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Jim Sutton speech to NZ-Korea Business Council

Office of Hon Jim Sutton Speech Notes

20 November 2001

NZ-Korea Business Council, Auckland

Chairman Giff Davidson, Ambassador Chong, members of the Korea/New Zealand Business Council, thank you for the invitation to speak today.

It’s appropriate to talk to you this week, when New Zealand, Korea, and the other 140 members of the World Trade Organisation are still basking in the glow of getting a new world trade negotiations round underway.

After six days of intense negotiations in Doha, Qatar, ministers were successful in finding a compromise that all members could agree on. With 142 members, finding consensus can be a bit of a drawn-out process.

There is no voting or majority rule in the WTO - all must agree or nothing is agreed. It makes for interesting discussions!

The launch of the new round at Doha, and the increasingly liberal trade rules we expect will flow from it, should translate directly into a more open and prosperous economic relationship between New Zealand and Korea.

The multilateral focus on the new round means that attention on bilateral agreements is likely to be distracted.

New Zealand continues to support bilateral free trade agreements that are comprehensive in scope and compatible with WTO and APEC commitments. New Zealand ‘s interest in further exploring a Closer Economic Partnership with Korea remains. We appreciate that Korea’s immediate priority is its pioneering free trade negotiations with Chile. The ball is in Korea’s court.

I would like to acknowledge the strong support that Business Council has provided to the concept of a CEP with Korea.

On the bilateral front, Korea is New Zealand’s fifth largest trading partner and exports to Korea are at an all time high. Our total merchandise exports for the year ended August 2001 reached $NZ1,450 million. That represents an increase of 19.3 percent over the same period last year and almost $NZ500 million more than pre-Asian financial crisis levels.

On the services side, tourist and student flows from Korea are also showing good growth. The number of Korean visitors to New Zealand for the year ending September 2001 increased to 83,119 compared with 63,194 in the same period last year.

The government has agreed to increase the number of flights from Korea over the summer as Korean travelers switch to what they perceive as safe Australasian destinations. We hope that will help to cushion the tourism industry in both countries from the effects of the 11 September terrorist attacks.

Despite the active trade relationship shared by New Zealand and Korea, the backlog of requests for new or improved access for New Zealand agricultural products is an ongoing concern. On current count we have around 15 requests or issues before the Korean government including 4 horticultural products and 5 live animal issues. We have also been actively pursuing access for sliced deer velvet (and hope to finalise arrangements early next year) and are discussing with Korean agencies the introduction of new requirements for GMOs, BSE certification, dairy products and so on.

The lack of progress is disappointing given assurances we have received at the highest levels that our requests would be treated expeditiously.

Let me stress that we are not unsympathetic towards Korean sensitivities about animal health and food safety issues. On the contrary, as a leading agricultural producer we know that maintaining proper standards is vital. The issue for us is how Korea’s import standards are set and administered.

Our efforts to provide new products to the Korean market are hindered by slow responses on the part of Korean technical agencies. When responses are finally received, we invariably find that Korea’s proposed import requirements are in excess of internationally accepted standards and ignore established disciplines, such as equivalence.

My assessment is that the obstacles faced by New Zealand exporters of agricultural products to the Korean market are amongst the most difficult found anywhere.

One example may help to illustrate the problems we face. A New Zealand exporter wishes to tranship live honey bees destined for North America and Europe through Korea. The exporter already exports to Korea and has a good relationship with Korean Airlines which actively seeks the cargo business. However, the Korean authorities have insisted on expensive testing for the disease varroa, even though the destination countries do not require it and varroa has been detected in Korea. This makes transhipments commercially unviable. Although the request to remove the testing requirement had been with the Korean authorities for 18 months and a response was sought on numerous occasions, it was not until we raised the issue at a side-bar meeting in the WTO last year that a response was received. And even then it was negative! However, because we believe the requirement represents a clear technical barrier to trade we have continued to press the Korean authorities to remove the testing requirement in time for this year’s export season.

So what can the government do to assist in cases like this?

- The first point is that we are in continual contact with Korean agencies on these issues through our embassy in Seoul, in MAF-to-MAF channels and in New Zealand-based dealings with the Korean Embassy.

- Second, we continue to try and improve Korean technical agencies’ understanding of NZ MAF assurance systems through inward and outward visits. The Customs Agencies of both countries have built up an excellent working relationship - an official from the Korea Customs Service is on secondment in Auckland at present. There is scope for our quarantine agencies to develop similar linkages.

- We also use opportunities such as the annual Korea/New Zealand Joint Economic Committee and high-level political meetings to pursue our requests.

- And finally in cases where we consider bilateral avenues have been exhausted we will not shy away from referring systemic and specific issues to relevant WTO committees for consideration.

In short we use whatever opportunity we can to move positions forward. But there are important systemic issues which I believe the Korean government needs to address.

In addition, we will continue to build a constituency for New Zealand in Korea. Recently for example we have sponsored Korean consumer groups to visit New Zealand using our Trade Access Support Programme. That allows them to see first hand our food production and food safety systems, and helps to allay concerns about imports.

The Business Council can greatly assist these efforts by encouraging its Korean partners and importers of New Zealand product to be more vocal in their support for improved access conditions.

The rules based system of international trade provided by the World Trade Organisation has provided tangible assistance to New Zealand in trade access to Korea. This is most evident in the full liberalisation of the Korean beef market and most recently with the removal this year of retail restrictions on imported beef, in compliance with the ruling of the WTO. This was pleasing to see and has been good news for both Korean consumers and New Zealand exporters.

Agriculture, of course, is not the only area in which we seek to do better in our relations with Korea. We also need to look ahead at the opportunities in new fields, in particular the hi-tech sector and services. The Prime Minister and the business delegation that accompanied her to Korea in May put particular emphasis on opportunities in these areas.

Both governments are committed to transforming their economies into knowledge-based economies. Already Korea has undertaken some impressive initiatives. It has a bold vision.

By the year 2025 it is aiming to rank among the top seven nations in the world in the competitiveness of its science and technology. Already its investment in broadband technology leads the world in the number of users. Internet penetration is about 49% of the population.

E-commerce is also expanding rapidly in Korea. For example - in the last quarter of 2000 internet sales in Korea rose almost 40% to US$532.5 million.

The challenge for New Zealand, as a small player, is to get on Korea’s radar screen. Our technological skills are simply not known in Korea. The New Zealand government is encouraging more science and technology linkages because we see them as fundamental to the economic partnership we want to have with Korea in the future. But we need the interest of the science and business communities in New Zealand if tangible links in research and commerce are to be developed.

The opportunities are significant because just as there are complementarities in our traditional trade relationship there is also complementarity between our two knowledge economies.

New Zealand has a proud scientific history of basic innovative research, whereas Korean companies are very good at transforming research into mass-produced consumer goods.

Korea is embracing the challenges of globalisation on the education front too, and New Zealand is well positioned to assist in providing education and training in an English-language environment. The number of Koreans learning English in New Zealand and attending secondary and tertiary institutions has shown growth of around 40% over the last year. But we are still not back to where we were prior to the 1997 economic crisis.

And only a few NZ institutions have taken what I would call a strategic approach to the Korean market. The “New World Class” brand developed by Education New Zealand is a good move on the marketing front. But there is much scope for institutions to research likely trends, form partnerships with Korean educational institutions, and tailor educational products to best utilise human and capital resources here in New Zealand while meeting specific Korean needs.

Education New Zealand and TradeNZ have made Korea a priority market for education services. I hope members of the Council with an interest in education will support this decision by investing effort in this important market.

Film and television production is another area where New Zealand has developed considerable skills and technologies and where there is scope to develop some exciting partnerships with Korea. I applaud the initiative of Trade New Zealand and the Film Export Network in participating in the Busan International Film Commission Showcase earlier this month, as part of the strategy of attracting production and post production work from Asia. Former Business Council Chairman Michael Stephens was part of the New Zealand team in Busan. I look forward to hearing about the outcome of the mission.

In particular we need to raise our quality profile in Korea. New Zealand has a favourable image - a nice place to visit and a good source of agriculture and food products. But this is not necessarily the image that helps us sell education and services. We need to persuade Koreans that we are a smart, innovative society. This will require a sustained effort by all of those involved in the services sector.

One resource that I do not believe we have used to best advantage are those Koreans who have chosen to settle in New Zealand -the majority of whom live here in Auckland. They are the “brain gain” which compensates for the “brain drain” we often hear about.

The quality of migrants here and their settlement outcomes is just as important as the quantity of immigrants we attract. We need to encourage more migrants to establish innovative new businesses in New Zealand that will grow our economy.

I am encouraged when I hear of new trade that has developed in recent years because of Korean immigrants using their networks in both countries. But I would like to see more new companies being established by our Korean migrants.

In this connection I have been encouraged by several initiatives here in Auckland. The Chamber of Commerce deserves credit for its matchmaking role between new migrants and potential employers. The Auckland City Council is looking at how it can help migrants in the business field.

And I know that the Auckland University of Technology is investigating the possibility of incorporating into its business incubator programme a special incubator and related services for Korean business people who might want to use this way of setting up in NZ. These are exactly the sorts of initiatives that we need to make the most out of our economic relationship with Korea.

Let me conclude with a request to the Business Council - to reach out to the Korean community in New Zealand and assist them with the process of becoming familiar with business norms here. If I were to hazard a guess, I would say that our ability to make the best use of the human capital in areas like migration and education will determine how far and how fast we can take the relationship in the years ahead.

Thank you.

ENDS


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