Trade Minister Todd McClay is heading to Canberra tomorrow morning for urgent talks with his counterpart, Steve Ciobo, about Queensland's plans to tear up a 20-year-old procurement agreement between New Zealand and Australian states.
And he is refusing to rule out responding with reciprocal protections on Queensland companies operating in New Zealand.
Queensland Premier Anna Palaszczuk announced at a Labor Party conference last month a new "buy Queensland" procurement policy which would giving Queensland companies weighting of up to 30 per cent when considering Government contracts.
Under the 1997 procurement agreement between New Zealand and Australian states and the Government, Australian and New Zealand companies are to be treated the same.
Asked if there was any chance New Zealand would apply reciprocal protections for New Zealand companies, McClay said: "That is something we would have to think very deeply about but it is important that New Zealand companies are treated the same as Australian companies."
"I want to get across there first and have a discussion with Steve Ciobo before we make any decisions around that. But it is something the Government is taking seriously."
He said he was worried to stop any "contagion" effect of what Queensland planned.
"I want to get on top of this at a federal level so it doesn't escalate. I believe New Zealand companies have rights in those markets as well as obligations and at the very least I want them to be treated the same as we treat Australian firms in this country.
"That is the bedrock of CER [Closer Economic Relations]."
McClay said he was worried that New Zealand continually had to fight for the rights of Kiwis in Australia when it came to trade.
He wanted to get the Australian government's view.
While the government procurement agreement of 1997 was not part of the CER agreement, and did not have an enforcement mechanism, it was in the spirit of CER, the transtasman free trade agreement that has been operating since 1983.
Ciobo has described the move as "reckless" and in contravention of the agreement, which was signed during the term of the National-New Zealand First coalition Government.
McClay said New Zealand had about $30 billion of Government procurement every year and Queensland had about $18b of procurement.
"There are many Queensland companies that work in New Zealand just as there are New Zealand companies there.
"Many many jobs on both sides of the Tasman rely upon these sorts of agreements working well."
New Zealand company Fulton Hogan had a turnover of $1.6b in Australia and had 2500 employees in Australia.
Australian companies operating in New Zealand included Downer Group, involved in the North Canterbury infrastructure rebuild following the Kaikoura earthquake.
And an Australasian infrastructure investor Morrison and Co and its Australian services partner, Spotless, won a $200 million public-private partnership contract in March to design construct and maintain five new schools in New Zealand, McClay said.
"Ironically I am going over there at very short notice and I am using Flight Centre which is a Queensland company that has won an all-of-government travel contract with the New Zealand Government to book my tickets to go there."
New Zealand First leader Winston Peters who was Treasurer at the time the procurement deal was signed in 1997 said he supported a "buy New Zealand policy" but he said it should not apply to Australia - and Australia should not use a buy Australia policy against New Zealand.
"I've never applied a 'buy New Zealand' policy against CER or against the Australian arrangement.
"It's against all others that I have applied it."
He said what Queensland was doing contravened the spirit of CER.