Groser Tim: Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill — First ReadingText is incorporated into the Bound VolumeGroser Tim: Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill — First Reading[Sitting date: 16 June 2015. Volume:706;Page:4401. Text is incorporated into the Bound Volume.]Hon TIM GROSER (Minister of Trade): I move That the Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill be now read a first time. I nominate the Foreign Affairs Defence and Trade Committee to consider the bill. At the appropriate time I intend to move that the bill be reported to the House on or before 3 November 2015. A report presented by the committee on or before 3 November will enable New Zealand to notify the completion of its domestic procedures for the purposes of the agreement’s entry into force as soon as possible. For entry into force to occur Korea and New Zealand must have each notified that they have completed their domestic procedures.The free-trade agreement between New Zealand and the Republic of Korea is a significant development in our bilateral relationship which stretches back to the Korean War. Since then Korea has become an important trading partner. Korea is New Zealand’s sixth-largest export destination and our eighth-largest source of imports. Our total two-way trade with Korea for 2014 was $4.5 billion and two-way investment amounted to nearly $1 billion. There is significant potential for trade and investment to grow over the coming years. The free-trade agreement will support this growth by breaking down trade barriers and by establishing a framework for resolving issues in the future.Strategically the agreement advances New Zealand’s wider trade policy interests of strengthening economic integration in the Asia-Pacific and multilaterally. The agreement will add to our existing network of trade agreements and supports our objective of broader trade reform and liberalisation through the World Trade Organization negotiations. The agreement was concluded following 5 years of negotiations. Given the economic and strategic importance of the agreement the Government was committed to securing the best possible outcome for New Zealand. The lack of a formal free-trade agreement with Korea has restricted trade growth and has put New Zealand at a distinct disadvantage relative to Korea’s current free-trade agreement partners. The elimination of tariffs under the agreement plays a key role in levelling the playing field for New Zealand businesses. For example kiwifruit exporters face a tariff of 45 percent on their exports while their major competitor in the market Chile is now exporting to Korea duty-free. The agreement is therefore crucial in helping New Zealand exporters to remain competitive and to retain their position in the Korean market.Under the agreement approximately 98 percent of tariffs on New Zealand’s current exports to Koreawill be progressively eliminated. This will take place through yearly reductions. It is estimated that $229 million in tariffs are paid on exportsper year. On entry into force duty-free access will be bound in and tariffs eliminated on approximately 48.3 percent of exports which is estimated to save approximately $65 million in duties. If the agreement does enter into force this year then the second tranche of tariff cuts will occur on 1 January 2016 meaning exporters will receive 2 years’ worth of tariff cuts in a matter of months. Therefore the earlier the agreement enters into force the earlier these tariff savings can be accessed by exporters.The phasing out of tariffs on Korean imports is expected also to have a positive impact on New Zealand. Under the agreement New Zealand has agreed to the elimination within 7 years of remaining tariffs on Korean imports. This should provide both consumers and businesses with greater access to high-quality Korean products. For manufacturers using Korean-made components this should help to reduce costs and in turn should increase their international competitiveness. Besides the elimination of tariffs the agreement includes a range of measures to help facilitate trading goods and services assist investment flows and encourage cooperation in areas of mutual interest. The agreement contains improved rules of origin and customs procedures including the ability for exporters to self-declare the origin of their product. This means that further costs will not be placed on exporters in order to claim tariff preference. Also the agreement includes other trade facilitating measures such as the ability to request advanced rulings on origin and tariff classification and a commitment to 48-hour customs clearance. There are chapters covering sanitary and phytosanitary measures technical barriers to trade trade remedies intellectual property rights and competition and consumer policy.There are new commitments in Government procurement that secure a level of access to Government contracts with Korea’s central government entities that is equivalent to the access granted by Korea to Australia and the United States as well as parties to the World Trade Organization Agreement on Government Procurement. The agreement includes a modern high-quality services framework with commitments that will mean greater services opportunities in both countries while at the same time recognising the right of our Governments to regulate for public policy objectives. Across a range of sectors New Zealand’s service suppliers will benefit from improved market access commitments over and above the undertakings that Korea has made in the World Trade Organization—for example new commitments in adult education services legal services and research and development services. As a result New Zealand’s services suppliers will not be disadvantaged in these areas relative to competitors from Australia Canada the European Union and the United States who have secured the same results in their free-trade agreements with Korea.A “most-favoured nation” provision will ensure that New Zealand service suppliers also get the benefit of any better treatment that Korea grants to any future free-trade agreement partners and will safeguard the competitive position of New Zealand businesses in the future. The agreement includes commitments to facilitate the movement of business people between New Zealand and Korea which will play a key role in businesses being able to maximise the goods services and investment opportunities opened up by the agreement. Korea’s entry commitments under the agreement exceed its commitments under the World Trade Organization with for example new commitments that allow access for New Zealand contractual service suppliers.Although investment between the two countries has been growing overall levels of investment are not as strong as they could be. The investment chapter establishes a modern high-quality set of rules intended to facilitate investment flows between both countries and assist New Zealanders to take advantage of investment opportunities in the Korean market. There are also rules designed to protect investments from unjustified expropriation or arbitrary or unfair conduct by a party and to facilitate the transfer of capital related to investment. The investment provisions of the agreement along with the increased attention and focus that the agreement will give to the bilateral trade and economic relationship should serve to boost investment interest over time.The investment commitments being made by Korea and New Zealand include an investor-State dispute settlement mechanism. This provides recourse to negotiation and arbitration if an investor believes that a Government has not honoured its investment obligations under the agreement and that it has suffered damage as a result. The investor-State dispute settlement provisions incorporate transparency requirements and key safeguards to preserve the Government’s right to regulate for legitimate public policy purposes. These provisions have been drafted in a manner that reflects New Zealand’s approach to these provisions in existing free-trade agreements as well as international developments around investor-State dispute settlement ensuring an appropriate balance has been struck between investor protections and the rights and responsibilities of Governments to protect public health safety and the environment.The agreement also includes chapters on labour and environment. This is only the second time that New Zealand has included these in the body of a trade agreement. The labour chapter promotes labour rights and enhances our labour capacity and capability while the environment chapter encourages sound environmental policies. In addition the agreement includes forward-looking mechanisms such as a joint commission to oversee the operation of the agreement and to resolve issues and several chapter-specific committees through which New Zealand and Korea can explore further opportunities to expand trade investment links. The bill amends New Zealand law to implement our obligations under the agreement thereby allowing New Zealand to ratify the agreement and bring it into force. This requires an amendment to the Tariff of New Zealand to add the Republic of Korea to the list of preferential countries and amendments to the Tariff Act 1988 to provide for the transitional safeguard mechanism contained within the trade remedies chapter of the agreement.To conclude this agreement will play an important role in strengthening our relationship with Korea. It delivers significant benefits across a range of areas including goods services and investments. It helps to reverse the current uncertainty faced by businesses and it puts the New Zealand - Korea trade and economic relationship on to a very positive track. From a strategic standpoint it contributes to New Zealand’s wider trade policy interests in strengthening economic integration in the Asia-Pacific region and multilaterally. The Government would like to see the bill enacted by the end of November 2015 in order for the agreement to enter into force as soon as possible. I commend this bill to the House.