Gordon Campbell on Govt’s favourite crony Serco, and the TPP

Column – Gordon Campbell

Gordon Campbell on Sercos emerging role as the governments favourite corporate crony, and the TPP fallout

Gordon Campbell on Serco’s emerging role as the government’s favourite corporate crony, and the TPP fallout

There’s no success like failure, as Bob Dylan once said, and Serco’s failures mean nothing but trouble on the horizon for ordinary New Zealanders. Unfortunately, its abysmal track record isn’t stopping the relentless intrusion of this particular multinational into the provision of crucial services in this country. Despite their proven history of failure in running British prisons, Serco have been granted major contracts within our prisons and they have no incentive to do better. Because when they have failed spectacularly this year, the Key government waived the fines for which the firm were liable:

It has been revealed in Parliament that private prison operator Serco has been let off hundreds of thousands of dollars in fines for serious contract breaches.

Mt Eden Prison is currently under the management of the Department of Corrections, while an official investigation is carried out into allegations of mismanagement by Serco.

The firm’s problems have now spread to Serco’s management of the new privately run prison at Wiri.

Undaunted, Serco has also shown an interest in the co-ordination of youth protection services.

Ms Tolley has said she would still be open to Serco – which is looking at running child services in the UK – being contracted to provide more social services.

Tolley’s readiness to put out the welcome mat for Serco is significant, given that the Rebstock review of Child, Youth and Family is due in November – and the Rebstock terms of reference have shown that this government has a strong interest in the privatization of some CYF services.

The Serco invasion of New Zealand is now spreading to public transport in the capital city – again, despite its abysmal performance in running similar services in Britain. In a terrific piece of reporting that got overshadowed by the TPP finale, Lindsay Shelton revealed on Scoop that Serco is now on the shortlist for the contract to run Wellington’s commuter train service. Inexplicably, the Regional Council has decided that local experience is insufficient to run the local train service – and this requirement has forced Kiwirail into a joint contract with an overseas company in order to stay in the running. Failure overseas though, is obviously not a disqualifier. Lindsay’s report is a must-read, available here.

TPP, the day after

So you keep the public entirely in the dark for eight years, refuse to comment on drafts that contain horrendous proposals of what you intend to do, and then when the international public outcry forces the hand ofother governments – eg Australia – to stand firm on key points like the cost of medicines (long after we have abandoned ship). Them, when the worst is narrowly averted, you then blame the TPP critics for fear-mongering and ignorance ! Incredible stuff, even by the NZ Herald’s usual standards.

The blizzard of spin during the last 24 hours has been pretty astonishing. In reality, the government’s performance has been abysmal. Remember all the previous talk about how the government wouldn’t sign anything but a high quality, gold standard trade deal for the 21st century? Forget it, because they have. What we’ve got instead are a claim for a level of gains by the year 2030 that would be dwarfed – or wiped out altogether – by the gains/losses from currency fluctuations.

Time and again in the coverage yesterday, the prospect of not being in the TPP tent was presented as being utterly unthinkable. The opportunity costs of doing so are being ignored. No small thing, given the losses in innovation and extra costs imposed by the copyright extension to 70 years and other restrictive IP measures contained in the TPP – which will land us with the same bad US standards and copyright terms that Europe has rejected. So far, the net gain ( if any) from the TPP has yet to be calculated. Some commentators in Canada have tried to calculate the gains from being in the TPP and also what Canada would have lost by not joining:

The benefits of TPP membership may actually be smaller than what Canada would have lost by not joining. Dan Ciuriak, a former deputy chief economist at the federal trade department, has estimated that the TPP will boost Canada’s economy by 0.1 per cent, while staying out would have cost it 0.5 per cent of gross domestic product.

On the political front, the Key government has almost entirely escaped criticism for its ineptitude. Tactically, New Zealand failed. It placed all of its eggs in the dairy basket – leaving Australia to fight the good fight on the costs of medicines on its own – and then failed to deliver on dairy. ( Lets leave aside for the moment the immorality of trying to trade off the added cost of patented medicines needed by sick people with the hoped-for gains to dairy farmers.) Ultimately, an almost empty handed Trade Minister Tim Groser has been left to claim that history will absolve him.

Happily, the Canadian press has been scotching that forlorn hope. Macleans magazine for instance, headlined its story with the announcement that Canada had successfully seen off the New Zealand challenge.

Canadian officials have slammed the door on a suggestion by New Zealand that it might push for greater access for its dairy products as the Trans-Pacific Partnership moves forward.

But disappointed New Zealanders, who ran headlong into Canada’s sacrosanct adherence to supply management during the talks, maintained that the day will come when Canada’s dairy farmers will no longer enjoy having their “hands held” by protective policies.

Faint hope. Not in our lifetime, evidently.

We have come a long way from the threat of eliminating supply management,” said Wally Smith, a B.C. dairy farmer and chairman of the Dairy Farmers of Canada.

Similarly, the Dairy Farmers of Canada body doesn’t share Groser’s view that the end is nigh for Canada’s dairy protectionism. As the TPP deal was clinched, the organisation tweeted exultantly : “No negative impact and supply management preserved for a generation.” If anything, the huge $4.3 billion compensatory TPP package that the Harper government has provided for Canada’s dairy industry will enable the exit of small dairy farmers, and will speed up the consolidation of Canada’s dairy industry and its evolution into a more formidable rival for Fonterra. Good work, Mr Groser ! Give that man a knighthood. Again…nothing succeeds like failure.

Footnote : The nadir of yesterday’s TPP coverage would have to be the claim by Crawford Falconer, Kathyrn Ryan’s RNZ Nine to Noon star commentator on the TPP, that investor-state disputes “certainly aren’t targeted at countries like New Zealand.” Rubbish. Here’s the Toronto Globe and Mail on two examples of huge ISDS losses inflicted on Canada in this year alone.

As mentioned previously in this column, the Canadian government was deemed liable in the Bilcon case when it sought an environmental impact review of the effect of a quarry that it had agreed to in principle:

The Bilcon decision [which has laid Canada open to a $300 million damages claim] has raised a number of concerns about the investor-state dispute settlement provisions that are commonplace in international agreements, ranging from the North American free-trade agreement, to the Canada-China foreign investment agreement, to the proposed Trans-Pacific Partnership currently under negotiations.
A dissenting member of the panel – University of Ottawa law professor Donald McRae – warned that the ruling represents a “significant intrusion” into domestic jurisdiction and will “create a chill” among environmental review panels that will be reluctant to rule against projects that would cause undue harm to the environment or human health.

There is a growing concern in legal circles that the arbitration panels are expanding their mandate – including substituting their decision-making role for domestic courts – and that they cannot be appealed, Toronto trade lawyer Larry Herman said Tuesday. The Bilcon decision “will feed ammunition to those who oppose international arbitration as a form of dispute settlement,” he added.

It’s the second high-profile NAFTA loss for Canada. Last month, Ottawa was ordered to pay Exxon Mobil Corp. and Murphy Oil Ltd. $17.3-million after a NAFTA panel ruled that Newfoundland and Labrador had violated the trade agreement by imposing retroactive research-spending requirements on its offshore oil producers.

It remains to be seen whether the final ISDS wording in the TPP will remove the expectation of profit as a grounds for liability. If it doesn’t, New Zealand would indeed be liable to exactly the same Bilcon-style cases, if it subsequently chose to seek an environmental review of a foreign investment that it had greenlit.

In sum… the whole TPP gains/losses equation will be moot if the US Congress nixes the deal. As mentioned in this column yesterday, the Washington Post is reporting that the House and Senate votes will not occur until April 2016, at the earliest. Meaning: our Parliament may end up passing a TPP that the US then votes down. Therefore, any rush to legislative change to make us TPP compliant will have to weighed against what is at least a 50/50 chance that the US Congress will torpedo the entire deal.

Finally, could a future government exit the TPP if we so choose? Well, we exited ANZUS, so anything is theoretically possible. Given the general consensus on international trade deals held by both Labour and National, such a route is unlikely. In reality, the TPP will effectively tie the hands of future governments.


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