Address to Business Breakfast Meeting - Cullen
Hon Dr Michael Cullen
Address to Business Breakfast
NZ-HK Business Association
Venue: Gun room, Royal Hong Kong Yacht Club, Kellet Island, Hong Kong
Good morning. It is a great pleasure to be back here in Hong Kong Special Administrative Region – this is my second visit as Finance Minister. I am enroute to attend the APEC Finance Ministers Meeting in Suzhou.
There has been a lot of activity since I was here last year. China is set to enter the WTO, and Hong Kong and New Zealand are making progress in working to establish a Closer Economic Partnership.
In part - but only in part - this initiative
is a consequence of events on a much bigger stage: in
November 1999 the world’s trade ministers gathered in
Seattle to negotiate an agreement on lowering barriers to
trade around the world – sadly, they failed to reach an
That was a set back but we hope that a new WTO round will be launched at the next WTO ministerial in Doha, Qatar in November. Hong Kong has always been a stalwart of multilateral processes and we wish Hong Kong well in its task as chair of the preparatory process for the Qatar meeting.
New Zealand and Hong Kong both have much to gain from progress in the WTO. Only through multilateral trade negotiations will we achieve the sort of lowering of trade barriers that will give our exporters a fair deal.
I am delighted that China is now close to concluding its accession to the WTO. New Zealand was the first OECD country to conclude an in-principle bilateral WTO agreement with China and we look forward to welcoming the world's most populous nation as a member of the WTO later this year.
Meanwhile we work closely with China in APEC and support the efforts that the Chinese leadership is putting into securing a positive outcome from the APEC leader's summit later this year. All this provides an important context for our ongoing and valuable co-operation with Hong Kong on WTO and APEC issues.
But, even while we work actively for
progress on the multi-lateral front, we in New Zealand are
ready to explore mutually beneficial bilateral arrangements
such as the one we are now negotiating with Hong
Because we believe that as long as bilateral partnerships are comprehensive, outward looking and WTO compatible, they can enhance rather than impede progress in the multi-lateral system.
Even before Seattle, New Zealand had begun exploring a country-to-country deal with another small, like-minded, complementary economy - Singapore.
That closer economic partnership with Singapore was New Zealand’s first since signing CER with Australia in 1983. Late last year,
Australia and Singapore announced their intention to negotiate a treaty similar to the one Singapore had just signed with us. Now Hong Kong and New Zealand are negotiating.
Hong Kong shares our view that free trade agreements can actually contribute to more ambitious regional and global goals. And in addition to Hong Kong, Australia, New Zealand and Singapore, several other APEC members are also exploring new country-to-country free trade agreements - Japan, South Korea, the United States, Chile, and Thailand, to name but a few.
We all still want an overarching deal to come out of the WTO, but “free trade agreement, or FTA fever” is taking on a life of its own. And the more who join, the more nervous those left out will become. In this way we hope to restore a critical level of collective momentum to get the WTO ball rolling again.
The upcoming WTO Ministerial meeting in Qatar then may show whether these CEPs become part of a bigger landscape. Let’s hope so.
Specific Comments on the CEP
As I have said, negotiations between New Zealand and Hong Kong are now well underway. I understand that the next formal round of discussions will take place in Auckland later this month.
Both sides are committed to concluding the negotiations as soon as possible and are aiming to achieve a high quality outcome, which will serve as an example to others in the APEC region.
The proposed CEP offers the opportunity to not only create a larger ‘common market’ with a complementary, like-minded economy, but also to fine-tune key institutional practices, such as competition law, in line with emerging international best practice.
The CEP also provides Hong Kong businesses with a constructive sparring partner for developing expertise in new areas of regulation, such as environmental standards, that are assuming increasing importance globally.
To help formulate our negotiating positions, we have undertaken a comprehensive programme of domestic consultations with business, unions, and our indigenous Maori people and with non government organisations. This process has been very useful in helping us to develop our views.
As the Minister for Finance, I am particularly interested in making sure that the Investment chapter helps to promote investment flows between our two countries. Although the 1995 Investment Promotion and Protection Agreement sets the ground-rules, the CEP aims to spring-clean the welcome mat and highlight some of the excellent opportunities for Hong Kong investors to help grow New Zealand’s economic base to the benefit of us both.
Hong Kong is a very important market to New Zealand. It is our seventh largest export market and our sixth largest source of foreign investment.
Let me now turn to New Zealand's domestic outlook. Our government is now half way through our first term with two successful budgets behind us.
We have proved to the public, who were disillusioned
with the instability of the previous coalition
that MMP and coalition politics can work and work well. The Labour and Alliance centre left coalition is delivering smooth and steady government for New Zealand.
I believe that in the 21st century the state must be a leader, a facilitator, a co-ordinator, a broker and a partner. We are restoring balance to New Zealand. The era of hands-off economic theorising is over. We are putting in place a more integrated hands-on approach to the social and economic well being of New Zealand and all New Zealanders.
Our economic policy is focussed on achieving the economic transformations necessary for us to sustain first world living standards in the 21st century.
But while we acknowledge the need to lift our game, it is heartening to see some improvements in critical economic performance indicators.
Zealand's improving economy is a little out of step with
many of our key trading partners whose economies are slowing
down. We are seeing a range of economic indicators moving
in the right direction
for the first time in years. In the past our performance was more often driven by the global economic cycle.
The economy grew by 2.5 percent in the 2001 March year, and is forecast to average three percent growth over the three years after that. Initially, this was driven by a healthy export sector on the back of strong commodity prices, a competitive dollar and a good growing season for farmers. Now, the basis of growth is broadening, as tourism grows and life returns to retailing and construction.
We have just recorded our first trade surplus since 1995. Provisional figures show that in the twelve months to the end of July the trade surplus was $65 million. That is a big turnaround from a year ago when the trade deficit was $3.1 billion.
The current account deficit has fallen from seven percent of GDP to less than five, and is still falling, inflation remains subdued and unemployment is at a thirteen year low.
New Zealand is now back on a stable AA+ credit rating and consumer and business confidence are firmly in positive territory.
The government is running an operating surplus, projected at over one percent of GDP this financial year, rising by roughly half a percent of GDP a year for the years after that.
These positive indicators, while welcome, have not encouraged complacency at a government or business level. We are moving from an over-dependence on an economy reliant on factors outside our control such as the weather, commodity prices and exchange rates.
We need to ensure education, skills, research and development, innovation and entrepreneurial activity boost and enhance our traditional sectors with more high value added products.
We have the right conditions for an economic take-off if we focus our energy. New Zealanders are better educated, more highly employed and better connected to new technology than many of our peers.
The government has taken the lead in promoting e-commerce for exporters and providing government services on line.
We are seeking to improve and strengthen the links between tertiary education and research institutions and the business world. We need to be able to turn our good ideas, inventions and discoveries into successful businesses. We have recently introduced new polices for seed capital and incubator support and we have improved and simplified the tax treatment for research and development expenditure.
We have set up a new agency, Industry New Zealand, to work alongside and in partnership with both overseas and local business to foster economic growth and innovation. The agency works in tandem with Trade New Zealand's export boosting activities and it already has a number of runs on the board in terms of bringing high quality investment to New Zealand.
Recently, Ericsson-Synergy made the decision to set up a high-tech mobile applications research centre in New Zealand and we are gaining a solid reputation as the superyacht capital of the Pacific with two construction firms moving to New Zealand over the past year.
At long last New Zealand exporters will be on a par with their competitors with the government's new export credit scheme providing a basic measure of support.
The government is also paying close attention to how the rest of the world sees the New Zealand market. A strong market needs good rules. The government has introduced a long overdue Takeovers Code We have strengthened the Commerce Act to get a better deal for consumers and small businesses and we will deal firmly with anti-competitive behaviour from dominant firms in the market.
We are developing a constructive relationship with business. We listened to their concerns about compliance costs and we are taking action to reduce those costs.
And finally, again in the spirit of balance and equity, the government has established a fund to help ease the burden of future retirement pensions. Unless forward provision is made now, New Zealanders will face the prospect of either reduced levels of New Zealand Superannuation; tighter eligibility criteria; or increased average tax rates to cover the additional costs. The 2001 Budget started the process of transferring a part of the operating surplus into a fund that will assist future governments in meeting the costs of an ageing population.
These positive trends in New Zealand's economy make us an exciting partner for Hong Kong and Hong Kong business as we pursue our new trade agreement.
In closing, let me say again that New Zealand highly
values our ties with Hong Kong.
I look forward to working successfully with Hong Kong at the APEC Finance Minister's meeting and to the conclusion of our closer economic partnership.