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Q+A: Tim Groser interview transcript

Published: 12:34PM Sunday July 03, 2011 Source: Q+A

The man in the hot seat who will negotiate details of a free-trade agreement is the much-travelled Trade Minister, Tim Groser. Of course, he hadn't seen that interview with Mr Sharma when I spoke to him last night in Berlin. But I started by asking whether a deal with India could deliver the same sort of benefits as a deal we've had with China.

TIM GROSER - Minister of Trade
Absolutely. There are several people who've said to me - actually not so much with China in mind, but the TPP
negotiation - that this could be more important than TPP. Well, I don't need to get into that argument, because we've got to try and do both. But the comparison with China, I think, is very relevant. We know we're dealing with the second emerging super power after China, and I think in 20 years' time, it's entirely realistic to think this could be as important for NZ as China is today.

GUYON Some people are worried about more outsourcing of jobs. That people in NZ who work in, say, call centres or IT jobs, that companies are going to be more able to shift those operations to India. Is there a foundation for that concern?

TIM Well, to the extent that it's a legitimate concern. The danger exists already, and I don't think a FTA is going to make a great deal of difference to that, because what we're trying to do is improve access across the board. But I think there's a broader issue here - that NZ has to accept that the way the world is moving is towards what is called trade in inputs or intermediate goods. Something like 60% of world trade is now in intermediate goods, so people don't export things; they export bits of things. That's the reality of the global supply chain. And, actually, from a NZ perspective, while we want to maximise as much production of high-value, well-paid jobs in our own country, we've got to fit into this global supply chain, or we're going to fall behind.

GUYON India is an economy which is growing very strongly, but one where there is still a great deal of poverty. According to the World Bank, 75% of its people live on about US$2 a day. How much of a challenge is it to do a free-trade deal with a country that has a lot of poverty and is very different from a developed country like NZ?

TIM Well, the figure sounds a little high, but it doesn't alter the underlying point you're making, Guyon. There still are hundreds of millions of people living in very, very difficult conditions, extreme poverty. But that figure is falling every year. India, as you say, is in fact the fastest-growing large economy in the world, fractionally ahead of China, I believe - not that there's a big deal of difference between the two of them. And poverty, while staying at the same level in absolute terms, because you've got a rapidly growing population here in India, and it's predominantly a young population. The median age is only 27, 28. Uh, the actual percentage of that that's in extreme poverty is, thank goodness, falling year by year. Now, from our point of view, our market in this gigantic country is not those people; it's at the absolute high end - the emerging middle class, which is, depending on your definition, estimated at anywhere between 50 million and 250 million people. Expected to be 400 million in 10 or 15 years' time. We just don't operate at that mass-village level, and I don't imagine we ever will. We want access for our goods and services at the middle-class level.

GUYON One of the impacts of poverty in India is obviously the child labour issue there. There are millions, apparently, of 5-14 year olds who work in child-labour conditions. I spoke to the India Trade Minister about this. They are very sensitive about that issue, and they say they don't want labour standards to be included in the free-trade agreement. Are you comfortable with labour standards not being included in the free-trade agreement?

TIM Well, we base our discussion with India and with all developing countries which have this problem, and all of them, of course, uh, bar a few very strange regimes, are as deeply concerned about their own child labour and poor working conditions for rural and urban poor as we would be. We deal with that through the ILO conventions. We've adopted, as a country, a policy of trying to engage in a cooperative way with these countries. That's the model we've used in China. It's in the model we've used in Indonesia. It's the model we've used elsewhere, and I think that, in the long run, is going to serve everybody's interests the best.

GUYON You mentioned the International Labour Organisation there. When I go back to your 2009 joint feasibility study on this free-trade agreement with India, it says that, and I'll quote this to
you: 'As a minimum, the outcomes of all trade agreements to which NZ is a party must be generally consistent with and not undermine these core principles.' When I look at the core principles of the International Labour Organisation, one of them is the abolition of child labour. Clearly India has not abolished child labour, so isn't this going to be a sticking point for you in this agreement?

TIM Oh, I don't think it will prove to be a sticking point. I think it's something we're trying to work with the Indian government in a cooperative way. I mean, the main focus of our negotiations is to try and work in areas that are very important to the economic development of India, that also benefit us. My firm and long-standing view is that the best way to achieve higher standards for all exploited people is through the process of economic development. I mean, if you go back into Western economic history, we had appalling child-labour problems in Victorian England. The pathway is economic development, and I'm an absolute believer that trade is the best possible thing NZ can do in a practical sense, while maintaining a political dialogue on these standards, but not in a confrontational way. We're just not going to go there.

GUYON So, that's fascinating, actually, what you've said - that the way to get out of the problem of child labour and poverty is free trade, in your belief.

TIM Absolutely. Absolutely, but it's not quite as black and white as an either/or proposition. I mean, I think that the fundamental driver of getting rid of poverty, getting rid of abuse of child labour even in our own economic history - if we go back to the economic antecedents of NZ - is economic development, to give people the resources by which they can do something about it. I mean, I remember when I was ambassador to Indonesia. At one stage during that in the mid '90s, the Indonesian government - now, this is before real democracy - this is during the Suharto years - they increased the compulsory age for primary education. Why? Because the economic development process made it realistic for them to do this, and Indonesia's been doing that in a staged way over the last 25 years. I don't think there is any doubt that the pathway here is wealth creation, plus the judicious use of this by the governments concerned, to address these social problems. Now, the extent to which a tiny country like NZ can help here is indeed primarily by expanding economic opportunities for people.

GUYON Before I leave that issue, is there any way that people buying products in NZ, say bed linen, which I know that India exports a lot of to NZ - is there any way that New Zealanders buying those products in our country can tell, or should they know, whether these products have been made with child labour?

TIM Well, it would be extremely difficult. I mean, we went through this, I remember, in the previous Parliament when I was in Opposition. We looked very carefully at this issue in terms of some iconic products like chocolate. Now, the problem here is that while New Zealanders obviously morally don't want to use products where there's gross exploitation, it's in a practical sense, we found, almost impossible to trace the inputs. So, once again, you come round full circle to what I think is the only conceivable and practical way through this. It is not grandstanding. It is to promote economic development. Trade is absolutely central to this process. It's because of trade that a country like Korea has gone from being one of the 10 poorest countries in the world, with dreadful labour conditions, to being an outstanding country now, with very high living standards for most of its people. So, you know, I'm an absolute believer that trade is actually the best long-run route.

GUYON On the actual substance of the free-trade deal itself and the removal of tariffs - India has some quite high tariffs or taxes, if you like, on agricultural goods. As high as between 30% and 50%, I believe, on some goods. Are you confident that they will actually be phased out?

TIM Well, we won't do a deal that is not comprehensive. And the two prime ministers have just agreed and communicated that the deal will be high quality and comprehensive. At the same time, I think all of us on the NZ side are very much aware of the political and social sensibilities around some of the agriculture issues. So we've been quite open and frank with our Indian friends in saying, you know, 'We understand there's got to be a transition path here. We understand that we need to be able to show or even bring to the table agricultural technology.' I mean, that will go with our stable trade platform for us. So, I mean, we're not sort of mad dogs on this issue. We do understand that there are sensitivities, but we will have to have a comprehensive agreement to do the deal.

GUYON Just a couple of minutes left, and I want to switch if we can to the Trans-Pacific Partnership, which I think you did mention at the beginning of this interview. Um, there were initial hopes that it could be signed at APEC in Hawaii this year. I presume that that sort of timetable is now not realistic.

TIM Well, I can't speak for the world on this matter, because there are nine different countries involved and 700 or 800 officials. What I still think is doable is signing some type of interim agreement - call it a framework agreement - well, not signing it, but politically endorsing it at the highest level of government at the APEC meeting. And the content of that is really the subject of negotiation over the next few months. So, you know, we'll just do as much as the traffic will bear. That remains my view.

GUYON There's been obvious public concern - considerable concern from some - about the impact on Pharmac if the United States pushes its intellectual property rights cases aggressively on this. Do you think New Zealanders need to be concerned? Will the NZ negotiators be prepared to reduce the role of Pharmac and push up the price of drugs for New Zealanders?

TIM Well, Guyon, I think you're absolutely right. There has been a huge amount of concern expressed by all manner of people on this issue, and that's why about 10 days ago I decided for once I wouldn't speak off just little dot points, but prepare a formal speech. So I've put a stake right in the ground, and what I've said in that speech, from memory - these might not be the exact words I've used, but they will be a close as damn it - is that our public health system is not up for negotiation. Pharmac is an outstanding institution that has helped NZ get on top of its pharmaceutical drug bill in a spectacularly successful way, and we're not about to negotiate its fundamentals. But to every single journalist, and there are dozens who have asked me, 'What do you mean, Mr Groser, by fundamentals?' I say, 'Well, I'm not going to negotiate that over the media - whether it's in a studio in Wellington or on top of a roof top looking over the Reichstag in Berlin.

GUYON All right. Good place to leave it. Thank you very much for making time for us, Minister Groser. We appreciate your time.

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