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Free Trade – New Zealand’s Lifeblood

Thursday 22nd Mar 2001 Richard Prebble Speech -- Governance & Constitution

Speech to Hong Kong New Zealand Business Association AGM At the Auckland Club, Shortland Street, Auckland

Thursday, 22 March 2001 at 1.15pm

Thank you for the invitation to speak to the New Zealand Hong Kong Business Association. I applaud business associations such as yours.

You do much to promote New Zealand's exports, promote friendly relations, and help New Zealand and Hong Kong entrepreneurs to take the first step into trade with another country.

As a trading nation in a global economy we are dependent on you, and we in ACT do all we can to promote and support your work. So I have chosen today to make a significant announcement.

As the Leader of the ACT Party, I have written this week to the Prime Minister Helen Clark, urging the New Zealand government to formally propose to Hong Kong that our two countries sign a free trade agreement.

What is the significance of this announcement? Labour is a minority government and its two coalition allies are anti free trade. When Labour signed the Singapore free trade agreement that had been proposed and negotiated by National, the government had to rely on the votes of National to pass the empowering legislation. National, having negotiated the agreement, felt obliged to vote for it.

ACT expressed strong reservations about an ill-advised Waitangi Treaty clause and voted against that clause, but we voted for the free trade agreement.

The significance of my letter is that I am advising the government that ACT will deliver a Parliamentary majority for a free trade agreement with Hong Kong.

The timing is significant. The Prime Minister is visiting Hong Kong next month. Armed with my letter, she knows she can offer a free trade agreement.

The time is now right. World trade is at a crossroads. Despite Mike Moore's best efforts, it may be years before another round of world trade talks start, yet trading countries are looking to sign bilateral free trade agreements, similar to the CER agreement we have with Australia.

New Zealand is in great danger of missing out on this round of bilateral free trade agreements that are, for cosmetic reasons, being called closer economic relations.

The largest such agreement is the European Community, which is holding talks with a dozen different countries. New Zealand, not being part of Europe, is of course excluded.

The next is the North American free trade agreement between Canada, the USA and Mexico. The National government asked President Clinton if New Zealand might join. He promised to get back to us about it, but got pre-occupied and never replied.

John Howard, on his recent visit to New Zealand, dismayed trade officials by confirming that Australia has proposed a free trade agreement with the USA and the Australians have excluded New Zealand from their proposal. We are paying a heavy price for our government's lack of support for the ANZAC relationship.

New Zealanders are now second class citizens in Australia, able to pay taxes, but not to vote or receive benefits. Helen Clark calls that a win-win deal - I hate to think what a lose-lose deal looks like.

The South American nations have formed another trading area, Mercosur. Helen Clark was rebuffed by Chile when she visited last year.

A world of trading blocks from which New Zealand is excluded is a distinct possibility. We could find ourselves a third world nation that just contributes peacekeepers to the world's trouble spots - very like the role Fiji plays today.

If we want to be a first world nation, then we must be able to trade. Hong Kong and Singapore, as small trading nations, face a similar trade block scenario. It makes sense for us to work together.

A free trade agreement with Hong Kong would be largely symbolic. Trade between our two countries is virtually free today. But removing restrictions on service industries could become significant.

New Zealand professional firms - lawyers, accountants, engineers and financial services could become a significant contributor to Hong Kong's financial centre.

A free trade agreement has other benefits. Let me reiterate first what everyone here will know.

Free trade makes countries who practice it more wealthy. Every reduction in tariffs and import duties has made the average New Zealander more prosperous. Go into The Warehouse and see for yourself. There are goods on sale and at prices that 20 years ago could not be bought by the average family.

What about the jobs? New Zealand has lower unemployment than any state in Australia, and all but Ireland in the European Community. Only the USA, which has lower average tariffs than New Zealand, has lower unemployment.

Free trade promotes employment. High tariffs can create a few jobs in a car assembly line, making poor quality, very expensive cars. Each of these artificial job destroys dozens of real jobs. Every firm needs a car. If cars cost $40,000 each, not $20,000, that's $20,000 not available to employ a New Zealander.

You would think the free trade debate would be over. Most adults learn from experience. Our free trade agreement with Australia has made Australia our biggest export market, so we have won.

New Zealand is Australia's biggest market - so they have won. Yet in Parliament this week I heard Ian Ewen-Street - he is a Green MP - asking, and this is a quote – “why do we import biscuits from Australia? New Zealand can make biscuits.”

Well, Mr Ewen-Street, New Zealand can make cars. In war time we even made rail locomotives. Under the Greens logic we should slap tariffs on anything we can technically make in this country. Such a policy will result in retaliatory restrictions on our exports, a reduction in choice and quality for New Zealand consumers and a drop in our standard of living.

I note that Mr Ewen-Street is going to Cuba next week. It's a country he admires. He should look around. Cuba is a country that is following the red/ green parties economic ideas - its people live in poverty.

The socialists have not gone away - they just call themselves Greens.

There is a further reason for a free trade agreement with Hong Kong. New Zealand's future is in Asia. The Asian meltdown, the present crisis in Indonesia, and I believe a very serious situation in Japan, have caused many New Zealanders to look exclusively to Europe and the USA.

Already Singapore and Hong Kong have bounced back. Korea, Thailand and the Malaysian economies have made significant recoveries.

China and India are going to be world economic power-houses.

At our recent ACT conference Gavin Faull gave an impressive presentation urging ACT to take the lead in promoting closer economic ties with Asia. He pointed out a massive wealthy middle class is being created in Asia who want three things New Zealand can supply.

Tourism - our tourism potential is huge. We can triple the number of visitors and still be an open, clean green, country.

Education - the demand for quality education in English cannot be met.

Good food - A wealthy middle class is demanding the sort of high quality food New Zealand produces.

Gavin Faull put to us a vision of New Zealand seeking to be an Ireland to Asia. You will know the extraordinary success story of Ireland. Ireland's been described as an aircraft carrier off Europe, the place where United States investors into Europe go first. It's a role that Hong Kong itself plays to China.

Can we emulate this? Yes we can, and Mrs Anson Chan, Hong Kong’s Chief Secretary for Administration in her impressive presentation in Auckland last year shared some of Hong Kong's secrets - a 15% company tax rate and a 16% individual tax rate.

New Zealand is a tiny country at the bottom of the world. With a higher tax rate than Australia, we are currently the last bus stop on a road to nowhere. At tax rates like Hong Kong’s, New Zealand would be worth staying on the bus for.

Of course we need to do other things - reduce our red tape, lift education standards, reform our welfare system.

But the first step is to seek out free trade agreements with Asia. The time is right. If we won't, Asia won't, and we could find ourselves excluded.

Let me raise a cautionary note. Mr Faull raised it in his presentation very diplomatically - the Treaty of Waitangi. Asian investors do not understand the government's policy on the Treaty. There is a good reason for this. The government's policy is incomprehensible.

Last year, closing the gaps was a cornerstone policy - this year the Prime Minister has amnesia.

Investors like certainty. When even lawyers cannot explain what a Waitangi claim means, or that a tourist hotel proposal can be held up by a last minute spiritual claim, investors just go elsewhere.

We are now so politically correct that no one reports what we all know to be true. Uncertainty over Waitangi claims and lack of clarity by government over its Waitangi policy is frightening off significant investment.

Today I have not got time to analyse the validity of the Waitangi issues. Let me just say that it's ACT's policy to get some finality into the issue. Government needs to put a clear final time for filing new Waitangi claims. If after 160 years you do not know about a claim, it cannot be a serious issue.

The Tribunal needs to be given a strict timetable for hearing all claims. All settlements must be fair, full and final. A clear programme, setting out how Waitangi issues are to be handled would be welcomed not only by foreign investors, but also by all New Zealanders, Maori and non-Maori.

Then we can get on with creating a prosperous New Zealand that our children will want to stay to live in.


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