Patrick Gower interviews Prime Minister John Key from the G20 in Brisbane

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Patrick Gower: Thanks, Lisa, and thank you, Prime Minister, for joining The Nation at the G20.

John Key: Pleasure.

Gower: Barack Obama yesterday called Vladimir Putin a threat to the world. Do you agree with that?

Key: Potentially. If you look at what's happening in Ukraine and the wider, sort of, Eastern Bloc and the, you know, potential motivations and intentions, it's a very serious situation, and I think that's why you are seeing countries respond, and I think that's why you are seeing, you know, a very sluggish growth period now, in Europe, as they adjust to, you know, being very uncertain about what's going to happen next.

Yeah, well, let's look at that economic threat, essentially, that Russia poses. Russia has put a ban on imports from some of our allies – the United States, Australia, Great Britain, yet New Zealand is still trading with Russia, up to $200 million a year. Is that damaging our international reputation in that we are not being heard by Russia here?

No. If anything, actually, our partners think we've taken the moral high ground. So they know that in the end we can't control who Russia puts on a list and who they don't. What we have done is actually actively stopped our free trade agreement negotiations right at the, sort of, final point, and they could see us do that. They can see that we're not going out there overly exploiting opportunities, and in the end, actually, it's having quite a big impact on dairy products.

Let's talk about not exploiting those opportunities. How are we doing that? You said that you have talked to Fonterra and told them not to profit from this.

Yeah, well, I mean, look, I think the Minister and MPI and others have all spoken to Fonterra and the likes and said, 'You know, it would be a terrible look for New Zealand if we went and just filled that void,' and essentially went around our partners now. The private sector companies – we can't stop them trading, but, actually, from what we can see, they're taking a very responsible view.

Isn't that remarkable, in some senses, to stop New Zealand's biggest company from trading -- from making money?

Yeah, but I think you have to say, 'OK, this is a short-term position.' And then there's a long-term position, and New Zealand takes these issues seriously.

So you can tell a private business what to do -- the biggest private business in the country?

Yeah, well, what we can say to them is, 'It's not in your best interest to exploit that opportunity, because if you do, then the implications long-term could be negative for New Zealand, and we have responsible business people. They take all sorts of decisions for corporate and social responsibility reasons. I don't think any of us should be surprised by that.

Would you support further sanctions against Russia? There's calls for that here. Would you support further sanctions--?

Potentially. I mean, the issue is—

..economic ones, as well. Would New Zealand support those?

Well, the first issue is, are they working? They are certainly slowing down Europe. If you look at Germany, the growth rate was about 2%. It's now down to 1.2%, and most of that they attribute what's happening in Europe -- in Ukraine and Russia. The second thing is that it's very challenging. If you look at something like the German economy, it's quite dependent on Russian gas, so it's not quite as straightforward as everyone says. You know, New Zealand can't put unilateral sanctions, unless we change our law.

We could push them on the Security Council, though, couldn't we?

That's right.

Is that something you would look at doing?

We're not even there yet, so it's pretty early days, but, look, in the end, Russia is bound to be a topic, I think, that's gonna float around for a while. Don't forget they're a Permanent Five member, though, and they can veto anything the Security Council does.

True. Moving on to climate change. Barack Obama and, in fact, China have really well and truly put that on the agenda here. Barack Obama called yesterday for all nations, including down here in the Pacific to step up. Will New Zealand step up?

Yes, insomuch that when we go to Paris next year, which is the next, sort of, UN, sort of, conference, and one that will hopefully define what the rules and what the targets are, New Zealand will absolutely pay its part, but I think it's worth remembering that there is no great shock here, in terms of what President Obama is doing. I mean, ultimately, he campaigned six years ago on climate change as a major issue. He headed off to Copenhagen. It wasn't successful, but nevertheless he went there. Now, the economy's been weak in the United States, and it's natural that leaders would withdraw a little bit and make sure that they focus on getting jobs, but now the economy's getting stronger again, it's no great surprise that he's actually pushing that to the front.

So are we on track? Is New Zealand on track to meet our emissions target?

I think so, but we have to set those targets, and, ultimately, that's the work that we're getting at the moment.

Because you're not, actually. Let's look at the official figures. The target is for emissions down by 50% by 2050. They are actually up 25%, and under your government, they are up 20%. So we're not on track—

No, I don't think that's right. I think it depends on exactly how you, kind of, measure and at what particular point—

This is the Ministry for the Environment.

Yeah, one of the reasons for that is under the current measurement, we are actually gonna harvest a lot of trees, and at the moment, they are big sink, and they essentially help our position. As soon as we harvest them, they have a big impact. The second thing is you're talking about a 2050 target. We're in 2014. We're investing hundreds of millions of dollars a year in scientific answers for agriculture—

And we're going the wrong way, so will our actions be--?

The question is – will we go the wrong way in 36 years? The answer's no.

The question is, will we be more aggressive to get there in that time?

Will we hammer our agriculture sector? No. And, I think, actually, the world doesn't want that. In fact, when we talk to—

You'll rule out bringing agriculture into the ETS?

At the moment, yes. They already pay their costs through diesel and electricity prices, but—

While you're Prime Minister, will agriculture come into the ETS?

Absolutely, if we can actually give them solutions which mean that they can take actions to mitigate their emissions, but if it's just simply a tax for the sake of a tax, then the answer's no.

Yeah, so, it's basically possible that they might come in, but unlikely, by the sounds of things.

No. Well, I think the point here is we're trying to change behaviour, and actually, when you go and talk to the American system, they think New Zealand's on the right track. They say 14% of world emissions come from food. No one's trying to stop the production of food, and so they say, 'Look, you know, it's one thing to say, "We can get in a more fuel-efficient car. We can become more renewable."' But if we don't have an answer to that agriculture, we're gonna stop feeding people, that is not gonna take the world in the right direction, and, in fact, you know, with the greatest respect to individual countries, for a start, yesterday, President Obama promised $3 million for a climate fund. Actually has got to get through Congress and Congress have already said, 'Don't like that.' Secondly, some countries, for instance, in 1990, were 1% renewable. We're 70%, 75% renewable. So we've got nothing to be ashamed of in terms of our record.

But any moves next year won't include agriculture.

Not unless we can genuinely believe it would actually be practical for them to have measures they could take to mitigate their emissions. Now, over time, there will be those answers, and DCD was actually the very early point at, sort of, giving them some options. So, look, I'm quite confident. I don't think this sort of thing is ever gonna be a straight line. I don't think it's gonna be as simple as saying—

And 20% up is not shameful for your government?

I don't think so, because, again, it depends on what point you're measuring, what point you're doing— There's lots of different numbers here, but all I can tell you is we have an emissions trading scheme, we're becoming more renewable in our energy, we're certainly becoming more energy efficient, but we're not gonna go to a company like New Zealand Steel and say, 'Close up today and go and start in India or somewhere else.' That doesn't help the planet.

Sure. Let's look at tax — or tax evasion. That's a big issue here. Will New Zealand take a more aggressive stance against tax avoidance?

Certainly, if you're talking about the sort of global base reduction and companies like Google potentially moving their, you know, their base around the world, absolutely. We're part of the OECD countries that are working on exactly that issue at the moment.

Yeah, so Facebook, for instance, in New Zealand paid something like 2.7% of its earnings — about $23,000 in tax on over 800K. When are you actually gonna act against that kind of thing?

It's not a question of us acting. You saw the Labour party get themselves in all sorts of mess when they tried to play around with this issue. What Facebook will be doing is they'll actually be paying the legally correct amount of tax in New Zealand. You can be quite sure of that because we've checked it many times. The question is — does the system fairly allocate their revenue? And the answer is we would say potentially definitely not. And that needs to change. But we can't change that unless all of the countries actually come in and do that.

So those other countries have to go first?

Absolutely.

Let's look at the Cook Islands, Samoa, Vanuatu — all of those are tax havens. Shouldn't we be using our moral leadership in the Pacific region to crack down on them as well?

Yes, but— And again, I mean— So if they look at New Zealand not moving because no one else is moving, then— The issue isn't— New Zealand can't move unilaterally when it comes to a global multinational and ultimately where they decide that they are gonna pay their tax and therefore park their revenue. Now, in principle, they've got to pay it in the country they earn it. But once you get into IP, and the sort of things that Facebook are doing, they will argue very strongly they're earning it in the jurisdiction they want to pay tax in.

Just quickly, will you act on the Pacific or not? Will you put pressure on them or not?

We will as part of the overall OECD solution, but it's not a matter of targeting them. It's a matter of the world actually coming up with an answer there.

Sure. Now, looking at Iraq and going in with trainers behind the wire to keep them as safe as possible — green-on-blue attacks when trainees kill trainers actually killed about a hundred trainers in the last three years of the war in Afghanistan. Is that something you're concerned about? What can you do to protect our troops from that?

Yes, I'm very concerned about that. One of the reasons we've sent about 10 people now to the Middle East is to scope out whether we are comfortable that we can find a location that is, you know, in theory as safe as it can be. And secondly to think about how we could address that issue best. And one of the reasons we'll send quite a few people who are there just for security of our own people is to protect as best we can against that issue. But you can never 100% eliminate that risk.

So you will send the SAS with them to protect against—?

May be SAS or it may be other combat or, you know, basically military people that have the capacity to keep our people safe.

So that's actually protecting against the people they're training, isn't it, is what you're talking about?

Yeah, it's perimeter protection, and that's normal in those kinds of environment to do the very thing you're talking about — to make sure our people are as safe as they can. But you can't— I mean, I saw the security expert that TV3 had on the other night, and he's actually right. He's right that that's a risk.

David Kilcullen.

Yeah. Yeah, no, he's— We don't disagree with him. What we would say is, 'OK, on a relative basis, we're gonna do everything we can to try and reduce that risk.' And relative to other risks we might take, this is probably a safer environment. But there's always risk.

So in terms of stopping a trainee from turning the gun on a trainer, you're actually gonna have combat troops in on the base. Is that—? Is that—?

Well, there'll be people on the perimeter of the base, absolutely.

Yeah. All right, Prime Minister, thank you very much for your time and joining us at the G20.

Thanks very much. See you soon.

Thank you.

ENDS

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