Nash Stuart: Tariff (New Zealand-Hong Kong China Closer Economic Partnership Agreement) Amendment Bill — First Reading 
Text is incorporated into the Bound Volume 
Nash Stuart: Tariff (New Zealand-Hong Kong China Closer Economic Partnership Agreement) Amendment Bill — First Reading 
[Sitting date: 22 June 2010. Volume:664;Page:12094. Text is incorporated into the Bound Volume.] 
STUART NASH (Labour) 
: 
 I stand to speak in support of the Tariff (New Zealand-Hong Kong China Closer Economic Partnership Agreement) Amendment Bill—quite a long name. The reason I support the bill is it will hopefully lead to increased opportunities for New Zealand exporters in the Hong Kong market as well strengthening our relationships in the Asian region in general. Closer economic partnerships or CEPs—trade is full of these acronyms—are a vital part of New Zealand’s economic development policy as they work to break down tariff quota and customs duties which restrict access and profitability for New Zealand exporters and importers. They tend to lead to increased exports and imports and have the potential to add wealth to both countries. 
New Zealand signed a closer economic partnership with Hong Kong on 29 March 2010. This bill implements that agreement. The closer economic partnership agreement had its roots in the work of a former Minister of Trade Jim Sutton and the next elected Prime Minister of New Zealand the Hon Phil Goff during his tenure as Minister of Trade. Whilst we tip our hats to Mr Groser for getting this bill across the finishing line I think that even he would admit that it is a result of the work of his predecessors and we must recognise the efforts of those who worked on this issue in the past to get it to this point. Trade is one of those wonderful areas where we all work together when it comes to securing the national interest. How to grow trade is the real challenge which the National Government does not seem to get as is evidenced by the latest Budget. However that is a story for another day. 
So what are we talking about when we debate the closer economic partnership with Hong Kong? Well Hong Kong is currently our ninth-largest export destination accounting for $823 million last year. New Zealand imported $199 million of merchandise goods from Hong Kong last year making it the 31st-largest source of imported goods. However to put it into perspective Hong Kong counts for only 1.9 percent of New Zealand’s total exported goods and 0.04 percent of our total imported goods. Herein lies the challenge for this economy going forward. Our ninth-largest export destination accounts for only 1.9 percent of New Zealand’s total exported goods. If there is ever a case for global diversification then those figures are it. There is a very strong argument for this type of free-trade agreement. It puts potential trading partners on the map and on the radar of New Zealand Trade and Enterprise as well as potential exporters. Despite Hong Kong’s small size it is a market that is already rapidly expanding with last year’s total exports increasing by 33.6 percent compared with 2008. However total imported goods declined by 2.5 percent last year compared with 2008. 
What sort of things do we export to Hong Kong? We export about $200 million worth of crustaceans to Hong Kong. The area of largest growth is apples which is good for the people of Hawke’s Bay considering that it is the fruit bowl of this country. Other things that increased were milk powder and venison. Frozen meat and frozen beef were second and third in terms of export value. Milk powder exports had dropped which I was interested to see and cheese had dropped. But some interesting products are exported there and we are doing quite well. In terms of imports the largest area of imports is machinery parts which accounted for about $16 million but it dropped by 15 percent. The area that increased by 217 percent was printing machinery. 
Hon Darren Hughes 
: Yeah? 
STUART NASH 
: Yes. I suspect there were one or two capital purchases but I am not too sure. Insecticide imports were worth $4 million. They increased by about 400 percent. Believe it or not spectacle imports increased by 118 percent. Some of the guys on the benches opposite need some spectacles from Hong Kong because they see the world through rose-coloured spectacles and do not understand reality. 
Hon Darren Hughes 
: They need rear-vision mirrors. 
STUART NASH 
: Absolutely. But Hong Kong not only is an important market in its own right as outlined a couple of minutes ago but provides a vital foothold for New Zealand businesses wanting to expand into the much larger Chinese market. Building closer economic relationships with Asia is vital to New Zealand’s future economic prosperity because it is the major market of the future. This closer economic partnership is another step in that direction. So hats off to Jim Sutton and Phil Goff. 
Although free-trade agreements and closer economic partnerships come with undoubted benefits we must not ignore that for some businesses and sectors they can potentially cause harm. This closer economic partnership has been evaluated as having a low negative impact on New Zealand business largely because Hong Kong specialises in services rather than cheap manufactured goods that could undercut local businesses. New Zealand manufacturers of footwear textiles etc. are most at risk from free-trade agreements and closer economic partnerships and this closer economic partnership has given those sectors the longest phase-out period of tariffs to allow them time to adjust. 
We also need to be aware that fiscal costs are associated with this sort of agreement and they need to be fully understood to ensure that they are outweighed by the benefits. As with any free-trade agreement that results in a reduction in tariffs there will be lost tariff revenue. In 2008-09 the estimated tariff revenue collected on imports from Hong Kong was around $4 million. This will be phased out by 2016; no revenue will be collected from Hong Kong imports. 
I would like to outline some of the advantages of the closer economic partnership agreement. Although Hong Kong already offers duty-free imports for all countries the closer economic partnership will ensure New Zealand’s existing duty-free access is locked in for New Zealand exports giving New Zealand exporters added certainty that competitors other than Mainland China do not enjoy. The phase-out of certain remaining domestic duties may also reduce some costs for New Zealand producers who use imported Hong Kong components or capital equipment—for instance components or equipment relating to electrical transformers whiteware and steel products. It is interesting to note that one of our largest exports is recycled plastic. Obviously Hong Kong turns it into added-value products and brings them back here; it is a pity we cannot do it here. 
The closer economic partnership provides New Zealand with the early harvest of most of Hong Kong’s Doha service commitments—that is Hong Kong is offering New Zealand through the closer economic partnership most of what it is offering the World Trade Organization membership in the yet to be concluded Doha negotiations. The commitments that Hong Kong makes to New Zealand in the closer economic partnership address service sectors of key export interest to New Zealand including education business environmental and logistic services. New Zealand service exporters have also secured strong future-proofing of their position in the Hong Kong market through the most favoured nation treatment and a ratchet clause. Most favoured nation treatment means that New Zealand exports will automatically benefit from any preferential treatment that Hong Kong provides to future free-trade agreement partners subject to certain reservations and exceptions. The ratchet clause means that any future unilateral liberalisation undertaken by Hong Kong in certain sectors will be bound and committed to New Zealand. We do not lose; we cannot lose. New Zealand will be using the tariff reduction schedule in the New Zealand - China free-trade agreement—which was also negotiated by the Hon Phil Goff—for imported products from Hong Kong. As I already mentioned the longest tariff phase-out periods will apply to industry sectors in New Zealand that are particularly sensitive to potential imports from Hong Kong such as textiles clothing and footwear. Delayed tariff phase-outs will apply to other products such as steel furniture plastics and rubber products. 
I will very quickly go through some of New Zealand’s legal obligations under the closer economic partnership. These include tariff reduction phasing-out identical to that provided to China; market access and national treatment commitments to Hong Kong service providers similar to those provided in the P4 agreement—which is an agreement between New Zealand Brunei Chile and Singapore—along with some elements provided in other recent free-trade agreements and a few commitments drawn down from New Zealand’s Doha offer all within domestic policy settings of course; a reciprocal commitment to extend most favoured nation treatment to Hong Kong in relation to services subject to specified reservations; doubling the overseas screening regime threshold from existing World Trade Organization levels of $10 million to $20 million; a commitment not to take trade remedy actions in an arbitrary or protectionist manner and to carry out trade remedy actions in a transparent manner; specific rules of origin to accommodate part-processing of certain clothing products in Mainland China with robust verification procedures to mitigate any risks from this approach; and commitments on temporary entry of Hong Kong business visitors that go beyond New Zealand’s existing World Trade Organization commitments. 
This is a good bill. It is a cross-party bill; we will all support it. I think it will benefit New Zealand and for that reason I commend it to the House.