Groser Tim: New Zealand-China Free Trade Agreement Bill — In Committee 
Groser Tim: New Zealand-China Free Trade Agreement Bill — In Committee 
[Volume:648;Page:17353] 
TIM GROSER (National) 
: 
 Madam Chair first of all let me give you my personal assurance that I have taken note of your harsh but possibly just ruling. I shall make carefully targeted points about Part 1 which after all is—to use plain language—the meat and potatoes of the agreement. 
The preferential rates are very important and I will illustrate the underlying point about this in a couple of different ways. First of all we take Dr Mapp’s earlier point about the competitive edge and we look at it in terms of one example that comes to mind which is wine. I stand to be corrected but from memory the most favoured nation rate on wine imported in bottles into China is 14 percent. For a country that enjoys as we do the privilege of having the highest per-bottle price in the world—believe it or not—on the largest wine market which is the London market having this competitive edge will be of considerable benefit. There is absolutely no truth in the belief that the countries in Asia that are seeing the emergence of the middle class will not move into consumption of these products and I think New Zealand wine exporters will benefit enormously from this competitive advantage. That is the first basic point that I make about the tariff reductions. 
The second point is that I want to address some criticisms about the allegedly slow pace. First of all I do not consider it slow at all by the standards of most trade agreements particularly coming on top of the major liberalisation that China itself has undertaken in the context of its accession—or readmission according to the official script—to the international trading system. I use the term “roughly a decade” to describe the overall totality of a complex tiered formula that has been negotiated on tariffs. I do not consider it a long period of time at all particularly when we look at the profiling of our major exports in relationship to that timetable. 
The other point I would make is about the automaticity of this process. In Part 2 we will come to the question of safeguard measures and contingency protection devices which qualifies us a little bit but I do not believe in any important way. When we come to look at the automaticity of this process this is a very very important qualifier to any criticisms about the slow pace. What is quite clear—and we have seen this in a variety of different trade agreements; I saw it 20 years earlier in respect of the Australia and New Zealand Closer Economic Relations Trade Agreement—is that when businesses know what the end point is they can get ahead of that end point and accelerate the process. We had literally within weeks a spectacular example of that in the signing of the deal by Fonterra our largest goods exporter worth some $300 million over a period of time. Fonterra took advantage of tariff reductions that literally had not even come into legal effect for the very simple reason that we are here today in this Committee enabling the legislation to go through to have that effect. 
So already we have seen that this is not theory; this is how the market works. If we put in place what looks to some a modest pace finally—within reason—it does not matter. The automaticity of the process is what matters. Then people can get ahead of the programme as we have already seen. 
The second point is in relation to tariff reductions when we measure them with these econometric exercises. I have been involved in many of these exercises. Although they are highly sophisticated in terms of their methodology personally I do not think they are particularly useful. They omit what in earlier times were called x-efficiency gains by economists—or the dynamic effects in more plain language—and almost always seem to me to understate the importance of the tariff liberalisation process. The mere reduction of tariffs is one part of it but the stimulatory effect in terms of actual company business also matters. 
My own view is that this will have what is called demonstration effects which has been much commented on internationally in the literature around trade agreements and which will be particularly strong in this agreement. The reason I believe this is to do with the Confucian nature of the society we have negotiated this agreement with. When China designates New Zealand as a preferred tourist destination—I imagine that if the Australian Government did that we would all fall around the floor laughing along with our Australian cousins—I believe the signal to Chinese businesses will be considerable.