Speeches and Articles

Presentation to Stakeholders Forum

07 December 2012


Introduction

I am delighted to have this opportunity to address today’s Forum about the potential of the Trans Pacific Partnership to deliver economic success for New Zealand’s economy.  Speaking plainly - trade works - I will explain why.

I do so from the perspective of the NZ US Council, a non-partisan organization funded by both business and government in New Zealand and aimed primarily at strengthening New Zealand’s relationship with the United States.

I want to begin on a personal note.  Earlier in the week, over breakfast, I asked my two children; Guy aged 11 and Felicity recently 13, why they thought international trade was important.

Kid Quote

Felicity had this response – “It's good because you get money and then you can get things, like spending it on a box of sushi from Japan."

This statement goes to the heart of why we trade internationally.  It is about earning money so we can buy and sell goods and services from other nations.

The Letter

Without putting too finer a point on it, it was for this reason 50 of New Zealand’s senior business representatives put their names to an open letter to the Prime Minister expressing their support for the TPP process. 

The letter makes clear how much support exists in our business community for the TPP negotiations.  The 50 signatories are all Chairs or CEOs of New Zealand domiciled companies or business organisations. 

They represent a cross section of all major sectors – well over two thirds of the wealth of our private sector economy - primary industries Fonterra, Anzco, Silver Fern Farms, Zespri, Sealord; manufacturers like Fletcher Building, Gallagher and Glidepath; hi-tech companies like Tait, Fisher and Paykel Healthcare and Orion. 

The leading business organisations include the BusinessNZ family, the Chambers of Commerce and sectoral organisations like the Meat Industry Association, Beef + Lamb, Seafood Industry Council, WoodCo, NZ Winegrowers and the Federation of Maori Authorities.

The letter points out the benefits of trade and investment for New Zealand, welcomes the TPP negotiators to Auckland, endorses the effort now underway and recognises the complexity of the issues under discussion.  It takes a “glass half full” approach and notes the final judgment about TPP will need to wait until the negotiations are concluded and the result put before our Parliament for ratification. 

Finally the letter expresses confidence that Trade Minister Tim Groser and his officials know what they are doing and are focused on New Zealand’s interests. 

In much the same way the NZUS Council was pleased to be a signatory to a joint statement at the recent APEC Economic Leader’s meeting in Vladivostok where business organizations from the US, Canada, Singapore, Peru, Chile and Australia also expressed their support for the TPP negotiators urging them to move forward “expeditiously and boldly” to achieve an ambitious, comprehensive and high standard outcome in TPP. 

Business representatives from Canada, New Zealand, Australia and the US met on earlier this week and reaffirmed this sentiment in a similar statement pressing negotiators for more urgency to conclude the TPP negotiations.  They note that now is the time for negotiators to tackle the more sensitive issues to ensure a 2013 deadline can be met.

The Website

We have listened to voices we’ve heard saying business is not doing enough to speak up about the importance of initiatives like TPP – the letter I referred to earlier and the statements I have mentioned respond to that criticism.

There should be no doubt in anyone’s mind there is strong support for an open economy on the part of business in New Zealand.  We agree however more can be done to explain this to civil society so we launched the Trade Works website.   The funding required to build the site was provided by the NZUS Council but the site is supported by 13 different business organizations.

We chose the name Trade Works deliberately.  Public research told us a majority of New Zealanders thought more needed to be done to connect with global markets and the need to create more jobs was a key concern. 

Trade Works precisely because these jobs can only be created by trade and investment and because freer open markets and better trade rules can create the conditions of economic recovery and growth which we so desperately need right now.  That’s why TPP is so important to New Zealand and why we are pleased the TPP negotiators are in town this week.

TPP and New Zealand’s Economic Success – the Role of the Negotiators

I want to focus on TPP’s role in New Zealand’s economic success for a moment.

Trade is New Zealand’s life-blood.  This is a phrase we hear often from our politicians and business leaders.  It is so true.  More of us need to absorb this fact and work harder to get the blood flowing.  New Zealand has traditionally been a nation of traders.  We must do more to build on this legacy.

International trade accounts for around two-thirds of New Zealand’s total economic activity. In 2011 New Zealand’s merchandise exports totaled $48 billion, while service exports totaled $13 billion.  These are big numbers but we are not paying our way.  We spend more than we earn.  As our Trade Works website puts it – it takes a lot of kiwifruit to buy a plane!

We need a level playing field to compete in competitive world markets. Trade agreements set the rules of the game that allow us to compete.

Free trade gives us more choice.  It helps to diversify our economy. It exposes our businesses to innovation and makes them more efficient, it attunes them to international markets and exposes them to high value customers.

Trade agreements also deal with the flow of capital. Companies need investment to grow. Investment creates jobs.

Research undertaken by the East-West Center in Honolulu suggests that if successfully concluded, TPP could add around $2.1 billion to the New Zealand economy by 2025.  And the gains could be even larger if a Free Trade Area of the Asia Pacific was developed from the TPP pathway.  Our GDP is forecast to expand by 0.83% under TPP and 1.35% under FTAAP.

For all this to happen I need to reiterate the points made by my colleagues in the statements I referred to earlier.  They made it very clear that if negotiators are to secure a successful TPP it will need to be:

• Comprehensive – with no product exclusions and with commercially meaningful and flexible rules of origin.

• High quality – with strong standards across all main areas, from transparency, investment and government procurement to intellectual property, e-commerce and sanitary and phytosanitary measures.

• Ambitious – with the elimination of tariffs and non-tariff barriers on trade in goods and services and investment no later than 2020, the deadline set for free and open trade and investment in the Bogor goals.

• Innovative – with concrete new commitments on new generation and behind the border issues, including eliminating chokepoints in the operation of regional supply and value chains, fostering small and medium-sized business participation in expanding trade, facilitating regulatory coherence, and promoting and protecting innovation.

• Enforceable – with clear commitments, and strong and transparent state-to-state and investor-to-state dispute settlement mechanisms.

• A living agreement – open to accession by other Asia-Pacific economies, provided these economies share TPP's ambitious vision and can demonstrate their ability to accede to an agreement with the characteristics described above.

Asia Pacific

The FTAAP came a small step closer with Mexico and Canada joining the TPP negotiations. The TPP now offers a combined market of over 650 million people and represents about US$21 trillion in GDP.  That’s a lot of potential customers and wealth that might be enticed to buy our agricultural products and services, our movies, our tourism, our software and our niche manufactures and consultancy services. 

The Regional Comprehensive Economic Partnership was announced recently when leaders of the ASEAN countries and their six regional free trade partners agreed to start negotiations to eventually lead to the creation of an integrated market with a combined market population of more than three billion people, and a combined GDP of about US$19.78 trillion (based on 2011 figures). With the region accounting for more than half of the global market and about a third of global economic output, a successful RCEP would significantly boost global trade and investment.

The momentum is all in the right direction.

The Role of the US

The US plays a key role in generating this momentum.  We welcome the leadership reflected in President Obama’s recent statement at the East Asia Summit that TPP was his government’s top trade priority and urging negotiators to look to October 2013 to conclude the negotiations.

The US also plays a key role in the TPP negotiations and we encourage and support their negotiators ambitions as they begin to tackle the more challenging aspects of the market access negotiations.  More open markets for agricultural trade, particularly in dairy, sugar and beef are vital but textiles markets also need to be liberalized.

The US is New Zealand’s third most important trade partner.  We have a shared history and share strategic aspirations for the Asia Pacific region and other international theatres.  

Addressing the myths

Before concluding my remarks I would like to address two or three of the most strident criticisms against TPP.  They concern allegations of secrecy, the fear that TPP will allow foreigners to buy our land and undermine our sovereignty.

Trade negotiations cover a lot of sensitive commercial and economic issues.  We would get nowhere if they had to be held in a public forum.  Negotiators are sharing the broad parameters of the negotiations and, as far as possible the details and progress being made.  These negotiations are following the norms of trade and investment negotiations.  As stakeholders we have all been able to meet with the negotiators here in Auckland and in earlier rounds.  And as soon as the parties reach an agreement the full agreement will be available to everyone.

We often hear the allegation that TPP will force us to change domestic regulation.  This raises the issue of sovereignty and the right of a country to make its own laws.  To be a global citizen it is inevitable that we give up a degree of our sovereignty.  The fact remains New Zealanders, Vietnamese, Australians, Chileans and Americans will always determine their own destiny and will want to live by laws, domestic and international, which are just, fair and humane.  It is worth remembering too, that in a New Zealand context, if laws do need to be changed as a result of the TPP this will only be done after Parliament has agreed to these changes. 

TPP will let foreigners buy our land is another charge against the agreement.  In fact “foreigners” are already allowed to buy our land, subject to the approval of the Overseas Investment Office, and when they do they must abide by all our laws and regulations to look after that land and anyone who works on it.  The same principles apply in all the other TPP economies.  In New Zealand, any final TPP agreement will only change current policies if the Government agrees and Parliament ratifies this decision.

Kid Quote II

Thank you for the opportunity to present and be heard. 

Could I leave you with my 11-year-old son Guy’s response to my breakfast question about international trade?  He said,  “I think it’s good idea because it brings cultures together”. 

Today’s stakeholder forum has done just that.   International trade, free trade, fair trade, open trade; it’s all about bringing cultures together and improving livelihoods.  We are surely on the right track. 

 Link to associated Powerpoint



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