Shearer David: Tariff (Malaysia Free Trade Agreement) Amendment Bill — Second Reading In Committee Third Reading 
Shearer David: Tariff (Malaysia Free Trade Agreement) Amendment Bill — Second Reading In Committee Third Reading 
[Volume:664;Page:12137] 
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