A few earlier posts touched on some issues around TPP.

I remain pretty uneasy about the likelihood of overall net benefits emerging from this deal for New Zealanders.

And since this is one of those polarising issues – at least in New Zealand – I should restate (in a perhaps over-simplified way) my priors:

  • The ability to trade freely in goods and services is generally good and beneficial
  • Unilateral removal of New Zealand’s own trade restrictions has generally benefited New Zealanders.
  • We should have gone further and removed our remaining tariffs and either abolished, or sharply constrained, our anti-dumping regime.
  • A liberal foreign investment regime is generally good and beneficial.
  • New Zealand’s foreign investment regime is less liberal than it could and should be.   (There may, however, be important exceptions to the general case for a liberal regime.  Had the Soviet Union sought to buy up a large contiguous chunk of Northland I’d have had no hesitation in supporting a ban.  And non-resident purchases of houses, especially houses that sit empty, on a large scale might also be an exception,  but only given the absurdities of our domestic planning and land use restrictions.)
  • Intellectual property protections appear to have generally gone beyond what is appropriate to foster a climate of innovation.  Copyright is the most obvious example.
  • Strong government institutions, and particularly those which protect and ensure the rule of law, are important to any successful and prosperous society.
  • A key element of the rule of law is equal treatment of the powerful and the weak.
  • The freedom for domestic Parliaments to adopt even daft and dangerous policies is an integral part of the sort of system of government that we inherited from Britain and have made our own.

So I’m pre-disposed to favour trade and investment liberalisation.  In general, the more the better.

But even the academic literature tells us that free-trade agreements among groups of countries are not the same, and don’t offer the same welfare gains, as more generalised free trade. The Australian Productivity Commission reminded us of that again just last month. Australia’s own FTA with the United States has generally been regarded as having secured few (perhaps even negative) benefits for Australians.

And it is already apparent that intellectual property protections are set to be extended in any TPP agreement.  That is a win for the owners of those properties – few of whom will be in New Zealand – but where is the evidence of a general welfare gains for New Zealand citizens, or indeed, those of other countries?   (And this is so, even acknowledging Eric Crampton’s in-principle point about free-riding and pharmaceuticals).

And why do we want to further entrench investor-state dispute settlement provisions (ISDS), that provide greater rights to foreign investors than domestic investors have? We should, primarily, be making New Zealand law in the interests of New Zealanders, and I have not seen a single serous argument for how that end is served by providing better remedies to foreign investors than to our own. Disputes about government policy should be fought out in domestic political arenas, and disputes on law should be fought in the domestic courts. For better or worse, we ended “foreign” jurisdictions (the Privy Council) in domestic law a decade or so ago.    I’m not suggesting that foreign investors are any better or worse than domestic businesses – but we shouldn’t treat them differently. As I noted in an earlier post, previous great eras of foreign investment flourished without the need for such additional protections.

And while perhaps it is true that key points in any negotiations go down to the wire, shouldn’t we be uneasy that at this very late stage, such indications as there are suggest that the prospects of trade liberalisation gains that matter to New Zealand don’t look good? Dairy gets a great deal of attention in our media, but I wonder just how important any progress on liberalising it is in any other capitals? There seem to be more countries who care about resisting liberalisation, or for whom it just doesn’t matter, than who really care much about securing more dairy liberalisation.   That doesn’t sound like a recipe that leaves our negotiators much leverage.

And no doubt there is considerable truth in the proposition that negotiations need to take place in private.  No doubt, equally, if there was a will there would have been a way to be more open than the TPP process has been. After all, we used to think domestic government deliberations should be protected from public scrutiny as well. Now we subject them to extensive consultative processes, and the scrutiny of, for example, freedom of information acts.

Negotiations in private are a delegation of responsibility, by New Zealanders to responsible ministers. And trust is an important dimension of any delegation. Perhaps trust might be a little higher if New Zealand had a Trade Minister who, however competent, comes out with statements like this

“This is a moving game, and we need adults to do this – not breathless children to run off at the mouth when the deal is not actually finished.”

I guess he is old enough to have been a public servant before the Official Information Act.  But after a decade in Parliament those sorts of attitudes really aren’t good enough –  perhaps the only saving grace is that he is indiscrete enough to say what perhaps others only think.

I’ve expressed concern previously about the momentum that takes hold in these sorts of processes.  These negotiations have been going on for years.  New Zealand ministers and officials have prided themselves on having a key administrative role in them.  So how willing is the government, really, to walk away, on a hard-headed (rather than wishful) assessment of whether any deal actually benefits New Zealanders.  And will other hard-headed governments think New Zealand will really be ready to walk?  On its own.

Our Trade Minister is rumoured to be about to head off to Washington as our next ambassador, and the Prime Minister appears to enjoy his good relationships with, and easy access to, people like the Barack Obama.  Basic agency theory suggests we shouldn’t just assume that their interests (or any other past or future ministers) are sufficiently aligned with those of the principals –  New Zealand citizens and voters.  To walk away might mean putting ourselves “outside the club”, whatever that specifically means.  At a time when the government appears to be revelling in its position on the UN Security Council (and I still struggle to take seriously the idea of New Zealand as a key player, whether in the cause of Middle East peace, or the Security Council veto), there might be more reasons than usual to question how willing the government will be to step away if only a bad economic deal is finally on the table.

Perhaps the issue won’t arise.  Perhaps Malcolm Bailey’s comments this morning that the current dairy offers (whatever they are) should be “unthinkable” for New Zealand are just part of some orchestrated positioning exercise, with a bit of MFAT choreography, to try to prod slightly better offers out of our trading partners. But, at the moment, what we read and hear in the media doesn’t sound promising.  It doesn’t sound enough for even those instinctively inclined to support liberalisation to think that we New Zealanders would be better off it we signed up.    Bad deals have been done in past –  the Australian-US FTA –  and we can’t just assume away the possibility.

Of course, if a deal is signed it will still have to be ratified by Parliament (and through domestic processes in other countries).   No doubt the government will have a rough ride through that process –  no matter what deal is signed –  but equally I’d have thought that the support of ACT and United Future shouldn’t be hard to secure, and that there is little serious threat to its ability to secure ratification.

But if an agreement is signed, it is going to be important that there is serious scrutiny of it before Parliament is asked to ratify it.  There will lots of vocal commentators, and no doubt some of them will make useful and reasoned points that contribute to the debate.  But we need more than that, on what will be quite a detailed agreement.  We need a serious independent assessment of economic implications of whatever ministers have signed.  Perhaps the Productivity Commission could be invited to oversee that analysis. As it happens, the Commissioners include a former Secretary to the Treasury, and a former Director-General of Agriculture.  I doubt that the Productivity Commission currently has the in-house expertise at present to do the detailed work itself, but with the ability to (for example) contract modelling expertise the PC should be able to make a useful assessment, better informing any pre-ratification debate.

2 thoughts on “TPP

  1. Isn’t there a political rule that you only ask questions if you already know the answer? I don’t think asking PC to assess the TPPA would fall into that category. But for other reasons I agree it would be a good thing to do.

    Given current Japan/Canada/US agricultural/dairy restrictions, it would seem surprising to me that changes to them would be left until the end of the negotiations if they really believed that big changes were likely. Maybe some token gestures.

    I always wondered why they went for the big prize (TPPA/40% world trade), when they had no bargaining strength, rather than stick to a smaller trade pact, build up size by inviting other smaller countries, then when of sufficient scale invite the big countries to join.


  2. Re your first point, indeed. Which is why I worry that the govt will only seek analysis from MFAT or Treasury.

    I think the govt/MFAT would probably argue that they did start small (the P5 agreement), but then they got lured by the siren song of a deal with the US. The precedent of the Aus-US deal should have been a lesson – when the small country really wants a deal, they have next to no leverage. And because we seem to have really wanted a US deal, and then got committed to the process, we also rolled over on allowing Japan and Canada into the TPP process, even though that only increased the likelihood of diary problems. As Keith Woodford has pointed out, in some ways US, NZ and Aus interests around dairy are now more aligned than they historically were, but that certainly isn’t true for Japan/Canada – more’s the pity for their consumers.


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