Address to the National Press Club of Japan
Hon Tim Groser
Minister of Trade
27 September 2013
Address to the National Press Club of Japan
Thank you for another opportunity to speak to the National Press Club of Japan.
When I spoke here in April I noted with regret that the WTO negotiating agenda had stalled as the regional trade agenda moved with extraordinary speed.
If anything that was an understatement. To underline the point, let me use my own country’s active trade agenda as an example.
As you may know, NZ is the only developed country to have a comprehensive FTA with China. We added a matching FTA with Hong Kong in 2010 and on 10 July this year it was announced that agreement had been reached on a comprehensive economic agreement between New Zealand and the customs territory of Taiwan. The new ANZTEC agreement is a modern framework with high-quality rules and market access commitment across a full range of sectors. You will also understand the significance of the fact that it ultimately delivers elimination of tariffs on 100% of New Zealand's current exports to Chinese Taipei.
The wider point is that growth-oriented governments in the region are looking to conclude new-generation agreements that feature unprecedented levels of market opening and while also setting out best-practice rules to ensure that key public policy requirements can be met. And they are trying to move beyond bilateral agreements to regional frameworks – reflecting the realities of the modern marketplace.
The TPP, or Trans-Pacific Partnership negotiation, is a development of truly global significance. Indeed, it is the most ambitious attempt yet seen to develop a high-quality trade and investment framework spanning the Asia-Pacific region. I would go even further. If TPP can deliver on its promise, it will inevitably have a powerful influence shaping the other great FTA negotiation across the Atlantic - TTIP, or Transatlantic Trade and Investment Partnership negotiation between the United States and the EU.
My view is that there are very powerful political and other links between these two ‘arms’ of regional trade policy. TPP, a far more mature negotiation, will shape political expectations for the trans-Atlantic negotiation amongst lobbies in both Europe and the United States and no doubt provide models that can be applied to certain common trade policy problems and issues.
If that is proven correct, then these two mega FTAs will unquestionably then influence thinking and practice at the global level. I would have to say equally that if contrary to current progress we were to falter, a failure to conclude a high-quality TPP would shape expectations for TTIP in exactly the opposite direction. Either way, the strategic, economic and political stakes are high.
We are delighted, of course, that Japan is now a full negotiating partner in TPP. For reasons that go back to its negotiating origins, New Zealand is the Administrator of the Agreement and as such we were pleased to be able to play a facilitating role in expanding TPP to include Japan. As the third largest economy in the world, Japan’s participation is enormously significant. With Japan involved, TPP economies account for US$27 trillion.
We have already been impressed by the contribution of Japan. Mr Amari and his team have unified Japan’s negotiating structure and have brought into the process a level of commitment and energy that immediately answered any doubts about Japan’s capacity to participate effectively after entering at this stage in the process. As was underlined for me again in a conversation with Minister Amari last night, they also have a genuine long-range ‘partnership’ vision which sits very comfortably with our own approach.
TPP ministers and Leaders will be meeting again shortly in Bali. This is a part of a clear pattern of increased momentum in this negotiation, which has now had 19 formal negotiating sessions, backed by numerous informal discussions and negotiations. Considerable progress has been made in developing coherent negotiating texts and I think we are on track to deliver a result on the timetable set by our Leaders.
The reason we put resources into complex negotiations of this sort is that we want to spur growth and lift incomes. Good trade agreements typically force some changes in policy but at the same time open up new commercial opportunities. TPP will be no exception.
Japan-New Zealand partnership in
It is not however directly TPP that has brought me back to Japan, but it does provide context. When your Prime Minister announced on 15 March the Japanese Government’s decision to take part in the TPP negotiations he made it very clear that this was in the context of a broader strategy of economic revitalisation. That clearly includes revitalising Japanese agriculture. As Prime Minister Abe said:
“We have to bring back strong and affluent agriculture and farm villages where the young will have a dream in the future.”
It is up to Japan to chart the way forward and arrest the serious issues your Prime Minister raised around the abandoned cultivated land which has approximately doubled in the last 20 years and the troubling fact that amongst full-time Japanese farmers only about 10% are less than 65 years old. I think it is widely understood that change is now inevitable and that would have remained the case even if Japan had decided to continue to stay outside the TPP negotiation.
While however the solutions must be crafted by Japanese experts and leaders, taking account of Japanese culture, institutions and the sophisticated capacity of your economy to innovate, I have no doubt that we can play a small but positive role in the development of a revitalised Japanese agriculture. In specific areas of agriculture - dairy, meat and parts of horticulture - New Zealand is not a ‘small’ country at all. We play an important role in world agriculture and have world class technology, companies and systems, all of which may provide some opportunities in the new and revitalised agriculture sector your Government is seeking.
The key question I have been exploring in my current visit is the scope for us to develop a Japan-New Zealand partnership in food. That was a main theme of yesterday’s Japan-New Zealand Partnership Forum, for which Minister Amari kindly agreed to be the opening speaker. I had a follow-up discussion with New Zealand agrifood sector leaders this morning. I will be exploring this question further in the course of a visit to Hokkaido from Sunday to Tuesday.
I have already formed several views. The first and obvious one is that we should expect the combination of the Abe government’s growth strategy and the proactive agriculture strategy being developed by Mr Hayashi and his colleagues to lead to structural change in the agriculture and food sector. But structural change is occurring anyway, even without TPP, hence the growing number of abandoned farms and declining value of total agriculture production. The real question is to find a way to create a new and positive future.
The second is that a TPP deal should, over time, lead to much deeper commercial ties between Japan and other TPP partner countries, and in both directions. I am talking here not so much about exports of farm products but about new investment relationships, development of services, technology flows and cooperation in research and development. We are already seeing a pattern of greater involvement by Japan and other regional partners in New Zealand sectors such as dairy, beverages and food.
This is exactly what our experience has been in previous FTA negotiations, both with developed and developing countries. It is, for example, inconceivable that NZ would have such a significant investment stake in Australia and Chile without the positive framework of the FTAs we have with them. With China, NZ is investing in 33 huge dairy farms that will produce, when complete, 1 billion litres of milk - about 10% of Chinese milk production back in 2000. No-one saw this clearly when we were negotiating the comprehensive FTA with China but trade and investment are finally linked. I see every reason to believe it can happen between Japan and New Zealand - and in both directions. In horticulture, for example, we have wonderful growing opportunities in New Zealand and when it is winter in Japan, it is summer in New Zealand allowing for seasonal complementarity and providing supply continuity for our sophisticated consumers and the agribusinesses that meet their needs.
From what I have heard on this visit my sense is that opportunities might be emerging for New Zealand participation in areas of the Japanese food and agricultural sector where we might have particular expertise to offer. And I have been struck by the apparent growing receptiveness in Japan to such involvement by New Zealand partners.
The underlying conditions for such partnerships to succeed can certainly be identified. Political stability, friendly relations at government level, business-friendly investment environments are the foundation. On top of that our two countries share a common commitment to safety and quality in foodstuffs and food industries that have shown themselves to be innovative and internationalist in their outlook.
Japan has some unique advantages, including market scale and Asian expertise. New Zealand in turn has assets including capacity to produce in the opposite season, the unique flavours available from cool-climate production, New Zealand’s plant and animal health status, our highly export-focused development, production and marketing systems.
Our dairy sector exemplifies a number of these qualities. We are now highly constrained in our ability to increase domestic production and export volumes, with the effect that future development of the industry will depend heavily on finding partners offshore.
A good number of Japanese dairy farmers already have links of some form with New Zealand. In Hokkaido on Monday and Tuesday I hope to hear views on whether there might be scope to take those links a stage further in the years ahead.
Ladies and gentlemen, all of this enhanced interest in my country in developing our economic ties with Japan has been triggered by Japan’s decision to join the TPP negotiation. No country can sit for ever on what might have been a ‘winning formula’ at some earlier stage in its political and economic development. The world moves on. And I am certain that a high quality TPP offers both Japan and New Zealand, as it does for all TPP economies, a huge opportunity. It is our job to make it happen.