Mapp Wayne: New Zealand-China Free Trade Agreement Bill — In Committee 
Mapp Wayne: New Zealand-China Free Trade Agreement Bill — In Committee 
[Volume:648;Page:17359] 
Dr WAYNE MAPP (National—North Shore) 
: 
 I was going to talk specifically about Part 2 and about the purpose of Part 2 which I might add is an imposition on the New Zealand manufacturer. This is a change to New Zealand law actually not to Chinese law and it is worth remembering that point. It is worth thinking about the origin of certificates of origin. That point has been addressed significantly by Tim Groser and Mr Chris Auchinvole and addressed tangentially I guess by Mr Keith Locke. 
The whole point of a free-trade agreement is that it regulates trade between two particular countries. That is axiomatic obviously. But we have to know whether the products came from those two countries and to know that the countries do not act as trans-shipment points for products from other countries that would then seek to take advantage of the free-trade agreement and to have a covert free-trade agreement using the good offices—or indeed the bad offices—of one or other of the countries. Certificates of origin are about authenticating that goods have come from one country and are going to another country. 
Historically under the GATT and the World Trade Organization this has been measured by way of percentage. Goods have had to have a minimum of 60 percent which was subsequently changed traditionally to 50 percent and then 40 percent as manufacturing became increasingly globalised. Most manufactured goods for instance would consist of products from literally all over the world and the original view of 60 percent simply was unsustainable. Many goods would have a much greater percentage of overseas inputs so the percentage went down. That is not the contemporary way because as globalisation has further developed what is being looked at now is not so much percentages—which are increasingly hard to measure anyway; they would impose huge compliance costs on the manufacturers in New Zealand and would in many respects negate the advantages of having a free-trade agreement—but the transformation of the goods the process that occurs in the manufacturing of the goods. 
The question is whether a process has occurred through the New Zealand manufacturing that would therefore entitle the goods to have a new origin. It is not about percentages but about whether a manufacturing process has taken place. The same rule now exists in CER and I recall that that was not the case originally. So free-trade agreements have had to evolve as we have had much more global trade. 
A huge number of elaborately transformed goods as the term used to be known consist of goods from literally all over the world and measuring percentages is extraordinarily difficult. That is particularly true of a country like New Zealand. By definition we do not have a comprehensive manufacturing base where all inputs could be sourced in New Zealand and there could be a high degree of reliability that we would reach the 60 percent or 50 percent of whatever is being made. But we can easily identify whether a process has occurred in New Zealand. That is easy to measure and easy to police for both the New Zealand authorities and for that matter the Chinese authorities. 
Looking at it from the other perspective of New Zealand’s importing goods from China there are the same rules. It does not really matter so much because China has a comprehensive industrial structure where basically all the inputs will be manufactured in China and there is a high degree of reliability that the goods exported from China to New Zealand will be Chinese. That is not the case with New Zealand. 
Of course members will note I am talking primarily about industrial goods. Agricultural goods by definition are different. It is relatively easy to determine whether goods are sourced in one country. Even though the labelling may not have to be in the store from a customs point of view it has to be demonstrated that the goods were sourced from one country or another. If we take the situation of agricultural exports from New Zealand to China we still have to be able to demonstrate that the goods actually originated from New Zealand.