Groser Tim: Tariff (Malaysia Free Trade Agreement) Amendment Bill — Second Reading In Committee Third Reading 
Groser Tim: Tariff (Malaysia Free Trade Agreement) Amendment Bill — Second Reading In Committee Third Reading 
[Volume:664;Page:12142] 
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.