Goff Phil: Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill — Third ReadingText is incorporated into the Bound VolumeGoff Phil: Tariff (Free Trade Agreement between New Zealand and the Republic of Korea) Amendment Bill — Third Reading[Sitting date: 24 September 2015. Volume:709;Page:7076. Text is incorporated into the Bound Volume.]Hon PHIL GOFF (Labour—Mt Roskill): The Labour Party supports this legislation which is necessary to bring into effect the free-trade agreement between New Zealand and the Republic of Korea. Labour is a free-trade party. In fact you would have to be stupid as an agricultural exporting country not to be free-traders because the whole of the international trading system discriminates against agriculture. For decades our exporters have had to face enormous tariff barriers including in Korea in order to get our product into those markets. Our country by comparison has had low tariffs since the 1980s. We trade freely and we have benefited from that.This agreement has been a long time coming. Way back in 2007 as the Minister of Trade I initiated a study done by the New Zealand Institute of Economic Research and its Korean counterpart to look into the possibilities of a free-trade agreement. That study came to the unanimous opinion—both sides agreed—that a free-trade agreement was both viable and would bring benefits to both of our countries. And it most certainly will. It will not harm New Zealand producers because the tariffs on exports from Korea to New Zealand are both low and few—around 5 percent on things like washing machines and tyres. By contrast when our efficient agricultural producers want to export into Korea we face very significant barriers. If you are a wine-seller from New Zealand—it might be the best wine in the world—there is a 15 percent tariff. If you are a kiwifruit-seller there is a 45 percent tariff. Then consider that our main competitor Chile because it has a free-trade agreement with Korea gets its exports in free. If you look at something like butter it is 89 percent; cheese 36 percent; wood 10 percent; and salmon 20 percent.Those tariffs will be phased out and will be gone within 12 years. That obviously is of benefit to New Zealand. In the first year it will save us $68 million in tariffs paid by exporters alone. By the end of the process we will be saving $229 million a year. It is not just primary produce; it is things like manufacturing—for instance aviation medical devices and precision and marine engineering. They will benefit from this treaty. Services—growing in importance—like education and professional and legal services will benefit.Is Korea an important market for New Zealand? Yes it is. It is our fifth-biggest trading partner. There are 51 million people in Korea—I think; I stand to be corrected Mr Groser—and it is an increasingly affluent society. It is the eighth-largest trading nation in the world and the 13th-largest economy—so yes there are benefits. So that is the positive side and that is why Labour will be supporting this bill.There is however a more negative side I regret to say. Despite the best efforts of the negotiators—Tim Groser has negotiated and in particular Martin Harvey and Alison Mann—and we are still faced with big tariff barriers in some of the areas that we could make no progress on. Out-of-quota milk powder is at a 176 percent tariff rate—176 percent. You cannot trade over that and you cannot trade around it. There are other areas that will not be happy with this agreement. Frozen deer velvet has a 15 percent tariff barrier. This is our major market for frozen deer velvet. If you look at fresh abalone or frozen squid the tariff is 22 percent. Nothing in this agreement reduces or eliminates those tariffs so we have got some way still to go.I would give credit to the Minister and his negotiators for doing their very best on it but there is one area where we have failed and there is no excuse for failure. That is in the area of failing to carve out our freedom as a sovereign nation to limit foreign investment—Korean investment—in residential property. Ironically we have maintained our ability to limit investment in farm land in this agreement but we did not put in our ability to limit investment in residential property.I happen to believe that generally foreign direct investment is good for our country. We go out and we look for it but it is not good in every area and you will never persuade an Aucklander that it is good to have foreign direct investment in existing residential housing. Why not? Because there is a failure of supply of housing over demand and why would we allow demand to be inflated further by encouraging investment in existing residential housing by people who are not resident and who never intend to be resident in New Zealand?As a proud New Zealander I hate to have to admit this but the Australians got it right and we got it wrong. Australia bans foreign investment in existing housing and other countries put a stamp duty on it. When Australia negotiated its free-trade agreement with Korea it put in protections for its right to continue to do so but we did not. My question to the next National Party speaker is: was that a cock-up—I suspect it was a cock-up—or was it was deliberate? That would be even worse—that would be a cock-up with intent.In Auckland we have had 25 percent housing price inflation in the last year. We have got the lowest level of homeownership in 64 years. It makes sense when you are negotiating an agreement for investment that you do not make it worse for Kiwis trying to achieve their dream of owning their own home. Yet this bill will—well this bill will not but the agreement will unfortunately do that. That is the one key criticism that I have of this bill. It was the wrong thing to do. What I want to say with some degree of anger is that John Key has not taken responsibility for this. He knows it is wrong he knows the damage that it does and what does he do? He says it is Labour’s fault.I want to ask Mr Groser a question if he is listening. I admit responsibility for initiating this free-trade negotiation; I do not accept the responsibility for the cock-up of not protecting us against inflationary foreign investment in existing housing. Do you know what Mr Key said? OK he negotiated it—or his Minister negotiated it—but he said that it is Labour’s fault because it put a most favoured nation clause in the agreement with China. Listen to this Mr Groser: a most favoured nation clause. Mr Groser will nod his head when he admits that we put that clause in every agreement right? Yes that is exactly right.We have a most favoured nation agreement in every free-trade agreement and if we did not put that in the New Zealand - China free-trade agreement then that would have been regarded by the Chinese as absolutely discriminatory—and it would have been. But because you have a most favoured nation agreement you negotiate with care knowing that everything that you put in new trade agreement will create a precedent and will be carried over into other free-trade agreements that you have. I do not accept the dishonesty of a Prime Minister who knows that he has got it wrong and tries to transfer the blame. He has been Prime Minister for God’s sake for 7 years. These things are happening under his watch and he needs to take responsibility.Now I want to go back to where I began. We will support this agreement. We will support this agreement because there is a net and real advantage to New Zealanders. We regret that the agreement did not go as far as we would have liked. As Russell McVeagh says anybody expecting this agreement to deliver what was delivered by the New Zealand - China free-trade agreement the Taiwan free-trade agreement or the ASEAN free-trade agreement will be disappointed. And they may be. But the Government did its best in that area. It did its worst in omitting to protect New Zealand in an area where it should have—in terms of foreign investment in existing residential housing.I just want to say one thing about the investor-State dispute settlement process. Some people have used that as a surrogate for the Trans-Pacific Partnership in saying that we will not support this agreement because it has an investor-State dispute settlement agreement in it. I put an investor-State dispute settlement agreement in the China free-trade agreement and I put one in the ASEAN free-trade agreement. Over the years that they have been in existence neither has caused us any problems. They are there to protect New Zealand investors in countries where there is no rule of law and that is why we put it in. Korea does have the rule of law. We did not need it with Korea but Korea insisted on it.What I want to say finally is that what we need to do Mr Groser in the Trans-Pacific Partnership agreement is do a lot better than we have done on dairy in this agreement. I fear from all the reports that I am receiving including from Mr Groser himself that we will not get a good dairy agreement. That is our biggest single export product and we should insist on getting a deal at least as good—