International treaty examination of the agreement between New Zealand and the Republic of Korea Statement to the Foreign Affairs, Defence and Trade Select Committee 30 April 2015 Stephen Jacobi, Executive Director, NZIBF

Mr Chairman, Honourable members.

Thank you for the opportunity to speak to our submission. I do so on behalf of the business leaders who make up the membership of the NZ International Business Forum. The organisations they represent are among New Zealand’s largest internationally oriented businesses and peak business associations.

You will be hearing from several of these organisations directly and questions related to the impact of this agreement on their individual operations are best directed to them. As the NZ International Business Forum we are particularly interested in the way New Zealand enterprises and our economy as a whole is able to integrate with the global economy. From this perspective this agreement with Korea is a very welcome development.

In the interests of time I would like to comment on two issues highlighted in our submission.

The first relates to market access to Korea.

Trade Minister Groser has been quoted as saying that the Korean FTA is not a perfect agreement.  That’s because of the lengthy time frames for the elimination of some Korean tariffs of interest to New Zealand and because some products will remain subject to tariffs and with safeguards.

There’s no hiding the fact that this negotiation has been a difficult one. The Korean Government was very reluctant to eliminate tariffs on some products and this is not surprising given the long history of protectionism in Korea. The Korean FTA however provides a pathway to tariff elimination for a number of key products for New Zealand including most dairy products, beef and kiwifruit and immediate tariff elimination on wine.  NZIBF is satisfied that this was the best outcome that could be achieved in the circumstances.

In particular given the FTAs that Korea has achieved with our competitors, it was important that this deal was concluded in a timely fashion to avoid ongoing discrimination in the Korean market.  There was no point in letting the perfect become the enemy of the good. Even with this outcome some New Zealand exporters will continue to be penalised until the tariff phasing catches up with our competitors.

Should, as is expected, Korea seek to become a member of the Trans Pacific Partnership (TPP), once concluded, there will be another opportunity to address the outstanding issues which remain of concern to the affected sectors.

The second issue relates to foreign direct investment.

As you see we have attached to our submission some further commentary on FDI given the public interest in these issues at present.

Korea and New Zealand currently have low levels of investment.  The FTA provides additional protections for investors in both countries, which should contribute to improving the investment climate.

Importantly however the FTA does not weaken the Government’s ability to continue to regulate on matters of national interest including in respect to public health, the environment or the Treaty of Waitangi.

As the annex explains in greater depth this is done in two ways – by a list of “non complying measures” in Annex II to the investment chapter and by general exceptions language in Article 20, which also applies to investment.

We have compared the provisions in the Korea FTA to earlier undertakings given in the NZ China FTA (2008) and the Australia New Zealand Investment Protocol (2013).

We submit that the protections contained in the agreement are equal to, and in some cases superior to, past provisions.  This suggests to us that the Korea FTA has maintained an appropriate balance between investor protection and government regulation.

This is clearly of relevance to the current TPP negotiations, where we have no doubt New Zealand’s negotiators are seeking similar provisions.

Mr Chairman, Honourable Members

Korea is an important trading partner for New Zealand and with the right rules and framework there are opportunities to increase two-way trade and investment.

The Korea FTA provides a basis for improving the economic relationship between the two of us.  In the assessment of the NZ International Business Forum it is, on balance, a good deal for New Zealand and deserves your support.