Agenda Transcript: Phil Goff & Phil O'Reilly

LISA: With Australian ships on standby to evacuate their nationals from Fiji questions are again being raised about the ability for New Zealand's Defence Forces. Defence Minister Phil Goff has said the government's goal is to build a strong niche force but what exactly will that force be capable of. Also on Goff's agenda this week – Trade – as negotiations continue for a free trade agreement with China New Zealand is faced with the prospect of a new form of protectionism, food mile taxes, these would penalise New Zealand exports for the carbon emissions produced during their transport. The Minister of Defence and Trade, Phil Goff, joins me now. Good morning Mr Goff.

PHIL GOFF – Minister of Defence and Trade
Good morning Lisa.

LISA: To begin with can you bring us up to date with the latest in Fiji?

PHIL: Well the situation is really on hold I think there at the moment but from a defence point of view we have to be prepared for the worst possible contingency plan. I don’t think we'll get to that I think the situation if we had to evacuate people we would do it commercially through the airport and using commercial airlines, but if the situation were to turn violent then we need to be ready for an evacuation in extremis, I'm working personally with my colleague the Australian Minister of Defence, Brendan Nelson, so that the two countries would have a coordinated approach, but I'd have to stress that that is not the most likely scenario that is if everything went badly we need to be ready for that, we of course through the Prime Minister and the Minister of Foreign Affairs are taking every step we can to discourage any action against a government that is properly democratically elected and to get the message across to the Republic of Fiji military forces that the role of the military is not to dictate policy to the government but to act on the authority of the democratically elected government. We're trying to do just that.

LISA: In terms of the evacuation though isn't that the point that you're liaising with Australia that we would in fact be relying on Australia to transport our people out in the worst case scenario.

PHIL: Well we'd do it together, I've been involved in this in the past in the Solomon Islands where we've taken out people from other nationalities, Australians, Americans, Japanese, we'll provide the help that we can Australia will provide the help that they can, they're of course a bigger country they have more forces, but we are working in alignment with them for the purposes of evacuation and I think that’s important.

LISA: What support could we offer to the government besides a few words of moral support?

PHIL: I've been through this situation in two previous governments in 1987 and then back in 2000, I don’t think that New Zealand, nor do I think that Australia are ready for any Rambo action, that would very rarely be appropriate in these circumstances or be helpful in resolving the situation. What we're focused on specifically is if the need arises to be able to evacuate New Zealanders, Australians and other nationals. We don’t think it'll come to that but if it does come to that of course we need to have the contingency plans in place.

LISA: Alright in a situation like this, this does raise questions about our Defence Force. I want to read you some extracts from the Annual Defence Report which was released earlier this month. Under the heading Naval Combat Forces 'shortages in key positions, air crew, bridge watch keeping, welfare officers, technicians, land combat forces, staff at below 80%, in many cases personnel are junior soldiers less than two years service. Hercules, flew reduced hours due to old age and faults and poor serviceability' – that’s just a taster, is that a defence force, does that paint a picture for you of a defence force that is in top shape?

PHIL: Well I could have given you another dozen quotes out of there that talked about how we've put 3.3 billion in so that we're now getting a defence force that has state of the art equipment in all three services. I could have given you quotes out of that that said the attrition rate in the defence forces is much lower than previously. I could have given you the quote out of that to show that the money is now there for a 12 to 15% increase in personnel.

LISA: You do still have some serious issues to address.

PHIL: Look there are always personnel issues in all those areas of shortages particularly in specialised positions, you go back and read any Annual Defence Report over the last 20 years and you'll see that, but put this in the context. After the numbers of personnel were nearly halved during the 1990s, when the real level of expenditure was halved in the 1990s this government has begun a serious process of rebuilding the Defence Force, 4.6 billion over ten years focused largely on personnel, raising the numbers by 12 to 15%.

LISA: So do you think that is a good report card, that report.

PHIL: The overall report card is very good and talk to the Chief of Defence Force Gerry Mataparai and he'll tell you how pleased the Defence Force is with the progress that’s being made both in new equipment – for heavens sake we've just spent 771 million dollars on new helicopters, we've got new utility helicopters coming, we've got seven vessels being launched or commissioned this year of the Navy, that’s never happened in the Defence Force history in New Zealand.

PHIL: In light of that where is our niche, the government has said and been quoted as saying that we're trying to have a strong niche force, what is our niche then?

PHIL: Our niche first of all our troops are combat trained, they have to be combat trained and from time to time they will be involved in combat, but we work closely with Australia particularly in the Pacific, our niches will be looking at places like Timor Leste, like the Solomon Islands, in the past Bougainville.

LISA: So peacekeeping and border control?

PHIL: Not just peacekeeping and border control, we obviously have our people working in Afghanistan at the moment, we have been involved in combat, we are involved in peacekeeping and we're doing a damn good job in Bamian and everybody that’s part of the coalition there acknowledges that fact. We are going to always be involved in any scenario with other people, we're not gonna go in on our own, four million New Zealanders generally don’t take control of a situation in the Middle East or the Pacific.

LISA: So we're relying on the goodwill of others?

PHIL: No, we work with others because we work multilaterally, we've always made that commitment since 1945 that we go into areas where there is a UN mandate to do so. We more than pull our weight, New Zealand has 400 people serving overseas right as we speak, per capita that’s probably more than most other countries are providing and we've now got them equipped with state of the art equipment so that we can be sure that we can minimise the risk to our people when they service overseas.

LISA: Closer to home though the Pacific is no longer this idea that it's a continually peaceful place, we have problems in the Solomons and Fiji, are we fully prepared for what's happening in our own backyard then?

PHIL: Yes, I mean you're quite right, we have the picture postcard image of the Pacific of swaying palm trees and beautiful beaches, well those things exist but we also have ethnic tensions, we have poor governance and corruption, we have impoverished people and we have fragile states, and states that could well fall over. New Zealand is playing its role, United States Undersecretary for the State Department has acknowledged the job that New Zealand and Australia are doing in the Pacific that’s important.

LISA: Turning to Trade now Mr Goff, free trade negotiations with China, there are some significant hurdles there, agriculture, work schemes, how are you going with these issues?

PHIL: Pretty well, there are hurdles of course, this is the first time China has negotiated a Free Trade Agreement with a developed country and its level of ambition at the start of this process was much lower than that of New Zealand's. What do we want? Particularly on the good side we want elimination of tariffs albeit spread over a period of time for sensitive products and that will apply to New Zealand products as well where we have sensitive products and we'd like to make some advance in areas like services, government procurement investment, China's never negotiated in the latter area so that will be harder. We're about nine rounds through, we're happy with the progress that’s been made, we believe that there's good will and a genuine desire to complete these negotiations on the Chinese side and we got a boost from the Chinese Premier Wen Jiabao when he was in New Zealand to say that China too wanted a comprehensive high quality balanced agreement with benefits to both sides.

LISA: China has raised the issue of limited work scheme or permits, I mean how are you going to handle that and how can you guarantee that if you let people in on those permits they're not going to become overstayers?

PHIL: Fair questions. First of all New Zealand obviously is going to have limitations on any temporary labour that comes into the country, that is what applies now, that is what would apply in the future, it's not open slather, it would be very carefully managed according to New Zealand's needs and there's no guarantee actually that any change will happen in this area at all. For New Zealand to respond in that area we would have to have a very good offer reciprocally from China and it remains to be seen whether the outcome of the negotiations will be sufficiently ambitious to encompass any reference to temporary skilled labour coming to New Zealand. If there is any reference it would be quite tightly set out in terms of numbers.

LISA: So when do these things become deal breakers and when does the agreement become a hollow deal, it's not worth it any more, when is the time to pull the plug?

PHIL: Well if it’s a hollow deal we wouldn’t do it.

LISA: So no movement on zero tariffs over time?

PHIL: We would like to see the elimination of tariffs, that’s always been our position but you go in with high ambition, you look for the highest possible quality and you look to maximise your own country's interests and the process involves flexibility, it involves compromise or you don’t get the deal, there's a lesson for that and what's happening in the WTO.

LISA: But how much compromise?

PHIL: Oh in the end both countries have to see advantages for themselves in doing the deal otherwise neither country is prepared to enter into that arrangement. We did a study before the negotiations started it showed that from New Zealand's point of view it may be worth between 250 and 400 million dollars in net additional trade a year for New Zealand, that’s quite significant, some big boosts to the produce that we sent over that currently face much higher tariff rates than most Chinese products face in New Zealand, so there are real advantages. China wants to get this deal through because it wants to start negotiating with other countries, it needs to demonstrate that it's capable of doing that and there is enough common ground and mutual interest that makes me confident that we'll see the deal done in the timeframe that’s set and that’s in the year leading up to April 2008.

LISA: Back here though are you facing some more urgent trade issues. We heard this week about the Stern Climate Change Report and the bad publicity that followed about New Zealand food imports into the UK. Food Miles – how can you fight this kind of protectionism which is basically a PR campaign isn't it?

PHIL: It is. Now let's get one thing clear because I think some of the media to date…

LISA: No Stern didn’t include the kiwifruit in there, but a UK Minister…

PHIL: A former minister Bayers made the comment and then there was another article in the Guardian.

LISA: Generated discussion and debate and pointed the finger at us, so how do you guard against that?

PHIL: Well first of all we bring some facts into the discussion, Bayers said you know this is the cost of air freighting kiwifruit to the United Kingdom, well one small problem, we don’t, all the kiwifruit goes by sea, it was setting up a straw man and knocking him over, it was frankly nonsense and the same comment was made about olive oil, you know the cost of air freighting olive oil from New Zealand, we don’t do it, we send it by sea, but the critical thing with food miles is if you're talking about energy costs, if you're talking about environmental sustainability you look at the amount of energy and the impact on the environment that goes in not just to transporting the product but producing and transporting the product, we've done proper academic studies on this, Lincoln University, the Germans have done the same, the Brits have done the same as well, what do they all show, let's take the key products, dairy – half of the energy costs going into producing an amount of dairy produce in New Zealand and transporting it as against producing and transporting in the UK, four times as much energy absorbed in the United Kingdom to produce a leg of lamb and take it to the market as to produce the same product and transport it from New Zealand.

LISA: I know that, you know that, but when a Brit goes into Tesco's they don’t necessarily understand that, so instead of you, instead of a Trade Minister, don’t we really need a good spin doctor a good PR company, is that what we need more than you at this point.

PHIL: We need to get the message across but let me just say a couple of things in the last week that has helped get that message across. Firstly I met with the British Minister of Trade while he was in New Zealand, he acknowledge the point that I was making, the British government are aware that the facts are different from the spin that is being put on by some vested interest protectionist groups. Secondly, I met with all of the European heads of mission this week in Wellington delivered the message loud and clear they acknowledged that message and the representative of the European Union, that message will go back. Thirdly, we're talking to the environmental groups, it was good to see the Greens come out this week and acknowledge that food miles was a nonsense and to pass that message back to their colleague party in the United Kingdom. I've met with some of the NGOs, they also were sending that message back.

LISA: Let's bring another Phil into the conversation at this point, let's bring in Phil O'Reilly from Business New Zealand who's live in Wellington. How can we fight this new form of protectionism do you think Phil?

PHIL O'REILLY – Chief Executive, Business New Zealand:
Well the first thing we need to do Lisa is recognise that it is just that, it's protectionism. This is trade protectionism in drag it's dressed up as being some sort of concern about global warming and climate change, it's got nothing at all to do with that, so the big thing that we need to do as the Minister says I think is talk to all of those interest groups that otherwise might keep the conversation going, keep the debate going, but I do think there is a need to be out there talking to the public of Great Britain and the public of Europe about this issue and making it clear about what New Zealand's doing in this area, about the efficiency of our product and the fact that we're signatories to Kyoto and paying our part in the wider issue without trying to over rig that case.

LISA: Have we come to a real tipping point here with business and environmental issues though, is business recognising more the costs and the benefits of being green so to speak.

PHIL O'R: Well there's a wide range of views in the business community as you might imagine about the issues related to climate change, but I think that what there is, is a real recognition that we need to engage, that whether or not whatever you think about climate change you need to engage because these sorts of things are going to occur and the government's going to take action whether you like it or not. So what we've noticed I think Lisa is that over the last six twelve months or so, is business is really trying to get ahead of the curve trying to work with government and amongst themselves to say what can we do that’s not only good for the planet but also good for business, for example energy efficiency and so on, what can we do about adding to New Zealand's case for free trade and at the same time making sure that we're seen to be responsible players on climate change.

LISA: You mention free trade, the negotiations with China, when is it too many concessions, when does it become a hollow deal that you walk away from?

PHIL O'R: Well I think the big issue for me will be manufacturing and services, it's the manufacturers of New Zealand who are facing real threats from China right now, we don’t even have a free trade deal and yet you know lots of New Zealand manufacturers are really facing intense pressure from Chinese imports and the services piece Lisa is the big piece for the future, we'll increasingly become a services exporter we already see that, exporting education offshore for example, that kind of thing will increase. So when we look at the deal it'll be are we making good gains for New Zealand manufacturers being able to export into China and are we opening up the new opportunities that we might have in services, and the Minister's well aware of that.

LISA: Let's put that to Phil Goff those concerns, manufacturing, gutting the manufacturing industry, would you like to address Phil O'Reilly's issues?

PHIL: Well we're not gutting the manufacturing of course, but the manufacturing industry as Phil and I both know has had to adapt and change over time, we don’t produce t-shirts in New Zealand any more at four times the cost of what we can import them, we're part of globalised trade, globalisation is a reality but we have to look at our manufacturers being adaptive being able to make the changes they need to to be globally competitive and we've done that. In 1982 when we were gonna go in with Australia the doom and gloom merchants said this will destroy New Zealand manufacturing. New Zealand manufacturing thrived on that but there are things that obviously we can't do cheaper but New Zealand manufacturing will start to look more towards value added to intellectual property, design work. Textiles in New Zealand might not be doing t-shirts any more but we're world beaters in fashion design and the sort of work that a whole lot of our manufacturers and designers are doing internationally. Now there will be – there will be as I say sensitive areas in New Zealand, textiles is one of those, that is just as China will want to have a phase out of protection for their sensitive areas, so too will there be a phase out for New Zealand areas.

LISA: Let's bring our panel in on this conversation going first to Brent Edwards from Radio New Zealand. Do you see a benefit in this agreement and free trade agreements generally?

BRENT EDWARDS – Political Editor, Radio New Zealand
Well potentially but I think one of the problems that New Zealand has is that you know we've got two impediments, we're small so we don’t have much of a market to offer, and the other thing is the market's already very open so those country's doing negotiations with us aren’t getting actually a lot out of that negotiation in the sense that they're already as Phil O'Reilly made mention in manufacturing, Chinese manufacturing goods are coming in here all the time at very low rates of tariff if not tariff free on many lines, so we don’t have a lot to negotiate.

LISA: Is he right – Phil Goff?

PHIL: Yeah we're a much more open economy than most but the world is moving in our direction because people can see, I mean we've had protectionism for years, all of us around this table remember when we used to have very high levels of subsidy and very high levels of protection did that make New Zealand manufacturing and New Zealand agriculture stronger – no it nearly destroyed it and in 1984 our economy was close to collapse. So we had to make that journey.

LISA: Let's bring Bernard Hickey in, I'm sure he's got some questions on this.

BERNARD HICKEY – Managing Editor – Fairfax
Yes free trade agreements, Minister isn't there a risk when you try and do a deal on the side with a big player that you dilute your own negotiating resources and also dilute the chances of a world trade agreement which really is the holy grail of what we're doing, and also plays into the hands of the big players who'd rather not do the big deal which actually delivers the real gains and they can pick people off on the side.

PHIL: Well you're right, our first priority is the WTO, why is it our first priority, because bilateral deals can never deal with some of our key problems such as heavy domestic subsidies and export incentives. We need the WTO for that reason, we need the WTO also for the purposes of a more stable and a more prosperous world by bringing developing countries into globalised trading, but we can't put all our eggs in one basket, you know we will do our level best to make sure we can get progress and complete the WTO round but we by ourselves don’t determine that.

BERNARD: Do we have enough diplomats to do all that foot work?

PHIL: Well we do remarkably well for a little country of four million, one we're in the Green Room, so I'm one of 25 ministers that sit around in the core group that take those talks forward and secondly we have the chair of the Agriculture Negotiating Committee, but if I just come back to what I was saying before, not all the eggs in one basket, we've gotta do the bilateral thing, we've gotta do the regional thing as well.

LISA: Let's bring Phil O'Reilly in here, I can see some head nodding there Phil, are you agreeing with what the Minister is saying?

PHIL O'R: I absolutely agree with what the Minister's saying, what we need to do it seems to me with China and everywhere else is think about what's in New Zealand's best interests and that’s largely about trying to get the world to do what we did before and that is open up its barriers to trade, in that way New Zealand will be richer as a result. It seems to me though Phil one of the dangers that we have here being a small country is that we tend to get on the dance floor with whoever's prepared to dance, so we've got a deal going with China, fantastic, that’s great, we've done one with Thailand and now we're about to do one hopefully with the Arab states but the thing that I think causes business some concern is that doesn’t feel all that strategic, it feels as though we're doing deals with just whoever might want to do a deal with us, you know the last girl at the dance party.

LISA: Are you setting your sights too low – Phil Goff?

PHIL: No no we're not doing that, I've just come back Phil as you're aware, and we'll have a talk about this when the Ministerial Advisory Group comes together that you're on, to Korea and Japan. Japan's our third biggest trading partner, Korea our fifth biggest partner, so those are strategic countries as you'd agree. A few years ago you would have thought you'd never get a free trade agreement with those countries, they're heavily protectionist, they're GTan countries, it's not gonna be possible. I had good discussions with Ministers of Agriculture, of Trade, of Commerce, we're starting to move them to a position where they will consider looking at a trade negotiation in that area, the United States – you and I have both been working with our counterparts in the United States, I don’t rule out a free trade agreement with the United States, I think it'll be doable, the question is when and that will depend in part on whether the Trade Promotion Authority is extended. So we are looking at the big players but we also have to be prepared to take advantage of worthwhile opportunities when they come up and one of those worthwhile opportunities actually is with the Gulf Cooperation Council, we think we can do a deal with them, why wouldn’t we.

LISA: We're gonna have to leave it there, thank you very much Phil Goff for joining us this morning and Phil O'Reilly down in Wellington.

FINAL THOUGHTS – GUEST COMMENTATORS

LISA: To our panel now for their final thoughts for the day. Let's go first to Brent Edwards from Radio New Zealand. Free Trade did you learn anything or have your views changed on whether it's a worthwhile way to go?

BRENT: Well I don’t think we learnt anything new, but I mean the issue around free trade is in terms of the free trade deals that New Zealand's negotiating if you look at New Zealand's export performance over the last 20 years or so since New Zealand opened up it's actually been pretty dismal, so I guess in a way there would have been perhaps a question for Phil O'Reilly from Business New Zealand about what is business doing about taking if you like the opportunities that are being provided by these negotiations that the government has conducted with a number of countries now, but I think it's a difficult area because again as a small country which is now very open to other traders there's not a lot in it for those other countries larger countries to do a deal with us and if we want to talk for instance about trying to do a deal with US everyone brings up the anti nuclear thing, but from an American perspective small market already open, why would they want to do a deal.

BERNARD: And I think we underestimate - Mr Goff's very optimistic and go for it and he should do that but we underestimate the power of some of the players that we're playing with. If we were to do a free trade deal with America for example Pharmac would be under serious threat, the pharmaceutical lobbyists in America are very strong and the idea that somehow we'd get an open door for all of our agricultural exports into America is frankly nonsense, the power of the lobbyists in America is enormous that’s why they’ve stopped America from doing a decent World Trade Organisation deal and the Europeans for that matter, the lobbyists tend to be in government …and from the private sector and also in China it's great that he thinks we're going gangbusters and we need to tick a few boxes and go for it, there's a lot of hard work and the Chinese despite what the President says the Chinese are very reluctant to give up control, particularly their dairy industry. Not a lot of people know but Fonterra's exports to China have actually fallen in the last year or two, the dairy industry in China is going gangbusters largely with New Zealand genetic material, a lot of cows have been exported to China and they will not want easy access for New Zealand dairy products into China.

LISA: Do you see that as the deal breaker or a deal breaker on the horizon?

BRENT: Well I mean agriculture could be a deal breaker with the Chinese although the Chinese are very keen on a deal they need it politically that’s the one advantage New Zealand has in that negotiation, for China it's a political deal to get a deal with a developed country…

LISA: To use as an example when they go knocking at the door of other people.

BRENT: Because that’s also very important to the Chinese to get it right, from their perspective, they don’t want to set precedents that they’ll then set in negotiations with much much larger economies.

BERNARD: The other thing we're forgetting is that Australia wants to do a free trade deal with China and they’ve been in talks as well and we've been thinking about our little patch but Australia and for the Chinese that is a much bigger deal because they really have stuff that they want from China and they would love to get those materials.

LISA: Alright, thank you very much to our panel this morning.

ENDS

© Scoop Media