New Zealand First leader Winston Peters has warned that planned Foreign Affairs job losses and the closure of overseas posts will cost more in the long run than they save.

A State Services Commission report last year said the ministry was looking at slashing 200 jobs out of almost 1000.

An announcement on the details is expected soon.

Peters, a former minister of foreign affairs who negotiated a big increase in funding for the portfolio, said a “slash and burn exercise” would seriously affect this country’s overseas trade.

He said the move was a “serious, retrograde step” at a time New Zealand was desperately trying to increase its export trade.

Phil Goff has also joined in the bleating, arguing that more bureaucrats in MFAT will increase exports. If only, it was so simple.

As it happens exports have been growing quite nicely. In the last three years, they have increased 15.1% to $46.1b. That’s pretty good considering the wobbly global economy. Why have they increased?

Well exports to China have increased 169.5% to $5.6b. The dollar increase of $3.5b makes up 59% of the overall increase in exports.

It was three years ago we signed a Free Trade Agreement with China. An agreement that Peters as Foreign Minister not only refused to vote for, but actively campaigned against with a newspaper ad campaign urging people to sign up in opposition to the FTA.

So Peters’ record is having opposed the China FTA which saw exports to China increase 170%, and instead his solution is more bureaucrats in MFAT.  I doubt I have seen a more moronic economic prescription in recent times.

This is the annual trade deficit with China over the last decade. Both the Greens and Winston rail against imports and say we need to export more and reduce the trade deficit.

They also both voted against the China-NZ Free Trade Agreement in 2008. They both still maintain it was a mistake, and a bad thing to do.

The results speak for themselves. After the trade deficit rose from $1b to almost $4b, it has reduced to $1.5b in just three years.

The Greens, like all of us, care deeply about the environment. But on economic policy, they and Winston are consistently wrong. They are skilled at talking about problems, but their solutions are toxic.

Exports to China in the three years prior to the FTA were $5.7b. In the three years since, they have been $13.1b. Those exports have helped keep kiwis in jobs, have grown the economy and provided billions more in tax revenue to help pay for schools, hospitals and welfare. And if the Greens and Winston had their way, it would not have happened (unless you wish to argue the massive unprecedented growth in exports was a coincidence).

• In 1990 we exported 12 times as much to the US than China – $1.9b v $0.16b
• In 2000 we exported 5 times as much to the US than China – $3.7b v $0.77b
• In 2008 we exported twice as much to the US than China – $$4.0b v $2.1b
• In 2011 we exported 7/10ths as much to the US than – $3.9b v $5.6b
• From 2000 to 2011 the level of exports to the US has increased only 5% (and these are nominal dollars)
• From 2000 to 2011 the level of exports to China have increased 635%
• Since the FTA was signed in 2008, exports to China have increased a massive 170% in just three years
• In actual dollar terms, that is $3.6b more exports to China in 2011 than 2008
• Comparing three year periods, 2009-11 saw $13.1b of exports compared to $5.7b the previous three years

I suggest people ask candidates of parties that opposed the NZ-China Free Trade Agreement, why? The Foreign Minister in the last Government campaigned against it. The Greens voted against it.

I regard the China/FTA as the best achievement of the 5th Labour Government, and a probably the best legacy from both Clark and Goff who should be very proud of making it happen. If we had not had that extra $13b of exports in the last three years, we’d be a lot worse off.

John Armstrong reports:

New Zealand has scored a major trade coup, becoming the first country in the world to start negotiating a free trade deal with Russia.

The decision to officially begin negotiations was announced last night by Prime Minister John Key and Russian president Dmitry Medvedev following a one-on-one meeting between the pair during this weekend’s Apec summit in Japan.

It will be wonderfully ironic is we conclude the Russian FTA before we get an agreement with the US.

Meanwhile, the Apec “silly shirt” tradition for leaders was to be extended to spouses this year.

Bronagh Key was measured for a kimono designed by Japanese fashion maestro Hiroko Koshino. John Key was not sure how his wife would look.

“If they have Bronagh versus Michelle Obama, she [Bronagh] will look like the Hobbit,” he said, referring to the difference in height between the two first ladies.

Good God, that comment may cost him

New Zealand ministers have their fingers crossed that a poll of the Japanese public will back Tokyo’s plans to join a Pacific-wide free trade agreement.

The Japanese Cabinet formally approved a new trade policy on Tuesday which will see Japan “gathering further information” before “initiating consultations” with the nine-member Trans Pacific Partnership (TPP), which includes New Zealand and the United States.

Despite the cautionary tone of that statement, Trade Minister Tim Groser last night described the Cabinet’s position as the most significant development in Japanese trade policy in the last 25 years. …

Japan’s highly-inefficient farmers have long been sheltered behind high tariff walls, effectively blocking foreign exports, particularly rice and dairy products.

However, big business in Japan is firmly behind the Government amidst feelings that Japan risks falling behind the play unless it secures more free trade deals to safeguard its industrial exports.

A poll in the Daily Yomiuri newspaper had more than 60 per cent of respondents favouring Japan joining the TPP and only 18 per cent against.

This would be amazing if Japan agreed to an FTA which includes agriculture.

The EU may remain the last bastion of protectionism at this rate!

Last year, New Zealand exports to Russia were worth $187 million, a modest sum even if well up on the $51 million of a decade earlier. As Russia has a population of 142 million, those figures hint at the potential of a free-trade pact.

But more telling still is the fact that not so long ago, New Zealand enjoyed thriving commercial arrangements with the former Soviet Union despite an often strained diplomatic relationship, not least over the invasion of Afghanistan.

But Keith Locke supported that invasion, so maybe we should make Keith the free trade negotiator for Russia

The Press supports the creation of a new bank:

The proposal to merge three finance organisations to create a new locally owned bank is a timely one.

For the finance institutions themselves, it is an opportunity, driven by necessity, to turn themselves into stronger, more robust entities, particularly after the turmoil of the last three years or so.

For investors, looking to diversify their investments away from the great Kiwi stand-by, domestic real estate, it could provide a worthwhile and productive place to put their money.

And for borrowers, particularly small-business owners who have complained of being cold-shouldered by unsympathetic banks during the financial crisis, it could provide a friendlier, more knowledgeable lender to local business. …

The three entities involved – Pyne Gould Corporation’s finance arm Marac Finance, the Canterbury Building Society and the Southern Cross Building Society – are established names in finance.

They have not been unscathed by the upheavals of the financial crisis, but they have survived it with credit ratings still at very respectable levels for non-bank institutions.

Two have BB+ ratings and the other a BB rating, which is at the high end for entities that are not banks.

But still not great. The acceptable grades are:

• AAA : the best quality borrowers, reliable and stable (many of them governments)
• AA : quality borrowers, a bit higher risk than AAA
• A : economic situation can affect finance
• BBB : medium class borrowers, which are satisfactory at the moment
• BB : more prone to changes in the economy
• B : financial situation varies noticeably

Once you start to get into CCC and below, institutions are officially vulnerable.

The Dom Post talks off shore drilling:

But for recent events in the Gulf of Mexico, the Government would be making more of a fuss of Brazilian oil giant Petrobras’ decision to explore for oil and gas off the East Coast of the North Island.

The world’s fourth-biggest energy company, a world leader in offshore drilling, this week won the right to explore about half of the Raukumara Basin, which extends north and east of East Cape. The company will spend up to US$118 million (NZ$174m) over the next five years gathering seismic data and drilling an exploratory well.

The project will create jobs and draw international attention to New Zealand as a potential source of petroleum.

But the big gains will come if Petrobras makes a commercial find. Already the petroleum sector generates about $3 billion a year in export revenue. Energy Minister Gerry Brownlee has estimated that figure could rise to $30b by 2025 if preliminary estimates of New Zealand’s petroleum resources prove to be correct.

Which would make a huge difference to our standard of living, and ability to fund health and education services.

However, celebrations this week have been muted by the ongoing disaster in the Gulf of Mexico. Six weeks after an explosion on BP’s Deepwater Horizon rig killed 11 workers, the well 1.6 kilometres beneath the sea is continuing to spew between 1.9b and 3b litres of oil a day into the gulf, polluting the fragile Louisiana coastline, threatening fisheries and destroying the livelihoods of fishermen and tourist operators.

For that reason it is essential that the promised overhaul of New Zealand’s health, safety and environmental arrangements for offshore petroleum operations is completed well before any deepwater drilling begins.

Agreed.

The ODT looks at Facebook and privacy:

Facebook, once a small, “free” social networking site for university undergraduates to share personal information, has become a vast subdivision on the information super highway.

It is expected soon to reach a landmark figure of 500 million registered users.

This would make it the third largest country on Earth, bigger than all but India and China.

On Monday this week – “Quit Facebook Day” – Canadian campaigners urged people worldwide to remove themselves from the site.

They, and many others, were riled about the way in which they felt their privacy was being purloined for profit.

Quite why they should have been so surprised is another matter: you do not pay upfront to belong to Facebook, but the company must make ends meet – and a tidy profit – somehow.

That “somehow” is no great secret.

The site sells advertising to companies tailored to the defined demographics of its users.

The “footprint” they create in their Facebook activities is like gold to advertisers and marketers who will pay accordingly.

I was talking last night to someone about Facebook, with the idea being that if a user is aged under 18 then their privacy settings are set by default to not share data with anyone but friends.

New Zealand has scored a trade coup by becoming the first country to start negotiating a free trade deal with Russia.

While the Russian market is currently small for New Zealand – around $200 million a year – the potential is seen as huge by our trade negotiators.

It will be ironic if we end up with free trade agreements with China and Russia, before we do with the US!

The drawing up of free-trade agreements is always an exercise in compromise. Sometimes, unpalatable concessions have to be made with an eye on the bigger picture. …

At the forefront of American concerns will be two issues – the strength of our dairying industry and the role played by Pharmac, the Government’s drug-buying agency.

The US farming lobby will want little conceded, while American pharmaceutical companies want Pharmac’s role drastically reduced.

The drug companies say an end to New Zealand’s anti-competitive drug-funding system would give its people quicker access to new and expensive medicines.

US drug companies can introduce these new and expensive medicines at any time. Whether or not they gain a subsidy from the state is another issue.

Trade Minister Tim Groser has described Pharmac as “an outstandingly successful public institution”, which has saved taxpayers hundreds of millions of dollars. The estimated savings in a five-year period are enough to have built the Starship hospital.

Mr Groser has also said that, as the principal economic adviser at the Ministry of Foreign Affairs and Trade, he had negotiated with the US on Pharmac 10 years ago and had seen no need to make concessions.

That is reassuring. But the issue will doubtless be raised again, as New Zealand covets a free-trade agreement with the US. Hard choices will have to be made.

The Government has already bowed to pressure and allowed some slippage in Pharmac’s integrity. With the taxpayer uppermost in its mind, it should hesitate before venturing further down that path.

I agree Pharmac is of great value to New Zealand. The gains from a free trade deal would have to be significant for us to agree to changes to Pharmac.

The Press remembers ANZAC Day:

The history of Anzac Day remembrance has been shaped by memory and ideals – memories and ideals that have changed over the decades since the landing on the Gallipoli Peninsula in 1915.

The commemoration therefore has reflected the great alterations that New Zealand has undergone in those 95 years.

Yesterday’s services saw the men and women of World War II and will continue to see many of them in future years. But their number is dwindling and thoughts thus turn to the Anzac Days of the future. …

Voices last week were raised, predicting a decline in turnout over the coming decades, but that is unlikely to eventuate. The respect for what our fighting men and women achieved and the honour they brought us is now deeply and uncontroversially embedded in the nation’s psyche.

The Press pages on New Zealand’s military history, which we printed in the lead-up to Anzac Day, are but one example of this. They were prized by readers, and schools have taken them in large numbers. A hunger exists for hearing again the old tales of valour and service.

The men and women who performed those deeds will not be forgotten and Anzac Day will live on in their honour.

While on TV, once again I found Maori TV did best.

The Dominion Post looks at Fiji’s proposed media restrictions:

The primary function of Fiji’s proposed new media regulator is “to encourage, promote and facilitate the development of media organisations and services”. It sounds reasonable.

There is just one problem. In order to perform its duties the Media Industry Development Authority is being given the power to fine and lock up journalists, editors and publishers, censor news reports, search premises, seize documents, and shut down news organisations.

Coating a dictator’s iron fist with a veneer of legality does not soften the blow.

The commodore is labouring under a misapprehension. The misapprehension is that he is the big man in the Pacific.

He is not. He is a tinpot dictator who has gained power at the point of a gun and is destroying his country’s economy and prospects and the institutions, already weakened by three previous coups, that underpin good government.

The news media is one of them. Journalists, editors and publishers will bear the immediate brunt of the latest restrictions, but the real losers are the Fijian people, who have already lost the right to learn what is happening because of “emergency” regulations put in place last year.

Free speech is a fundamental pillar of democracy. “Were it left to me to decide whether we should have a government without newspapers, or newspapers without a government, I should not hesitate a moment to prefer the latter,” said Thomas Jefferson, the author of the American Declaration of Independence.

Another great Jefferson quote.

Two developments in Suva provide renewed evidence of the regime’s distaste for democracy in any real meaning of the word. They must surely have dismissed any thoughts among transtasman officials and politicians of achieving change by appeasement.

This is the unfortunate thing, with the timing. I think NZ, and Australia, were edging towards a more constructive relationship. But this draft decreee pushes them in the other direction.

First, Fiji’s just-published draft of a Media Industry Development Decree would virtually eliminate freedom of expression in the country. It is a remarkable document, one which would make Zimbabwe proud and Singapore blush.

I am one of those who believe taking away a voice is worse than taking away a vote.

The decree protecting the regime from prosecution is a more abstract threat to democracy – a coup leader’s fantasy that surely, once this sorry interregnum is over, will be declared null and void by a legitimate court – with the case against him then reported by a free press. That time can come, though, only if New Zealand and Australia continue to hold hard to democratic principle and the regime is subjected to the greatest sanction, the decision of the Fijian people to call time on their dictator.

This is why I don’t think the Commodore will even surrender power. He has no exit plan which guarantees him immunity from prosecution.

The Dom Post looks at trade with the US:

The US has much to gain from improved access to Asian markets for its goods but it is an unsentimental dealmaker, which swaps its free trade principles for self-interest when it sits down at the negotiating table.

The new ambassador to Washington, Mike Moore, has work to do. So does Mr Key, who is hoping for a formal invitation to the White House later this year and the heft that will give him with US business and farming organisations.

And the ODT talks apples:

The Australian apple market is not huge and estimates for New Zealand exports range around $15 million to $20 million per annum, small but significant.

On the other hand Australian apple consumption is much lower than New Zealand’s and better prices and more competition could be what is needed to stimulate demand.

It can be a win-win,

Australia is in this instance, however, a blatant hypocrite.

It battles for free trade in agriculture while putting up several specific agricultural barriers to protect its own, including against New Zealand apples.

Yes, and if they refuse to act on this issue, will risk undermining their credibility as the WTO can then approve trade sanctions against them.

India and New Zealand have begun negotiations for a free trade agreement which Trade Minister Tim Groser says will put New Zealand in a prime place to benefit from India’s economic growth. …

Mr Groser said a deal held “great promise” for New Zealand businesses and negotiators would target the high barriers to trade. India had a population of more than one billion and was expected to be the third-largest economy in the world by 2025.

India’s GDP currently is US1.2 trillion – around ten times the size of New Zealand’s

He expected negotiations to be prolonged. India was not one of New Zealand’s traditional trading partners, partly because the high trade barriers on major New Zealand exports, such as wood products and agriculture, had held back trade.

That suggests the benefits of an FTA with India could be a lot larger than with countries with relatively low barriers.

1. Australia, since 1983
2. Singapore since 2001
3. Thailand since 2005
4. Trans-Pacific (Brunei/Chile/Singapore) since 2005
5. China since 2008
6. ASEAN (Brunei/Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam)
7. Malaysia
8. Gulf Co-operation Council (Bahrain, Oman, Kuwait, Saudi Arabia, UAE, Qatar)
9. Hong Kong
10. Korea

Now who are our biggest trading partners:

1. Australia $18.7b – in force
2. USA $9.0b – zip
3. China $8.9b – in force
4. Japan $7.6b – some momentum
5. Singapore – $3.1b – in force
6. Germany – $3.0b – zip
7. Malaysia $2.9b – finalised
8. UK $2.8b – zip
9. Korea $2.7b – under negotiation

Also the total value of trade with ASEAN is $12.2b and GCC $4.3b.

So while progress on Doha remains stalled, we’re doing pretty well. The big gaps are USA, Japan and the EU. The EU are hopeless. Japan is showing some signs of life and in a very welcome move, President Obama a few minutes ago said the United States would seek to join the Trans-Pac agreement.

I’m delighted his protectionist election rhetoric, may have been just that – rhetoric. I started writing this blog post unaware of Obama’s announcement – how is that for good timing!

New Zealand has successfully concluded negotiations for a free trade agreement with six oil-rich Gulf states, Trade Minister Tim Groser announced yesterday.

The Gulf Co-operation Council (GCC), made up of Saudi Arabia, Kuwait, the United Arab Emirates, Oman, Qatar and Bahrain, is New Zealand’s seventh-largest trading partner with bilateral trade worth $3.85 billion.

Not bad. Mind you I don’t think Groser should be given time off until we have free trade agreements with every country on Earth, bar North Korea.

• Malaysia is NZ’s eighth-largest market.
• NZ exports to it were worth $1 billion last year, and has grown 80% since 2004
• 99.5 per cent of NZ exports will be duty free within seven years.
• Kiwifruit exports will be duty free by 2012 – current tariff is 15%
• A “most favoured nation” clause which means Malaysia will automatically extend to New Zealand exporters the benefits of any other concessions it makes in subsequent free trade deals with other partners

The FTA negotiation started under Labour in 2005 and was concluded this year.

A year ago today New Zealand’s free trade agreement with China came into effect.

The results so far show it to be a big success, says New Zealand Trade and Enterprise’s general manager for North Asia, Rod McKenzie.

New Zealand exports to China climbed to more than $3.3 billion in the year to June 30 – an increase of 61 per cent on the previous year.

Clark and Goff did very very well with the China FTA. I regard it as their finest foreign policy achievement, even though their own Foreign Minister campaigned against it.

“Malaysia is our seventh largest trading partner – last year we exported nearly a billion dollars worth of goods to Malaysia with two-way trade worth nearly three billion. Goods exports alone have grown 34 per cent a year since 2005.

I didn’t realise they were 7th.

With NZ First out of Parliament, the only party that will vote against will probably be the Greens.

The United States has put on hold scheduled talks with the grouping of Trans Pacific Partnership countries – including New Zealand – while key appointments are being made to the Trade Representative’s office, including congressional confirmation of US Trade Representative Ron Kirk.

President Barack Obama’s new Administration also wants to review its position on free trade before beginning talks which the US signed up to last September when George W. Bush was still in office.

If the delay is only due to the first factor – key appointments not yet made – then it is not a big problem.

It is the second factor – the review of the US position on free trade – that is far more of a threat.

Obama’s rhetoric was strongly protectionist during the Democratic primaries. If that represents his true position, then we have real problems.

However a senior Obama staffer was exposed telling the Canadian Government to ignore what he says about NAFTA, which suggests it may have been rhetoric only.

I admire John McCain’s free trade stance – he supported free trade agreemenets with basically every country on Earth, only excluding those they have security issues with (half a dozen countries such as North Korea, Cuba, Iran etc).

Bush had free trade rhetoric, but would ofen go protectionist to appease domestic pressures. McCain was a wonderful opportunity to actually turn the US away from protectionism.

If the US and Europe dropped their tariffs on goods from Africa, that would do more to lift many in Africa out of poverty than any amount of aid.

This is no surprise, as work started on this last year with an economic study into the benefits of having an FTA. But good to see NZ making such good progress with Asian countries on trade issues.

The economies that are scaring me are the EU and the US. The EU is under massive pressure with tensions between old and new Europe. And some countries may end up being forced out of the Euro. And the US just looks set to drown in a mountain of debt.

We may turn out to be grateful of our location down under.

“I completely understand where people are coming from on both sides of the debate,” says Joyce – speaking before the delay was announced – “but there are some wider trade-offs for the country around this stuff as well.” Overseas trade agreements require New Zealand to have such a law, although he thinks the Labour-led government, which passed the Act in its dying days, went too far.

Several people have made this argument, but it is overlooking a rather salient point – namely that we do not have an FTA with the United States – in fact we are not even in the queue to have one. And as far as I know, no current FTA or treaty requires us to have such a law.

So let us look at what will happen, if one day the US does sit down to negotiate a FTA with NZ. It is quite correct that the US will demand our laws reflect the demands of their intellectual property industry.

But think of the damage we have done to our negotiating ability, by already giving them everything they wanted – before we even are in the frame for an FTA.

If we ever do get to negotiate an FTA, this is what you want:

US Govt: Now we turn to your intellectual property laws. We want you to force ISPs to terminate Internet users who we think infringe copyright from our struggling Hollywood music and movie studios.

Tim Groser: Well that will be very unpopular back home. Our Government would get a lot of flak for that.

US Govt: But this is crucial. We insist that you have such laws.

Tim Groser: Well I can try selling this to Cabinet and Parliament, but I need some real wins to counter it.

US Govt: Like what.

Tim Groser: Well this will piss off around 80% of NZ – every NZers who uses the Internet. That is around 3 million people. Now you have only 1.2 million beef farmers and 1.5 million sheep farmers, so if you agree to all tariffs on beef and lamb disappearing by 2015, then I think I can sell this back home.

US Govt: Good try. We can’t do 2015, but how about lamb goes to zero tariff by 2018 and beef by 2023.

Tim Groser: I think we have a deal

You get the general idea. You don’t give away one of your strongest negotiating points, years in advance of even negotiating the free trade agreement. That is not in NZ’s national interest.

Hence it is very good news that despite the recession, NZ is making good steps towards reducing trade barriers. Trade Minister Tim Groser is earnign his pay!

The agreement to start FTA negotiations with India is exciting, but of more immediate impact is the signing of an FTA with Asean nations, initiated by the previous Government.

Trade Minister Tim Groser, who was in Thailand to sign the agreement negotiated under the previous government, said 99 per cent of New Zealand’s trade to those countries would be duty-free within 12 years. When fully implemented, it would mean annual duty savings of about $50 million.

The real gain isn’t just the savings, but also that it prevents those countries hiking up tariffs against us, as a protectionist measure. The current tariffs are quite low, but as I understand it could be lifted to up to 50% before this agreement takes force.

Some very good news for Tim Groser’s first week as Trade Minister.

The one good thing that may come out of the credit crisis is a renewed determination to lower trade barriers.

It is also looking promising that Obama’s protectionist rhetoric was for the campaign only. This will be one flip-flop I welcome if he does stick with the P4 negotiations.