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Goff Speech: Japan - NZ Economic Relations

Japan - New Zealand Economic Relations

Phil Goff Address to the Japan New Zealand Joint Business Council, Rotorua.
Mina (mee–na) sa ma, konnichiwa (ko–knee-chee–wa) Good afternoon everyone.

I am pleased to be able to join you for the Japan-New Zealand Business Council meeting this afternoon.

The bilateral relationship between New Zealand and Japan is deep and multi-faceted.

Japan is one of New Zealand’s most important trade and investment partners.

We have developed cooperation across a wide range of international and regional issues. Our wider city-to-city and people-to-people relationships are amongst the strongest that New Zealand has with any country.

Like all good relationships, however, we cannot take things for granted. We need to keep on working together to ensure that we are able to adjust to meet evolving challenges, and to ensure that our relationship remains in good health.

Many of our Japanese guests have travelled a long way today to be here. Tomorrow, I plan to return the favour – when I travel to Nagasaki and then Tokyo for a bilateral visit to Japan.

During my visit I will participate in meetings and events in my trade, defence and disarmament and arms control portfolios.

It will be an interesting time to be back in Japan. Prime Minister Abe’s new administration has just taken office - and my visit provides an early opportunity to get to know my new ministerial counterparts; and to reaffirm the importance New Zealand attaches to its relationship with Japan, and to working together with Japan in the Asia/Pacific region.

There are many things to discuss:

A major subject will be our efforts to reinvigorate our bilateral economic relationship;

There is the status of Doha round of World Trade Organisation trade talks, and how we might work together to resuscitate these;

There are the regional initiatives to advance trade and economic integration – including Japan's "ASEAN Plus 6" FTA proposal;

And, of course, we will discuss regional security issues, including the international community's response to the provocative and dangerous actions taken by the Democratic Peoples’ Republic of Korea last week.

New Zealand’s place in the Asia-Pacific

A priority for New Zealand in working with regional partners has been to promote regional stability through economic interdependence. The region’s security and economic prosperity directly impact on us.

The East Asian region alone: accounts for more than half of our total merchandise trade; over 80% of international students studying in New Zealand; and 50% of tourists that visit New Zealand each year. East Asian countries are also substantial investment partners for us.

East Asia is taking on even greater significance as a driver of growth for Japan. China is now Japan’s number one trading partner, as well as a major investment destination. Similarly, there is a huge two-way trade flow, and massive Japanese investment in ASEAN. Japan has invested US$4.6 billion in ASEAN (11% of Japan's total FDI) and US$6.1 billion (or over 14% of Japan’s FDI) in China.

We have appreciated Japan’s support for the development of open and inclusive regional processes that include New Zealand. For example, we were pleased to join the East Asia Summit at its inception and look forward to contributing to its development.

Doha Suspension

For trading countries like New Zealand and Japan, the removal of international barriers to trade is clearly in our interests.

By far the best mechanism for removing global barriers to trade is the World Trade Organisation.

The suspension of the WTO Doha Development round in July created a real problem for countries with diversified global trading interests like Japan and New Zealand.

We both benefit from a robust, rules-based framework for international trade under the WTO. We both stand to lose from a lengthy Doha suspension.

Some are pessimistic about the prospects for revival of the Doha round, yet all the key players state that they are committed to concluding.

The reason for that is simple. These negotiations are too important to our countries, and to the multilateral trading system, to allow the Round to fail. This is especially true for developing countries.

I welcome the clear statements from Japan’s new government that it is firmly committed to working to get the Doha negotiations back on track. As a member of the key G-6 grouping, Japan has an important role to play.

I look forward to discussing with Minister Amari in Tokyo how we might continue working together toward an early resumption of negotiations.

Bilateral Trade Initiatives

The uncertainty surrounding a successful conclusion of the Doha round has resulted in increased bilateral and regional trade negotiation activity.

For New Zealand, reaching a multilateral deal through WTO remains a top priority. But we have long employed a multi-track approach to trade liberalization.

New Zealand, along with Singapore and Chile, was at the forefront of the wave of FTA initiatives begun in the Asia-Pacific region at the start of this decade.

Japan, too, is now an active player in regional Economic Partnership Agreements.

New Zealand has agreements in place with Australia, Singapore and Thailand. There is also the groundbreaking Trans-Pacific Strategic Economic Partnership – a four-way partnership between New Zealand, Brunei, Chile and Singapore.

Negotiations with Malaysia are at an advanced stage; and, together with Australia, we are in negotiations for an FTA with ASEAN. The aim is to have this negotiation concluded in 2007.

Our single largest negotiation, however, is with China. As the first OECD country to start FTA negotiations with China, what we are trying to achieve goes beyond what China has achieved in agreements with other countries so far. During Premier Wen Jiabao's visit in April this year, and more recently during a visit by Commerce Minister Bo Xilai, New Zealand and China reaffirmed their intentions to conclude an agreement that is comprehensive, of high quality, balanced and mutually acceptable to both sides. The timeframe targeted in which to conclude negotiations was set between April 2007 and April 2008. The ninth round of these negotiations was held this month in New Zealand. The round included detailed exchanges on 'crunch issues' including market access for goods and services, while continued progress was also made on supporting 'rules' issues (e.g. SPS, TBT, intellectual property). It is clear, however, that significant work is still required at the negotiating table if we are to deliver an agreement consistent with our objectives on quality.

Further meetings are expected between experts later this year in advance of the next full negotiating round in January 2007. Regional Integration We are also supportive of efforts to enhance regional economic integration. The role of East Asia as the economic centre of gravity for New Zealand is becoming increasingly clear. We were grateful for Japanese support and were pleased to join the East Asia Summit from the outset and look forward to contributing to its development. For New Zealand, the countries in the East Asian Summit now account for more than half of our total merchandise trade, contribute over 80% of international students studying in New Zealand and more than 50% of tourists who visit New Zealand each year. These countries are also substantial investment partners. New Zealand strongly supported the initiative Japan took in August to promote consideration of a Comprehensive Economic Partnership in East Asia (CEPEA), comprising the "ASEAN Plus 6" members of the East Asia Summit. We will seek to play an active and positive role in the study process initiated at Kuala Lumpur. We also support the idea of an Asia-Pacific FTA covering the APEC region - put forward by the APEC Business Advisory Council. New Zealand does note see any conflict between these two. We recognise though, that it will take a new level of commitment by the major economies in the region for this idea to evolve into a viable proposition. This will take time. In the immediate future there is valuable work to be done under APEC's broader agenda, including in areas such as business regulation and structural reform – where we have worked closely with Japan. The economies covered by the CEPEA initiative account for 25% of world trade and those in APEC account for 46%. This underlines the importance of both processes for our two countries. Reinvigorating the economic relationship

While Japan and New Zealand work closely together in regional trade and economic integration initiatives, we are also conscious that one missing element in our relationship is a process to advance our trade links at the bilateral level. Our Prime Ministers recognized this when they met last year, and the joint statement issued on that occasion embodied the commitment to take a “forward-looking and fresh look” at our bilateral economic relationship and to consider ways to strengthen it. We are working to give effect to this commitment on several levels. One short-to-medium element in our efforts is to enhance cooperation in areas such as science and technology, investment promotion and creative industries. New joint research, science and technology funding arrangements are beginning to be implemented. For example, this month in the southern Kermadec Arc offshore of New Zealand, Japanese and New Zealand scientists are collecting geological and biological material from underwater volcanoes, rifts and the immediate area. But there is potential to do far more. And, we need to be conscious of the risks to our bilateral trade and economic relationship if we stand still. We do not, for example, want to risk seeing the good bilateral economic and trade relationship we have, eroded by the new arrangements each of us is pursuing with others. That would not be in either Japan's or New Zealand's interests. We want to ensure that all options for strengthening our trade and economic relationship, including the possibility of looking at a future FTA or EPA negotiation, are part of our “fresh look” process. New Zealand understands clearly that there are sensitivities surrounding some aspects of agriculture for Japan, but we think concerns about any possible threat from New Zealand agricultural exports are exaggerated. A more detailed examination of New Zealand’s trade and investment relationship with Japan bears this out: Economically, Japan is vitally important to New Zealand. It is our largest trade partner in the region. Last year, New Zealand exports to Japan totalled NZ$3.2 billion. That’s double New Zealand’s exports to China. We have complementary seasons and differentiated products, so many of our agricultural exports do not directly compete with Japanese products; Over one third of New Zealand’s exports to Japan are raw materials, such as aluminium, coal and forest products; New Zealand’s economy is relatively small and has some natural limitations on production volumes. There are advantages to Japan too: New Zealand is a reliable supplier of raw materials. For example, 95% of all Kiwi fruit sold in Japan comes from New Zealand.

And it's not just about agricultural products. Much of Japan’s electric industry relies on a dependable supply of high-quality aluminium from New Zealand Aluminium Smelters. Half of all the cell phones you all have with you in this room, for example, will have electrical components containing aluminium made in New Zealand.

And – very importantly – we have expertise in agricultural production, technology, and marketing we can share with Japanese partners. A good example of this is the partnership programme between Zespri and Japanese growers, which has capitalised on New Zealand and Japan's complementary seasons to produce year round supply of kiwifruit to the Japanese market. In five short years, the programme has expanded rapidly from 34 growers in 2001 to over 600; and Further, while New Zealand has one of the most open economies in the world, there are still areas where Japan can improve its terms of access to New Zealand. Examples include auto parts and various industrial vehicles such as graders and forklifts. An EPA would also provide Japan an opportunity to argue for similar conditions to those New Zealand is negotiating with its other partners in the region in the areas of government procurement commitments, a range of services and investment bindings that go beyond those currently applying to Japanese investors There are good reasons for a Japan – New Zealand FTA. Japan and New Zealand are natural partners across a broad spectrum of issues. A deepening of our bilateral economic and trade ties is a vital ingredient in that partnership. Working together with Japan can complement these efforts and is in keeping with the policy vision Prime Minister Abe has set out for his government. This puts strong emphasis on the “power of innovation and openness” to bring “new vitality” to Japan’s economy and envisages a big role for encouraging innovation, concluding regional trade arrangements and attracting investment. I know that as business leaders operating in Japan you are well aware of the advantages that closer strategic cooperation with your Japanese partners can bring. Clearly, it makes sense for two progressive economies in the world’s most dynamic region to work hard to maximise the advantages available through closer economic and trade partnerships. New Zealand and Japan really are natural partners in the region. We share common interests which are based on the values of natural justice, democracy, respect for international law and the UN, concern for the environment, and determination to promote human rights. With this in mind, New Zealand and Japanese officials are currently establishing a working group to consider ways to improve the economic relationship.

The group will be tasked with examining existing barriers to trade and investment between New Zealand and Japan. It will also consider possible initiatives for deepening our bilateral cooperation.

We want to ensure that all options for strengthening our trade and economic relationship – including the possibility of looking at an Economic Partnership negotiation, are part of this “fresh look” process.

The New Zealand government is firmly fixed on tackling the issues we see as forming the next level in our economic transformation agenda. In doing so, we believe we will further enhance the robustness and transparency of our regulatory frameworks.

A major review of the structure of business taxation is underway. And key infrastructural requirements, such as fast broadband access and sustainable, energy supplies are also being tackled.

We are looking to ensure that our regulatory and policy framework makes New Zealand an even better business partner.

Democratic Peoples’ Republic of Korea

Another issue that I will be discussing while in Japan is our shared interest in ridding the world of the threat of nuclear weapons.

This is not something I will go into in great detail at this conference, but it is extremely topical in light of the provocative and unacceptable actions taken by the Democratic Peoples’ Republic of Korea earlier this month.

New Zealand has joined with its friends, such as Japan, in condemning the DPRK for pursuing nuclear and ballistic weapons capability. Such actions are wholly inconsistent with the behaviour expected of a state seeking security and other guarantees from the global community. New Zealand fully supports the Security Council’s recent swift and decisive response to North Korea’s provocative actions.

Resolution 1718 sends a clear message to the Democratic People’s Republic of Korea and includes the type of targeted sanctions New Zealand supports.

We commend Japan’s levelheaded approach - emphasising peaceful and diplomatic efforts in response to North Korea’s provocation.

The negotiating table is the only route to achieving peace and security for the people of North Korea and the wider region. New Zealand calls upon the DPRK to return to the 6 party talks – without pre-conditions – and to quickly work towards implementing the previous disarmament and security agreement they entered into.

New Zealand will be working with other concerned countries to explore options to deal with this problem.

Conclusion

In conclusion, I believe that New Zealand and Japan must work hard together continue to adapt our relationship to keep it modern and relevant.

We have a strong foundation built on long-standing and diverse linkages, and which is based on common understanding, trust and shared interests.

And the relationship is a comfortable one. We share similar values. We have common interests. We know each other well. But with comfort often comes complacency. Our trade and investment statistics are static when we want them to be moving forward.

We need to follow through on the commitments undertaken by our Prime Ministers last year to take “forward-looking and fresh look” at the economic relationship.

As part of this process, Japan and New Zealand need to consider ways to develop closer economic ties. An Economic Partnership Agreement would make certain that the relationship endures and can meet the challenges of the future.

Finally we need to ensure that the relationship is enduring. This means that we need to adapt, where necessary, to meet new challenges. These include the developing regional architecture – such as the East Asia Summit – and taking the economic relationship forward.

As business leaders with a foot both in Japan and New Zealand, you will be well aware of the advantages that closer strategic cooperation with your partners can bring.

You also have a vested interest in broadening and deepening the relationship.

My challenge for you to take away today is to think what you can do – either collectively or individually – to help us achieve this.

Your assistance in communicating the potential benefits of a bilateral FTA – in Japan – can make to both Japanese policy makers, and your business counterparts – can make a critical contribution to progressing this important initiative.

With your cooperation, I believe we take the relationship to a new level.

ENDS

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