TPP — can’t get something for nothing

By Bill Kaye-Blake 12/02/2014 5


I have avoided discussing the Trans-Pacific Partnership (TPP) trade negotiations, because it’s complex and secret and yet to be decided. But a statement from Tariana Turia, Associate Minister of Health, leads me to comment. Turia’s plain packaging for cigarettes bill just passed its first vote. The bill is intended to reduce the sale of cigarettes by making the packaging less attractive. A challenge to a similar Australian law is before the WTO, and the bill raises questions about the TPP.

The question is whether New Zealand will have the latitude to pass such laws should it sign the TPP. Just to stress, until the language is finalised, it’s all speculation. This legal post on investor-state arbitration is an example. But, Turia’s statement suggests a certain naivete about the negotiations. She said:

While the tobacco industry may have laid down a threat that if this legislation is passed [it will be challenged] my message to them is that our country has a sovereign right and a legal right to protect its citizens.

The point of these sorts of negotiations, though, is the give-and-take. New Zealand gives up a bit of its sovereignty to make laws within its own borders in exchange for consistency across borders.

One lesson from the analysis of international trade — the one that gets trumpeted — is that free trade makes countries better off. It lowers prices, increases the amount of products, increases product variety, leads to greater uptake of technology, and promotes innovation. Another lesson from exactly the same analysis is that there are distributional impacts from free trade. Some people within a country can be made worse off. This result arises either from the supply or demand side — either individuals’ resources fall in value or their consumption bundles become more expensive. The now-richer country can moderate the distributional impacts, but it isn’t a requirement of the models.

So back to New Zealand. Let’s stipulate that TPP will lead to economic benefits for the country as a whole. The same analysis would also tell us that there are likely to be winners and losers. Given that much of the negotiation has happened out of sight of the public, and that the Government won’t even let the people’s representatives see the text, one does have to wonder who those winners and losers will be.

Also, the cigarette companies have a very good legal argument on their side. The products are legal and their brand image is valuable. Quoting ACT MP John Banks:

I don’t believe the State should seize property rights from legitimate companies selling legitimate products.

So we have two opposing legal rights — the country’s right to protect its citizens, and the property right of companies. In the future, TPP will end up being a thumb on the scales. Turia may find that the balance has shifted.


5 Responses to “TPP — can’t get something for nothing”

  • hmmm.

    The govt had no problem seizing the legal right of so called legal high manufacturers to protect broad public health.

    The difference appears to be the capacity of the tobacco industry to fund legal challenges and (perhaps) lobby governments for influence.

    If totally free global trade is the sole goal of TPP, what point national sovereignty?

  • The government allows the property rights to exist.

    Stipulating that the TPP will benefit the country, and actually providing evidence that it will, or has (once they force it through with little oversight) provided benefit, is two separate items.

    NZ is predominantly open to foreign trade, with little if any duty applied. The TPP will not aid the general consumer base with more products, or cheaper products. If anything, it will increase costs with the removal of grey importing and being left with the pricing desires of the multinationals, who have shown no desire to price locally better or even equal to other countries. Increased costs of medicines, increased local IP protection for offshore industry, more control of internet access (net neutrality… pfffft).

    Who will the TPP actually benefit? Who profits from the agreement being signed.

  • Since there is no hard evidence upon which we can base our pronouncements in the first instance (the official text is secret), then we need to use the precautionary principle and look to existing examples of investor-state settlements.

    Multinational corporations have sued, and won, in trade tribunals set up under agreements less far-reaching than the TPPA. Canada has been sued at least eight times (even by a Calgary-based firm in one instance) under NAFTA. Ecuador has had a $18B award against Chevron for gross enviromental damage overturned, leaving its citizens out of pocket for pollution cleanup and economic losses. And of course there is the Aussie tobacco story. The latest round of investor-state dispute settlement frameworks allow companies to sue based on assumptions and forecasts of profits. Not even real losses, but simply projections of what they might have earned had the stars been in perfect alignment. There’s no better definition of rent-seeking than getting to make up numbers and then have the force of law to collect from a sovereign state.

    New Zealand already has some of the lowest barriers to international trade in the world. This is a mixed bag: we have lost nearly all of our manufacturing sector and we import over half of our foodstuffs. It also means we don’t have many chips to bargain with in trade negotiations, so what we are being pressed to give up is far beyond the scope of what traditional free trade agreements sought to achieve.

    The putative benefits of free trade are a two-edged sword as well. Not only have we lost our capacity to produce goods domestically, but our supply lines depend on cheap foreign labour and cheap oil. As soon as there is upward pressure on these inputs the advantage to the consumer disappears.

    Ever since the US pulled up a seat at the table, it has become clear that any agreement will have terms favourable to American interests and this simply reinforces an already hegemonic situation. All you need to do is look at the state of copyright and patent law in the US and envision how that nightmare of legalistic wrangling, patent trolls and suffocation of innovation will be enforced upon the rest of the TPPA signatories.

    The negotiations and draft text are being hidden from the public for a simple reason: No sane person would agree to be bound by the likely provisions of the agreement unless there was a pile of money to be made. Evidence of actions conducted under existing multilateral treaties must lead us to apply the precautionary principle and refuse this thing outright. Nothing good will come of it for the vast majority of New Zealanders.

    • Here’s the process as I understand things.

      The text remains confidential while negotiations are underway.

      If the final deal looks good, NZ signs on. But, this only indicates an “intention to ratifty”. It isn’t itself ratification.

      Then, the text comes to Parliament. Parliament discusses it in select committee. If the deal looks good, then Parliament must introduce and pass legislation to bring New Zealand into compliance with the deal. The Prime Minister then completes NZ’s accession to the agreement.

      The “Intent to ratify” is not binding on Parliament. If Parliament, on proper discussion of the trade deal and with proper consultation at Select Committee, decides that it’s not worth signing, then we don’t wind up passing legislation to bring us into compliance with the TPP and we don’t come into the agreement.

      The leaked chapters have been really interesting. In part, they told us what we already knew: that the US was pushing for some bits sufficiently objectionable on copyright that it would be worth throwing out the bill. But, we also saw that the US was very isolated in these positions. It had few partners on any of the nasty bits – like one or two countries would go with the US on those, but 9 or 10 would be opposed. I’m consequently pretty optimistic that the final deal will be much better than that which has been leaked.

      It’s nonsense to refer to the precautionary principle here because NZ’s signing on is not binding. Signing is only an intention to ratify. It doesn’t bind us to join up. It doesn’t force Parliament to pass legislation bringing NZ into compliance. We don’t get to be part of the trade deal if we don’t, but that’s something best decided by all countries at the same time after a final version of the text has been set. Otherwise, instead of having a bunch of negotiators hammering stuff out, we get every Parliament and Congress in on it at the same time. It would be a complete unworkable mess.

      So long as we’re happy to say “Sorry, the deal isn’t good enough” if it doesn’t wind up being good enough, then I’m pretty happy to wait to see the final negotiated text.

  • ” “Sorry, the deal isn’t good enough” if it doesn’t wind up being good enough, then I’m pretty happy to wait to see the final negotiated text.”

    I think I would be more interested in the spoken but unwritten future decisions (to be) made against NZ if we don’t sign. What are we being threatened with behind the closed door? The tobacco lobbies response may be just a small – in THIS case obvious – portend of what may happen.