were patronising at best and offensive at worst and we should always— 
Grant Robertson 
: It must’ve been Paul Quinn. 
JACINDA ARDERN 
: Strangely it was not Paul Quinn on this occasion. John Hayes really outdid himself in his contribution this time. The Greens raised some valid issues that are raised around trade almost every time we have this debate. When we are discussing free-trade agreements there are very valid issues around human rights. The first point I would like to make on that front is that I support a negotiated and agreed rule-based global system of trade. Having said that it is also very valid that we think about the implications for a broadening of free trade given our role as a nation that has very strong labour law and that is developed around the impact we can have on some of our trading partners who may not have entrenched in their systems some of the rules that operate in our own. 
I am talking about a level of corporate responsibility being exercised in the way we operate in some of those nations. If the large amount of time we spend talking about how to better negotiate the free movement of butter were spent talking about how we globalise some of the most essential core elements of human rights then we would be a long way down the track to making some vast improvements to labour laws for a starting point globally. So that is just a small point on that issue. 
I come back to the economic benefits of this particular free-trade agreement. I think it has already been mentioned that Malaysia is New Zealand’s eighth-largest export market and that it totalled about $1 billion in trade in 2008. It might be a useful comparison to point out that that is the same amount of debt the Government is adding to New Zealand in order to deliver its tax cuts in the last Budget. I think it probably points to the magnitude of both that export market and that level of debt. In fact we have actually wiped out the benefits of this free-trade agreement in one fell swoop. Between 2004 and 2008 exports to Malaysia grew significantly by 80 percent. It has been estimated that this agreement eliminates tariffs to 99.5 percent of New Zealand’s current exports by 2016. My understanding is that there are exemptions in that for alcohol which I touched on briefly. The percentage of estimated duties that New Zealand exporters would have to pay will be reduced by 86 percent by 2016 which is incredibly significant. It is useful to point out that when we compare that with New Zealand there is duty-free access to 72 percent of imports from Malaysia. I think it is worth making the point that a lot of these free-trade agreements in particular the one with China are free-trade agreements that are primarily beneficial to New Zealand in that regard. 
There was a lot of discussion over whether the China free-trade agreement should have been used as an opportunity for New Zealand instead to prove a point on our political position on democracy labour laws and human rights and whether we should proceed with a free-trade agreement. It is an interesting debate to have but at the end of the day the point was well made that when we have in the same way we have with Malaysia a situation where that country already has very open access to New Zealand markets we are in a sense cutting off our nose to spite our face. Having said that it does not mean that we do not still have a duty to ensure that those issues where they exist are put on the table when the opportunity arises in those diplomatic negotiations or leader to leader or however we choose. That is a trade-off that was made in that particular scenario. 
Finally there has been great discussion over the benefit of this agreement for Zespri in particular. It is an excellent example of where this agreement has been beneficial. I know that one of my colleagues is not as enthusiastic about kiwifruit as I am. I undertake to find out what benefits it will have for nectarines as I understand that that is Clayton Cosgrove’s fruit of preference. 
Grant Robertson 
: His passion. 
JACINDA ARDERN 
: There is some passion for the nectarine. 
Charles Chauvel 
: And feijoas. 
JACINDA ARDERN 
: He is also partial to the feijoa so I undertake to find out whether that will have a significant impact. 
New Zealand steel lines which currently face a 50 percent tariff will be tariff free. I would have thought that that would be the perfect excuse for the Government to perhaps reduce the enormous subsidies it is putting in place for such producers by the emissions trading scheme. I understand that my generation will be covering off those subsidies for the next 50 years. Given we are removing tariffs for that particular industry and it will make a cost saving perhaps we could balance what is currently an emissions trading scheme that has no incentives to reduce pollution built into it. That might be something that one of my other colleagues might like to pick up on in his or her contribution. Otherwise I reiterate that Labour supports this bill. 
Dr PAUL HUTCHISON (National—Hunua) 
: 
 I am grateful for the opportunity to speak on the Tariff (Malaysia Free Trade Agreement) Amendment Bill. It is undoubtedly another great achievement for the National Government although I must note that the genesis of it has been over a long period of time. It would even date back to the days when the current Speaker the Hon Dr Lockwood Smith—not the Assistant Speaker who is currently in the Chair—was spending time up in that area. Often it takes time to achieve— 
Simon Bridges 
: Good things take time. 
Dr PAUL HUTCHISON 
: That is right. Undoubtedly not only will this agreement have the effect of expanding our vital trade with Malaysia and the remainder of the Asian area but also tariff reduction will be sped up at a far greater rate than was expected to occur under the initial agreement that established the ASEAN-Australia-New Zealand Free Trade Area. 
There is no doubt that that is wonderful for some of our most important innovative products. Kiwifruit is the classic example. We were absolutely dazzled by the innovation of Zespri the other night. It brought us its new varieties of kiwifruit: a particularly sweet one designed for the Asian market not to mention the pink one which would suit the Labour Opposition but it was a fine fruit. The real point of this— 
Grant Robertson 
: There’s a point? 
Dr PAUL HUTCHISON 
: There is a huge point and it is that kiwifruit is a little fruit that had very little significance anywhere in the world until New Zealand innovators grasped it by its skin and made it a highly valuable export product. Obviously this free-trade agreement is a living example of New Zealand’s benefiting from that approach. 
I was intrigued by the contribution of Dr Kennedy Graham. As always it was extremely thoughtful. I must say that we cannot agree with all the thoughts behind it but I look forward to having a look at the list of names of environmental economists that he read out. For me a simple-minded physician surgeon I often think of the words of Galbraith who pointed out that economics were common sense made complicated. Some of the thoughts of Kennedy Graham did seem to be a trifle complicated. 
It was interesting to hear the contribution from the Minister of Trade Tim Groser who has made a tremendous contribution not only to this agreement but also to many others. He mentioned that econometric models on the impact of tariff removal clearly are very problematic to rely on but he went on to say that free trade is a pragmatic way of advancing the welfare of New Zealanders and of the other country that is involved. It is extremely important to realise that this agreement is just one of the many free-trade agreements that New Zealand is entering into. The countries involved do not just include China; before too long they are likely to include India Indonesia and the USA which means almost half of the world’s population. There is no doubt that free trade is a pragmatic way of advancing the welfare of New Zealanders because we are an exporting nation and free trade is the pragmatic way by which we will have if we are successful in exporting first-class education first-class health services first-class welfare services etc. 
But it is also important that we respect the fundamental cultural differences between countries. I keep being reminded of those in the areas of tobacco yes and alcohol etc. but also on a day-to-day basis. I had a group of Malaysian teachers in my office this Monday afternoon up in Pukekohe and I asked them what they were doing in terms of climate change. They said that pervading their school system was a great and increasing consciousness of practical measures to improve the environment. So it is very refreshing that for one of the first times ever environmental protocols are built into this agreement. I think Kennedy Graham was slightly sceptical about that—and he has a furrowed brow on my saying that—but it is a very important start in terms of practical implementation. Hopefully that will be part of the agreement that has been achieved. 
This agreement is incredibly important for an exporting nation such as New Zealand. I was delighted to hear from Jacinda Ardern that steel tariffs will be coming off. That is vital for the area I represent Hunua and clearly it is vital for the future of New Zealand. 
GRANT ROBERTSON (Labour—Wellington Central) 
: 
 I am pleased to take a call in the third reading of the Tariff (Malaysia Free Trade Agreement) Amendment Bill. We have had an extremely interesting debate today. Although the matters we are debating in this urgency motion call into question the meaning of the word “urgency” the opportunity we have been offered here today has been useful. I congratulate members on all sides of the House for their contributions particularly Dr Kennedy Graham. There is a broad consensus between National and Labour on the issue of free trade although there are some differences in emphasis and nuance. The Green Party has a different view and I think it is good that Dr Graham has taken the opportunity to put those views out there. As I have said in earlier speeches I certainly share some of the concerns he raised about an absolutist approach to free trade. Free trade is not magic and it is not the panacea for all things. To my mind it is an important part of our economic well-being and it is part of a global economy in which people can get the benefits of their labours but it is not everything. It should not be put up on a pedestal as being in some way or other above and beyond rigorous analysis and that analysis is what Dr Graham brought to the debate today. 
As a number of other speakers have mentioned this is a high-quality bilateral free-trade agreement. It makes a number of positive moves in advance of the ASEAN free-trade agreement. I think it is good when we are working on free-trade agreements to build on what has been done earlier. The ASEAN free-trade agreement offers a lot of potential for New Zealand exporters but in a number of key areas this agreement brings in tariff reductions well in advance of that period of time. As with other agreements there are phased tariff reductions in the Malaysian free-trade agreement but 95 percent of those reductions will take place on the day that this agreement comes into force once the House has dealt with it. That is a very impressive achievement of which all of the officials not only those from the Ministry of Foreign Affairs and Trade but also those from other departments who have been involved can be justifiably proud. The final phase of bringing in tariff reductions will be by 2016 and that will get us to as was stated earlier 99.5 percent of the tariffs being removed. 
This is indeed an excellent agreement. It is one that offers huge scope for manufacturers exporters and service providers. Our trade with Malaysia has a large component to do with the export of goods but it also has a growing component around services and a historical connection to services particularly in the education area. There is a lot in this agreement that New Zealand can be proud of and a lot that we can also see an opportunity to exploit. As was stated in earlier readings the 0.5 percent of tariffs that remain are mainly as a result of discussions on cultural and religious matters particularly to do with alcohol. I restate the comment I made in the Committee stage that I believe the way the national interest analysis describes New Zealand’s enthusiasm for 100 percent of the tariffs to be removed is a little unfortunate. The recognition from both Mr Groser and Dr Graham in the earlier part of the debate was that we have to respect other countries where there are issues particularly those of a cultural or religious nature. I think that brings us back to my concern that New Zealand has from time to time in trade negotiations taken a very absolutist stance. That is not only potentially difficult in terms of our respect for other countries’ cultural and religious beliefs but also from a negotiating point of view it has sometimes put New Zealand in a less than advantageous position when we have pretty much given everything away while still trying to negotiate. 
The other aspect I want to reflect on again is the importance of the environment and labour cooperation agreements which are of a treaty status. They sit alongside the free-trade agreement and are to be considered together as being the engine room of the next stage of our relationship with Malaysia. In the past those agreements have sometimes been seen as just add-ons that were there to placate people who think we need free trade to be more than just free trade and that it should be seen in a wider economic context. I take comfort from the Minister’s statement that he understands that environment cooperation and labour cooperation are now an important part of our negotiations with other countries. There are a lot of opportunities for New Zealanders in the environmental area in terms of services and I think that the environmental cooperation agreement can be used for leverage for those service providers. We also need to learn from the Malaysians because all over Asia at the moment issues about sustainable development loom large for Governments and for people. We need to be there contributing our skill and technical knowledge learning from what has been developed in those countries and making sure that as part of our ongoing relationship with these countries we have strong environmental standards and strong labour standards. New Zealand can be proud of the fact that we have led the way in making those a part of free-trade agreements. 
I conclude by again congratulating the Minister of Trade and indeed previous Ministers Phil Goff and Jim Sutton on having brought us to the position where we are today. I hope that the Malaysia free-trade agreement will not only see an increase in wealth for New Zealanders through increased exports and services but also see a deeper stronger relationship between New Zealand and Malaysia across trade environment labour and other fronts. 
A party vote was called for on the question  
That the Tariff (Malaysia Free Trade Agreement) Amendment Bill be now read a third time. 
Ayes 110 
New Zealand National 58; New Zealand Labour 42; ACT New Zealand 5; Maori Party 3 (Flavell Sharples Turia); Progressive 1; United Future 1. 
Noes 11 
Green Party 9; Maori Party 2 (Harawira. Katene). 
Bill read a third time.