Friday 3 February 2012

Most Favoured Nation?

Signed, Sealed, Delivered: The signing of the China-New Zealand Free Trade Agreement was hailed as the Clark-led Labour Government's crowning foreign policy and trade achievement. It is simply inconceivable that the Labour Party has forgotten that agreement's "Most Favoured Nation" clause guarantees China the same rights as our other trading partners - including the right to purchase New Zealand farmland.

AT THE RISK of being branded a “traitor”, I’m declaring my support for the Crafar Farms sale. Not because I like seeing productive New Zealand farmland pass into the hands of foreigners, I don’t. The reason I’m in favour of the sale is because I believe New Zealanders should keep their promises and fulfil their undertakings.

In 2008 this country ratified a Free Trade Agreement (FTA) with the Peoples’ Republic of China. That agreement was hailed as the most important foreign policy and trade achievement of the Helen Clark-led government of 1999-2008. Not only was it the first such agreement to be signed between China and a western-style democracy, but it also offered New Zealand businesses immense economic opportunities.

Those opportunities were, of course, reciprocal. The Chinese have been merchants and traders for the best part of three thousand years. They needed no reminding that in this world you don’t get something without giving something in return. And what we gave China was “Most Favoured Nation” (MFN) status.

In the context of the Crafar Farms Sale, MFN means: “If it’s okay to sell New Zealand farmland to Americans, Englishmen, Germans and Indonesians, then it must also be okay to sell farmland to the Chinese.” Under the terms of the NZ-China FTA, the Peoples’ Republic is legally entitled to no lesser consideration than that shown to the most favoured of our trading partners.

That’s what Prime Minister John Key meant when he said “our hands are tied”. It’s what New Zealand’s leading critic of the NZ-China FTA, Professor Jane Kelsey, meant when she stated:

If the New Zealand government had declined the Shanghai Pengxin purchase of the Crafar farm it could have faced an international law suit for breaching its free trade agreement with China […] The government cannot treat applications from Chinese investors differently from similar applications from other countries’ investors under what is known as the ‘most-favoured-nation’ or MFN rule.”

And that’s not all. Had the application from Shanghai Pengxin been declined by the Overseas Investment Office that decision would almost certainly have been challenged in a New Zealand court. And rightly so. We’d have broken our own rules.

It was all the more perplexing, then, to hear Opposition Leader, David Shearer, declaring his and the Labour Party’s opposition to the Crafar Farms sale. It’s simply inconceivable that Mr Shearer is unaware of the MFN prohibition against denying China the same right to purchase land as the nations that purchased upwards of 650,000 hectares of our national patrimony exercised when Helen Clark was Prime Minister, and Mr Shearer’s friend (and former boss) Phil Goff was the Minister of Trade.

To avoid the inevitable charges of rank hypocrisy and populist opportunism, Mr Shearer needed to accompany his statement opposing the sale with an announcement that Labour was committed, immediately upon regaining office, to repudiating the NZ-China FTA and tightening-up the legislation regulating overseas investment.

I’m still waiting for those other shoes to drop. And, frankly, I think I’ll go on waiting. Why? Because I simply don’t believe Labour is about to abandon its long-standing commitment to free-trade. Nor am I confident that Mr Shearer is any more willing to court the fury and retaliatory trade restrictions of the Chinese Government than Mr Key. Both men are well aware that this country’s future prosperity is inextricably bound up with China’s.

If foreign ownership of New Zealand land was something successive New Zealand governments wished to restrict, then they should have legislated against it before they embraced the doctrine of free-trade. And if we, the people, were serious about preserving our patrimony, then a majority of us would’ve voted for the political parties – the Alliance, NZ First, the Greens, Mana – which promised to do exactly that. But, the closest the New Zealand electorate’s come to voting against free-trade (27 percent) was the election of 1993. In 2011 the anti-free-trade vote was just 19 percent.

It’s a little late, now, to shout: “Stop!”

This essay was originally published in The Dominion Post, The Otago Daily Times, The Waikato Times, The Taranaki Daily News, The Timaru Herald and The Greymouth Star of Friday, 3 February 2012.


Galeandra said...

Indeed, Chris,there are legal considerations regarding the Crafer sale,but the flavour of commentaries I've read has pointed out that alienating NZ land by selling to overseas purchasers from anywhere is of concern to the broad NZ public. Your focus seems a little wide of that mark, and somewhat after the fact.

Chris Trotter said...

Not so, Galeandra.

It is the New Zealand electorate that has shot wide of the mark in election after election.

The opponents of free trade agreements have pointed out the consequences of entering into such pacts over and over again, and over and over again they've been ignored.

Public opposition to the Crafar Sale is irrelevant, given New Zealand's solemn undertakings to the Chinese and our other FTA partners. As Jane Kelsey has pointed out until she is blue in the face, these are legally enforceable documents.

Yes, they can be repudiated - but only at enormous diplomatic and economic cost. And if Labour has shifted its position so radically on this issue that it is now prepared to see New Zealand carry those costs, then it behoves Mr Shearer to come out publicly and explain why.

As an aside, I saw the "Campbell Live" phone-in poll deliver a generous thumbs-up to Mr Cameron's farmland purchases in the Wairarapa. Quite how this can be squared with the same programme's 97 percent phone-in poll rejection of the Chinese purchase - without recourse to the obvious explanation of New Zealanders' ingrained Sinophobia - I cannot imagine.

Paulus said...

Mr Trotter,
Thank you.

cheesefunnel said...

I'm glad somebody has finally pointed this out, we seem to have such sort memories when the truth is getting in the way of a good idealogical rant.

Allie said...

My heart is sinking a little as I was hoping David Shearer would be one of the Opposition Leaders with integrity. Is it just me or does Labour struggle in Opposition?

Don Robertson said...

I agree with you to an extent. I have not pored over all the details but there have been a number of reports of the directors of the company being charged with fraud and corruption. This concerns me.
I would also be concerned if Foodstuffs were to start buying large chunks of land - although they don't need to own the farms to dictate the price.
I would rather the owners of these farms work on them rather than in office blocks - whether in Auckland or Bejing.
Large corporations are starting to gain too much control of the food supply chain - you should check out 'Whats not on the label' by Felicity Laurence and read about how they are doing in southern Spain. Corporate landowners, Tunisian guest workers, toxic chemicals and lots of rubbish.
And 'Fast Food Nation' - the book - and see how the US meat packing industry has consolidated.
I simply do not understand why these farms were not sold off separately.
Mr Cameron is an entirely different issue. He is an individual that intends to live here - and hopefully make a few movies in Wellington. The only concern with him is that the price of land is no longer based on its productive capacity but on what Hollywood directors can pay for rural retreats.

Bernard said...

I'm curious as to why you voted for one of NZ's most prominent sinophobes - Winston Peters?
I think there is a strong element of sinophobia objecting to the sale of Crafer farms, however, it would be mitigated somewhat if there was some reciprocation in allowing NZ business to purchase land in China. I also think that there is a strong case in maintaining our economic soverignty.

Chris Trotter said...

Since you weren't looking over my shoulder in the polling booth, Bernard, you can't possibly know how I voted.

Why pretend that you do?

Offer sensible commentary - or don't bother returning to Bowalley Road.

jh said...

I’m in favour of the sale is because I believe New Zealanders should keep their promises and fulfil their undertakings.
One effect of the free trade agreement is that Chinese bus drivers out number Kiwis (they speak mandarin because they are from China; we speak English because we are from New Zealand). Not sure if our union donates to Labour but plenty of people would pull the plug over this.

Luke said...

Hi Chris,

What I find extremely disconcerting about this is, as you pointed out, there seems to be a strong element of Sinophobia in the general public's reaction to the sale of Crafar farms.

It shines through especially strongly when you contrast the reaction to Shanghai Pengxin with that to James Cameron (of all people) buying himself a cosy chunk of the Wairarapa.

On top of that, the Chinese own significantly less of our 'strategic assets' than UK or US citizens, or even the Swiss, but yet are apparently a danger to our national sovereignty.

Absolutely, the sale of large quantities of New Zealand land to foreign corporate entities is of concern, but on the other hand autarky as an economic creed has been thoroughly discredited since the 1920s and 30s.

Globalisation is a fait accompli; and our FTA with China is now too diplomatically and politically important to expediently repudiate. No amount of suddenly-found economic nationalism is going to put that genie back in its bottle.

jh said...

This may interest the geniuses, a treasury economist argues that our population increase since the 1980's (infill housing, congestion etc) has got us in the poo; investment in housing and related infrastructure has crowded out business investment, led to higher interests rates and worked against a re adjustment of the exchange rate.
If this is true then ordinary New Zealanders have paid a big price for the self-interest of the right and ideological blinkers of the left. Therefore it musn't be true.

jh said...

May I elaborate on tour bus and tour drivers from the Peoples Republic. The free trade agreement call for 100 tour guides to be allowed to work in NZ. The fastest growing company employs drivers as sub contractors, they don't have to register for gst until they earn over $35,000. A driver recently alerted a hotel (having poked his head in a door) "do you know there are 6 drivers sleeping in that room?" (Kiwi drivers won't share rooms).

jh said...

I don't think people realised the free trade agreement was like a garage sale where people can wander in and buy the furniture inside the house. With an estimated 8000 billionaires in Beijing there will be quite a few speculator farmers willing to sell. I think people mistakenly think of NZ as "our country" but as the man from Harcourst Shanghai put it "“Chinese economy we all know about…
Chinese government says it’s time to grow offshore…..
Let’s take a good selection of New Zealands “products” [land] over….
“We’re all New Zealanders, we all love the country so I think it’s healthy for us to have the debate and make the right decisions for our country…. but hey!…. young people coming through see it as “our planet” rather than “our country”. This "the worlds your oyster" sentiment applies to the rich elite who can buy the best farms, bays, headlands etc, whereas the suckers can only buy a widescreen TV and a job will always be there if the price of labour is low enough.

Anonymous said...

Chris, would your comments be the same if your beloved Bollwalley Road sign was repalced by a chinese sign!

jh said...

How about we replace the director of Titanic (the largest grossing movie of all time) with Donald Trump?

Humans are instinctively racist (as are all creatures), as we all need to distinguish between "them" and "us", it is about protecting our resources form invasion. The response doesn't kick in so much when people who look like us pile in.

Bernard said...

Sorry Chris, I misunderstood. I thought I had heard you comment on TV sometime about the reasons why you voted for NZ first in the last election. Obviously I mis-heard and am clearly wrong.

Anonymous said...

Since the advent of David Shearer I wake up each morning and sincerely thank god that I have no faith in labour for my salvation.

What a wet washed out totally forgettable waste of otherwise usable space that wee man is!

He makes a political utterance like Casper Milkquetoast apologetically asking for a cheese toasted not too hot and please no onions.

Pissing about trying to stick his little plastic flag on the fence post.

Honestly, if I was a Labour person I would offer Phil Goff anything to please please come back and give at least a rag of dignity to the office of Labour leader.

Chris Trotter said...

Apology accepted, Bernard.

Thank you.

To: Anonymous@7:23

Am beginning to share your disappointment - feeling quite embarrassed about my earlier support for the man.

Politics-free Waitangi - what next!

Anonymous said...

Come on guys, David put it on record that he is up for 364 days of political struggle, so a politics free Waitangi is not so bad in context.

Who knows, tomorrow the dude might be out in all his most bestist bestial savagery dilating his biceps and his nostrils going down to the wire for the waterside workers.

Have faith.

blueleopardthinks said...

I was not aware of the ins and outs of TPPA until last year when I went to a talk by Murray Horton. When we have media which 'sells' something such as free-trade agreements as a good thing, and states opposing it as a dangerous thing is there little wonder that voting outcomes can be cited such as you have in this article?

I query statements about foreign land ownership. There are rules around foreign ownership:

"Applicants for consent must satisfy a number of criteria, including the core “investor test” criteria. In addition, consent to acquire sensitive land will only be granted if:

the transaction will, or is likely to, benefit New Zealand, or alternatively
the relevant overseas person intends to reside in New Zealand indefinitely.
Some types of land (such as farm land) also have specific consent criteria.

Applicants for consent to acquire fishing quota must satisfy a “national interest” test."

(off the linz website)

This sale and others could easily be rejected and I find it dubious that they have been accepted. Another case of when one is able to afford an expensive enough lawyer you can get blue murder passed as acceptable?

jh said...

I think the Crafar farm thing could be the crossing of the Rubicon for many people. I mean if you look at the Harcourts site here they are all lining up for a photo after the enterprisng product sale in Shanghai, complete with beaming attractive young ladies and you can hear the ice crackling in the cocktails. Then you read this sort of clinical economic analysis from an economics lecturer:

"Think of it this way. There are private individuals that happen to be New Zealanders that own things. There are private individuals that happen not to be New Zealanders that would like to buy these things, and guess what – they value them more highly than the New Zealanders do. So they trade.

So what the cartoon misses is that this stuff wasn’t ours to start with, it is being sold by its owners to a buyer who values it at a higher level. Applying a feeling of ownership on the basis of nationalist sentiment is weird."
With 8000 billionaires in Beijing and since it is only between the seller and buyer (from overseas) many people will feel that there is a big party going on to which they are not invited and that the NZ state is a nullity.
The goal of the liberal govt of the 1890's was to settle the small man on the land; current policy is to settle the foreigner on the land.

Scouser said...

As you point out Chris one cannot enter an agreement and then renege on it without proper cause and often with consequences.

What's sad about this whole process has been the obvious anti-chinese mindset being used as a whipping boy for what is likely an opposition process i.e. oppose anything the party in power does. Eat your heart out Enoch Powell. This is exceedingly hypocritical and a bit nasty.

We should actually feel a bit ashamed as one of the best things I noticed when I immigrated to NZ was it is relatively a lot less racist than other countries I have lived in. I glance over the ditch and see a country where day to day racism is pretty rampant and I am happy to be here and not there as an example.

Kiwis are generally better than this.

Victor said...

Sinophobia, like any other form of racism, is to be wholly deplored.

This should not, however, blind us to the problems that Mainland Chinese involvement in our land-based sector are likely to cause.

China has, unfortunately, a deplorable record in cognate areas such as food safety, environmental protection and animal welfare.

As a result, our brand reputation in third markets could well suffer by our association with the PRC. This could be so, irrespective of whether production and/or processing took place in New Zealand, in China or in a third country.

And this could easily have downstream consequences, not just for the marketing of our dairy products but for just about any exports that depend upon our pretensions to being "clean 'n green", "100% pure" etc, including wine, meat, tourism and even fashion.

Obviously, similar objections do not apply to purchases of New Zealand farms by, say,German interests. When did several dozen German babies last die from contaminated milk?

But nor would such objections apply to farm purchasers from Taiwan or Singapore, let alone from hyper quality-conscious Japan.

Nor would they apply if a distinguished Chinese film director purchased a swathe of New Zealand land for his own enjoyment, as Mr Cameron has done.

There may well be those who object to the Crafar sale out of racism.
I am not one of them. But nor do I believe the bid's country of origin to be irrelevant.

Yes, Chris, you are correct. The FTA makes the sale to Chinese business interests inevitable in the absence of a better deal.

This still leaves open the question of why the farms had to be sold as a single lot.

And, perhaps, just perhaps, it leaves open the question of why no serious attempt has been made to put a better deal on the table, with the help of the New Zealand Superannuation Fund.

Instead, it was left to Michael Faye and pals to make a counter bid! Ye merry gods! Have we made no progress since the 80s?

blueleopardthinks said...

"I believe New Zealanders should keep their promises and fulfil their undertakings."

Why do you think that New Zealanders should promise to fulfill undertakings involving agreements they knew nothing about?

What about the members of New Zealand Governments' promises toward the New Zealand people to act democratically and in the people of New Zealands' best interests? Do these promises count for nothing?

How is making deals that lead to large sell offs to foreign interests serve New Zealanders?

KJT said...

As someone who is on record for opposing the continued selling off of our assets to overseas interests, since the 80's I may add, it is time some politicians had the guts to call a halt.

It is not racist to oppose the giveaway of our banking to Australia, our business profits to the USA and our land to the USA, UK and China.

China are certainly not stupid enough to sell their land for the modern equivalent of rusty muskets and blankets, soon to be valueless, US dollars.

Victor said...


"It is not racist to oppose the giveaway of our banking to Australia, our business profits to the USA and our land to the USA, UK and China."

Unfortunately, the Crafar deal involves virtually giving away things of even greater value; viz a slice of our brand equity and our ability to protect our brand's integrity.

Even by the logic of the global marketplace, this is a path of extreme folly.

It's certainly not racist or xenophobic to say so.

Moreover, the charge smacks of rank hypocrisy in the mouth of a Prime Minister who sat there smirking supinely, whilst his favourite media praise-singer made, at best, 'borderline' comments about our then Governor General.