Labour accuses National of scaremongering amid claims China FTA will need to be renegotiated

Trade Minister Todd McClay claims Labour's proposed ban on foreign buyers of houses will mean the China free trade agreement will need to be negotiated.

Labour has immediately dismissed the claim as wrong, and further scaremongering from the National Party.

However its trade spokesman admits renegotiating trade deals with the likes of South Korea could potentially take years, undermining the party's 100 day pledge.

On Sunday Labour leader Jacinda Ardern announced that foreign, non-resident buyers would be shut out of the housing market "by Christmas".

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She has since acknowledged that trade deals including that with South Korea, will have to be renegotiated, but played down the difficulty of doing so. 

On Tuesday McClay added Taiwan to the number of trade deals which National claims would need to be renegotiated under Labour's ban.

In an interview, McClay also claimed the free trade agreement with China, New Zealand's largest trading partner, would need to be negotiated.

The free trade agreement with China includes a "most favoured nation" clause, which automatically makes China eligible for any more advantageous terms granted to other countries in later deals.

Labour says while concessions granted to South Korea currently apply to China, if the issue with the South Korean deal was eliminated through renegotiation, the China issue would be resolved.

But McClay said on Wednesday that Labour's ban would also require the China deal to be renegotiated.

"Yes I do. China now has rights," McClay said.

"You can only take away a right through negotiation. If you do it unilaterally, you're ripping up a trade deal."

McClay said China would not simply be willing to give up the rights.

"I've been to China, more than 10 times. I've been working very closely with them to get more rights for Kiwis in that market. I think they will laugh at us."

Labour trade spokesman David Parker accused McClay of scaremongering, saying he had engaged in lengthy talks with experts that the China FTA did not, in itself, need to be renegotiated.

"He [McClay] is just wrong on that," Parker said.

"That is typical National Party scaremongering. I have in various press articles and blogs on trade, issues and checks with trade negotiators and trade lawyers, confirmed my position."

Daniel Kalderimis, a partner law firm Chapman Tripp said renegotiating the South Korean trade deal would, in effect, take care of the issue.

Kalderimis said the Korean FTA applied a non-discrimination rule to investors before they made an investment. China's FTA did not have such a clause, but because of the most favoured nation clause, Chinese investors have the same rights as those from South Korea.

If New Zealand renegotiated the South Korean deal "such that there was no preferential treatment, so we basically said, 'you can't invest either', then if Koreans were on that basis treated the same as Chinese investors, then I would agree, there's no problem [with China]," Kalderimis said.

Asked about the risks to the South Korean trade deal on Tuesday, Ardern said Seoul had demanded restrictions on New Zealanders wanting to buy residential property in South Korea. South Korea has granted reciprocal restrictions on residential property with Australia, so adding a restriction on foreign buyers here would not be a major issue.

"I don't believe it will put that deal at risk. Korea already has that provision for themselves. I'm sure they'll be very understanding of the rationale of why we would want the same."

McClay said the comments were naive - noting that negotiating the South Korean free trade deal took five years.

"Turn it around. Why would they give up a right that we've negotiated, to somebody else, without payment or compensation?

"The thing about trade is, the whole world is watching. If a large country gives something up free for New Zealand, everyone will want something for free."

One trade negotiator claimed  it was conceivable that South Korea could be willing to accede to New Zealand's request, possibly in return for New Zealand supporting its path into the TPP.

However the timing was "abysmal" as the United States was currently trying to force South Korea to renegotiate the deal with Washington. 

Parker acknowledged that South Korea may make demands in return for granting New Zealand's wish, and that negotiations could be lengthy.

"That may be the case, it may not be the case. We're not going to know until we try."

The issue was one of National's making, Parker said.

"The terrible shame of this is that it could've been avoided at the time if we just had reciprocity," Parker said.

"The idea that a new Government can't try to improve New Zealand by making sure New Zealand houses are priced according to a New Zealand market, rather than being outbid by one percenters from overseas, is abhorrent. It's just wrong," Parker said.

"If [McClay's] worried that we're going to have to negotiate to fix these things that are wrong, because they broke the earlier consensus, evidenced by what we achieved in the China FTA, you should be asking them why they put us in this position, not asking us why we're going to fix it."




 - Stuff