Groser Tim: Third Readings — 
Text is incorporated into the Bound Volume 
Groser Tim: Third Readings — 
[Sitting date: 24 July 2008. Volume:648;Page:17414. Text is incorporated into the Bound Volume.] 
TIM GROSER (National) 
: 
 This is the final legislative stage of a process to mark what I think a number of people have rightly called a very historic moment in terms of New Zealand’s chequered trading history and because I think it is appropriate to use this occasion to go back to first principles I want not to dive into the detail of this agreement but just to rehearse the broad argument that underlies this whole initiative. Before doing so I will comment on the fact that although we now accept there is a large measure of consensus in New Zealand politics on international trade issues this agreement marks a remarkable change from when I first became involved in such politics well over a quarter of a century ago. At that time international trade issues were one of the most divisive issues in New Zealand politics and any move to open up New Zealand to import competition raised issues of the greatest sensitivity. For reasons we all understood at the time because New Zealand had developed an industrial model that was highly dependent on very high levels of protection I think it meant that no New Zealand negotiators of the past could likely enter into any international trade agreements with their front foot forward because of the sensitivities of a political nature at home. So we have travelled quite a way; I happen to hold the view that this is the path we will eventually have to take on climate change but we are well removed from that point at this stage. 
But the basic infrastructure of the argument although very important I think is very simple. It is this: at the moment New Zealand’s trajectory in my opinion and the opinion of my party is not sustainable. We are losing—leaching—people. The most worrying statistic that I have in my head when I think of the 80000 people who left the country last year is that 80 percent of them—four out of five—were under the age of 40. And they are moving abroad in their legions. I regret to say that I see still the likelihood of that accelerating until we can actually address the root of the problem because the opportunities for highly skilled and semi-skilled New Zealanders now outstrip those opportunities available to them in our own country. So the key to this is to improve the functioning of the economy; to increase the productivity growth rate which is the key to higher real wages; and to make New Zealand once again a dynamic place so that our young people can see a future for themselves in New Zealand. 
Central to that process is the promotion of a greater export orientation of New Zealand. A trade agreement is simply an agreement about opportunity. We will not intrinsically earn a dollar from the Chinese free-trade agreement unless the opportunities are translated into specific action by individual New Zealand companies and entrepreneurs and backed by all the agencies that the Government has to bring to bear to help New Zealanders take advantage of these opportunities. Nevertheless the agreement is absolutely a central part of that equation and I think that is the reason why we are—I would use the argument—celebrating today the final passage of this bill. 
This agreement is fundamentally important for New Zealand simply because of the scale of the issue; it is about gaining access literally to a quarter of mankind. And as I and others have commented in recent days for a country that has historically had a massive political problem in finding markets for its exports this is absolutely a paradigm shift. It is absolutely a change of major significance for this country and its implications will come through over the next 20 years just as they did over the long term in respect of the other landmark trade agreement that New Zealand has in its own free-trade area with Australia—the CER agreement. 
So that is the broad economic picture. It is not just about agriculture; it is also about the new economy that is emerging in New Zealand. It is very important we do not see here a false dichotomy set up between the traditionally great strengths of New Zealand and the emerging companies that I think so many members are so proud of such as the examples given yesterday by my colleague Mr Tremain of the Bay around the Napier-Hastings area.  
But let me take a couple of examples to illustrate the point and instead of using general arguments I will use some highly specific arguments. I will talk about a leading industry of exported goods—dairy—and then I will take the clothing industry as an example. The dairy industry story I think is well known to members. We are seeing a situation where the average compound rate of growth—the average annual rate of growth—of dairy consumption in China is an astonishing 30 percent. Any number that increases by a compound rate of 30 percent is doubling in less than 3 years obviously. But this is not all about imports because Chinese dairy production is also growing at a stellar rate. I forget the figure since I am speaking here without notes but from memory the expansion in the last 5 years has been equal to the entire New Zealand dairy production. We must never forget this central fact about dairy: although we are a huge player internationally with something over 40 percent of total world trade—and it is astonishing for a country of our size to have 40 percent of world trade in anything—we are still only around 2 to 2.5 percent of world production. So the paradox here is that New Zealand is not very large in world dairy terms in respect of production but it is massive in respect of world trade. 
So this incredible stellar rate of growth of dairy consumption in China is stimulating not only domestic growth but also a very rapid increase in imports of which New Zealand being the leading exporter of dairy products in the world is the principal beneficiary. That is underwriting wealth creation jobs and export income for our future. By the way this does not mean there is any particular reason to believe that the end of adjustment difficulties for the dairy industry has been seen in New Zealand. I think it means—and most people who deeply understand the dairy regime understand this—that we are moving to a higher equilibrium price in world dairy but there will still be New Zealanders in the future who will lose their shirts over it. There will still be marked fluctuations around that higher equilibrium world dairy price and unfortunately since it is immediately capitalised into land values some people will go in at the wrong time with far too high a gearing and still suffer. 
But looking at it from an overall national New Zealand perspective this agreement underwrites an incredibly bright future for New Zealand. The debate that agriculture is a sunset industry is dead in this country. Agriculture will play just as vital a part in New Zealand’s future as it has done in our past and this signal agreement will underwrite that future to a very considerable extent. For those members who think that we have seen the last of dairy expansion I say they should just reflect on this: even given these high growth rates dairy consumption in China is of the order of 12 kilograms per head. Well in Europe it is 250 kilograms per head and in Japan it is around 80 kilograms per head so we will still see a remarkable growth for the future. We are well positioned; we are better positioned than any other country to take this up in terms of both our intrinsic strengths and the competitive edge that we now have into this giant emerging consumer market. Yesterday we talked about the fact that Fonterra has already cashed up on this by announcing a $300 million expansion with Chinese companies to take advantage of the agreement even before it has come into effect. So that is a very positive example. That is my dairy example. 
The other example I will give the House is less well known and it is the Icebreaker example. I had the privilege of being briefed by its managing director Jeremy Moon in Beijing when I went there with the very large delegation for the signing of the agreement. Here we have a company that is in a sector that I believe every New Zealander bar the most optimistic few thought a liberalisation of our import regime would mean the end of—and understandably so because the clothing and textile industry was deeply reliant on the highest levels of protection. In 1980 prior to the signing of the CER agreement essentially its exports were zero and it has made an adjustment that at times has obviously been quite painful for a number of the companies that were positioned in the wrong area of the market. New Zealand was never going to get rich by trying to compete on a pure labour-wage cost basis with countries like China. 
So an adjustment has taken place and now we can see companies emerging out of that adjustment process with an entirely different business model. I recall very clearly the managing director telling me that it had taken him I think from memory 6 years to reach the very modest figure of $1 million in sales and another 5 years to reach $100 million. That is all done by this globalisation model. The design is done here and it is as everyone knows outstanding design. The product is a very expensive high-quality product that uses New Zealand merino wool. The company then uses factories in Shanghai which the managing director described to me as having an atmosphere more akin to that of a university campus. Anyone who read the  
Listener 
 article on its visit to Shanghai will know that this production model is a million miles removed from a sweated labour arrangement. So those are two practical examples and I think that they should give New Zealand a great deal of confidence in our exporting future.