Q+A’s Guyon Espiner Interviews Trade Minister
Q+A’s Guyon Espiner Interviews Trade Minister, Tim Groser.
The interview has been transcribed below. Q+A is repeated on TVNZ 7 at 9.10pm on Sunday nights and 10.10am and 2.10pm on Mondays. The full length video interviews and panel discussions from this morning’s Q+A can also be seen on tvnz.co.nz at, http://tvnz.co.nz/q-and-a-news
TIM GROSER interviewed by GUYON
ESPINER
GUYON Thank you Minister for joining us this morning, we appreciate your time. As Paul says we're signing this Free Trade Agreement with Hong Kong, it's been negotiated since 2001, essentially Hong Kong has zero applied tariffs and we can effectively export our goods tax free there anyway, is this going to be worth anything at all to the New Zealand economy?
TIM GROSER – Trade
Minister
Before we drill down into
the specific of this or the TPB Agreement, let's just see
where we are as a country. We've been bottom trawling in
the OECD in the lowest quartile now for some years, we've
gotta lift that. As the Prime Minister says we're not going
to get richer by selling to ourselves, so trade is
fundamental to this. The problem for New Zealand until
really about 15, 20 years ago, was access to markets, and
New Zealand really did suffer in any relative sense. What's
happening now is transformational in terms of the
opportunities New Zealand has. So the Hong Kong deal is
more strategic than specific, you’re quite right, there
are some services improvements that will help certain
services exporters but fundamentally what it does is it
builds on the China deal. It's not just China, which gives
us access to a quarter of the world's people, as consumers.
We're starting to phase in now this agreement with this
unpronounceable name AANZFTA [ASEAN-Australia-New Zealand
Free Trade Area], which is merging the CER with the whole of
South East Asia, there's India going on as you said, there's
Korea…
GUYON And we'll come to those agreements. Hong Kong, any dollar value at all?
TIM Oh sure, but look it's more about making more coherent the China deal, and our exports to China in the last 12 months, have gone up by almost the size of our total exports to Korea. At the moment there’s a sort of porous border, so it's putting cream on the top of the China deal is how I see it.
GUYON Some manufacturers were concerned that increased competition with Hong Kong would lead to job losses, will there be job losses in the manufacturing sector as a result of this deal with Hong Kong?
TIM No there will not be job losses, for two reasons, first of all because we've been very careful to stage the tariff reductions in this area so they're consistent with the China deal, so in that respect in terms of import competition, it doesn’t change the situation at all.
GUYON India is predicted to be the world's second largest economy by 2050. On January 31, you announced that negotiations would begin. What are we predicting that deal could be worth to New Zealand?
TIM I wouldn’t want to put a number on it. What I know is that in the last two years our exports have doubled, India's gone from being a very small market to about our 13th largest export market, your figures are exactly right, we expect India on the current projections to be about the size of China today in 15 years time, we have only scratched the surface with this country, I think it's vital that we do this deal.
GUYON You did a joint study in March 2009, and under one scenario in that assuming a 100% tariff reduction, it talked about gains of 2.5 billion US dollars to New Zealand, a whopping 2.4% of our GDP, is that possible?
TIM It's possible, personally I don’t have much taste for these sort of figures, although they seem part of the deal that you have to do these estimate, I think it's more important for us to focus on the big picture, New Zealand needs trading opportunities, this is the second giant developing country in the world, let's do a deal.
GUYON But the producers and the exporters, they will be pretty interested in those sorts of numbers, if you look at some of the tariffs that India has on goods that we export there, sheep meat 36%, apples 51%, Kiwifruit more than 30%.
TIM That’s right.
GUYON Are those sorts of products expected to gain tariff free access to India under the negotiations you're doing?
TIM Absolutely, but if you look at our exports as I said they’ve doubled in the last two years, but what is interesting when you look at India is that it's not our traditional strengths in exporting that explain that. It's a whole range of other products. So I think there is major scope for our more traditional agriculture exports, that will require negotiation. I keep on saying this will be difficult, this will take years to complete, 14 rounds I think is what the China deal took, so we've gotta be patient but we're moving in the right direction.
GUYON That study I mentioned talked about under that scenario of 100% tariff reduction, a 12.6 billion dollar US gain for India, how is that possible that New Zealand could provide a gain of that magnitude?
TIM No, the figure must be wrong, it couldn’t possible explain it.
GUYON The figure is in your report Minister.
TIM 12.6 billion?
GUYON 12.6 billion dollars on page 43 of your report from March 2009.
TIM Alright I'll have to go back and look at it, I don’t believe that’s possible.
GUYON Well you're going into these negotiations, shouldn’t you have a handle on those things.
TIM I certainly do have a handle, I'm sure the figure is wrong.
GUYON So what's the point in doing these studies if the numbers are so wildly wrong?
TIM Look I think the point is this, these econometricians they do these studies, they look at the figure, I don’t know whether the 12.6 billion is over a period of years or not. The main thing is that it makes sense to India to move strategically into the Asia Pacific, we're in the forefront of the architecture of many of these FTAs and I think that’s really the main benefit for India. From our point of view it's more direct, they’ve got major trade barriers that we can negotiate downwards.
GUYON Do they want access to New Zealand's labour market?
TIM I imagine they’ll want something comparable to what China's got which is a few, very small number of jobs in highly specialised areas, but that’s for the negotiation that’s ahead of us.
GUYON So we could see some Indian workers coming to New Zealand in specialist trades and practices is that what you're saying?
TIM Oh I'm sure and it would be in New Zealand's interests to facilitate that in things like education for example. The Indian market is exploding for New Zealand, it's the fastest growing sector of our education industry, our education industry's New Zealand's second largest services export and it would be in our own interest to facilitate that. But forget the idea of massive migration from India as a consequence of this FTA, that’s not what happened in the China deal, it won't happen in this deal either.
GUYON In the whole document in the joint study, 120-odd pages there's one line about labour and environmental standards, and it says that India does not include labour or environmental standards in its free trade negotiations, is that acceptable to you, will we do a deal which doesn’t include that?
TIM We'll certainly want to try and look at the scope for that, but this is the stuff of a negotiation.
GUYON Would we do a deal without that?
TIM I'll make that decision later on.
GUYON It's turned to trade with the United States and talks have begun on this so-called TPP which groups New Zealand, the United States and six other countries in a massive free trade area, potentially. How confident are you that this is actually ever going to be realised.
TIM I think this will be quite difficult, but the objective is to try and do this in the next two years. The Obama administration has put this near the top of their trade agenda, so that’s very encouraging, but this is gonna be a major and complicated negotiation. I spoke to our chief negotiator on the phone on Friday, he still hadn’t left Melbourne, you know there were over 200 people in that room for this first negotiation, we expect over 300 in LA, so it looks like a major international negotiation.
GUYON You said something very interesting about this recently, you said that it would be wider than the traditional negotiation and probably look more like CER. What do you mean by that?
TIM Because the way trade policy is going is that we have to look at non tariff barriers, it's not just enough to look at the tariff barriers, we're still very interested in that, particularly New Zealand given that in the case of the United States there are still very significant trade barriers to dairy products for example, but it's almost certain that we will want to look at some of the behind the frontier measures. We will be looking at trade and labour in terms of its relationship to that, we'll be looking at trade and environment, so I think it's likely to be deeper than a conventional trade negotiation.
GUYON But are we talking about potentially an Asia Pacific EU, I mean is that the sort of end goal that we're looking at?
TIM That’s probably going too far, but after all the EU's a customs union. We're talking about a free trade area, so the basic distinction between a customs union and an FTA is, an FTA looks at trade barriers and then looks at some harmonisation of policies in association with that, customs unions go deeper, so we're not going to go as far as the EU.
GUYON Just before I leave trade I want to talk about our own tariff liberalisation process. We still have considerable tariffs on clothing and footwear, 14% on clothing, about 10% on footwear, are you looking at actually removing that?
TIM No, we made a decision to suspend the further unilateral liberalisation, in part because of the very success of these negotiations.
GUYON Is that a permanent situation that we won't do that unless it's in the part of any other deal with another country?
TIM I don’t know whether we would commit to all time, but we have no plans for further unilateral liberalisation. I think the main point is this – de facto New Zealanders moving to complete free trade, by the time you’ve got complete free trade for Australia, which we have, complete free trade for all least developed countries, which we have, complete free trade for all the South Pacific countries, which we have, we're phasing in complete free trade for China and the whole of South East Asia, frankly in all practical senses you’ve got to free trade.
GUYON Just before we leave it, you are Associate Foreign Minister also, and we should touch on Fiji because the Foreign Minister is possible going to hold talks with Commodore Bainimarama in the coming days. Now he said in parliament recently that there could be changes to the sanction regime at some point in the future if progress is made on other issues. Under what grounds would we consider, what does Fiji need to do, for New Zealand to lift the travel sanctions on that country.
TIM Well I leave the talking on this to Mr McCully basically, but that statement has got a lot of conditionality to it. Clearly we want in the long term to be in the right space with Fiji, we don’t want this impasse to go on, but fundamentally it's a question of them committing to full restoration of democratic process and that’s what the object of our government is.
GUYON Would it require that before sanctions were lifted?
TIM I'm not going to speculate on the precise process. That’s the general statement of intent.
GUYON Alright we'll leave it there, thank you very much for joining us this morning Minister, we appreciate your time.
ENDS