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Employers Federation annual general meeting

Hon Jim Sutton Speech
To Employers Federation

Good Morning, president Robyn Leeming, chief executive Ann Knowles, ladies and gentlemen.

It is almost a year since the Labour-Alliance Government was sworn in.

This time last year, I had just been appointed Minister for Trade Negotiations and for me, the year started on a highly dramatic note. The day after the election, I was on a plane to Seattle to join the New Zealand delegation to the World Trade Organisation conference.

There, amid street protests, teargas, people dressed as turtles, police dressed as Robocop, 130 or so countries met in all-night negotiating sessions to try to agree a negotiating agenda for a new round of trade negotiations.

As you all know, the talks failed at the 11th hour, and delegations came away empty-handed.

There has been much soul searching since then about what went wrong. There are a lot of theories, but one conclusion is worth noting. There were new voices wanting to have a say in multilateral trade policy ? both inside the meeting rooms and outside in the streets. Developing countries would not be ignored, and neither would the protestors.

Seattle exposed a level of public unease about how the international trading system ? and globalisation ? affects people's daily lives. It showed that many people do not see how a rules-based international trading system can contribute to global economic growth and prosperity.

The challenge that globalisation poses for New Zealand is not whether we can accept it or not, but how we manage its effects. How do we make sure that we benefit fully from the opportunities it offers? How do we minimise the risks, especially to the disadvantaged in our society?

Many of the protestors at Seattle claimed to have the answers to those questions. Many argued for restrictions on trade to address their concerns.

But here in New Zealand we cannot afford to shut ourselves away from the rest of the world.

Yes, we make some of the best food in the world ? but we make much much more than we can eat ourselves. We need to sell it to buy from other countries the things they make which we don't ? or that we can't make as well.

New Zealand does not produce all the things our citizens have become used to having ? tea and coffee as most basic examples.

There is a lot of evidence around that shows trade liberalisation has raised the living standards in countries, such as New Zealand, that have embraced international trade as an integral part of their economic policies. We pursue such policies, not as an end in themselves, but as a means of raising the living standards of our people.

Trade liberalisation enables us to concentrate on those things we do best and export more of our special products and to get better prices for them, without chunks being bitten out by tariffs.

Our economy will do better without domestic subsidies and tariffs on imported products.

Take farming as an example. When 50% of a farmer's income comes from Government subsidies, 50% of his or her effort is likely to go into "earning" those subsidies. The effort goes into filling in forms, meeting government-imposed bureaucratic criteria, keeping on top of the rules. That leaves only 50% of the effort for farming. In New Zealand when government subsidisation was removed, we found that farmers reverted to putting 100% effort into their farming activities. 100% devoted to what farmers do best - farming. The percentage contribution of agriculture to our GNP increased significantly, even as the cost to the taxpayer declined.

That is not to say tariffs should be cut overnight, abandoning industries to their fate. That is not what this Government intends to do.

Policy is that tariffs will remain at current levels, unless bilateral agreements are reached with trading partners ? as in the Singapore Closer Economic Partnership agreement ? where tariffs are cut together. Occassionally, there may be exceptions, as was announced last week when Prime Minister Helen Clark announced that the 48 poorest countries in the world would have duty-free access to New Zealand for their goods.

I find it hard to believe that anyone could doubt the morality of that decision.

I would like to acknowledge Robyn Leeming here for publicly applauding Helen Clark for her stance of free trade. Businesses and exporters do want to simply to get on with the job of selling their products, and the Government is working hard to enable them to do so with as few restrictions as possible. While we all here know that, I must say business people and politicians have done a poor job at selling the benefits of trade liberalisation. I'd like to thank Robyn Leeming for doing some public selling.

Exports are New Zealand's life blood. They play a central role in the Government's economic strategy for New Zealand. Our success in competing for our share, our place in the global economy will determine the future we are able to create for ourselves, as employers and employees, and our children.

Currently, exporters are surfing the upside of the low Kiwi dollar. They are also exploiting the increasing market interest from Asia as it recovers from its downturn, and from other important markets where our quality products and services are making an impact.

The record growth in exports is a result of a continuing strengthening of our traditional pastoral base, as well as growth in new sectors such as software and education. New Zealand has the infrastructure in place to produce high-value, knowledge-based products and services, and everyday more New Zealanders are doing just that.

While we often concentrate on economic trends and exports at the higher level and the issues that face sectors and regions, it is important not to forget that at the end of the day it is individual companies that generate the wealth we are seeking.

The Labour-led Government is seeking a partnership with business.

This government believes that there is a greater role for government to play in helping New Zealand work through the issues that exporters face today to increase the momentum of economic development.

The way to do this is in partnership with business. Last month the Prime Minister hosted the first of the government's economic business forums.

That seemed to be a highly successful event. More are planned for next year. I intend to be present for them ? unfortunately I was overseas on a trade mission for the first one.

The government's export development agency is Trade New Zealand. It has a global network that enables it to provide a wide range of services to exporters to help them increase their export earnings.

Trade New Zealand offices around the world are doing a tremendous job in responding to an unprecedented demand for their services. Many offices are reporting their highest work levels in five years with the increased demand coming from both established exporters and from first time exporters.

We have got a proactive strategy to attract overseas investment, particularly investment that creates new businesses. The right kind of investment can do that, and often provides new market access, new technology and management expertise as well.

The invaluable work carried out by Trade NZ is starting to pay off, as the investment by Ericsson and Synergy here in Wellington shows.

Our aim is bring new business to New Zealand, or to bring in the investment that enables existing businesses to grow.

A noticeable trend in the global economy is the growth of international trade in services. The services sector is dominated by tourism and transportation, but new sectors like software and consultancy are also significant.

Another growing service sector with tremendous potential is education.

The government is investing $3.5 million in an international marketing strategy for the education sector. With effective development, that sector could double its annual foreign exchange earnings to over $1 billion in over five years.

Last month I led a trade mission to India and Nepal. Whereas in the past the focus might have been on wool, coal and food products, the focus of this mission was on education.

I opened theeducation fairs held by New Zealand institutions in three of the four Indian cities visited. These were the first-ever New Zealand education fairs to be held in India.

More than 2,300 students were registered as having attended, with Delhi alone attracting 1,000 students. Education marketers said the quality of the students attending surpassed expectations and were generally as good as or better than students at comparable fairs elsewhere in the world.

Auckland University and Auckland University of Technology in particular both made a significant number of offers of places to students.

The Indian students at the fairs, a substantial proportion of whom were post-graduate students, were interested in New Zealand because our tertiary institutions were equal to those anywhere in the world, but were less expensive to attend.

One of the reasons I am so keen on the Singapore Closer Economic Agreement is because of its groundbreaking inclusion of services.

As I said before, services are a growth area in international trade. Last year, New Zealand earned $8 billion in services exports. 80 per cent of all jobs here are in the services sector. You can see its importance?

I know there are several things this government has done in the past year that your organisation is not happy about.

But on the balance sheet, I believe any downsides you perceive in the Employment Relations Act, ACC, and the like are more than offset by other changes brought about by this Government.

We intend to be much more actively supportive of business, and exporters. Through the new Ministry for Economic Development and the new Industry NZ agency, we are seeing new initiatives to support businesses with new ideas and regions with plans for growth.

The Government is looking to where New Zealand can be in 10 years. We see New Zealanders increasingly interconnected with the wider world, up to date with the latest technologies, and being innovators.

The seed bed of our economy will be a dynamic and enterprising business sector.

To help become a more dynamic trading nation, we are pushing trading opportunities and seeking new arrangements, such as the newly-signed partnership with Singapore.

Business and employers such as yourselves have a vital role in that. Especially in explaining to the public the advantages of trade liberalisation.

In closing, I do not believe the way ahead for New Zealand lies in sticking to doing what we have done in the past in the same way. Things change, people change, societies change.

There are new ways to sell our products, new industries to develop. Some industries may well disappear ? what the Labour-Alliance Government wants to do is make sure that our citizens can cope with that change. We want people to be well-educated, skilled, adaptable and confident in their abilities.

That is the bright future we want for New Zealand. And we need your help to get there.


ENDS

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