Thursday 2 November 2017

Is The Government’s TPP “Solution” Too Good To Be True?

"Just one of those things you say in opposition and then forget about when you're in government." - Steve Maharey, former Labour cabinet minister. On the question of whether or not to support the TPP, is the new Trade Minister, David Parker (pictured above addressing an Auckland anti-TPP rally in 2016) preparing to follow in Maharey's philosophical footsteps?

WHAT WORRIES ME MOST about the proposed “No Foreign Buyers” amendment to the Overseas Investment Act (OIA) is its apparent simplicity. Nothing in politics is ever that easy! And isn’t it remarkable, the way the proposal just happens to solve Labour’s primary objection to the Trans-Pacific Partnership (TPP)? It’s almost as if somebody at the Ministry of Foreign Affairs and Trade (MFAT) had the relevant file tucked away in a draw somewhere, ready to be presented to the incoming Trade Minister, David Parker, with a Yes Minister-style flourish, at just the right moment.

Come to think of it, exactly when did the foreign-buyer problem become Labour’s primary objection to the TPP? More importantly, when did it become a more important issue than carving out the Investor/State Dispute Settlement (ISDS) provisions from the agreement? How did that ISDS carve-out end up as a sort of secondary issue? When did it become what Bill English used to call a “Nice To Have”? An outcome the Prime Minister and her Trade Minister will do their utmost to achieve, but not something over which neither of them are willing to offer concessions.

It makes no sense. The ISDS provisions of the TPP are the ones permitting foreign investors (a.k.a huge multinational corporations) to sue the New Zealand Government for imposing legislative and/or regulatory restrictions on their existing or proposed investments. Such litigation to occur not in a New Zealand courtroom, in front of a New Zealand judge, but before an international tribunal staffed and adjudicated by the sort of lawyers more usually to be found working for – you guessed it – “huge multinational corporations”.

How does that work? Well, a government pledged to uphold the provisions of a multilateral trade agreement might decide that, in order to secure its people’s right to access affordable housing, it will legislate to prevent foreign buyers from bidding-up the price of private dwellings beyond their reach.

“Oh no you don’t!”, objects the huge multinational corporation dedicated to acquiring foreign real estate on behalf of its fabulously wealthy international clients. And before that government can say “goodbye national sovereignty”, it finds itself in front of an ISDS tribunal.

I know, I know! The Trade Minister, David Parker, has assured us that providing the OIA is amended before the TPP comes into force, then New Zealand will be protected from the ISDS provisions of the agreement.

To which I offer the following two objections.

My first, is that David Parker’s “solution” logically foresees New Zealand being bound, in all other respects, by the TPP. Why else would he bother using this rather convoluted way of banning foreign property speculators? There must be simpler ways. The only logical answer is: because the new Labour-NZ First-Green Government is committed to signing the TPP – ISDS provisions included – and Parker’s “solution” is the only way it can keep its big election promise to end foreign property speculation.

My second, is that the new Government’s “solution” may prove to be not a solution at all. Even if the OIA is amended prior to the TPP coming into force, I believe that those foreign property investors affected might still have a crack at New Zealand under the ISDS provisions.

They could argue that the legislation banning them amounts to a pre-emptive circumvention of the agreement. The OIA’s original purpose of protecting “sensitive” land was to ensure that sites of environmental, historic and cultural significance remained in New Zealand hands. They could, therefore, argue that the amendment’s redefinition of “sensitive sites” to include private dwellings represents a deliberate perversion of the OIA’s original intention. As the victims of a pre-emptive circumvention of the TPP, they could demand that the ISDS tribunal award them billions of dollars by way of reparation. And what guarantee do we have that the corporate lawyers sitting in judgement of the New Zealand state’s actions wouldn’t find in favour of the plaintiffs?

That’s why I’m so uneasy about this amazing, eleventh-hour “solution”. I can’t help seeing it as too good to be true. Yes, it is acting as a superb distraction from the most dangerous aspect of the TPP – its ISDS provisions – but why? The arguments in favour of refusing to sign the TPP until New Zealand is exempted from those provisions are very easy to make – hell, they’re core NZ First and Green policy! – so why aren’t Jacinda and David making them?

What would make me a whole lot happier, is a rock-solid guarantee from the Prime Minister and her Trade Minister, that a TPP agreement containing ISDS provisions applicable to its own actions will not be entered into by the New Zealand Government.

Aotearoa must not surrender its tino rangatiratanga.

This essay was originally posted on The Daily Blog of Thursday, 2 November 2017.


pat said...

I suspect walking away from the TPPA 11 will b a bridge too far for labours advisors at this agreement that falls over at the last hurdle however is much more politically saleable.

David Stone said...

It's hard to imagine Winston going along with the ISDS. It could be that David Parker sees the foreign speculation in housing as a
more popularly recognised issue than the more complex ramifications of the ISDS. Also it might not be prudent to go into negotiations with too much out there.
What are the views of the other participants on the ISDS? Does anyone know? It seems like it would be horrifying to any country except America which would see itself as hosting most of the multinational beneficiaries.
The honeymoon period will be short for the new administration if they dive straight into signing up to that.

Charles E said...

Firstly you are forgetting that Ardhern has HC & MC as her mentors and they are wise and experienced and know that we have nothing to fear from the TPP and heaps to gain. The dispute clauses are much more likely to benefit NZ than not. Our businesses are more likely to take other dodgy governments to dispute than any foreign company ours.
Secondly, many in the Labour Party are staunch nationalists and so are very, even excessively proud of the fact that the TPP is a NZ initiative. They love spouting the nonsense the 'NZ punches well above it weight' and so much of what we have is 'world class' and 'world leading'. All bullocks but powerful myth for nationalists. The fact is we only get anywhere in this world because we are members of the Anglo Club. And the irony is that Labour has tried hard to get us kicked out in the past with pointless and destructive nonsense like opposing the visits of US ships etc. All gone now and thank goodness. I am confident that this conservative Labour we have now enjoy will indeed be National-lite. A large majority of NZers will support such a direction.

greywarbler said...

Our tino rangatira is vital. Maori didn't perceive the Treaty of Waitangi as agreement to us overrunning their country and are still adapting to the predatory, growth and profit-priority approach that all the European nations adopted. Piracy, theft, raids, domination on a big scale, and willingness to use people as a resource that resulted in slaves replacing animals as beasts of burden. All this done in accordance with carefully contained moral laws that allowed for this by dividing humans into enlightened and religion-bound, good, and the others, bad and unworthy of the concern of the good.

In Aotearoa land-hungry Europeans driven by the money society, rather than bartering for needs and resources wrecked the previous status quo of Maori.
Though extending some personhood to them, particularly when they adopted the 'true' religion that made them good, they were still regarded as inferior as people, in their economic life and in the use of their resources.

Now NZ is playing the money game in a worldwide way with TPP as just part of a more formalised system of economic domination and profit growth.
If Labour can't think their way out of this corner, using whatever means they have to get out of the TPP trap, and considering the economic results and how they might be used to our advantage, our currency might drop for instance, and so boost our exports. They could advance government money to assist business to take advantage of that, offering tax benefits as soon as they take on more paid employees from within NZ, thus getting people off the benefit, getting PAYE and 15% GST from them, and increasing our money flow at the people level. One possibility. The next would be would our exports suffer a downturn because of not belonging to TPP. Could we increase our trade with Europe? China? Russia? Countries that don't want to be tied to this Anglo-centred straitjacket. It's just the modern way of piracy of the great Empahs built on stealing other's resources.

Show some grit and intelligence Labour you twits. Life is different to what they taught you at your 'good' schools, MBAs, post-Keynesian economics lectures, and Harvard. Learn from the school of hard knocks, what would graduates of the 'Borstal Old Boys' lot like a John A Lee do?

(A snippet from wikipedia on John Maynard Keynes The economist Harry Johnson wrote that the optimism imparted by Keynes's early life is a key to understanding his later thinking.[31] Keynes was always confident he could find a solution to whatever problem he turned his attention to, and retained a lasting faith in the ability of government officials to do good.[32] Keynes's optimism was also cultural, in two senses: he was of the last generation raised by an empire still at the height of its power, and was also of the last generation who felt entitled to govern by culture, rather than by expertise. He was a wide thinker with a broad education and once thought of pursuing philosophy. If we pursue similar lines of thought to his, perhaps we can justify his faith in government!

Guerilla Surgeon said...

"The dispute clauses are much more likely to benefit NZ than not. Our businesses are more likely to take other dodgy governments to dispute than any foreign company ours."
And we know this how? These provisions were put into place at the behest of large multinational corporations. Their major role is to make sure no government enforces laws that might interfere with their profits. Like pollution regulations. So be prepared for anti regulatory hell IMO. And remember Chas opinion is as good as a fact in your lexicon.

Victor said...

David Stone

I suspect that Japan and South Korea would see some advantage in a tight ISDS regime, in order to defend their powerful global brands.

But I would agree that the nature of their economies would make them much less likely than the US to apply ISDS in ways that are actually harmful to New Zealanders.

In some ways, TPPA without the US isn't too bad an option, with probably more gain than pain. The problem is that the US can always opt to join the club at a subsequent date (e.g. post Trump).

Victor said...


I would agree that a trade agreement which includes the US automatically raises the risk of interference in how New Zealand is run, particularly with respect to our freedom to pursue adequate environmental and consumer standards and to access reasonably-priced pharmaceuticals. At the same time, domestic US commercial lobbies would restrict any compensatory advantages we might gain from such an agreement. And the inherent litigiousness of the American approach to business would run us ragged as well as sapping our sovereignty.

With respect to China, the situation is different but not less problem-fraught. All the signs are that Beijing wants integrated supply chains, which includes government owned or aligned Chinese companies owning both the land on which primary produce (both animal and vegetable) is grown, the factories in which it's processed and the supermarket chains in which it's retailed. Beijing also has an increasingly frank policy of wresting global dominance from the US, with economic relations a key part of this process. This too is and will continue to sap our sovereignty and will do so all the more if we're unable to diversify into other markets.

Trade with other Asian countries, with Canada or with potential Latin American members of TPPA does not, it seems to me, involve equivalent problems. There would still be a limitation on sovereignty imposed by ISDS rules but, as far as I can work out, less chance of New Zealanders suffering as a result. The problem, as I've said in another post, is that the US might subsequently join the agreement and run the ISDS mechanisms its way.

Even less problem-frought, to my mind, is our projected trade deal with the EU27. As far as I can make out, negotiations are likely to start by the end of the year and to be completed in around two years time, using the blue-print established by the Canada-EU agreement (which took eight years to negotiate).

A key aspect of this agreement is likely to be the prominence given to labour, environmental and consumer protection standards. It will also be an agreement that links us with a sizeable grouping of countries which broadly share our values. And that's a rare thing in today's world.

I'm not sure how Winston's plans for a deal with the Eurasian Union fits with all this. It may be that we will have to make a choice between the EU27 and Moscow & pals. If so, for a whole heap of reasons, the EU27 seems to me to be the more promising bet.