Trading away our rights

Written By: - Date published: 3:38 pm, November 15th, 2010 - 34 comments
Categories: Economy - Tags:

The dark side of the current much-heralded free trade talks is that New Zealand could end up letting foreign firms dictate how the country is run, from quarantine rules to local content laws, unless it learns the lessons of previous trade deals.

A new book edited by Auckland academic Jane Kelsey, No Ordinary Deal, points out that free trade deals are now about far more than just tariffs. In the name of freeing up markets everywhere, they tend also to prevent governments from taking any steps that might harm foreign businesses – even basic measures that democratic societies take for granted, like controlling tobacco sales.

The result, the book warns, is that foreign companies can often sue governments for millions of dollars simply for carrying out the anti-poverty, communitarian policies that their electorates want.

The background to all this is the latest round of trade talks, scheduled for Auckland next month, in which New Zealand will be talking about extending a current free trade agreement, with Brunei, Chile and Singapore, to cover other Pacific Rim countries including, crucially, the United States. These talks – known as the Trans-Pacific Partnership Agreement or TPPA – have, by holding out the prospect of free trade with the US, got ministers all excited.

No Ordinary Deal, however, warns that that hope may prove illusory. The US has almost certainly no intention of dropping barriers to New Zealand dairy farmers. As economist Joseph Stiglitz said of previous trade talks, ‘One can’t think that New Zealand would ever get anything it cares about.’ We, having removed almost all our tariffs, have no negotiating power; and the US very rarely gives away any significant concessions.

A wider Pacific trade deal that included Japan, say, could bring benefits for New Zealand by cutting import tariffs. But even those benefits may be less than expected, the book warns. The IMF has predicted that Australia’s 2004 free trade deal with the US, for instance, will actually shrink its economy by 0.03 per cent a year.

Since 2004, Australia’s trade deficit with the US has widened from US$6.4bn to US$11.6bn. Free trade deals often allow the bigger country to import more into the smaller than vice-versa. They also make it easier for companies to move offshore, knowing they will face no barrier to entry, rather than stay in their home country. Advocates of free trade usually rely on the abstract idea that it automatically gives the economy more dynamism and makes investment less risky – an assumption not backed up by any evidence, the book argues. (It is surprising, the book argues, that no formal study of the TPPA’s benefits to New Zealand has been carried out.)

But if the benefits are small, the dangers are great, No Ordinary Deal warns. It is not clear just what the current talks will mean, because – in a fundamentally undemocratic move – the text of any trade deal remains secret until after it is signed. But judging by previous deals, the US will exert enormous pressure to include clauses that prevent any policies harmful to foreign companies – even if they might be justified socially.

Such provisions in past trade deals have forced countries to abandon quotas for local content, weaken policies that give citizens cheap generic medicines, and drop controls on tobacco advertising. More seriously, some countries have even given foreign companies the right to sue them if they feel disadvantaged by law changes. This extraordinary move, which puts companies on the same legal footing as democratically elected governments, has already cost countries hundreds of millions of dollars in court cases worldwide.

However, the book also highlights how Australia resisted most US attempts to include these dangerous provisions – partly thanks to a huge lobbying campaign by leftwing groups, trade unions and charities. The argument is not against trade: almost everyone accepts that increased trade between nations is a good idea. The point is the terms of that trade. New Zealanders should be very concerned if, in order to gain some potentially quite small benefit, the National government signs away our right to protect local communities, take public health measures that may hurt tobacco companies, and, in the most fundamental sense, organise our society the way we want it.

34 comments on “Trading away our rights ”

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  1. Rex Widerstrom 1
    15 November 2010 at 4:14 pm

    On one side of this debate you have the elites, supported by a few prominent necromancers (aka economists), for who any expression of an opinion that we should adopt a position short of pantsless ankle-grabbing toward foreigners sees the holder denounced as a xenophobe and a racist.

    If the criticism is merely pointing out, for instance, that the “Australian” banks have no real interest in Australia and even less in NZ, then condescension is the de facto reponse: we simply don’t understand the intricate complextities of international finance; we don’t comprehend the horrific implications of any attempt to control their rapacious and unprincipled behaviour; we’re simply simple economic Luddites, who need to shush and leave the important decisions to our betters.

    Meanwhile Australians themselves express exactly the same concerns about their country:

    Concern is growing in rural areas as foreign government-backed entities buy up significant parcels of agricultural land.

    More than $9 billion of prized agricultural assets have been sold to offshore interests in the past two years alone, The Daily Telegraph said on Monday.

    Nations leading the charge are predominantly Asian and Middle Eastern and include the economic powerhouse of China.

    A NineMSN online poll running today (admittedly not scientific, but a large sample size) asking “Should foreigners be stopped from buying prime farmland?” is running 62,420 “Yes” to 6017 “No” – a margin of roughly 10:1.

    And the elites wonder how NZ First gained traction… People don’t have to read Kelsey’s book to instinctively know something is amiss. They need only look at their own attitudes and know that the only country they love is their own; that if they owned large tracts of another then they’d exploit it without concern for what was best for its inhabitants, with whom they have no connection and feel no empathy, and at least to the full extent permitted by local laws.

    And they know that if they’d do it, then it is most certainly being done to them.

    Unless a major party repositions its stance to reflect this, then third parties who do – notably the Greens, at this point, though there will be others – will end up relegating them to the second tier of politics.

    • Richard 1.1
      15 November 2010 at 4:52 pm

      A NineMSN online poll running today (admittedly not scientific, but a large sample size) asking “Should foreigners be stopped from buying prime farmland?” is running 62,420 “Yes” to 6017 “No” – a margin of roughly 10:1.

      It’s all in the wording, of course.

      I think that you might get very different answers to questions such as:

      – Should foreigners be allowed to buy marginal farmland?
      – Should Australians be able to borrow money from foreigners to buy land in Australia?
      – Should foreigners be prevented from investing in Australia?
      – As they Share Our Cultural Values are English investors better than Asian ones?
      – Should immigrants to Australia be able to buy land in Australia?

      • Rex Widerstrom 1.1.1
        15 November 2010 at 8:08 pm

        I think that you might get very different answers

        The last one asks a very different question to to the others and so I think you’d get a very different answer. Most people accept that if someone wants to come to their country and embrace living there, then they ought to be accorded the same rights and opportunities as anyone else who lives there.

        It’s the faceless offshore residents (in which description I include companies) that quite legitimately concern people. They have no ties to nor interest in the country in which they’re buying up land, other than maximising the profit they can extract.

        On that basis I think you’d be told no; possibly (depending on the terms); depends (on how you define “investment” for a start); usually (though some Asian investor may not share those values they’re still willing to respect them); and yes.

        At least that’s my read of it, from talking to a large number of Australians from all walks of life (no merchant bankers or directors of foreign multinationals were included in my sample, however).

        • Richard 1.1.1.1
          16 November 2010 at 8:48 am

          The last one asks a very different question to to the others and so I think you’d get a very different answer. Most people accept that if someone wants to come to their country and embrace living there, then they ought to be accorded the same rights and opportunities as anyone else who lives there.

          There only seems to be thin semantic difference between a property owner in, say, Sydney but who lives in Brisbane, and one who lives in New Zealand.

          It’s the faceless offshore residents (in which description I include companies) that quite legitimately concern people. They have no ties to nor interest in the country in which they’re buying up land, other than maximising the profit they can extract.

          The same holds true for many of the Australians who own land in Australia.

          The problem is the sorts of people who have access to the resources to enable them to “own” large tracts of land, and how they are permitted to use that ownership. The problem is nothing to do with the “nationality” of those people.

          • Rex Widerstrom 1.1.1.1.1
            16 November 2010 at 5:25 pm

            There only seems to be thin semantic difference between a property owner in, say, Sydney but who lives in Brisbane, and one who lives in New Zealand

            I’m a NZer presently living in Perth. I like Australia, and Australians. I certainly wish them no harm. But do I care about them in the way I do NZ and NZers. Not even close. Maybe I’m an anomaly?

            If I owned property in Sydney and lived in NZ, why would I care about the quality of life of Sydneysiders? I’d want the Australian government to do whatever was best for my property interests, nothing more nor less.

            The problem is the sorts of people who have access to the resources to enable them to “own” large tracts of land, and how they are permitted to use that ownership. The problem is nothing to do with the “nationality” of those people.

            I’m not sure what you’re suggesting (if anything) here? We can’t start choosin g who we sell assets to on the basis of “suitability”, surely? It’s too subjective. We can, however, assume – and reasonably so, IMHO – that someone who doesn’t live in the country in which they own land won’t care about that country beyond whatever affects their capacity to maximise the value they extract from that land.

  2. Bill 2
    15 November 2010 at 4:24 pm

    What about pharmac? My understanding is that foreign pharmaceuticals have been wanting it gone for some time now. Under a free trade deal, pharmac could, probably would, be deemed to be a trade barrier.

    • Lanthanide 2.1
      15 November 2010 at 5:18 pm

      Yeah, that’s my biggest fear with any free trade deals. I don’t want to see our public health care system, and I’m including ACC there, be impacted negatively in any way by a free trade deal. Getting a deal with the US is almost certain to see discussions around those areas, however.

    • Vicky32 2.2
      15 November 2010 at 7:46 pm

      I heard something about Pharmac on the politics programme on RadioNZ this morning – the right guy (Mathew Hooton?) foaming at the mouth as usual, and Andrew Campbell being rather concerned about Pharmac’s fate …
      Deb

    • Rosy 2.3
      15 November 2010 at 9:14 pm

      It seems Germany is planning legislation that seems very much like Pharmac. That will have a really big impact on drugs companies if it goes ahead.
      http://www.pharmatimes.com/Article/10-11-15/German_pharma_price_cut_plans_move_closer.aspx

  3. BLiP 3
    15 November 2010 at 4:35 pm

    National Ltd™ has already proved that its willing to sell legislation that removes the rights of citizens to the benefit of foreign corporations.

  4. Draco T Bastard 4
    15 November 2010 at 5:18 pm

    Trade is a good idea but land is not trade-able and neither is sovereignty. It should, quite simply, be limited to completed products only.

    • Bill 4.1
      15 November 2010 at 5:30 pm

      Like blue eyed babies?

      • Joachim's 4.2.1
        15 November 2010 at 9:47 pm

        Where services are not things like tap water, electricity, internet, basic banking, phones, prisons and sewage treatment.

        • Rex Widerstrom 4.2.1.1
          15 November 2010 at 10:06 pm

          Indeed. In fact calling electricity, water, sewage etc “services” is stretching the term to breaking point considering the turbines, dams, pipes etc etc that are required to manufacture them, let alone the infrastructure required to deliver them, which is why I wasn’t even thinking of them when I wrote the above. They’re selling a product, not a service.

          Banking is more a service, but it’s importance to national stability puts it into a category of its own IMO. Internet, well… I think the delivery pipes are on the verge of expanding to such an extent that, for once, genuine competition might do the job it’s sold as doing for all the above, but doesn’t.

          My views on private prisons don’t accord with yours (or indeed most people who comment here) because I’ve seen state and private prisons at work and the private one is superior in almost every respect. However they’re not all that way of course… my position is simply that they don’t have to be a bad thing, give the right contract, the determination to enforce it, and attitude by the operator.

          • Joachim's 4.2.1.1.1
            15 November 2010 at 10:12 pm

            Perhaps a prison where the hardware is owned by the Government and then it is maintained and run by a private firm? That way the private firm can be sent packing if required and a new crew brought in very quickly.

          • Draco T Bastard 4.2.1.1.2
            15 November 2010 at 11:30 pm

            In fact calling electricity, water, sewage etc “services”…They’re selling a product, not a service.

            They’re not a product either, they’re a public utility. Essential and/or a natural monopoly.

            Banking is more a service,

            Banking is a service. The problem I have with the present banking system is that the private banks print the money which should be a government monopoly. But some of the services also happen to be an essential service in today’s world (EFT-POS etc) which should be done by a government department rather than the private banking system.

            Internet, well… I think the delivery pipes are on the verge of expanding to such an extent that, for once, genuine competition might do the job it’s sold as doing for all the above, but doesn’t.

            Local internet/telecommunications is a natural monopoly as multiple networks cost a hell of a lot and you don’t get true competition anyway as it’s a losing business proposition. Transnational telecommunications cables can be competitive but I do recall what happened with the cabling between England, the US and Europe – they ended up with so much competition that the companies that put in the cables were losing money. Competition reduces profit – not costs.

            I’ve seen state and private prisons at work and the private one is superior in almost every respect.

            So if you put in all the necessary regulations to produce a better outcome then you get one.

            That’s really all you’re saying and that could have been done with a state prison without the dead weight loss of profit thrown in.

            • Joachim's 4.2.1.1.2.1
              15 November 2010 at 11:57 pm

              I believe that basic banking should be treated as a utility and run not for profit. You cannot function in a modern society nor collect your pay without the use of a bank account and an ATM/EFTPOS card. You cannot pay for your water, your electricity, your phone or your rates.

              You essentially have no choice but to use banking services to access every other necessity and utility in society, and banking should not make a profit on that basis.

            • Rex Widerstrom 4.2.1.1.2.2
              16 November 2010 at 5:19 pm

              So if you put in all the necessary regulations to produce a better outcome then you get one.

              That’s really all you’re saying and that could have been done with a state prison without the dead weight loss of profit thrown in.

              Absolutely… if you could get past the entrenched “we’ve always done it this way… I came up through the ranks… who do you think you are?” attitude you find in state prison administration (at least in NZ and Austrlaia, the two I’ve experienced).

              And then apply the same recruiting standards (retrospectively) to state prison officers to get rid of the small minority who are unsuitable. And probably clean out the superintendents of most prisons.

              If a party proposed a clean slate review of prisons I’d be all for it. And I’d then be saying private prisons are an unnecessary burden.

              The reason I want them at present is to have a real world example of how it can be done better, on the same budget (or actually less of one, if you take the profit factor out). Because the state employees will tell you it can’t.

              Broadly agreed re power and banks etc, BTW.

    • Nick C 4.3
      16 November 2010 at 12:22 am

      If you accept the rational for trade then what distinction can you draw between \’completed\’ products and uncompleted products? As an example: Consider a market with 2 countries and 2 goods: Japan and New Zealand, and computers and milk. You would accept that NZ has a comparitive advantage in producing milk and Japan in computers. presumably you support trade on the grounds that it leads to specialisation is mutually beneficial.

      Why cant that specialisation apply to primary production (producing uncompleted products) and then completing those products?

      • Colonial Viper 4.3.1
        16 November 2010 at 12:47 am

        Specialisation leads to additional economic fragility and is going to be less and less of a good thing going forwards. Especially as the price of transport oil skyrockets, each country is going to have to be able to manufacture a more complete portfolio of goods itself.

        Also you are changing the proper usage of the economic concept of ‘comparative advantage’. NZ may have some advantage in the production of milk, but Japan has no inherent nature given advantage in the production of PCs (unlike woollen textiles in England and wine in Portugal).

        Why cant that specialisation apply to primary production (producing uncompleted products) and then completing those products?

        Because although specialisation and technology can of course be applied to the production of primary commodities, the level of specialisation and technology measured in terms of commercial value added per unit of product remains relatively low. Grass to spray milk powder. Yes some value add. Sand and bauxite to an iPad. Huge value add.

        • Nick C 4.3.1.1
          16 November 2010 at 11:49 am

          “Specialisation leads to additional economic fragility and is going to be less and less of a good thing going forwards.”

          You are possibly correct, however that isnt a reason for intervention in the market or to not sign free trade deals. If high transport costs in the future means that imports become more expensive then that will incentivise businesses to produce those goods here. Its a question of who has better information about exactly to what extent it is efficient to produce those goods here vs overseas; the government or the market.

          “Also you are changing the proper usage of the economic concept of ‘comparative advantage’”

          No, comparitive advantage doesnt have to be a ‘natural advantage’, it just means you can produce a good at a lower relative cost than another country.

      • Draco T Bastard 4.3.2
        16 November 2010 at 11:46 am

        You would accept that NZ has a comparitive advantage in producing milk and Japan in computers.

        No I wouldn’t. NZ would have an absolute advantage in milk due to access to land and anyone can make a factory. If Japan wasn’t so over-populated they would have the same advantage in milk production as we do, ergo, no advantage either way and so trade would bring no benefit.

        presumably you support trade on the grounds that it leads to specialisation is mutually beneficial.

        Nope, I support trade because it allows for transfer of technology/knowledge until such time as both traders have the knowledge and technology to produce the products themselves (Which is what China’s doing BTW). Specialisation works at an individual level but not at a society level. As I’ve said before, not everyone wants to be a farmer. Given that fact those people who don’t want to be a farmer and who want to make computers instead, specialisation of the country will force them to leave. These are likely to be our best and brightest.

        Specialisation of a society harms that society by preventing it’s development.

        • Nick C 4.3.2.1
          16 November 2010 at 12:02 pm

          “Specialisation works at an individual level but not at a society level”

          I guess thats where we differ: I’m quite happy to view the entire globe as a society for economic purposes. Which seems to make more sense: with your argument for example why shouldnt Wellington or Auckland be self sufficient? Also, the transfer of knowledge and technology is an ongoing process as new technology is constantly being developed. You cant just decide “Ok we have all the technology we want, lets shut up shop” because thats when you fall behind everyone else.

          “Given that fact those people who don’t want to be a farmer and who want to make computers instead, specialisation of the country will force them to leave”

          Well specialisation has never occured to that extent. If you want to work with computers in New Zealand its not like you cant.

          • felix 4.3.2.1.1
            16 November 2010 at 12:32 pm

            And that’s exactly the problem with your approach, Nick. You see the whole world as a single economic entity so you think that as long as overall profits are increasing, the world as a whole is better off.

            Of course reality proves this not to be the case as these profits are heavily concentrated and becoming more and more so.

          • Draco T Bastard 4.3.2.1.2
            16 November 2010 at 12:49 pm

            I’m quite happy to view the entire globe as a society for economic purposes.

            Which doesn’t work either as each country is different and each has to live within it’s own Renewable Resource Base. NZ already doesn’t live within that base, especially in regards to farming, as can easily be seen by the state of our rivers and lakes. The pollution from farming far exceeds what nature can clean up (i.e, we don’t even have the absolute advantage there either). Then add in the cost of transportation and you’ll find that the “global economy” is pure delusion. Trade between countries will still occur but it won’t be as large as it is now.

            Well specialisation has never occured to that extent. If you want to work with computers in New Zealand its not like you cant.

            If it’s not occurring then what’s the argument for it?

  5. Kate Kennedy 5
    15 November 2010 at 8:47 pm

    I’m concerned that our communities haven’t really had the information with which to engage with our politicians on the issue of this free trade agreement, so on my blog I’m doing some ‘demystifying the TPPA’ discussion to help raise awareness of the types of things that are at stake. I’ve spent the last couple of days blogging on some of the issues identified in Jane Kelsey’s book on my blog ‘Kate’s Online http://katekennedyonline.blogspot.com. Please feel free to drop by, and if you’re interested check out my Facebook Group discussion as well. Knowledge is power, but only until the deal is signed and sealed.

    • jimmy 5.1
      15 November 2010 at 9:51 pm

      Great blog Kate (and Guest for that matter), I especially liked that bit about the investor-state complaints process, I have a section of my masters on that sort of carry-on so I will be Google Scholaring that up tommorrow morning!

      On that note, in International Relations the anti-democratic tendencies of these free-trade deals is called ‘New Constitutionalism’ as they are essentially constitutional documents limiting the soverignty of states to the terms of the agreement and empowering a closed-door juristocracy to make sure they dont try thinking of an intervention in the market.

      Thatcher, Reagan, and Douglas were roll-back neoliberals in that they wanted the state out, what we have now is roll-out neoliberals making sure we dont have any movement towards ameleorating any negative side-effects of the market utopia they have created.

  6. dave brown 6
    15 November 2010 at 9:48 pm

    The Pacific trade deal with the US won’t happen as the US is in full crisis mode. It’s trying to roll back history but won’t succeed. Economics speaks louder than politics. China is buying the loyalty of the Pacific countries and the US can only scramble its diplomacy and military in a futile gesture to bolster its waning economic power.
    Ironically China is the only country that has allowed the US to enter and screw it but on its own terms. No FTA which allows the US to impose conditions on China. US is allowed to super exploit Chinese workers but China gets the technology, the markets and accumulates capital in its own right. Major capital controls, limits to foreign ownership. No land sales. No way China will be bullied over its currency.
    Meanwhile China expands at phenomenal rate accounting for half of world growth. The NZ and Aust bosses know this and are have survived the recession so far on the strength of trade with China. So the circus around the Pacific FTA is nothing but a rev up to prepare for war as its economic interests begin to be seriously threatened by China. NZ workers should reject US imperialist sabre rattling and at the same time align themselves with the Chinese working class to oppose the interests of China’s new imperialist class.

  7. Carol 7
    16 November 2010 at 8:28 pm

    Jane Kelsey was detained entering Aussie on Sunday because of past criminal convictions. She says she has done many trips to Aussie in recent years and usually only has a slight delay, checking her convictions. She doesn’t know if it was a particular officer being a bit finnicky, or due to her going to Aussie to promote her book on the TPP:

    http://www.stuff.co.nz/national/4351076/Protest-conviction-causes-trouble-for-Kiwi-academic

    “I always tick the box about criminal convictions, which relate to the Springbok tour and Bastion Point in the early 1980s. They have the list on record at Australian immigration. Usually I wait 10 or at most 15 minutes and they wave me on. This twist came completely out of the blue.”

    She has complained to the Australian High Commissioner.

    “It is possible it is an ill-judged over-reach by super-officious immigration officials at Sydney,” she said.

    “However it is equally likely that my name has recently been flagged, presumably linked to my role in promoting critical debate on the TransPacific Partnership negotiations. Requiring me to apply for a visa each time I go to Australia would make it easier to monitor and restrict my movements. At the very least it sends an intimidating message to me and to others.”

    Prof Kelsey previously said the SIS was keeping tabs on her because of her criticism of neo-liberalism and free trade agreements.

  8. Frank Macskasy 8
    18 November 2010 at 12:41 am

    John Key recently warned New Zealand against over-reaction regarding foreign investment. He said, in part;

    “Because it will always be here, the use of that land will always be subject to New Zealand laws and regulations. And ultimately we as New Zealanders get to determine what those laws and regulations will be.” ” – http://www.stuff.co.nz/business/farming/4354966/Key-warns-about-foreign-investment-fears

    Are these the same laws and regulations that he and his mates recently changed, under “urgency”, for the benefit of Warner Bros?

    Mr Key – your BS is starting to catch up with you.

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