The TPPA was an attempted international agreement to change the rules of international trade and investment in a way that would have favoured big business and undermined the public interest.

 

Although there were twelve countries involved in the TPPA negotiations, it was mostly driven by the United States.   The TPPA was signed in February 2016, but it died a year later without ever coming into force when the United States withdrew from the agreement.

In a nutshell, the countries that signed up to the TPPA agreed to either change or freeze national laws to suit the interests of overseas investors from the other TPPA countries (the US, Canada, Mexico, Japan etc).  This would have meant locking in light-handed regulation, limiting restrictions on overseas investment, and making it harder for governments to respond to both the future needs of their citizens and the natural environment.  Had the TPPA come into force, it would have been very hard for future New Zealand governments to pull out of the agreement.

The Trojan Horse

The government talks about the TPPA as if it were a “free trade agreement” (“FTA”).  This is misleading.  Traditionally FTAs are about reducing tariffs (i.e. border taxes) on goods (like cars, butter or cellphones) which are traded between countries. The basic idea behind FTAs is that if all the countries who sign up to an FTA reduce their tariffs, there will be more trade between those countries and their economies will grow.  Whether this is true or not is up for debate — what is clear is that the TPPA was about much more than trade in goods and was very different from a traditional FTA.

The TPPA was mostly to do was trade in “services” (such as education, banking or construction) and in providing new rights for overseas corporations to set up business outside of their home countries.  The TPPA also contained requirements for countries such as New Zealand to change specific laws, regulations and policies to better suit the interests of corporations from the other TPPA countries.

What this all amounted to was governments agreeing to limit their own power so that overseas corporations could make more profit.  Whereas trade agreements typically involve countries bargaining to mutually drop tariffs in goods, the TPPA was an agreement for governments to water down their right to regulate in the hope of achieving drops in tariffs (mostly from the United States).

What was at stake?

Our sovereignty would have been eroded.  Under the TPPA overseas corporations would have had the right to directly sue the New Zealand government if new laws or regulations passed in New Zealand hurt their profits.  Not only that, but these law suits would have been decided in unaccountable international tribunals rather than in national courts.  The judgments of these international tribunals would be enforceable and would take precedence over our decisions of our Parliament and our courts.  This process is called Investor State Dispute Settlement (ISDS).

Other countries have previously signed up to ISDS in international agreements and have been forced to pay compensation to overseas companies where regulation designed to protect the environment or the public good have undermined corporate profit.  Even where countries have successfully defended ISDS challenges, it has cost them tens of millions of dollars to do so and has delayed the implementation of government initiatives.  A good example of this is where the Australian government was significantly delayed in introducing plain packaging of cigarettes because of an ISDS challenge by tobacco giant Phillip Morris.  Further analysis on the implications of ISDS is available here.

Environmental protection would have been undermined.  Around two thirds of the 696 ISDS cases under similar agreements have challenged laws or public decisions relating to the environment (particularly mining, fracking, oil and gas production,reguation of toxic chemicals, waste dumping and renewable energy).  Action on climate change would also have been hindered.  Read more about the TPPA’s environmental implications in one of the peer-reviewed expert papers prepared after the release of the TPPA text: Full environment paper and summary.

Te Tiriti o Waitangi would have been undermined.  The TPPA would have created new constraints on the ways that the New Zealand government can honour Te Tiriti obligations, affecting Māori tino rangitiratanga, culture, indigenous knowledge, biodiversity and opportunities for economic development. Read more: Full Te Tiriti o Waitangi paper and summary

Medicines would have become more expensive through the undermining of PHARMAC and restrictions on the availability of generic (off-brand) medicines.

Copyright laws would have been extended from 50 years to 70 years and would have been more harshly enforced, restricting internet freedom and access to information, costing libraries, schools, and businesses, and stifling innovation. Read more: Full IP and IT paper and summary.

Privatisation of state assets would be effectively locked in, and the formation of new state enterprises (as we did with Kiwibank) would effectively be ruled out.

Regulation of overseas corporations would have be undermined by the threat of foreign investor challenges. The threat of legal cases, and the high costs of defending cases, would make government reluctant to regulate.

Local business would lose out in competition with large multinationals.  The TPPA would have made it harder for governments to enact laws and policies designed support local business development and the local economy.

Workers would have lost out. Economic analysis predicted that the TPPA would mean 5,000 fewer jobs in New Zealand and increased inequality.

Financial stability would have been threatened.  Light-handed regulations would have been locked in, and foreign banks, insurance companies and money traders would have gained new powers to challenge laws designed to prevent another financial crisis.  Under the TPPA the government would not have been to tackle property speculation and the housing bubble through a ban on property speculation by non-residents.

A bad deal

New Zealand’s main aim in the TPPA was to achieve drops in tariffs on its exports on dairy and beef, mostly to the United States.  We got a bad deal, as the TPPA preserved tariffs and quotas in these sectors for years to come.  In exchange for very minor gains, the New Zealand government agreed to undermine its right to regulate in the public interest. Read more: Full paper on the economics of the TPPA.

What’s next?

The TPPA died in February 2017.  Unfortunately, the corporate interests that lay behind it are still around.

There are several possibilities for how the various elements of the TPPA may re-emerge as a threat for New Zealanders in other trade agreements.

Two agreements currently under negotiation are the Regional Comprehensive Economic Partnership (“RCEP”) and the Trade in Services Agreement (“TiSA”).

RCEP is an agreement being negotiated between 16 countries, notably China and India.  In the past RCEP was seen by many as a China-led competitor to the TPPA.  It is unclear how RCEP will proceed with the death of the TPPA.  The next negotiation round will be held in the Philippines in May 2017.

TiSA is a proposed treaty between 23 parties, including the European Union and the United States. The agreement aims to liberalise worldwide trades in services such as banking, health care and transport.  Although the TiSA negotiations are more specific than the TPPA (they are limited to trade in services), the motivation behind the agreement — watering down or removing regulation to suit the interests of international corporates — is the same.  The TiSA negotiations are currently on hold in the wake of the 2016 US election, but are likely to resume later in the year.

The New Zealand government is currently in negotiations to expand the NZ-China FTA, and has indicated that it wishes to preserve all or part of the TPPA in a new agreement with all the TPPA parties except the United States (“TPPA-1”).

We will be providing update on the above negotiations in our (semi) regular It’s Our Future Bulletins and on this website.  Sign up to the bulletin at the bottom of this page.

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