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Japan New Zealand Business Council

37th Joint Meeting of the Japan New Zealand Business Council

Tauranga


Co-Chairmen Mr Brian Martin and Mr Ryu Yano, ladies and gentlemen,

Thank you for the invitation to be here today at this 37th Joint Meeting of the Japan-New Zealand Business Council.

I give greetings to local participants and to our hosts from the wonderful city of Tauranga. I extend a warm New Zealand welcome to guests who have travelled a long distance from Japan to be here.

Let me acknowledge too the New Zealand participants from the Japanese government’s JENESYS invitation programme.

I am sure you will all join me in thanking the Japanese government for this initiative which to date has allowed 200 young New Zealand businesspeople to visit Japan and learn about its business environment.

This Council has a proud history of fostering economic and trade relations between New Zealand and Japan and contacts between our respective business communities.

Your programme over the next two days covers a waterfront of trade topics - progress in the relationship, food and agriculture, environment and tourism, investment.

I congratulate the Council and organisers on your highly relevant and topical agenda.

Significance of Japan

The Prime Minister visited Japan last October. I have had the pleasure of visiting twice this year - for a bilateral visit in February and to attend the APEC Trade Ministers Meeting in Sapporo in June.

Agriculture Minister Carter will attend an APEC Food Security Ministerial in Japan next week. Prime Minister Key, Deputy Prime Minister English, Foreign Minister McCully and I will be heading to Japan in November for this year’s concluding APEC meetings.

This will also be an occasion to discuss bilateral matters with Japanese leaders and their business community.

So Japan, and especially its political and economic situation, is very much on our minds at the moment.

At a time when China’s high growth continues apparently unabated, other countries, including Japan, might easily be thrown into the shade.

But Japan too is clearly going through a period of challenge and transition, which we need to understand.

Others here today are better placed to discuss the details.

I should like to focus on the fundamentals of why Japan remains a vitally important country and trading partner in the region.

Japan remains – and will remain for the foreseeable future – the largest concentration of wealth in East Asia. Japan is a huge, highly sophisticated, rule-based economy, representing around 8.3 percent of global GDP. Its companies and consumers constitute a large, dynamic and discriminating market. Others may be catching up, but Japan’s technological capabilities are cutting edge. Its R&D spending, mostly by the private sector, represented 3.5% of GDP in 2008 (US$149 billion). No surprise then that Japanese researchers have collected eight Nobel Prizes in the past decade. From a bilateral perspective, we also need to remember that while Japan presently may not display the same heady growth as China, it can still be a source of excellent growth for us. Recall that New Zealand companies are minor players in almost every sector in which we trade into Japan, so growth can be achieved variously through improved access conditions and smart marketing strategies. Our economic relationship with Japan is the most deeply rooted of that with any large Asian country. Japan was one of New Zealand’s top five export destinations in 1964. It remains in the top five today.

Other things have changed in this period. The United Kingdom, for example, took nearly half our exports in 1964, while Japan was the destination for 4.4 percent. In 2008, the UK took just under four percent of our exports; Japan was up around 10 percent.

Trade, investment and tourism remain central pillars of the relationship and we will continue to put effort into strengthening those linkages.

Domestic policy developments in New Zealand

For our part New Zealand is now emerging slowly from recession, assisted by the rise in global commodity markets and a supportive policy setting.

The government is committed to lifting our competitiveness and our attractiveness as a business partner.

In the last two years we have reduced corporate tax rates, made changes to the electricity market and Resource Management Act, taken steps to improve infrastructure, and begun a review of business regulation.

We have also introduced an emissions trading scheme which provides strong incentives for businesses to invest in energy efficient technologies, an area in which Japan is a leading supplier.

And we are taking steps to develop a number of industries including specialised manufacturing, minerals and aquaculture, where Japan can be a partner for us.

Japan/NZ bilateral developments

Like most of our bilateral relationships, that with Japan has had its ups and downs in the last two years.

The “downs” are well known and I will not dwell on them here.

The “ups” are not so well appreciated and bear repeating.

Trade is recovering from the downturn of 2008/09.

The latest New Zealand figures, to July, indicate that exports to Japan are heading back to where they were prior to the Lehman shock. For the year to July 2010, New Zealand exports were some NZ$3.1 billion.

During the recession Japanese direct investment in New Zealand has increased, through purchases of New Zealand or foreign owned businesses.

And in tourism, after last year’s sudden fall in numbers due to the influenza outbreak, numbers are recovering well.

Arrivals from Japan in the year to July were 18% up on last year.

And Air New Zealand has announced a major expansion of its charter flights to Japan over the summer period, from 4 to 14.

This will certainly help to expand New Zealand’s links to regional tourism markets in Japan.

Japanese tourists remain a pillar of our tourism industry, and we are focused on marketing New Zealand as a high quality destination.

The Rugby World Cup being held here next year is also unique opportunity to bring Japanese rugby fans to New Zealand.

Japanese companies have a big role in supporting rugby, and so we are looking to create opportunities through the Rugby World Cup competition to encourage business links.

Science and Technology

There is other good news on the technology front.

Most New Zealanders see Japan as a technology superpower, and we are all big consumers of Japanese electronic products and cars.

It is good therefore to see a number of New Zealand technology businesses have recently taken steps to enter the Japanese market and are competing on their merits in one of the world’s top technology marketplaces.

On the research side, a series of visits to Japan by New Zealand scientists, organised by the Ministry for Research, Science and Technology, is leading to new and strengthened linkages.

Japan and New Zealand will hold the first government-level Science and Technology Joint Commission meeting in Tokyo in October.

This will provide further momentum in the science relationship, building on a Science and Technology Cooperation Arrangement concluded between our two countries last year.

We encourage New Zealand businesses to see Japan not just as a source of technology but as a partner in developing and marketing New Zealand technologies.

Wearing my hat as Minister for International Climate Change Negotiations, let me also thank Japan for its support for the Global Research Alliance initiative that New Zealand has led, looking to find ways to reduce emissions of greenhouse gases from agriculture.

That initiative now has the backing of over 30 countries, and Japan’s role - leading work in the area of paddy field management - is greatly appreciated.

Trade policy

In the area of trade policy, New Zealand is working closely with Japan to advance the concept of a regional free trade agreement among the 16 participants in the East Asia Summit – the ASEAN countries, Japan, China, Korea, India, Australia and New Zealand.

We also support Japan’s initiatives, as this year’s chair of APEC, to strengthen the APEC process and define the path to a Free Trade Area of the Asia-Pacific that would include all APEC members.

Our work with Japan in these areas is part of a successful multi-track approach to trade policy that has also seen New Zealand complete deals with Australia, China, the whole of South East Asia through the AANZFTA Agreement as well as FTAs with Singapore, Thailand and Malaysia, and also pursue further deals with India, Korea, Russia and United States, the latter though the Trans-Pacific Partnership.

From a bilateral perspective our goal remains a free trade agreement between New Zealand and Japan.

It is regrettable, given the depth of our economic ties, that Japan is the only major country in East Asia with which we do not have an FTA completed or under negotiation.

This is not for lack of trying by New Zealand.

Indeed there is a bilateral officials level process underway looking at the issues involved in an FTA. We are keen to see the work of this Joint Officials Group progress.

But there is a continuing gap between Japan’s statements of support for regional FTAs and the reluctance of some parts of the Japanese government to address issues related to agriculture and liberalisation of agricultural markets.

My understanding is that this is the reason why Japan has found itself unable to engage in regional economic initiatives such as the Trans-Pacific Partnership now underway, which involves the US, New Zealand and others.

That also seems to be the reason behind the Japanese government’s reluctance to date to start FTA negotiations with New Zealand.

Let me be clear: if Japan does not want to move on agriculture, then it won’t. But if Japan does want to move, then there is an interesting case to be made for moving with New Zealand in the first instance. For example, our economies are essentially complementary, so too our seasons. New Zealand does not present difficulties in areas that Japan regards as sensitive. We don’t produce rice and sugar and do not export pork or wheat.

As well, our beef exports are not large in global terms and in dairy, New Zealand accounts for only 2 percent of global production.

We also present a match in terms of key Japanese interests. New Zealand’s ability to supply food reliably, and to meet high Japanese standards for food products, makes us an ideal partner for Japan’s food security in a world where supply is increasingly an issue.

To achieve progress with Japan, we need to put this relationship on the same trajectory as other of our bilateral trading relationships.

More broadly, New Zealand like others is looking for clarity on where Japan stands in relation to the quickening pace of economic integration in the region.

Our hope is that Japan will step up its efforts for trade liberalisation based on a process of strengthening and liberalising agriculture at home.

No-one expects Japan to open its sensitive sectors immediately: it will need to be a staged process. For our part, New Zealand has already demonstrated through other trade agreements that we are able to deal flexibly and creatively with our partners.

But without that process getting underway, Japan risks being left behind.

And it will be harder for New Zealanders to see Japan as the energetic partner that we want it to be.

Here in the heartland of New Zealand’s kiwifruit industry, I should also mention the work which Zespri has undertaken to grow gold kiwifruit in Japan, which is bringing increased incomes for Japanese fruit growers.

That is a good model for cooperation between our agricultural sectors for the future.

New Zealand is too small to pose a significant risk to Japanese agriculture, but we have the potential to be a useful partner.

We are ready to discuss FTA issues with Japan, and are waiting for signal that Japan itself is ready to move forward.

Conclusion

In conclusion, I would like to encourage the Japan/New Zealand Business Council to continue to give voice to the bilateral trade relationship and to support our efforts more broadly to enhance the trade and economic ties between New Zealand and Japan.

Together, we need to look for opportunities to add vitality to the Japan/ New Zealand business relationship.

Companies represented here today have played an important role to date and are our partners for the future.

For its part, the New Zealand Government remains strongly committed to growing the relationship.

We would welcome an ongoing partnership with Japanese government and business to do just that.

ENDS

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