Jane Kelsey: Pitfalls of a gold-standard trade deal

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President Barack Obama with Prime Minister John Key. Photo / AP
President Barack Obama with Prime Minister John Key. Photo / AP

Provide a photo opportunity with the US President and all common sense seems to go out the window. The journalists and commentators who uncritically endorsed the Pollyanna version of the proposed Trans-Pacific Partnership during John Key's trip to Washington should know better.

The Herald's editorial (July 26) was more thoughtful. While suggesting the stars might be in alignment for a 'gold standard TPP', it warned against being 'starry eyed' about the opportunities. The reasons warrant further explanation.

When the nine-country negotiations were formally announced at the end of 2009 the goal was to sign off a deal at the APEC leaders' meeting that Obama will host in Honolulu this November. There now seems little prospect they will agree on more than a vague 'framework' of principles.

That reflects two main factors. First, the US effectively determines the process and substance of these negotiations. Whether or not Obama has personally grasped the nettle on a TPPA as the editorial suggests, his political stars are far from aligned.

Controversial free trade deals with Colombia, Panama and Korea that were signed back in the Bush era and adopted by the Obama administration are still stuck in the Congress, which has more immediate priorities. They seem unlikely to be voted on until after the forthcoming summer recess.

The US has held off tabling its most sensitive positions until those deals are done and dusted. That will be after the next round of negotiations in Chicago in September, leaving only a round in Peru before APEC. That timeline pushes the TPPA talks well into 2012 - a presidential election year in the US. Any agreement with politically sensitive concessions would be pushed off until 2013 at the earliest.

The second factor is the hugely ambitious scale and scope of an agreement that aims to reach further into areas of domestic policy than any has before. In other words a 'gold standard' TPPA may not be politically saleable outside the US as well.

There is already scepticism over the economic costs and benefits. An Australian Productivity Commission report late last year found few gains and significant costs from their bilateral agreement with the US in 2005. With a raft of free trade treaties among the various participants, most of whose economies are already highly liberalised, there are few traditional market access barriers to clear away, except for the areas the US is likely to block - sugar for Australia, dairy for New Zealand.

The prospect that Japan might join the talks, boosting the potential economic gains and the prospects that other APEC countries might follow, is remote indeed. I have just returned from a lecture tour where it was clear that any such decision by the Kan government would be political suicide, given the economic and political conditions in post-tsunami Japan.

On the other side of the ledger, clear conflicts are emerging over hugely sensitive domestic policies. Australia has said it will not agree to give foreign (meaning US) investors the power to sue it directly in supra-national courts to enforce the agreement, having batted off those demands in their bilateral free trade deal.

The announcement by Philip Morris that it will use similar powers in an investment agreement between Australia and Hong Kong to challenge new tobacco control laws has strengthened the Gillard Government's resolve. Contrary to John Key's initial position, New Zealand is not following Australia's lead. The US is unlikely to agree to an Australian carveout from a template that it wants the rest of APEC to sign onto.

The challenge to our pharmaceutical purchasing agency is an obvious second crunch point. The big-pharma lobby in the US and here has declared Pharmac 'an egregious example' of what it considers unfair practices. Leaked US and New Zealand texts reveal an initial standoff between the two parties. Yet the Key government has refused to take Pharmac off the table, raising concerns about what Trade Minister Tim Groser means by protecting the 'fundamentals' of our affordable medicines regime. Significantly, the Labour Opposition has broken the previous bipartisan consensus on free trade agreements and made Pharmac a red line issue.

These are just two of many emerging conflicts. Other potential flashpoints include restrictions on foreign ownership of strategic assets or tighter regulation of utilities and the finance sector, the right to adopt a financial transaction tax or capital controls, increased costs for libraries and education institutions from tighter copyright laws, and superior rights to foreign investors in proposed public-private partnerships in prisons, roads, hospitals, and schools.

Given these complexities, why is there so little information about the TPPA and why is the National government determined to shut down opportunities for informed debate?

A parliamentary petition on behalf a broad range of New Zealand organisations, including the New Zealand Council of Trade Unions and a number of affiliates, the Public Health Association, New Zealand Society of Authors, ICT industry association NZRise and Oxfam, asked the Foreign Affairs, Defence and Trade select committee to conduct a hearing on the implications of the agreement. The call was supported by the Labour Party and the Greens. But the government majority has blocked the request.

If this really promises to be a 'gold standard' agreement that will bring great bounty to New Zealand the government should be prepared to prove its case - or at least allow Parliament to hear submissions on the costs and benefits so we can assess whether a Trans-Pacific Partnership really is in New Zealand's national interest.

Professor Jane Kelsey is Associate Dean (Research) at Auckland University's Law School

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