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AGENDA
Presented by RAWDON CHRISTIE
RAWDON Prime Minister Helen Clark leaves tomorrow for London and the Windsor Castle memorial service for Sir Edmund Hillary. It's widely expected she may stop in on Beijing next weekend on the way back to sign New Zealand's historic Free Trade Agreement with China, but that agreement will come at a time when the world is questioning China and its actions and putting down demonstrations in Tibet. The Prime Minister is with me now, good morning Prime Minister.
HELEN CLARK – Prime Minister
Good morning Rawdon.
RAWDON Will you be signing the Free Trade Agreement?
HELEN The Free Trade Agreement will be signed in Beijing at the start of not this coming week but the next week, it will be signed by Ministers with the Premier of China Wen Jiabao and I looking on.
RAWDON And so that’s absolutely set in stone we're going to see the Free Trade Agreement signed next weekend?
HELEN Yes you will see it signed, I will get to Beijing around Sunday evening, we have a huge New Zealand delegation coming up, at last count around 150 people in the business delegation, of course also officials, I understand there may be some local government representation, a number of the businesses are Chinese Kiwi businesses because they're very well placed to take advantage of the new opportunities, so it's seen as a very big showcase for New Zealand in Beijing.
RAWDON Let's talk about the businesses which will benefit, you know what's in it, what's actually in the Free Trade Agreement, there have been details you haven’t been able to specify recently, so what's in it?
HELEN Sure, and the full details will come out when the agreement is signed because it will then be immediately tabled in the New Zealand Parliament, it goes to the Foreign Affairs and Select Committee for 20 working days, they report back and then the government would table legislation to enable ratification, but in broad terms can I say, I think it is a high quality agreement and we're certainly looking from it, and you could anticipate that it will be good for those big New Zealand exports into China which have faced quite high tariffs and of course as a first mover, a first developed country getting this kind of arrangement with China we do expect benefit.
RAWDON What businesses are we talking about which have been facing the high tariffs, who's going to benefit straight up?
HELEN Well obviously it's in that primary sector industry where there's been particularly high tariffs over time, it seems to be the way of the world that just about everybody wants to protect their agriculture and their forestry so those have been very very big targets for us, but I think the agreement is bigger than that, it gives us first mover status as a first world country trading into China, that’s good for our services, it's good for our very high value exports because China has a substantial middle class which is affluent by our standards and that middle class will grow in size, that middle class wants to travel to places like New Zealand, it wants to educate its children in places like New Zealand, it wants to buy high quality software, designer clothes, it wants to buy goods and services of the kind that we need to increasingly be moving towards.
RAWDON So this is about changing our economy slightly to suit the interest from China?
HELEN Well we need to change our economy to both serve our own needs of being first world and affluent and to serve the needs of markets who will buy those sorts of goods and services. We have no future going forward trying to be a high volume low cost producer to commodities, we have to be transforming our economy to the top end, that’s what the big innovation announcement that we made in conjunction with the big pastoral and food sector industries about three weeks ago was about, it's how we get that permanent step change to innovative pastoral and food industries.
RAWDON There's more in it for China than being able to come over here and buy nice clothes though isn't it? What's been agreed pre the signing, in the run up to the signing for China?
HELEN My impression for a very long time, this is based on advice from our foreign ministry over a very long time, is that China has seen New Zealand and Australia as western countries in the broad East Asia Pacific region with which it can trial things it will later go on to do with other western countries, we are seen as broadly friendly, wanting good relations, but in world terms we're relatively small, so that they can try things with us. Now Australia is sequenced after us in Free Trade Agreement negotiations and I certainly hope and would expect that Australia will be successful at some point as well. So what China is doing through this agreement is showing that it can enter a high quality FTA with a first world country. New Zealand happens to be the first but I'd be confident others will follow.
RAWDON We must be more than just a template for them though, there must be specifics that they want from New Zealand.
HELEN I think we're partly a template, probably a large part of the template, I think it's also China showing strategically that it can have these high quality arrangements with a western country like ours. In terms of economic benefit of course the studies show that it's two way, but as we know the barriers to Chinese goods coming into New Zealand are very very low because of the unilateral tariff wiping that New Zealand's done over a long period of time, whereas that hasn’t happened in China, so it still matters a lot to us to get an agreement on tariffs for our goods going in there.
RAWDON What have they asked beyond the cheap Chinese goods coming in here, as you say which isn't necessarily going to change a lot, but what have they asked for beyond that as far as sort of personnel coming in here?
HELEN Well I think people will find that there's a very reasonable agreement around those things, there are some absolute Chinese specialties, for example in the are of cuisine, in the area of traditional medicine, and we now have a substantial Chinese population in New Zealand which is looking for those services so you'd expect a bit of leeway in those particular areas.
RAWDON Have numbers been mentioned?
HELEN Yes but I think you'll find they're very reasonable. The other key point…
RAWDON But what are they?
HELEN Oh no, I'm obviously not gonna put details out this morning but they're very reasonable. The other thing is that we do have labour and environment side agreements as well and that’s a breakthrough because it hasn’t been possible to negotiate those with every other country we've gone into FTAs with.
RAWDON Now you’ve said that you'll raise Tibet when you get there. I just want to ask if you'd go so far as to agree with Nancy Pelosi from the US 'if freedom loving people throughout the world do not speak out against China and the Chinese in Tibet we have lost all moral authority to speak out on human rights.' Would you agree with that?
HELEN Firstly I have raised Tibet with leaders of China, and general human rights issues over many years going back to when I was Leader of the Opposition, because our people expect our leaders to do that. Secondly I can there'll always be strong pushback because China has its own views. What I won't do is question the status of Tibet within China, but I raise it as an issue of how human rights can be respected in the country.
RAWDON Moving beyond Tibet though human rights is – I mean Tibet makes the timing particularly significant but we are talking about the essential human rights and the freedom of speech over there. So do you agree that if we don’t speak out against that we've lost the authority to speak out on human rights altogether?
HELEN I know that the response that I and the New Zealand Government made is at the sharper end of western responses. I also know that in broad terms it's western countries which have raised these issues in the last couple of weeks since the violence and riots in Tibet. Other countries tend to come in behind China in saying it's internal affair that others shouldn’t comment on, even to comment you can get a reaction.
RAWDON Do you think that trade negotiations are independent from human rights concerns?
HELEN I think the FTA stands on its own merits is something that is very positive for New Zealand, but I want to make a broader point. I believe that it is in our interests and the world community's interests to be drawing China into engagement with us, that means through trade, it means through it being able to host the Olympics, it means through its role in APEC, the position it has in the United Nations and many international agreements. China is emerging as a super power, for all of us it's important that that emergence is as a super power which is broadly speaking benign, I think that’s incredibly important.
RAWDON What does it say that Peter Dunne's withdrawn from the trip to China, you’ve talked about this large delegation going, but that’s – you know in the public eye that’s significant.
HELEN I don’t think he's withdrawn, I don’t think he ever agreed to go on it. Phil Goff said to our Cabinet should be invite reps of other parties and we said well go ahead. Now it's up to them whether they accept or not, Peter Dunne said he's totally in favour of the FTA, he knows I'm going to raise the issue of human rights, so maybe he's just got more important things to do at the moment.
RAWDON So you will raise the issue, how will you approach it with – you're not meeting the President are you?
HELEN I'm meeting the Premier who's my equivalent and we have an hour scheduled for the talks, of course an hour with translation both sides, we're going to be very focused in what we raise, but of course I'll be raising that one.
RAWDON And they're expecting you to raise it?
HELEN Oh absolutely, I think they'd be staggered if I didn’t.
RAWDON Okay I'll bring in the panel now, John and Barry have been waiting patiently to have a chat.
JOHN ROUGHAN – New Zealand Herald
Prime Minister the fact that this agreement is a template for what other western nations might be able to do with China in the years to come, are you confident that when the Americans, Australians and others look at what we've agreed to there won't be any criticism of some of the terms?
HELEN I'd be confident John that this is a high quality agreement because New Zealand is known for not selling itself short when it comes to signing trade agreements. Sometimes there are matters to be negotiated another day, for example we've still got issues to pick up in that P4 agreement across Singapore, Chile, Brunei and New Zealand, but I think people will see that this has been a pretty good outcome for New Zealand and it is a good template.
BARRY SOPER – Newstalk ZB
I wonder Prime Minister that you're going to raise objections about Tibet when you go to Beijing, we're nothing more than a blip on the radar screen, really what difference does it make New Zealand raising these concerns, we're a tiny country, not that important to China I would have thought.
HELEN Well you're certainly putting our position in perspective and sometimes I wonder why our little country of 4.2 million gets the access and entré that it does to China, but I think it's because China looks at us and Australia as friendly western countries in the region and it wants to engage with us, and it's found the experience of working with us useful in how it then approaches other western countries, that’s my impression, but does it make a difference Helen Clark as Prime Minister representing 4.2 million people raising it – well it depends on your perspective but there is the possibility that I may be the first western leader to go there after the events, I think there will be some interest in that.
BARRY How concerning is it for you that you see a country like Fiji being loaned 140 million dollars by the Chinese and Frank Bainimarama saying you know good luck to them in Tibet?
HELEN That’s one of many unfortunate statements that the Commodore has made, but with respect to China and the Pacific we, Australia, I'm sure the EU, all as major donors in the Pacific keep very close liaison with China, because we don’t want competition in aid to become a destructive thing, development assistance into the Pacific needs to be a positive thing.
BARRY It's a danger though isn't it?
HELEN Well it needs to be positive.
RAWDON We are going to address that slightly later in the programme through Steven Smith, but it's here that really matters at this stage, you know many people will be concerned the impact of a Free Trade Agreement when it comes down into our workplace, because competitively how can we really stand up?
HELEN We estimate from the studies done that the benefit to New Zealand when this agreement's fully implemented is in the order of somewhere from 180 to 280 million dollars per annum, that’s a lot of benefit to New Zealand. Now what we've been doing over a number of years now is restructuring our economy so that we don’t end up competing with low cost high volume goods, we have to be a specialist niche producer going for where the greatest value and return for our people is so we can pay higher wages and enjoy higher living standards, we shouldn’t see ourselves as being in direct competition with China, we've got a different product a different set of services, a different place in the world economy.
JOHN Are we getting tariffs on agriculture as low as our tariffs on Chinese manufacturers are?
HELEN Everything is phased and I'm confident that we've got the very best deal we could, which is going to be beneficial to our farmers, that means beneficial to all of us.
BARRY It looks as though the Australians are gonna be fairly hot on our tail Prime Minister after you’ve signed this agreement, Kevin Rudd's due to go there very shortly himself.
HELEN I think Kevin Rudd is due in Beijing almost the day after I leave, and the Chinese will certainly be looking forward to his visit because he's a Mandarin speaker, and they attach a great importance to that, but I hope that Australia does get a leg up and can conclude an agreement successfully, I understand they're somewhat behind where we are, but they’ll get there.
RAWDON Prime Minister can I just change tack slightly and talk about tax, it's the ongoing issue, it seems to be the hot issue possibly all the way up to the actual election, what are we going to see in the Budget a few weeks away?
HELEN You're going to see it addressed, you also know that the Labour Government has to address a range of other things, it's not an option for us to freeze spending in the big areas like health and education, we've got big investment programmes going in infrastructure, law and order, and so on, so it has to be one of a number of things addressed, but it will be addressed across the board.
BARRY Is it fair to say Prime Minister that you and Michael Cullen in the past week or two have basically been dampening down expectations, I mean you said we've got set a balance with all the other things that we have to pay for, are you talking down expectations, I mean Michael Cullen's saying that National's going to be offering more than what you can offer.
HELEN I think the National Party's positioned itself rather foolishly on this because they're essentially saying whatever Labour puts on the table we'll do more. Now I don’t think that’s responsible and it will invite the question well what are you not going to do that Labour's doing, and they don’t want to answer that question because the provision Labour's made across health, education, law and order, transport infrastructure and so on, is actually pretty well received, people know those areas are very important, but my modus operandi as Leader of the Labour Party has been to under-promise. I don’t believe we are ever served by going out and talking up big on things, we need to promise in a way that is realistic. If we exceed people's expectations that’s a good thing. The one time we got into trouble with a budget was then speculation began that something would happen that wasn’t going to happen, and I don’t believe that was our fault, there were some loose lips somewhere else, but that got us into some difficulty, so you certainly won't see me talking up the Budget, what I'll say is we're doing the very best we can with the deck of cards we've got to deliver for Kiwis.
RAWDON I mean promises effectively have been made that there will be tax cuts, if we see our economy continue to call at the rate it's falling potentially over the next few weeks, is the option on the table that there won't be tax cuts because Mr Cullen's certainly been playing down the size of tax cuts recently?
HELEN No that’s not an option, what we have to do is balance what we're doing, but can I deal with the issue of the economy. I don’t know anybody who's talking about the New Zealand economy failing to grow on an annual basis. The projections I'm see it's still for economic growth of somewhere close to 2% which used to be as good as it got for a while, so of course we've been used to more because the world economies that we trade into has been healthier but we will go through a bit of a sluggish patch, particularly off the back of a very very strong December quarter that’s just come in which boosted our annual growth for the last calendar year to end December to over 3%, but we're going to keep growing and unemployment is predicted to stay low.
BARRY I wonder how much Prime Minister you’ve dragged Michael Cullen kicking and screaming towards tax cuts, I mean he's never been one that’s been particularly enamoured of them and I wonder how much the push has come from you as opposed to Michael Cullen being a happy player in all of this.
HELEN Michael's never been ideologically opposed to tax cuts but he's had a lot of other demands that he's had to meet, his colleagues are saying I've gotta do more for health, I've gotta do more for education, I've gotta do more in policing, I've gotta do more here there and everywhere, and he is as you know a very orthodox Minister of Finance, he likes to see the money, he likes to see that he's running a stable fiscal policy, but the time has come when the issue clearly has to be addressed, not that there hasn’t been tax relief, Working for Families is substantial tax relief for 70% of families, the business tax package is substantial tax relief, there was tax relief on savings, but now the time has come to address it across the board.
JOHN I'm not clear whether if the economy gets back over the next few months and business gets very slack and consumption goes flat, I'm not clear whether the government's response on tax cuts would be more or less, do you follow?
HELEN I follow your question, but I'm obviously not going to spell out what the nature of the Budget is but put it this way it may well be that we go through a couple of sluggish quarters, it may well be that that encourages the Reserve Bank to act in a certain direction, I mean these are all imponderables at the present time.
BARRY Are the tax cuts now set in concrete, I mean have you sat down, you’ve decided the figures now?
HELEN We're waiting for some more information, obviously we had the issue in the last month of Inland Revenue wrongly reporting revenue figures and that caused some concern, fortunately they were wrong the revenue figures were healthier than they had told us, so we're just keeping our options a little open on the structure and I guess amount for the next little while, but obviously the Budget date's well announced, it's the 22nd of May and you’ve got certain deadlines to meet about when you sign off on it.
RAWDON Prime Minister you mentioned the Reserve Bank just now, what options are there as far as interest rates goes for the government?
HELEN Well obviously the Reserve Bank has statutory autonomy and we don’t normally comment on the decisions that they make because that tends to be undermining of them, but what I'd say in general terms is you look at a situation like the one in the US at the moment where the Federal Reserve doesn’t have a lot of options with monetary policy, I think our bank still does have a lot of options with monetary policy.
RAWDON Is the government tempted to - if it believes it can help or guide to be slightly more interventionist?
HELEN It's not our intention to interfere with the fundamentals of the Reserve Bank statutory autonomy, no. We have tended to stand back and let the bank make its judgements.
BARRY It's a tough call isn't it for you in an election year where you see many people now foreclosing, or banks foreclosing on mortgages and people selling up. Really Alan Bollard is showing very little sympathy towards home owners saying that they over extended themselves in the first place, I mean for a government that’s a tough situation to be in in an election year.
HELEN One of the issues for me is to go through this year with relatively stable monetary policy, cos I'm very conscious that not long before the Australian election their Reserve Bank put interest rates up, which was clearly very difficult for the incumbent government, that’s why you're not going to see a Labour led government here going crazy trying to match the National Party with whatever rash promise it wants to make, because the last thing we want to do is make the situation any more difficult for home owners who've seen their mortgage rates go up over the past year partly because the Reserve Bank moved last year, but also because the banks are now experiencing the fallout from the credit crunch offshore, and the banks have in a sense been doing the Reserve Bank's job for it by the way they’ve put interest rates up. We don’t want to aggravate that situation in any way at all and that’s why I keep coming back to the point of balance about the budget, we've got a lot of factors to take into account here.
RAWDON Prime Minister Helen Clark thank you very much for your time this morning, have a good trip and it'll be most interesting to see where it leads post the signing of the Free Trade Agreement.
