The Responsibilities Of Power

This Land Is My Land: Yes, but if we want to keep it out of foreign hands then New Zealand will have to abandon its 30-year adherence to the doctrines of free trade and unrestricted foreign direct investment. And that will cost us more than many of us may be willing to pay.

 

SO, LABOUR’S going to block the sale of Lochinver Station. The political party which proudly attached New Zealand’s signature to the People’s Republic’s first free trade agreement with a western nation is now proposing to slap the Chinese government in the face. Forgive me, but in the absence of a wholesale repudiation by Labour of its longstanding commitment to free trade, I just don’t see this happening.

 

At the heart of the free trade doctrine lie two fundamental and related provisions: Most Favoured Nation status and National Treatment. In a nutshell, these two provisions are about non-discrimination; about governments promising not to play favourites and undertaking to treat foreigners no better or worse than they treat their own people.

 

These provisions are fundamental to free trade policies for the very simple reason that free trade is impractical without them. Without a foreign government’s undertaking that your country’s exports will be treated no better or worse than those of the “most favoured nation” with which it currently does business, what possible incentive would your own country have to open up its markets to the products of foreigners? And why would anyone attempt to establish a business in a foreign land if it was immediately lumbered with obligations and restrictions from which local businesses are exempt?

 

David Cunliffe, David Parker and Phil Goff (especially Phil Goff) understand the vital importance of reciprocity in international trade relations. The idea that they will intervene to nullify Shanghai Pengxin’s perfectly legal purchase of Lochinver Station – thereby signalling to China and rest of the world that Labour is abandoning its longstanding commitment to the core provisions of international free trade is, frankly, laughable.

 

Why, then, have they given such an undertaking?

 

The answer, of course, is because all the indications point to the conclusion that New Zealanders are adamantly opposed to the idea of their country’s farms being sold to foreigners. With an election looming, and a potential coalition partner, NZ First, promising to ban foreigners from swallowing up New Zealand’s green and pleasant land, Labour’s strategists clearly believe they have no choice except to say: “Me too!”

 

Now there is nothing intrinsically wrong with a political party opting to embrace a more protectionist stance on trade issues. New Zealand’s was, for many years, a highly protected economy with import quotas and high tariffs to protect local industries. The rest of the world accepted this because, for the most part, the rest of the world subscribed to very similar notions of economic management.

 

But, times have changed.

 

Officially, the rest of the world no longer believes in protectionism. The IMF and the World Bank, not to mention the World Trade Organisation, take a very dim view of countries which persist with (let alone re-erect!) barriers to the free movement of goods and services around the world. The fact that many larger and more powerful countries (the USA, the EU, Japan, Russia, South Korea) still maintain substantial barriers to trade, especially in agricultural products, may be a sore point with the New Zealand government, but it is not one it can do much about. From the mid-1980s, successive New Zealand governments (beginning with the fourth Labour Government) have progressively stripped away all the impediments to free trade. As a very small country, determined to achieve unrestricted access to the world’s markets for its predominantly agricultural exports, we could hardly do less.

 

All of which makes it extremely unlikely that a Labour-led Government would do anything so foolish and provocative as to over-rule an Overseas Investment Office-approved sale of Lochinver Station to Shanghai Pengxin. Not unless they actually wanted to see New Zealand’s exports held up for weeks on the Chinese docks!

 

It is critical to the future prosperity of New Zealand that its political leadership, even at the risk of incurring the electorate’s wrath, remain steadfast in its adherence to the principles of open markets and open borders. And if that means rehearsing the arguments in favour of free trade, as well as pointing out the likely consequences of denying the benefits of Most Favoured Nation status and National Treatment to a trading partner as vital to this country’s economic interests as the People’s Republic of China – then so be it.

 

It is easy to secure the approbation of the masses by telling them what they want to hear. Much harder is the task of convincing one’s fellow citizens that the cost of the changes they are demanding is well beyond what most of them would be willing to pay.

 

Small parties without prospect of ever being in a position to formulate the core policies of the state are free to promise voters the diplomatically and economically impossible. The leaders of parties large enough to make a difference have a duty to accept the responsibilities of power.

 

This essay was originally published in The Press of Tuesday, 12 August 2014.