Shearer David: Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill — Second ReadingText is incorporated into the Bound VolumeShearer David: Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill — Second Reading[Sitting date: 17 September 2015. Volume:708;Page:6822. Text is incorporated into the Bound Volume.]DAVID SHEARER (Labour—Mt Albert): I want to take probably not a full call on this bill just to reiterate that the Labour Party supports the bill. This bill was brought about because we have to pass some enabling legislation to enable this treaty to come into force. We do not get to have the purview of the treaty before it is signed but we do have the ability in a sense to debate the merits of the enabling legislation to bring this into force.The Korean free-trade agreement was a tough deal. It was very tough for our negotiators and they did it over a period of about 5 years. Why was it so tough? Well it is on the basis that Korea will benefit by $4 million from the tariffs that we impose on their trade to us and we on the other hand will benefit in the order of $229 million. You have got to look at that and think that is a pretty good deal. In any view of this it is a pretty good deal. If Korea is sitting there and saying: “We’re only getting $4 million and you’re getting $229 million.” obviously it is going to be bargaining pretty hard. So in a sense I want to commend our negotiators because I think they did a good job.As the last speaker Jono Naylor said New Zealand exists from trade. We do not have a huge internal market like the United States. Trade is enormously important for us. Exports are enormously important for us and enabling our exporters to get their goods into countries without having tariffs imposed is obviously of great benefit to New Zealanders. Just imagine what $229 million effectively can get to and give to those industries that are going to be benefiting from that. That is the first thing.But the second thing is—and let us use the example of kiwifruit—right now our kiwifruit exporters are paying about 40 percent in tariffs to get into Korea. Our main competitor Chile is paying nothing because it already has a longstanding free-trade agreement with Korea. If you are competing against Chile with zero tariffs and your price is being hiked up by 40 percent you can see the difficulty and the amount of money that we are not making as a result of that competition.This free-trade agreement will not only give us benefits immediately but it will enable us to be able to get our products like kiwifruit into this market and have them more widely sold at a reasonable price that Koreans are willing to pay because our quality—certainly in kiwifruit—is better. The same thing applies to beef where the tariff is 40 percent and to lamb where the tariff is 22 percent. They all over time reduce to zero. So once again we get immediate benefit from those tariffs going down but we have longer-standing ongoing benefits because we get to compete against the European Union the United States and others that have no tariffs on their goods whatsoever—a good deal.There are some “buts” though—some exceptions. I do not think we did as well as we would have liked in the area of milk powder in particular; milk and dairy products; and possibly in deer exports as well even though the deer exporters group came and saw us and they still favoured the deal that we have got in front of us.There were some areas where we did not get quite as much as we would like but let us look at Korea in the whole. Korea is a country where we have a two-way trade of about $4 billion. It is not as important as Japan but it is just below Japan. Korea is certainly more important than the UK and it is a nation that is growing its wealth. In GDP figures it is the country that is immediately behind us and catching up fast. I would expect its GDP per capita to surpass ours in the coming years. So this is a country that we strategically should have an agreement with as well.The other “but” that I would like to have and this is something that my colleague David Parker talked about at length in his contribution in both the first and second readings is that we have left ourselves open to the issue of not being able to legislate about foreign buyers coming in and buying residential property in New Zealand because of this free-trade agreement.This free-trade agreement enables Koreans to come in and trade in residential property freely in New Zealand. Unlike Australia’s free-trade agreement with Korea we did not close that particular door. That means we cannot say no to foreign buyers coming into New Zealand to do that. We may be able to do other things but we certainly cannot do that.Sadly because there is a most favoured nation status clause in the free-trade agreement which means that if we extend a benefit to one country then other countries that we have done free-trade agreements with as well also benefit from those benefits that will also enable it to be opened up to some ASEAN countries and certainly to China.Mr Key said that was Labour’s fault for signing the free-trade agreement with China. Well that is absolute nonsense because we actually closed the door with China but we have left it open with Korea. So that is an issue. It was brought to our attention by an expert in the field from Auckland University and the Government up until now at least has not provided a very good explanation of why that was not closed off because it seems pretty blatant and pretty obvious to us.I just want to say a couple of other things about this free-trade agreement. There was a discussion from both New Zealand First and the Greens about free-trade agreements. The Greens said that it supported free-trade agreements. I have yet to see any free-trade agreement that it has agreed to. With the one that we signed with China our exports to China have gone from $3 billion to $10 billion in the space of about 6 years. That was signed by Phil Goff and it was carried on by this current Government in the same spirit. It meant that during the financial crisis when the rest of the world was suffering badly New Zealand because of the increasing access that we had to the Chinese market was actually pretty well safeguarded. If we did not have that we would have been in a much worse state than we are today certainly. So I am very pleased that we had the free-trade agreement with China despite the fact that the Green Party voted against it.New Zealand First’s opposition to this in terms of saying it is a bad deal—for the life of me I cannot see the logic in it. I can understand some of its reservations around the investor-State dispute settlement parts of the bill but I certainly cannot understand how this is a bad deal. We give up $4 million to Korea and we make $229 million overnight. That to me is a pretty good deal. That is $225 million we end up ahead rather than behind and that is before we are able to compete better with some of those other countries that have already got in and got those free-trade agreements before us.So the deal is a good one. There is some concern but I will say that we had a very good select committee process and I commend all members of the select committee and Mark Mitchell’s chairing of it. We asked the Ministry of Foreign Affairs to go back and reply to some of the reservations that we heard from submitters at least three times to give us fulsome advice in response to the issues that were raised. I think that the investor-State clause that we have and we have it in this New Zealand - Korea free-trade agreement—we insisted on having it in the New Zealand - China free-trade agreement. Why did we insist? Because we were concerned that our companies trading in China might not get the legal representation that they would need in order to safeguard our interests.In the case of Korea I do not think that is really a big issue. Certainly our legal framework is in the top three or four in the world—the Koreans are ranked at about 12th or 13th or 14thand so that is certainly a robust legal system—so we could do it through our domestic courts without having to resort to the investor-State disputes resolution. That I believe is unnecessary. However the Koreans wanted it to go into their free-trade agreement and we agreed to it. New Zealand has never come before the courts there and I do not expect it to have to in the future either. Thank you.