Tim Hazledine: Making world safe for big business

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Benefits from tariff cuts under the TPP trade pact will amount to a mere $40 a year for every New Zealander.
Hundreds of anti-TPP protesters march on the US consulate in Auckland. Photo / NZME
Hundreds of anti-TPP protesters march on the US consulate in Auckland. Photo / NZME

The Trans-Pacific Partnership agreement (TPP) - which is scheduled to be signed tomorrow in Auckland - is a mixed bag.

On the small-but-sure positive side of the ledger are the benefits to our exporters. Our wine, honey, fire engines and hundreds of other products will now get into the markets of our 11 TPP partners with reduced or zero tariffs imposed at the border.

You might expect this would wash-out with similar tariff concessions we will now have to offer on other countries' exports to us, but in fact New Zealand finally gets a little bit lucky here. One of the more gormless of the 1980s "Rogernomics" economic policy experiments was to slash tariffs on imports without seeking equivalent concessions from our trading partners. That didn't do us much good then, but means now that matching reductions under the TPP is relatively painless for New Zealand, because our tariffs are already so low.

So that is good. How good? Well, tariffs everywhere tend to be fairly low these days, so there's not a huge pot of money to be divvied up.

I calculate the TPP tariff cut benefits to New Zealand will be worth about $40 a person a year.

Supporters of the TPP have predicted much larger trade benefits. They get these partly by exaggerating (in my view) the likely gains from the tariff cuts, but mostly from claiming benefits of nearly $3 billion a year from liberalisation of unspecified non-tariff measures, a number which is then abruptly halved in the documents. Their economic methodology here is murky, to say the least, but I think I have it figured out.

There are two stages to the reasoning. First, close your eyes and think of a really, really big number. Then, cut it in half to seem moderate, "cautious", "conservative" (their words).

Half of nonsense is still nonsense. And, of course, the most important non-tariff barriers facing New Zealand - those near-prohibitive restrictions on our dairy exports to Canada, the US and Japan - have survived the TPP negotiations almost unscathed, as they always were going to, given the power of the dairy farmer lobbies in those countries.

Of course the TPP will weaken New Zealand's sovereignty. That is what these things are supposed to do!

It's a bit sad to remember that we were assured when New Zealand went into the TPP process that our negotiators would simply walk away from any deal that did not include substantial liberalisation of dairy access.

That said, what perhaps most concerns TPP doubters is possible loss of sovereignty - control by legitimate New Zealand governments over New Zealand policies and institutions: Pharmac, mining, greenhouse gases, fracking, biomedical patents, the Treaty of Waitangi and others have been raised as being at risk. TPP supporters have attempted to soothe such concerns, but I'd say they should come clean. Of course the TPP will weaken New Zealand's sovereignty. That is what these things are supposed to do!

The fundamental idea or ideology behind the TPP is that national governments cannot be trusted to act independently on many issues, because they will inevitably succumb to local vested interests. Only the cleansing discipline of untrammelled global free-market forces will deliver efficient outcomes.

I fully understand the economic logic of this position, and could easily myself compile a long list of harmful effects of local vested interests, at the top of which would actually be those Canadian etc dairy and other agricultural policies.

But the basic premise is flawed. Most of the sovereignty we are giving up is not ceded to the invisible hand of free, competitive markets. It is not even handed over to larger sovereign states, such as the United States. It is largely to be conceded in the cause of making the world a safer place for huge, stateless multinational corporations to roam. Are we sure this is what we want?

New Zealand is a well-run, successful democracy. I believe that we could develop an economy serving our own needs and goals - in our own "policy space" - without harming the legitimate interests of others. This is not yet a mainstream view, but the tide seems to be turning against the dogmas of forced globalisation, of which this TPP is an extravagant example. It would be smart to be open to alternatives.

A final word on due process, or the lack of it. The TPP negotiations were conducted in unprecedented, near-paranoid secrecy. The economic analysis was belated and insultingly perfunctory. If the TPP had been tried in a criminal court, the judge would have tossed it out years ago, on grounds of arrant disregard for the rules of evidence and disclosure, whatever the merits of the case. Perhaps the judge would have biffed the perpetrators into jail for contempt of court. We must never do anything like this again.

• Tim Hazledine is a professor of economics in the University of Auckland Business School.

- NZ Herald

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