Written By: - Date published: 10:32 am, June 13th, 2014 - 51 comments
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Wayne Mapp has a post at Pundit “Free trade: The end of the cosy arrangement?” about the possibility of Labour backing away from the Trans-Pacific Partnership (TPP).
For decades now National and Labour have had a cosy little arrangement when it comes to free trade. Both parties could count on each other to provide a solid bloc of votes in parliament to pass any bill implementing free trade agreements.
So any hyperventilating by the Greens, New Zealand First, the Maori Party or Mana counted for nothing. Jane Kelsey might get to write as many op-eds as she likes, but she has virtually no influence on the actual outcome of the free trade agenda. The solid National–Labour coalition ensures that the relevant legislation will pass.
But will this arrangement prevail after this election?
Essentially his argument is that Labour may be constrained by its possible coalition partners. He has a secondary argument that
Increasingly Labour activists, including their left leaning MP’s, oppose TPP. David Cunliffe, supported by Phil Goff and others, has positioned the party to be able to vote for TPP. But that is before the election. An election loss could well weaken the free trade faction in Labour.
The problem is that it isn’t just the left-leaning activists inside Labour. It is also the free-trade supporters inside Labour, like me. We are the “business” people who have allowed the “free-trade faction” MPs the freedom to be able to have this “cosy arrangement”, and we are the ones who over many decades have argued with the left of the party that free-trade and targeted deregulation inside the NZ economy is the best long-term approach for our country.
However apart from Phil Goff in 2012, I haven’t found a single one of this segment of the Labour party who shows any warmth towards the TPP as we are currently aware of it. And Phil essentially just asked me to trust him and wait for more details. But in the absence of any further real information (rather that the vague platitudes of MFAT and National), I’ve been steadily moving towards active opposition to it.
I’m not particularly “left” when it comes to trade. To be precise I have been a strong supporter of every freer trade agreement from Closer Economic Relations (CER) with Australia back in the 1980s through the various WTO attempts and to the agreement signed with Taiwan last year. This is hardly surprising as most of my working life has been involved in one way or another in the gradual freeing up of trade and the access to other countries over many decades. Every company that I have been involved in since the mid-90s has targeted more than 90% of their sales towards overseas markets.
Each of the previous trade agreements when you look at them from the point of view of the benefits and costs for NZ, have always wound up on the plus side of the ledger. Most of the costs have been to do with us not restricting investment into NZ by the the partner on the other side. Or to have minor changes to our legislation and regulations that caused less friction with those of our partner(s). The most extensive case of this was in the CER agreement in 1983 before we freed up much of our internal economy where we also agreed make our legal and commercial structures more compatible. Which bearing in mind the degree to which our countries economies and people were already intermingled was an obvious blessing.
But the TPP is a whole different type of agreement. As far as I can see through the immense veil of secrecy flung over it, most of it isn’t a free-trade agreement at all. For NZ it is largely a restraint of trade agreement, and we are on the losing end of all of the restrictions. We would be required make large parts of our economy more restricted and less free. Wayne Mapp passes over this with the blithe…
Of course any such treaty will not be exactly as New Zealand wants since it will be a compromise between fourteen nations.
Say what? Sure we changed some of our commercial and legal structures to make CER back in the 1980s, but in both the case of Australia and ourselves this involved both of us freeing up parts of our systems. Contrast that with even the brief list of added restrictions Wayne points to.
But the shape of the TPP treaty is starting to emerge.
Copyright terms will be extended to 70 years or more. State trading entities like Pharmac could lose at least some of their exclusive rights. There will be an international tribunal for major investment disputes.
Of course we don’t know virtually anything in the possible agreement and from what I understand about it, we may not until long after we restrict ourselves legally.
But it also looks like that there will be restrictions on many of the tools that are used to limit damage to our local economy. For instance the pricing signal from taxes like a capital gains tax, which is designed to prevent property speculation bubbles. The restriction of regulations designed to make our internal economy run better, for instance the regulation of effective monopolies like the electricity sector or constraints of the kind of daft stupidity of the financial sector that caused so much problem in the collapse of the finance companies.
We’d be constrained in attempts to reduce public costs like campaigns against tobacco smoking. Similarly the restriction of regulation to prevent the introduction of potentially dangerous or unwanted technologies like fracking or genetically modified food crops.
We’d also be returning to the draconian distribution channel profiteering that the introduction of parallel importing corrected. it looks like there would be significant limits on the ability to put transparency into labelling the content of products and thereby increasing consumer choice (something that needs increasing in my view). Restrictions of being able to prevent the introduction of animal or crop species regardless if they are potentially dangerous or useful. And a host of other restrictions put into the NZ economy.
In short, we’d be walking a long back from the freeing of the NZ economy that happened at such pain over the last 3 decades, and yielding a whole pile of our ability to govern our own society into the hands of costly and unelected international tribunals from which there is no appeal.
Almost all of these things are likely to increase costs inside our economy and to reduce the choices of consumers and business from where they are now. In other words they restrain us.
So what do we get from this? Wayne Mapp accurately points to the only benefit.
There will be a long drawn-out phase down of tariffs and quotas in agricultural products. The timing of the phase down will be dictated by Japan and the United States, and it will extend over many years, perhaps as many as twenty.
And the rest… This deal has to pass the US Congress and the Japanese Diet. Both are hell-holes of partisan politics and extensive pork-barrel politics. In the case of the US Congress they’d require that we legally implement and irrevocably bind our side of the agreement before they even start playing pork-barrel politics. And there is no more powerful lobby group in the US than food producer interest groups. The probability is that if it survives and gets ratified by a Congress that is deliberately being kept in the dark about what it contains, is that what they pass will bear little relationship to what it went in with. The Japanese Diet will be similar, but with even more pork to protect their powerful farmer constituents.
The nett effect is likely to be that any benefits to NZ agriculture will be towards the end of a few decades at the earliest, if they ever happen. There are no benefits for any other area of our economy as far as I can see, only restraints. Maybe it is ok for a few crony capitalists in the distribution field if they can stop parallel import competition.
Of course we know bugger all about this agreement. Information about it appears to have been restricted to the diplomats and a carefully selected set of “stakeholders” who are fed very limited and detailed information and whose selection appears to have been restricted to groups likely to benefit from any changes. In other words it is a PR consultation of no value. This is the same in every country participating.
It is hardly surprising that to date I have only found a single person inside the active Labour party people with an interest in trade who actively supports the signing of the TPP. That was Phil Goff.
For that matter I haven’t met virtually anyone in my circle of business friends who has any confidence that this agreement is worth pursuing. The only ones who do are the ones who have free trade as a religion rather than something that they think about, in other words the Randians, but I’m not very religious as I prefer some actual chains of business logic. To date I haven’t seen them.
So at present the answer to Wayne Mapp is that I suspect that neither the Labour caucus nor virtually any Labour activists are likely to be much interested in supporting this shonky agreement. It doesn’t mean that we oppose free-trade agreements. It is that this one doesn’t look like one. If National and MFAT would like support from the free-trade advocates inside Labour, then I’d suggest that they get off their padded arses and provide some solid information not only to us, but also to the public. But all I have heard so far is some Randian religious statements that are about as convincing as statements about the imminent arrival of the Rapture.
I have to ask why in the hell NZ is involved in this farcical process. So far the only explanation I have is that the National ministers involved like prancing around on the world diplomatic circuit and so do many of the MFAT diplomats.