Reti Shane: Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill — First ReadingText is incorporated into the Bound VolumeReti Shane: Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill — First Reading[Sitting date: 16 June 2015. Volume:706;Page:4410. Text is incorporated into the Bound Volume.]Dr SHANE RETI (National—Whangarei): It is a pleasure to speak to this free-trade agreement and to this bill and I would like to start by acknowledging the Minister of Trade the Ministry of Foreign Affairs and Trade and officials for the work that they have done over at least the past 5 years to bring us to where we are today. I would also like to acknowledge my colleagues around the House those who worked on the Foreign Affairs Defence and Trade Committee and the guidance of the select committee chair Mark Mitchell.Currently we import refined oil cars electronic equipment and machinery from South Korea and we export industrial goods metals organic chemicals forestry products dairy beef and lamb kiwifruit and buttercup squash. It strikes me that there are four major macroscopic benefits to this agreement with Korea. First of all we get increased access to a target market of 50 million people for New Zealand trade and investment. Secondly we get some frameworks that we can pin policy on and that we can work with: frameworks for resolving trade and investment issues and frameworks for resolving trade and labour and trade and environmental issues. We also get support for New Zealand’s wider trade policy interests in strengthening our economic integration in the Asia-Pacific region. As we have heard 98 percent of current export tariffs will reduceover time.I would like to look at some of those in a little bit more detail. What we will see is that the beneficiaries to this free-trade agreement are New Zealand wine cherries hides and skins some forestry products some aluminium and many industrial goods exports. They will become duty-free at the agreement’s entry into force. New Zealand beef exports to Korea currently worth $120.6 million will become duty and safeguard-free 15 years after the agreement’s entry into force. All duties on New Zealand kiwifruit exports to Korea currently $44.3 million will be eliminated over 5 years. If we look at 5-yearly increments—5 years 10 years 15 years—what we will see at the end of 5 years is that 67.4 percent of current exports to Korea will become duty-free. At the end of 10 years that goes up to 79.3 percent and at the end of 15 years that is 97.8 percent—clearly a significant reduction in tariffs over time.We heard from a number of submitters and I would like to comment also on the Korea - New Zealand Business Council. It reminded us that Korea has already signed agreements with Chile—which is one of our major competitors in this space—the USA and the EU and latterly with Canada and Australia. It commented that previously Korea was a relatively closed market and that over the past decade or so the lever for it becoming more open has been the big Korean electronic and car manufacturers becoming more internationalised. With this agreement we are seeing the benefit of that opening.It commented also on New Zealand seafood. Even though the green-lipped mussel will have a tariff rate quota placed on it it commented that New Zealand seafood penetration and entry into the Korean market is a very good thing. More specifically our green-lipped mussels are perceived as high quality and as having hugely beneficial health effects. As I am sure many of us know what it is relating to here is the perceived anti-inflammatory benefits of the green-lipped mussel which may be beneficial to people with arthritis inflammatory bowel disease or other inflammatory conditions. It made the point that even though it has a tariff rate quota it is well respected and well looked at in the Korean market.Zespri also spoke to us. Zespri is a big player—$1.4 billion in sales of kiwifruit worldwide—and it is projecting to double the volume of its gold kiwifruit in the next few years. For Zespri Korea is its seventh-biggest market and it differentiated the Korean market as being very discerning fruit consumers. Quality matters to Korean consumers. In Zespri’s view this is one of the competitive advantages we have over Chile—that our kiwifruit is high quality and the Korean consumer recognises that. Furthermore in the kiwifruit space what is really interesting is that we are actually walking the walk with Korea.So here we are: we have this free-trade agreement but we actually have skin in the game already because what Zespri was telling us was that it is already capacity building and risk spreading the kiwifruit market. It is doing that because it has actually got 100 hectares of kiwifruit growers and kiwifruit that it is growing in Korea and it employs 250 local growers. We do truly come to this agreement with skin in the game. We are already employing people in Korea. We have already got our plants growing in Korea. For kiwifruit growers their current tariff is 45 percent; Chile’s is zero. There is the reason. There is our loss of competitive advantage right there which this agreement will change.We also asked about intellectual property concerns because as we talk about growing our kiwifruit in Korea it might be a legitimate concern that we would have with any country that we were doing trade with. We were reassured that there are absolutely no intellectual property concerns with our Korean partners. I would also comment while I am on the kiwifruit story that this is very good news for horticulturalists in Whangarei and the far north. We have a substantial horticulture industry that will benefit significantly from the tariff reduction on kiwifruit.We also heard from Export New Zealand. It talked to us about the importance of the free-trade agreement in the context of Asia and what it said was this: “The Korean market is an important one. It is a larger market than the UK and falls only a little behind Japan in market size. Given that New Zealand does not yet have FTA links with the US and Japan this free-trade agreement is New Zealand’s third most important FTA after those with China and Australia. The duty savings achieved by this agreement are significant and will be greatly appreciated by our members.” Just to highlight Export New Zealand commented also that it is focusing on the policy aspect and on our relationship with the Asia-Pacific region which we can often forget the importance of when we are talking about the issue of tariffs. Sometimes that can be the highlight. Our relationship with the Asia-Pacific region is very important as well.Export New Zealand commentedalso as many submitters did on the investor-State dispute settlements clauses as my colleagues across the House have raised. I want to read point 9 which they commented to us: “We support the inclusion of the provisions on investment in this agreement. We believe that these will encourage New Zealand companies to invest in Korea and Korean companies to invest in New Zealand. Having an investor-State disputes settlement mechanism is an important protection for investors and we support this.” That is from Export New Zealand. It has 5300 members so it has some clout and it has a mandate to be speaking to us in this regard.I would also like to comment on Fonterra which was also a submitter and is clearly our biggest exporter. It said to us: “The Korean free-trade agreement allows us to start having similar discussions with Korea as we have had and as we now have with China.” Although part of its skim milk has not been released under this tariff as was commented on it sees this as opening wider opportunities with Korea. I would like to read one of the points about the benefits which it commented on to us. This is from Fonterra: “Importantly this agreement helps us to create a level playing field for the New Zealand dairy exporters relative to the EU the US Chile and Australia. The EU and US agreements in particular which entered into force in 2011 and 2012 respectively have put New Zealand at a significant competitive disadvantage. This disadvantage has started to be reflected in New Zealand’s share of Korea’s dairy imports which has fallen from 14 percent in 2011 to 8 percent in 2014.”On that point I would also like to comment on Fonterra’s reflection on the free-trade agreement and its benefit regarding introducing cheese to Korea. Historically cheese has been a key dairy export from New Zealand to Korea. However the preferential access for cheese negotiated by the EU and the US has significantly eroded sales of cheese from New Zealand to Korea. The cheese outcome for New Zealand under the New Zealand - Korea free-trade agreement represents effectively parity with the US and the EU for cheddar and block mozzarella. This means that cheddar and block mozzarella exports from New Zealand will reach a zero tariff at the same time as the US and the EU.I think this is an excellent agreement and as we heard from most submitters yes there are some concerns around investor-State dispute settlements which we have allayed and there is some thinking to do on that as our colleagues have spoken about but this agreement disproportionally advantages New Zealand. It is an agreement that has been worked on over many years. I have complete faith in this agreement and I commend it to the House.