24 May, 2013
Address to the Nikkei Forum, Tokyo
Mr Chairman, ladies and gentlemen,
I thank the Nikkei Forum for their invitation - it is great to be part of such a wide-ranging discussion on the future of Asia. And it is a special pleasure to be back in Japan at this particular time.
It is almost three years since my last visit. A lot has changed. Japan, like my own country, has suffered a huge natural disaster but is now well into the recovery phase. Japan has a new government. And the Nikkei Index is back to its pre-crash level.
But I want to start with the Trans-Pacific Partnership.
Within Asia, Japan’s decision to join TPP was the biggest trade news of the year. It is a decision we in New Zealand warmly welcomed.
Japan’s entry makes TPP a true Asia/Pacific enterprise, drawing together countries from Northeast and Southeast Asia, North and South America and of course Oceania.
New Zealand has a special interest as one of the founders of this project, going back to the 2005 “P4” agreement.
Within the expanded group of 12 countries, Japan is the second largest economy. Japan’s involvement lifts the combined GDP of the group by nearly US$6 trillion to US$27 trillion.
Collectively TPP countries will account for nearly 40 percent of global GDP and about a third of world trade.
In his 15 March announcement, Prime Minister Abe made a compelling case for Japanese participation, linking it to his wider vision for Japan’s future.
Certainly TPP is much more than a regular free trade deal.
We see TPP as an opportunity to set rules that match the complexities of modern trade and investment. We are serious about making it a true “21st Century” agreement.
It will reach well behind the border into areas such as competition policy, government procurement, regulatory management, state-owned enterprises and supply chains which are critical for traders and investors – including those based in Japan – who want to operate in multiple markets.
As the negotiation moves forward, the reality is that much of the political focus will go on to sensitivities.
Every country has its sensitivities. But you heard Mr Yonekura last night. If we respond by carving out the tough issues – whether in agriculture, or autos, or investment – nothing will be achieved.
That is why a shared commitment to quality is so fundamental.
TPP Leaders have agreed on a set of ambitious benchmarks, including elimination of tariffs and other barriers to goods and services trade.
After all, there is no point in creating a ‘21st century’ trade agreement if you do not deal with ‘20th century’ trade barriers such as tariffs.
There will be ways to manage sensitive issues through TPP, and this will be done in a sympathetic, responsible and reasonable way – but not through exclusions.
Events such as the Nikkei Forum are important as an opportunity to think beyond the short term.
The TPP project has its roots in the vision which APEC created in 1994 for free trade and investment in the region.
Japan had a central role in shaping that vision. It looks even more compelling today.
In the next five years, 50% of world growth is expected to be generated in Asia.
We can expect over 1 billion new middle class consumers in this region in the next couple of decades.
TPP won’t end with the current 12 countries. We welcome interest from others in the region. Over time we think TPP will provide a catalyst for wider trade and investment integration in the region.
TPP is a building block – quite possibly the key building block – for the ultimate vision of a Free Trade Area of the Asia-Pacific, or FTAAP, which APEC Leaders endorsed in Yokohama in 2010.
But people will also want to know what it means for individual countries and exporters.
For my Government, one of the great things coming out of Japan joining the Trans-Pacific Partnership is the opportunity to set a new direction for the New Zealand-Japan relationship.
We already have close ties in business, education, tourism, sport and diplomacy. A small example: Mr Motegi told me last night his son had just come back from a few weeks as an exchange student in New Zealand.
But I think there is a lot more we could be doing. One obvious example: Japan’s government is pushing the idea of a “proactive agriculture” strategy (seme no nogyo) with a focus on boosting food exports to high-end markets in Asia.
The opportunities are huge and we think there might be opportunities to work together in this area. We have complementary strengths.
As we rebuild communities devastated in the 2011 Christchurch and Tohoku disasters, it is also clear that there are opportunities to capitalise on our new expertise in major reconstruction programmes.
Let me now turn to energy, which is one of my main portfolio responsibilities.
We have seen tremendous growth in Asian economies in recent decades.
The Asian miracle has been achieved on the back of a massive expansion of energy use. But from here on we have to be thinking about more sustainable energy supplies.
New Zealand is more fortunately placed than some.
Over 70 percent of our electricity already comes from renewable sources – especially hydro and geothermal but also, increasingly, wind.
For electricity generation, our renewable energy share is the third highest in the OECD behind Iceland and Norway.
We expect the share of renewables to increase in the future, as New Zealand works towards a target of 90 percent of our electricity coming from renewable sources by 2025.
We are on the way to meeting this target.
Our electricity generating companies are leading the charge, and importantly they are doing so without financial support – such as feed-in tariffs – from the Government.
Renewables – geothermal and wind – are already cost-competitive with fossil fuels as a source of new generating capacity.
For example, two new geothermal power stations are due later this year, and a new wind farm is also under construction – without Government subsidies.
Geothermal is a high-capacity, reliable, clean energy source, drawing heat from the earth to provide a consistent flow of energy.
In New Zealand, we have been using it for electricity generation for more than 50 years.
Today, geothermal generation meets around 14% of New Zealand’s electricity demand and that figure is growing as we build more plants.
Current global geothermal generation stands at around 11,000 MW. This is projected to double over the next 10 years.
Here in Asia there is enormous potential for geothermal development.
New Zealand companies are already involved in projects and partnerships in Indonesia, the Philippines and Chile.
And recent joint ventures involving Japanese and New Zealand companies have been highly successful.
While we are putting effort into the development of the renewables sector, we also recognise that New Zealand – like the rest of the world – cannot shift from using non-renewables overnight.
We are therefore continuing to encourage the development of our petroleum and mineral resources.
Crude oil is now our fourth largest export.
The oil and gas industry sector currently supports around 8,000 jobs and pays NZ$330 million (about Y28 billion) to the Government in royalties, not to mention taxes.
However there is a lot of scope for growth.
New Zealand has the world’s fourth largest Exclusive Economic Zone and 18 petroleum basins, most which are largely unexplored and untapped.
We have good mineral prospectivity for gold, coal, iron sands and offshore phosphate deposits.
The New Zealand Government is committed to developing our resources in a sensible, safe and environmentally responsible way.
This process has begun with the annual offering of defined areas for petroleum exploration through competitive tenders.
The 2012 tender saw 10 permits awarded to both national and international companies, including one from Japan.
The areas for the 2013 tender include 1500 square kilometres of onshore, and almost 190,000 square kilometres of offshore acreage, ranging from a mature production basin to frontier areas.
With a robust regulatory regime, ease of doing business, and stable and supportive government, New Zealand is a great place to invest in.
New Zealand has a special role in supporting our closest neighbours – the developing Pacific Island states – most of which are small and economically vulnerable.
Those states face serious energy issues.
80% of their electricity generation comes from diesel generation, and 10% of the region’s GDP goes towards importing fossil fuels.
This creates significant economic problems.
As a step towards reducing the Pacific’s dependence on fossil fuels, New Zealand and the EU co-hosted a Pacific Energy Summit in Auckland in March.
The goal was to put Pacific Leaders, their energy roadmaps and 79 renewable energy and energy efficiency project proposals in the same room as major donors.
The Summit was a huge success.
It secured donor commitments of US$525 million (approximately Y52 billion).
This included Japan’s contribution of US$66 million in grants through the Pacific Environment Community Fund.
The challenge is now to translate this new funding into support for more than 40 renewable energy projects for the Pacific.
One such project involves New Zealand working alongside Japan through the Pacific Environment Community fund to develop solar/diesel hybrid systems in the Cook Islands.
Japan and New Zealand are also partnering with the Asian Development Bank in Papua New Guinea on a project to supply electricity to approximately 4,500 rural households, commercial premises and community facilities.
Greater use of renewable energy is of course a key component of our efforts to combat climate change.
But rising to that challenge is also giving us the opportunity right now to embed low-carbon economic strategies in our thinking and in our administrative and political systems.
There are many reasons why that is the right approach.
As well as tackling climate change, it will also improve our energy security, grow jobs, improve efficiency and productivity, and help us to manage increasingly scarce resources.
A low-carbon future also requires enormous innovation and creativity.
Japan is a great developer of innovative technology to combat climate change.
For its part, New Zealand is helping to reduce greenhouse emissions both at home and through international negotiations.
We have implemented an Emissions Trading Scheme which is innovative and world leading.
Internationally we support the conclusion of a new climate change instrument that can deal with the vast bulk of emissions that the Kyoto Protocol would never have included.
Nowhere is the challenge of covering these emissions felt more keenly than here in the Asia-Pacific, since the two biggest global emitters, both of which are outside the Kyoto Protocol, are located here.
There are practical steps that can be taken. New Zealand led the creation of the Global Research Alliance on Agricultural Greenhouse Gases, which now has the support of 33 countries including Japan.
Emissions from producing food are not often given much attention, but the reality is that they are between 11% and 14% of total global emissions.
That’s close to the total emissions from transport.
Factor in the likelihood that food demand will double by 2050, and you can see that we have a real challenge on our hands to feed the world and at the same time cut emissions from agriculture.
The aim of the Alliance is to support research collaboration and find ways to cut emissions from agriculture.
Japan has been a member of the Global Research Alliance since it got underway in 2010.
It has made an important contribution to the Alliance’s work on rice paddies, croplands and livestock.
In the long run, to make an impact on climate change we need to put a price on carbon so that businesses in Asia and elsewhere can factor that into their low-carbon investment decisions.
That in turn will depend on having a robust and transparent international market for carbon.
This is another area where Japan and New Zealand are actively working together.
To conclude, the Asia-Pacific region is being drawn ever-closer together.
TPP and other trade agreements will help to deepen our integration in trade and production networks, and the myriad of related policy issues.
But behind trade integration lies an ever-deepening process of cooperation in other aspects of the regional economy, including the fields of energy and climate change I’ve spoken about today.
This is a process in which all countries, big and small, developed and developing, have a role to play.
I know that both Japan and New Zealand are well placed to work together as part of these wider regional efforts.