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TIM GROCER – Minister of Trade
GUYON Well how has the cause of free trade been advanced at all by the statement that the leaders signed, because what I saw was a lot of talk about the desirability of free trade and a pledge not to introduce any new barriers to trade and investment, but that’s treading water isn't it, shouldn’t we be trying to break down these barriers to trade?
TIM Absolutely, I don’t think intrinsically there was anything different in the statement in a major political sense from previous statements that have been issued at the highest level of political governance. What we hope is different is the political context. During the last round the Uruguay round I remember hearing someone say it's like a game of musical chairs, somebody has to stop the music and then you see who's got a seat to sit down on, otherwise the negotiators will go on literally forever dancing around the theme. So they’ve spent seven years dancing around the theme this time round, there's a deal on the table, I believe it could be put together in many different ways, somebody has to stop the music. Now, we have got a global financial crisis, none of us know quite what the transmission mechanism is between Wall Street and mainstreet or between if you like the financial sector and the real economy, we know it's not positive, nobody knows how deep it is. Baroness Ashton the new Commissioner for the European Union for Trade rang me last night for a bit of a chat, and as she put it we will now see whether people actually are scared enough as a consequence of the lessons of the Great Depression to actually get down there take a few decisions and do the deal.
GUYON Okay, well what about APEC, I mean you’ve got 21 economies there, 15 years ago they pledged to drive this whole organisation through with the socalled Bogor Goals which were going to have free trade for developed countries by 2010 and the developing countries by 2020, do you believe they will meet that basic goal?
TIM I have always been a sceptic not of APEC generally, but of the Bogor Goals since they were signed in 1994 because nobody defined a method or sorry to use jargon – modalities which is you know the standard jargon these days for a method in trade negotiation – as to how to do it. So they struck out this goal, the goal is great, without ever actually confronting the realistic question as to how they were going to get there.
GUYON So does it have any credibility, can you have an aim without having a method of getting there?
TIM I think it's now attaining credibility as a result of the decision taken by the United States current administration to join in this strategic grouping that we've been calling P4 and now the Americans have renamed it and I feel very comfortable with this 'Transpak' this is now a means to actually attain the Bogor Goals, we're going to miss them in terms of the timetable that is for certain but I think it's a more realistic negotiating approach.
GUYON We're certainly going to miss them?
TIM Oh absolutely, there's no possibility of the developed countries which includes Japan reaching zero tariffs in a year and a bit, no possibility.
GUYON You talked about the socalled P7 for most people with an interest in trade watching they will know that our ultimate game here is to have some sort of free trade agreement with the United States. Now doesn’t the fact that we have now six other countries in this potential agreement or negotiation make that ultimate goal a lot harder for New Zealand to obtain, more complex?
TIM It's certainly more complex, but I think at the end of the day Guyon it's really a more realistic way to proceed with the United States, if we'd just gone head to head with the United States when the only real hard trade issue is dairy I don’t think that given the imbalance of relative negotiating power we would have got what I think we're capable of getting in this more complex negotiation. So the trade off really is yeah more complexity it'll take more time, but I'm confident that it will have a bigger strategic result.
GUYON Okay New Zealand sets itself up as a world leader on free trade and certainly we have no tariffs and we've been prepared to negotiate bilateral deals with other countries, but how open are we on investment, I mean take your own policy of directing the super fund to put 40% of its fund, massive 15 billion dollar fund, into New Zealand companies alone, that's protectionism isn't it?
TIM No no, that’s investing in our future, it's nothing to do with saying keep foreign investment out.
GUYON That has the same impact though doesn’t it, you're saying – what if other countries followed suit and had their big funds only invest at home?
TIM I think you'll find that many of them where they have similar schemes do exactly that, but that’s not – they're not trying to keep New Zealanders out of Singapore, I mean Temasek has its own mandate that’s obviously invested very heavily in Singapore and Singapore's the beneficiary of that, it's not stopping us investing in Singapore any more than we will be stopping foreigners investing in worthwhile assets provided they go through the normal screening procedures.
GUYON It's contrary to the principle though isn't it?
TIM I don’t think it is actually, no I think it's a perfectly rational approach to start to say as John Key the Prime Minister says, we have under invested in ourselves, so we are now going to use the huge resources, I mean I think it's a cheque of about 40 million dollars a week that arrives on Adrian Orr's desk, he's the gentleman in charge of making the operational decisions, and we're going to invest part of that in New Zealand's future.
GUYON Does that 40% include Australia, given we're basically a single market under CER?
TIM I don’t believe it does but the operational detail of this hasn’t been worked out, that’s Mr English's responsibility not mine.
GUYON Well let's look at another investment barrier. In March this year when Auckland Airport was under consideration for sale by the Canadian interest, the Labour government then inserted a clause saying that ministers had to consider whether an overseas investment would enhance a strategic asset on sensitive land, I mean again that was populist protectionism wasn’t it?
TIM Well I myself criticised the ministers for intervening in the process but the ...
GUYON Well the issue now is will you overturn that at all?
TIM I don’t believe we will be seeking to do that but it's too early in the life of our government to say precisely how we're going to approach this but you can be certain we will be looking to encourage high quality, particularly greenfields investment in New Zealand's future, we think - foreign capital's required in this country until we've sorted out the fundamental problem of the current account. So we can't survive without foreign investment, we will take a positive view of foreign investment.
GUYON Let's talk more specifically about trade then, your policy is to lift the ratio of exports to GDP from 30% to 40% by 2020 – how?
TIM Well I think in a variety of different ways. First of all the reason why we want to do that is fundamentally trying to raise real wages, I mean this is the number one problem in my opinion that New Zealand has, our real wages are too low, that is why we are bleeding people and the only way to do that in the real world is to increase productivity, what we know is that there's like a cast iron relationship country by country, company by company within the same country, between higher levels of participation in exports, and higher productivity, how do we do it – well it's not just about trade I mean that’s my side of the responsibility, it's also about things like infrastructure, I mean if we are to move more of our exports into the weightless economy we've gotta have ultra fast Broadband, you know what we've stood on in terms of this election, fibre to the home, ultra fast fibre to the home covering 75% of New Zealand addresses, that’s as much about this productivity trade nexus as the direct negotiation that Mr Key's charged me with.
GUYON Right so it's not necessarily about filling in the missing pieces of the jigsaw like trade agreements with Japan and Korea.
TIM It's not just that it's part of it, yeah.
GUYON What are the prospects say for those countries, I think you’ve identified what India Korea and Japan as areas where we should be pursuing, I mean what are the prospects there?
TIM In the 30 years I've been involved in this issue I have never seen a more promising situation. If you think about the really difficult position New Zealand faced from 1973 when we lost this market that was essentially our sole market, obviously I'm exaggerating, and then started to try and find new opportunities it was hugely difficult for every New Zealander involved in that. We had to fight tooth and nail to get access. The world has changed around us in most extraordinarily positive way, China has opened up, that’s a quarter of the world's consumers, we're going to have free access to in ten years, that is of enormous strategic importance, we're starting a slow process with India, it'll take years to complete in reality, Japan well there's some delicate politics around this and we didn’t push at APEC for very good reasons.
GUYON What are the delicate politics?
TIM Well because there'd been a change in Prime Minister in Japan, we clearly need to have a dialogue with the new Japanese team at the appropriate time. There's the issue with signing the CER after deal that’s got this unpronounceable acronym called ANFDA, people think I've got a grammatical problem, this is very important, the ASEAN countries collectively are New Zealand's third largest market, they're ready now to sign off and then there's the Korean deal and I had a very good conversation with the Korean Trade Minister in Lima.
GUYON What about the EU it's a five billion dollar market, surely New Zealand should be making some representations or you know scoping out the possibility of some sort of closer economic partnership....
TIM Absolutely, and that’s exactly what we will do, I've always held the view that there is a place for New Zealand in the bigger EU strategic plan, that it would be impossible to get the European Union to focus precisely on what that might be while the Doha Round was still underway, for a number of reason I could spend time on, but I think the key thing is they need to know where they stand on the multilateral front for better or worse, then I think we can engage in a dialogue and you know New Zealand still has got this extraordinarily positive relationship with the EU now that they’ve moved the agricultural protectionism into a far far better space from a New Zealand point of view.
GUYON Just before I leave it, what are your best bets for Doha, do you think there's a prospect that it could be actually settled by mid next year?
TIM I don’t believe for a minute that anyone knows when a deal like this can be done, I think that it is deeply improbable that this will be the first ever round we've had – this round meaning cycle of negotiations, we've had eight since the second world war that this is going to be the first to fail, so I don’t know whether we'll get it done now, obviously I'm going to approach it in Geneva from a positive perspective, but I believe eventually we will get this deal done.
RAWDON Thanks Guyon, thanks Mr Grocer, I'll now open this up for the panel, Brent Edwards.
BRENT EDWARDS – Radio New Zealand
TIM Well we'll find out when we get there, I mean there's only one way to do this and that is to get on to the field and see what happens, the underlying point remains the same. I've said on a couple of occasions that there's this old saying people never learn the lessons of history, I don’t believe that, and if we look at the current financial turmoil there are two fundamental things in forming the reactions of serious hitters around the world, and they all come from the lessons of the Great Depression. One, on the financial side throw the kitchen sink and everything at it to stabilise financial markets, that is exactly what they have done and you know the principal operator here Bernard Bernanke, he is the inner academic guru on the Great Depression, he's learned that lesson of history and they're applying it and we just have to hope as New Zealanders that they’ve done more or less enough for financial markets to start stabilising. The other great lesson is on the trade side, we all know that what turned a financial turmoil into a catastrophic global depression with enormous political and strategic adverse consequences following a few years later was the growth of trade protectionism, it started with a thing called the Hawley Smoot Tariffs, so these were two – I think they were senators, I'm not quite sure of that, who proposed that you know we've gotta put the United States worker first, we've gotta protect US jobs – sounds pretty good, fine, except when they did it they then sparked off a whole series of retaliatory measures around the world of exactly the same type which put American workers in the export industries on the unemployment queue. So what the world has learned is that in times of real crisis the trade equation has to be stabilised and moved forward, so let's just hope that because of the seriousness of the occasion people are actually prepared to take – it's not that complex that’s what the annoying thing about this is, I mean it's not all that hard to put this deal together so let's just hope they’ve got the guts to do it.
BRENT But which countries have to give ground to get the deal done?
TIM It is fatuous to single out one or two countries, what they need to do is to move forward collectively, we know what the negotiating linkages are, we know that the major developing countries are gonna have to be a little more realistic on this technical thing called the SSM the Special Safeguard Mechanism but we don’t want to lose your ratings by having me talk about that, so the developing countries have gotta move on that, the United States has got to move on a series of issues under its control including things like cotton, cotton is a very very sensitive subject for the poor West African countries, the US has gotta move on that, they know that, and then a range of other countries have to put together a series of concessions so that everybody can say well it's not just one guy taking the hit, we're all moving forward in the right way, that’s the name of the game.
RAWDON Tim Groser, you said it's like musical chairs, well traditionally somebody when the music stops doesn’t get a seat, we're a pretty small nation, could we be a loser in this, I mean are we gonna see smaller nations come out as losers?
TIM The one country that will come out here a winner under any conceivable deal is New Zealand, and this is a simple fact of that any deal that we're gonna get we'll involve the elimination of export subsidies, no country in the world will benefit more than that than New Zealand, any deal that we get will involve taking disciplines on what are called technically trade distorting support, given the concentration of these massive internal subsidies, on products of vital interest to New Zealand, dairy sheep meat, beef, other products, no country will benefit more. In terms of the other issues I wouldn’t make nearly such a big statement, where services are very important, now I think 27% stand to be corrected but around that of our exports are in services, they're growing faster than our exports of goods, we'll benefit from a services package, I mean not in the same spectacular that my earlier comments – no we'll do very well out of any conceivable deal.
RAWDON What about food miles, you're also involved in the conservation ministry so surely that in a way implements itself as a form of protectionism?
TIM This is a huge challenge, and I mean I know that John Key has put forward the case in London that this is actually a very crude approach, food miles is a danger to us, we've been tending to look at this more in terms of our agriculture exports and the carbon footprint issue, I think we've made a lot of progress in the last few years on this because the only research that I've seen that’s properly internationally referenced research and I'm sure you're aware of it, shows that even when you take account of the huge transport distances that New Zealand products to our most distant markets in Europe have to take our carbon footprint is better than anyone's and sheep meat, the calculation is literally one quarter of the amount of greenhouse gas emissions than the comparable northern European industry. Now we've got that out in the market, I'm told by people who are close to the market – I am not yet close I've been out of the game for three years – that slowly that is being pushed into a more rational corner, but whack around the corner in our first week in office comes another variant of it on the air tax so it's a major issue and a major concern.
VIRGINIA LARSON – North and South
TIM You're right, and it's quite clear from the international media alone that I've been monitoring that this is developing as the next major, well not the major, a significant problem, I don’t think of the same magnitude as the bigger issues but I've asked – I talked to John Whitehead the Secretary to Treasury whom I've known – I used to work in the Treasury with John years and years ago, far too many years for me to admit to – and talked to him about this and the Treasury and the Ministry of Foreign Affairs are preparing a report for me and Mr English and other ministers to analyse one how large is the problem from a New Zealand perspective, we know it's a more significant problem than it was before the crisis but it's not clear how big it is. (B) Is it likely to be self correcting. (C) If not what does the government need to consider. So I'm waiting that report with some interest.
BRENT At APEC there was talk again about this free trade area of the Asia Pacific and you made mention of the expanded P4, did that come up for discussion with APEC Trade Ministers or Leaders?
TIM Well it came up on the sides of the meeting – one of the great things about meetings like this is not just what goes on in the formal meeting as you know Brent or the formal communiqué but the extraordinary opportunity it gives you to meet your counterparts and people closely related to your interests in the margins of the meeting. So I mean I participated in three or four very intense and formal discussions sometimes with all seven of the ministers including the American Trade Minister, called USTR US Trade Representative Susan Schwab and the other Trade Ministers of this new grouping to push this forward, so it wasn’t discussed per se inside the formal meeting but discussed a great deal – we had even a major press conference on the issue, so Lima was hugely helpful I thought to moving that agenda forward, not pun intended.
RAWDON Sorry time's against us, Tim Grocer thanks very much for coming in.