Trade deal intrudes too far



OPINION: The Trans-Pacific Partnership covers a lot of non-trade matters, so why is there a reluctance to discuss the overall balance of costs and benefits, asks Simon Terry.

The Trans-Pacific Partnership is very different from past trade deals and the differences matter.

It bundles together standard gains from trade with a wide range of non-trade matters that will set privileges for foreign investors and impose serious costs.

More than any past trade deal, it matters what the overall balance of benefits and costs is.

When sizing up the gains, the Government has relied on estimates from a team of United States economists who most recently published with the Peterson Institute.

Based on their work, Trade Minister Tim Groser told Parliament the TPP would result in US$4.1 billion of gains for New Zealand in the year 2025 (about NZ$5 billion).

But a detailed review of the potential gains led by economist Geoff Bertram finds that there is much less in prospect.

The Sustainability Council review concludes that the trade-related economic benefits likely to be available from the TPP are less than a quarter of those the Government has claimed.

These have to be set against a wide range of costs that are not counted in the estimates.

There are readily visible costs, such as those triggered by extending intellectual property rights beyond the rules set in global treaties.

For example, proposals that would delay access to generic drugs and so raise Pharmac’s costs.

But it is provisions that inhibit or prohibit the exercise of national autonomy that cut deepest.

In its quest to penetrate “behind the border”, the TPP intrudes far further into how governments operate than is necessary to facilitate trade.

There are restrictions such as the Government cannot preferentially “Buy New Zealand Made”.

Then there are requirements that foreign investors be consulted in advance on proposed changes to laws and regulations.

But the most potent element is the investor state dispute settlement rights.

These would allow foreign investors to file a suit against a government in an overseas tribunal if they believed that government actions had diminished their expected future profits.

There are no rights of appeal on judgments from these tribunals even though they could effectively usurp New Zealand’s courts

The Government says New Zealand’s ability to regulate in the public interest is not at risk because this will be specifically protected in the TPP text.

But a leaked draft of this TPP chapter uses wording that has proven unreliable in defending other governments, as tribunals have wide discretion.

All up, New Zealand is being asked to sign away considerable sovereignty for what are relatively small gains, and on the information publicly available, it is doubtful there is an overall benefit for New Zealanders.

The response from TPP proponents has been to try to put this net benefit question back in its box.

The Employers and Manufacturers Association retreated to the suggestion that there was “no evidence” investor state dispute settlement provisions will be in the TPP – as though draft texts should be ignored. A recent article by ExportNZ similarly had not a word to say about the detail of the Sustainability Council’s review (No one benefits more than we do from free-trade deals, February 10), relying instead on distorted characterisations of its work across unrelated matters.

Why the reticence to meaningfully engage with the question?

One possibility is that the TPP’s net impact on businesses will not be the same as for taxpayers and communities.

For example, while investor state dispute settlement provisions would provide New Zealand businesses with free insurance when investing overseas, taxpayers and communities bear the brunt of foreign investors seeking to sue here.

Issues such as this have persuaded the European Commission to publicly consult on similar investor state dispute settlement provisions that it is negotiating with the US – and to suspend negotiations in the meantime.

It acknowledges that problems have arisen under investor state dispute settlement, with vague treaty language “allowing companies to exploit loopholes”.

The acid test for the New Zealand Government will be, when it has finalised negotiations, whether it will make the text available for public scrutiny and institute a serious assessment process – before it signs.

The standard parliamentary process for treaty making would not require the TPP text to be tabled before it is signed – only before it is to be ratified – and the assessment is undertaken by the same people who perform the negotiations.

That process also does not require a vote on the treaty itself, only on changes to legislation arising from it.

There is a great deal at stake in the TPP and it requires a process for consideration of the text that matches this significance.

Simon Terry is executive director of the Sustainability Council, a research and advocacy trust. The council’s review, Economic Gains and Costs from the TPP, is available at