Labour: Exports, FTAs and Homes

Guest post: Hon. David Parker – Labour’s Trade Spokesperson

The NZ-China free trade agreement was established by Labour in 2008. It was led by Phil Goff, now Auckland Mayor, and back then Labour’s Trade Minister. We remain proud of it.

Trade with China has grown enormously since, and now exceeds $10 billion pa each way.

However, total NZ exports to the world have dropped from 30% of GDP in 2008 to 27% of the economy now.

I would remind voters of National’s 2008 election promise, repeated subsequently, to increase exports to 40% of GDP by 2025. Nine years on, they have plainly failed to meet their own target. They should be held to account for that failure. National’s new target would be laughable if not so serious. National’s new target is to have 90% of exports covered by FTAs by 2030.  Exports could drop further and they could still meet that target!

There are a number of reasons behind the serious fall in New Zealand’s exports as a proportion of our economy. Most concerning is what others have labelled the productivity drought. The OECD as well as various New Zealand economists and commentators have highlighted that productivity is stagnant. This shows up in low growth. Per capita GDP growth has been only 1% for a while now. GDP per hour worked is negative. Wage increases for most people are not even keeping pace with inflation.

Trade agreements, important though they are, will not fix the productivity drought.

To grow exports we must build competitive advantage. Exporters build comparative advantage by developing new markets for existing products, or by investing in new products be they goods or services. Investing more human and financial capital in the crucial productive part of our economy is the key to building both productivity and exports.

The decline in exports is linked to out of control house prices in Auckland in recent years. More and more money has been sucked into that market, and related infrastructure. As a consequence, less of our precious investment capital has gone into growing our exporters of goods and services. To grow productivity and exports we must apply a greater proportion of our capital to productive investment classes, and less to speculative asset classes.

Returning to FTAs, the most pressing issue is to fix the TPP11. While a shadow of its former self now the USA has pulled out, it still has trade benefits.

The crucial issue to fix is the right of a future New Zealand government to ban the sale of our homes to overseas buyers, which the current National government has deliberately given away. This is the largest area of disagreement on trade issues between National and Labour, and needs to be resolved. National’s abandonment of the prior consensus should be criticised and can be fixed.

Labour’s policy is to ban overseas buyers of existing houses, other than to our closest neighbours like Australia where we have a close relationship and reciprocal rights.

We say if you have the right to live here, you have the right to buy here, but not otherwise. In this world of rapidly increasing wealth inequality, we do not want 1%ers from overseas to be able to outbid New Zealanders for our homes or farms.

Under the China FTA negotiated by Labour, any future New Zealand government could ban the sale of farmland or houses to Chinese investors. China can do the same, and since the FTA has indeed banned non-residents, including NZ investors, buying houses in some of China’s main cities.

The China FTA requires NZ to treat China no less favourably than other countries. This is under the most-favoured-nation (MFN) provision – article 139. This allowed New Zealand to ban the sale of farmland or houses to Chinese investors, but requires NZ to treat China no less favourably than other countries.

Clause 3 of article 139 means earlier agreements with our Australian and Pacific Island neighbours are not affected, and do not flow into the NZ-China FTA.  Later agreements do. The recent South Korean FTA, and the terms of the unresolved Trans Pacific Partnership, have caused a serious problem.

National does not believe we should ban foreign buyers, and negotiated different terms in the South Korean FTA and the TPP. These purport to stop a future NZ government banning the sale of NZ homes to buyers from South Korea. The South Korean provision flows to China under the most-favoured-nation clause in the NZ-China FTA

National’s change was wrong and ideological. This is proven by the fact that South Korea in their FTA with Australia a year earlier allowed Australia to ban the sale of their homes to Koreans. Even more absurd is the fact that South Korea can ban house sales to New Zealanders under that FTA, though New Zealand can’t do the reverse.

Similarly under the draft TPP Australia can ban overseas buyers of their homes from TPP countries.

We want the same right here in New Zealand and if elected will pursue this. National have refused to even try.

If this is not fixed, the effects of TPP11 will extend to earlier agreements under most favoured nation clauses. We in Labour are determined to stand up for New Zealanders and will not give way on this issue. We anticipate sympathy from other countries, given that they have allowed Australia this right under the TPP.

Other trade agreements beckoning include the Pacific Alliance countries of central and south America, the European Union, the UK (post Brexit), India, and of course the upgrade of the China FTA, as well as other initiatives in Asia. All must be pursued vigorously.  Non-tariff barriers, and services, must be addressed in addition to tariff reductions.

Labour believes in trade, and in FTAs. However, if public confidence is to be maintained, and we are to avoid the protectionism on the rise in the USA and elsewhere, public concerns about selling New Zealand homes to foreign buyers must not be ignored.