Article – Jordan McCluskey
We are a nation of traders. New Zealand is a country that has, since its colonisation, been dependent on foreign trade to support our economy. Extractive industries came first for the Kauri, then gold, then whale oil, and finally seal furs. Following …
The Beginning and the End of the TPPA
By Jordan McCluskey
We are a nation of traders. New Zealand is a country that has, since its colonisation, been dependent on foreign trade to support our economy. Extractive industries came first for the Kauri, then gold, then whale oil, and finally seal furs. Following colonial wars of dispossession against Māori, the land was then transformed, through large foreign borrowing by the Vogel government in New Zealand from London, into being suitable for a nation of smallhold farmers. A severe slump in the 1880s and continuing economic boom and bust in the 1890s lead to what James Belich calls the ‘recolonisation’ of New Zealand for the production of meat and dairy for the market of the British Empire.
This system of imperial trade saw Britain take almost all our meat and dairy until the mid-1960s, when it signalled that it wished to join the European Economic Community (The Pre-EU economic organisation). Britain would stop taking all our mutton, wool, and cheese at guaranteed prices for New Zealand if it gained entry. The New Zealand government spent years lobbying Britain to back out, but in 1973 Britain entered the EEC, causing New Zealand to lose its largest market for its goods.
New Zealand pivoted to Asia for trade from the 1970s out of necessity and became highly respected around the world as tough but fair, innovative trade enthusiasts. The Kirk government recognised the People’s Republic of China in 1972. The Muldoon government assiduously courted fellow Commonwealth nations in Asia, trying to improve trade flows.
The crowning economic achievement of the Muldoon government (yes, they exist) was signing the CER free trade agreement with Australia. Following the Rogernomics reforms of agriculture, almost all tariffs and subsidies were removed from the New Zealand economy out of pure necessity, as we are told that the country could no longer afford them.
New Zealand’s reputation in free trade became one of the best in the world. A country with no tariffs or subsidies. A small unthreatening nation on the periphery of the globe. A country seeking to improve its trade to improve its economic livelihood, with no hidden agendas. With this context in mind, may surprise you that the TPP (Trans-Pacific Partnership) is not something being forced on New Zealand, but was in fact the creation of New Zealand trade negotiators. It is not an American invention.
Initially between the Pacific Rim countries of Brunei, Singapore, Chile and New Zealand, it gained the interest of the United States, leading to excitement of our government.
The TPP is not the world’s first RTA (Regional Trade Agreement). The European Union is a customs union with a shared currency and no tariffs between member states, though with the kind of incredibly distorting agricultural subsidies that New Zealand has long since abandoned. NAFTA (North American Free Trade Agreement) created a free trade zone between Canada, Mexico and the United States under Bill Clinton. Mercosur has created a free trade zone incorporating most of South America.
The problem with RTAs is that they tend to be dominated by the interests of the larger states. The EU as we have seen in the unfolding Greek tragedy is dominated by Germany, NAFTA by the United States, and Mercosur by Brazil. There are also weaker and more dysfunctional customs unions in Africa and the nations of the former Soviet Union. The WTO (World Trade Organisation) actually frowns on RTAs, and prefers that states work towards bilateral (state to state) trade agreements, in order to work towards the WTO’s overarching goal of a completely free trade world.
So a small, relatively niche RTA gained the interest of the United States. Following them Australia, Vietnam, Peru, Malaysia, Mexico, Japan, Taiwan, and Canada entered negotiations. China also wants to be part of TPP negotiations, but the United States is resisting them, in another episode of the adversarial symbiosis which plagues the two great powers of our age.
New Zealand has allowed the United States into the TPP negotiations to try and gain the holy grail of our trade negotiators for four decades: Free Trade with the USA. Policy Officers of MFAT (Ministry of Foreign Affairs and Trade) are conditioned from entering the Ministry, that Free Trade with the United States is something that must be attained no matter the cost, even if really does not make economic sense any more.
Previous attempts have been derailed by David Lange refusing to allow nuclear ships to enter our waters, and Helen Clark refusing to invade the Middle East with George W Bush. The TPP is our silver medal, a backdoor way to try and get free trade with the United States. It is a quest to fulfill the yearnings of the only Ministry in New Zealand besides the Treasury to resist long overdue concerted change. MFAT was formed in the 1940s, and its strategic outlook remains stuck in the 1940s.
At the beginning of the twentieth century the politics of Anglophone world were riven by debates on tariff policy. The two major political alignments in Australia were even know as protectionist or free trader. The benefits of Free Trade are so well known, they are almost a cliché. More trade, more jobs, more economic growth. If the TPP was purely about the reduction of tariffs, and the elimination of subsidies, it would have my full support. But it is not. The TPP has a dark side.
The TPP contains provisions introduced to the United States relating to intellectual property, pharmaceuticals and investor-state arbitration. There are also complaints that as trade negotiations go, the TPPA has set new standards in terms of secrecy and lack of disclosure to the citizens of states who may enter into it. I don’t agree with this complaint because trade agreements have always been negotiated in secret due to commercial sensitivity. However, fragments of leaked text continue to leak.
They show that Intellectual property changes would make it easier for members to sue each other in the other nation’s courts over issues such as copyright and patents. The provisions relating to pharmaceuticals would require New Zealand to disestablish the state pharmaceutical purchaser, Pharmac, in favour of American drugs which may be more effective, but also far more expensive.
Of the potential negatives of the TPP, the investor-state arbitration is perhaps the most damaging. I would preface what follows next by saying I am not a lawyer, and I apologise in advance if what I state next is not technically perfect. If a government changes the law in a way that disadvantages a product, say for example tobacco, the tobacco company or its host government could then sue the offending country’s government for hundreds of millions of dollars in that country’s own courts.
This is without a doubt, a damaging attack on the sovereignty of the nation state. The freedom to regulate and legislate for our own people would be seriously harmed by entering into the TPP. The TPP would also have a destructive effect on how New Zealand manages its environment, regarded as one of the most pristine biospheres left on the Earth. Water quality, energy usage and oil drilling decisions could all be challenged under investor-state arbitration provisions.
New Zealand is a nation of Free Traders, with an economy built on the lifeblood of international trade. Without trade our country would be a poor, third rate Kiwifruit republic. We have however become so invested in our reputation as the world’s most ideologically pure free traders that we have lost sight of the reason our country pursues free trade; to make our country richer, not poorer. I would argue the primary reason our country is pursuing the TPP is gain back door entry to free trade with the United States. There is no need to accept a trade agreement with the kind of huge gaping flaws the TPP has in it.
China is now the world’s largest economy according to the IMF. We already have free trade with them. We are a small country of nearly 5 million people trading with a country of 1.3 billion. This is already seeing New Zealand beginning to reach the edges of its biological and environmental limits. There is only so much land that can be converted to dairying, and cows can certainly not be stacked on top of each other.
The counter argument is that by being so locked into the Chinese economy, we risk recession if China experiences economic turmoil. So would the entire planet. There is only so much we can produce, we are quickly reaching the absolute peak of that, and having a bigger market to sell it too would probably not make much more than a marginal difference.
So we come to the point where we should try and view things coolly and dispassionately. What is the point of Free Trade? To mutually increase the wealth of nations engaged in trade with each by the reduction of barriers to trade. What is not Free Trade? Reducing barriers, but inserting fish hooks into a trade agreement so the economic gains are offset by new costs. What would New Zealand stand to gain from the TPP? Greater access for agricultural products. What would New Zealand stand to lose or pay? Greater costs for medications, greater environmental degradation, lawsuits against our government costing the taxpayer millions of dollars.
The government argues that the benefits to dairy, among other sectors would see the increased wealth filter down into the wider New Zealand economy offsetting the potential negatives of the TPP. I disagree. This is not the case. For this reason New Zealand should not sign the TPPA. The maths does not, and will not, stack up.
Jordan McCluskey is an Honours graduate in history from Victoria University of Wellington, where he specialised in Chinese history. Jordan is also the co-editor of The Co-Op blog at https://nzcoop.wordpress.com/, where he writes on New Zealand politics and history.