Written By: - Date published: 8:53 am, January 25th, 2018 - 137 comments
Categories: business, capitalism, Economy, employment, Environment, farming, Free Trade, overseas investment, tech industry, wages, workers' rights - Tags: Comprehensive and Progressive Trans-Pacific Partnership Agreement, CPTPP, TPPA, TPPA-11
We may be forgiven for thinking that the main reason we got into the TPP in the first place was to enhance our industrial agricultural interests and diversify our trade and investment relationships. Personally I blame the undemocratic process of its formation for this. For agribusiness interests, the results on balance have been mixed and the entire predicted export sectoral outcomes don’t blow me away.
But there are three even better reasons than NZ agribusiness for the CPTPP’s staying power.
First, it rises to the needs of digital trade and e-commerce, the fastest growing sector of the global economy.
Second, it addresses the importance of small and medium enterprises (SMEs) in international trade.
Third, it promotes trade tariff eradication and trade access with the countries we need (good globalisation), along with the values of civil society (playing by the rules being essential to small, trade-dependent and peripheral states like ours, plus environment, labour and native peoples protection) —things that, despite populist backlashes in America and Western Europe, continue to be highly desirable in other markets.
1. Digital Trade and E-Commerce
The dematerialisation of our economy away from bulk and low-value commodities like dairy and wool is a massive task for New Zealand’s economy. That means e-commerce in all its forms. The CPTPP does a good job of addressing today’s digital trade and e-commerce phenomenon by laying out practical rules on how to facilitate business in such a fluid environment. Unlike the majority of existing “shallow” FTAs, which deal primarily with the reduction of customs duties, the CPTPP goes well beyond this to tackle non-tariff issues such as the protection of intellectual property, transparency standards, e-commerce rules and cyber security.
CPTPP standards are already trickling down into the digital economy. Consider, for example, “open sourcing,” a practice which began in Silicon Valley. Despite this seemingly perilous act—which involves publicizing and sharing product designs, software code and digital infrastructure on the web in order to tap into collaborative opportunities in the global commons—open sourcing has become an everyday business practice. Companies as diverse as Alibaba, GE and Volvo couldn’t survive without open sourcing. It works not only because it’s mutually beneficial, but because it’s free, it’s open, and, generally, these commonly accepted behavioural rules result in fair treatment for everyone.
Can governments and multilateral trade bodies formally adopt the same kind of CPTPP standards, combined with the practices of digital commerce? The answer is yes, and CPTPP provides massive momentum for the rest of the world to adopt the same.
2. Small to Medium Enterprises
The New Zealand economy consists of mostly small and medium-sized enterprises, and has been so since we started trading flax, sailship spars, whales, furs and weapons with Sydney from the late 1700s. International trade is and will always be the very fabric of our society. Over the past twenty years we have seen digital technology empower SMEs, the number of cross-border transactions will increase exponentially. That is an outcome of the platform economy. Technology is lowering barriers and levelling the playing field for buyers and sellers in the most remote parts of the globe. The CPTPP provides a forward-looking and practical framework for integrating SMEs into Free Trade Agreements. Those protections have been needed for a while, and now we have a binding cross-national framework to enforce them.
3. Upholding Civil Society Values, including for labour and the environment
We’re probably used on the left to seeing FTA’s as a blunt weapon to smash civil society values particularly labour – and every trade agreement since the Battle for Seattle lives with the stigma of that foolhardy repression.
But the logic behind this claim about the CPTPP upholding civil society values is straightforward. Ultimately, foreign direct investment (which we regrettably need) and global value chains will gravitate towards stable, open markets that also recognize the benefits of civil society. The benefits of civil society include being able to depend on wrongdoers being held to account, on enforcement of deals you make not just handshakes, and like reduced carbon footprints and protecting native peoples agreements and the prevention of illegal logging or fishing as noted below.
To achieve this strengthening of civil society values, the deal that the Labour-led government will be signing in Chile this March has significantly improved. The differences between the Trans-Pacific Partnership and the CPTPP are summarised as follows:
There are now specific labour and environmental standards provisions in the agreement:
As part of the Labour chapter contained in CPTPP, the Parties agree to:
• Make the labour provisions of CPTPP subject to dispute settlement so they can be enforced.
• Reaffirm their obligations as members of the International Labour Organization (ILO).
• Ensure their laws and practices uphold certain labour rights stated in the 1998 ILO Declaration on Fundamental Principles and Rights at Work, including:
o freedom of association and effective recognition of collective bargaining;
o non-discrimination in employment; and
o the elimination of all forms of forced labour and abolition of child labour.
• Ensure they have laws governing ‘acceptable conditions of work’ with respect to minimum wages, hours of work, and occupational safety and health, as determined by each party.
• Recognise that labour standards should not be used for protectionist trade purposes
• Recognise that it is inappropriate to encourage trade or investment by weakening or reducing labour laws.
• Ensure they do not deviate from their laws (or offer to do so) in a manner affecting trade or investment between the parties.
• Commit to discourage the importation of goods produced by forced or compulsory labour from other sources.
• Encourage businesses in their respective jurisdictions to adopt corporate social responsibility initiatives on labour issues.
As part of the Environment chapter in CPTPP, the Parties agree to:
• Make the environment provisions of CPTPP subject to dispute settlement so they can be enforced.
• Prohibit subsidies that contribute to illegal, unreported or unregulated fishing or that negatively affect over-fished stocks. This is a meaningful contribution to achieving UN Sustainable Development Goal 14 (on dismantling fish subsidies and addressing collapsing fishing stocks before 2020).
• Take action to address the illegal trade of wild flora and fauna.
• Make sure they implement the commitments they have made under the following international environmental agreements:
o Montreal Protocol on Substances that Deplete the Ozone Layer
o The International Convention for the Prevention of Pollution from Ships (MARPOL); and
o The UN Convention on Trade in Endangered Species (CITES).
• Co-operate on environmental matters of shared interest including :
o the conservation and sustainable use of biodiversity, and sharing the benefits arising from the utilisation of genetic resources;
o reducing carbon emissions;
o the conservation and sustainable management of marine fisheries; and
o liberalising trade in environmental goods and services.
• Encourage the private sector to develop flexible voluntary mechanisms to protect natural resources and the environment in ways that are science-based, conform with international best practice, promote competition and innovation, and are not discriminatory
Granted, it’s not intended to save the world or any of the standard liberal causes. It’s still basically a trade agreement. But it’s ambitious enough to do more.
If you’d like to dive into the impact of these in more detail, see the MFAT National Interest Analysis.
No one has to pretend that this deal is perfect. And without the United States, and pretty much no dairy access to Canada, the benefits are less to do with future uplift in our GDP and more to do with our SME-dominated economy and enhancing the global connectedness of New Zealand with 10 other countries in a strong rule-based order, as well as the specific tariff gains noted by MFAT for our dominant exporting sectors.
And like yourselves, I’m very interested to see how this government will finesse Investor-State Dispute Settlement processes in our interests.
But let’s be really clear: it’s far bigger than CER and at least as big as the China-New Zealand FTA (now our two dominant trading partners) in their integration of economies in to the medium term. The economies in the agreement are the destination for 31% of both our goods and services exports, four of our top ten trading partners, and four countries we’ve never had trade agreements with. If amending legislation needs to come into our Parliament, there will be almost no resistance.
The CPTPP is a really big deal for New Zealand.