Mapp Wayne: New Zealand-China Free Trade Agreement Bill — In Committee 
Mapp Wayne: New Zealand-China Free Trade Agreement Bill — In Committee 
[Volume:648;Page:17349] 
Dr WAYNE MAPP (National—North Shore) 
: 
 I will continue to elaborate on the points I was making about the way Part 1 initiates the free-trade agreement by reducing the tariff schedules down to zero by 2019. It is a remarkable achievement by the officials to get that outcome in the negotiations. I note that the Government must take some credit for driving the negotiations in that way. Clearly it takes a high-level push from the Government to be able to drive forward that level of success. I know that the Minister of Trade and indeed the Prime Minister were actively engaged with the Chinese Government to that effect. I think we have to consider just what a tremendous achievement that is. 
I was saying when I was closed off—if you will—that the Ministry of Foreign Affairs and Trade said there would be only a $300 million gain per year in a 10-year period—at least by 2019. I have always thought that that is an absurd proposition. I choose those words carefully. Trade is already worth $2 billion. Is the ministry seriously suggesting that the effect of a free-trade agreement a decade from now will be only 10 percent of the current levels of trade? That does not seem credible because it ignores the fact that it is not just about the potential gains we will get by the tariff reduction of 20 percent; it is actually about the relative advantage we will have over all other nations. 
It is a well-known theory of free-trade agreements that one of the advantages countries seek is not just the growth in trade between countries but also trade diversionary effects from other countries. Although China might currently buy meat grain and dairy products from a range of countries it will now divert that trade to New Zealand because we will have a 20 percent price-competitive advantage over all other nations once the agreement comes into full effect. People act before the reality of that full effect which is why Fonterra was able to get the $300 million deal now in anticipation because the trend is already established. People act on the basis of the final effects not just on the initial effects. 
The second point I make as to why that $300 million gain has to be an underestimate is that once trade is boosted total demand goes up. China is growing extraordinarily rapidly—even now at a rate of 10 percent per annum. Even now several hundred million people are able to spend $10 a day or more on advanced products in China. At 10 percent growth per annum that will increase rapidly and the demand that this agreement will generate in China will be far greater than a simple 10 percent increase in trade over the course of a decade. I predict that within 5 years China will be New Zealand’s single largest market. Trade will be largely in agricultural products but it will also be in services tourism and so forth. 
I say to the Maori Party that Maori organisations understand that advantage. That is why they came to the Foreign Affairs Defence and Trade Committee and were so enthusiastic about the agreement. They saw the potential to grow a market and that is what the reduction of tariff barriers does. It does not just divert trade; it leads to total growth in international trade. If we want a comprehensive demonstration of that we have only to look at the European Union. The establishment of no tariffs right across the European community did not just divert trade from say New Zealand to Britain; it hugely increased the economic potential of Europe and Europe has gained immensely over the 50-odd years since the establishment of that free-trade agreement. This agreement will do the same for New Zealand and China and for other countries that join in as well. It will not just lead to trade diversion; it will lead to a massive and total increase in trade and prosperity. That is the gain of Part 1.