TPP Or Not TPP

What every voter needs to know about the Trans Pacific Partnership, and our government’s continued support of it….

by William L. Jobson

Trade policy is high on the election agenda, with National seeking to enact the Trans Pacific Partnership deal minus the United States, and Labour seeking to re-negotiate our FTA with South Korea. Timely then, to revisit why the TPP is a bad deal for this country, with or without the US on board. – Editor’s note.

tpp-logoWhen considering the TPP the first thing to note is that the TPP is not a Free Trade Agreement. It is the product of 28 US Congressional Trade Advisory Committees comprised of US multinational corporate industry representatives. It has been drafted to secure for them monopolistic intellectual property and investment rights to enable them (at the expense of other member countries) to recover from the losses they sustained during the US Financial Crisis, and the European Financial Crisis.

Indeed contrary to our government’s contentions signing up to the TPP has not and will not remove agricultural protectionism and quotas and tariffs on our dairy and meat exports to the US, Japan,Canada or Mexico.

For example : tariffs on our beef exports to Japan will remain at 38.5% and only reduce to 9% after 16 years. Tariffs will remain at 25% and 35% on our exports of skim milk powder and butter to Japan ; and their quotas will remain at 3,188 tonnes until 5 years after implementation when they will increase by 500 tonnes. In other words – and contrary to the contentions of Prime Minister Bill English, any trade gains under the TPP in our trade with Japan will remain miniscule.

In particular, the actual gains derived from New Zealand ratifying the TPP are only 0.2% of GDP as opposed to the governments claim of 1.4% of GDP – with the speculative balance being based on the supposed benefit of non-tariff de-regulation, and a failure to factor in the costs of de-regulation. In fact, the difference between the gains made as a result of ratifying the TPP and not ratifying the TPP is a mere 0.9% by 2030.

Despite the fact that the TPP does not remove agricultural protectionism from its major markets and only offers us miniscule returns, our New Zealand government has under Chapter 9 of the TPP agreed to accord to overseas multinational corporate investors unrestricted access to our strategic economic assets (farms, fisheries, minerals and natural resources) and our strategic economic infrastructure – as well as the unrestricted offshore remittance of their capital and profits, except where legal proceedings have been instituted against them.

Should the New Zealand government prohibit them from doing so – thereby causing them present or future losses – then the multinational corporate investor is empowered under Section B of Chapter 9 of the TPP to institute Investor-State Dispute Settlement proceedings outside the jurisdiction of our laws and courts for actual or future losses or damages arising from a breach of provisions of the TPP or international law.

Indeed, given that the average ISDS claim in 2015 was $622 million (US), legal costs ranged from $8-30 million (US) and awards ranged from $500 million-$1.5 billion (US) how brain dead was it for our government to ratify the Investment Chapter of the TPP when:

• The cost of meeting such awards is highly likely to offset the gains in market access achieved under the TPP; and

• ISDS claims can and have been used to pressurise governments into legislating or acting in the best interests of multinational corporations, and not in the best economic interests of their country.

Problems for New Zealand with respect to the provisions and requirements of the TPPA don’t just stop there. Under Article 2.19 of the TPP our New Zealand government – in the best interests of US agribusinesses – has committed itself to recognising GE and GMO produced agricultural and fisheries products as products of modern bio-technology and under Article 2.27 of the TPP has committed itself to approving the importation of GE and GMO products of modern bio-technology, and to accepting levels of GE and GMO contamination of agricultural and fisheries products.

Likewise under Article 14.5 of UPOV 91 – an agreement that Article 18.7 of the TPPA requires us to ratify – our government is committing us to accepting GE produced plant varieties for registration.

Indeed, when the Canadian government ratified UPOV 91 the results were disastrous for Canadian horticulture farmers : namely, increased operational costs, GMO contamination of their crops and loss of market access to countries other than the USA.

Here, the point to note is that the New Zealand government’s ratification of these provisions puts at risk our $20 billion trade with the EU as well as our agricultural exports to Japan,South Korea and India where any level of GMO contamination is not acceptable.

Also of concern is the fact that under Chapter 18 of the TPP, the New Zealand government has signed up to granting the holders of marketing approvals for patented agricultural chemicals, pharmaceuticals or biologics (as well as copyright holders) monopolistic access to the New Zealand market : free from competition, and free to charge usurious prices for their products, and has agreed to enforce and meet all of the costs of enforcement of these conferred rights.

The consequences of this are twofold. First, the New Zealand taxpayer is lumbered with the costs of enforcing the monopoly rights of these intellectual property right holders, as opposed to this being the responsibility of the copyright holders themselves. Second, the cost of affording these patent and copyright holders competition free market access for their products is that of unfettered profit maximisation and an exponential increase in our farming, health and business operational costs. How brain dead is that?

Should the New Zealand government not grant these rights then ( as Article 9.1 defines “intellectual property rights” as an “investment ”) it is open to these intellectual property rights holders to institute Investor-State Dispute Settlement proceedings against the New Zealand government.

Also objectionable is the fact that Chapter 19 the Labour Chapter of the TPP facilitates the offshoring of New Zealand jobs and manufacturing to the cheap labour states of Malaysia Brunei,Viet Nam and Mexico. This is of concern as the US Labour Advisory Committee estimated that ratifying the TPP would result in 330,000 job losses from offshoring of production, and because of the resultant increase of poverty within Nrw Zealand

The other objection to note is that under Chapter 19 of the TPP, Investor /State Dispute Settlement proceedings can be invoked to oppose labour law changes and to prevent New Zealanders from ever receiving Living Wages, despite growing levels of poverty.

So, why is our government hellbent on selling us out for short term gains, albeit that it will prove destructive of our long term economic sustainability? Currently, New Zealand has an international debt liability of $286.5 billion (108.2 percent of GDP} with financial assets of $139.9 billion(52.8 percent of GDP) leaving a net debt of $146.6 billion (55 percent of GDP) and a family household debt of 158 percent of GDP. Both have been incurred as a direct result of our government’s mismanagement of the economy.

The government’s policy of tax cuts for the rich and balancing the books by – for example – increasing GST to 15 percent, increasing road user charges, and increasing educational costs via cutbacks in public services (and minimum wage levels set far below the living wage) have cumulatively proven to be economically disastrous for us.

In particular these policies have resulted in the destruction of our spending and savings capacity, the undermining of the viability of our businesses, the increase in our international borrowings and an exponential increase in poverty. Indeed when this has been accompanied by the failure of our government to act to rein in property speculation and its deregulation of the finance sector, the prognosis is clearly not good for sustainable development, given the increase in accommodation and debt servicing costs.

In addition the undermining of our spending and savings capacity and the consequent reliance on international financial borrowing is considered to have both undermined the viability of our businesses and rendered them vulnerable to overseas takeovers or bankruptcy.

In this regard it should be noted that the underlying causes of the American Financial Crisis of 2007-2008 and the European Financial Crisis stemmed from a similar failure to regulate financial transactions, an undermining of earnings and savings capacity and a failure to control property speculation.

If this was not bad enough our governments response to the resultant financial crisis of facilitating the export of logs ,milk powder and unprocessed meat carcasses to China – as opposed to investing in added value processing – is regarded to be both short sighted and economically unsustainable.

This is considered risky as the Peoples Republic of China has an international debt of US$ 1,952,591,803,279 (or 69 trillion yuan) with worsening terms of repayment. Moreover, China’s economic recovery is contingent on obtaining unprocessed or semi-processed products from other countries at the lowest possible cost and processing them into added value products in China, in order to maximise their returns.

This is reflected in the fact that whereas the value of New Zealands exports to China are worth $5.8 billion, China’s exports to New Zealand are worth $6.9 billion, a loss leader of $1.2 billion.Part of that loss stems from the sale of logs to China at the lowest possible cost and the purchase of timber products back from them at the highest possible cost.

Now we are being asked to believe that the TPP – regardless of it terms or the risk of Investor to State Dispute Settlement proceedings – is the solution to the economic quagmire that our governments mis-management of the economy has landed us in.

Here it needs to be noted that the TPP has major impacts upon the capacity of our government to phase in sustainable economic development in our best interests. This should not be a surprise as the TPP, along with TTIP ,TISA and the TRIPS agreements were drafted by multinational corporations to protect, maintain and increase their market dominance.

As in the USA those politicians who enact legislation in the interests of multinational corporations can receive economic benefits from doing so. To the contrary – under Chapter 9 Investments, Chapter 18 Intellectual Property, Chapter 2 Market Access or Chapter 19 Labour of the TPPA – should our government enact legislation that reduces in any way any member country’s multinational corporation’s rights to maximise its profits at our expense, then it can find itself being held liable under Investor-State Dispute Settlement Proceedings for Awards ranging from US$500 million-US$1.5 billion.

So what does all of this mean for us? Firstly. signing up to the TPP means signing up to government by, or in the interests of, multinational corporations and not us.

Secondly, signing up to the TPP threatens to undermine the capacity of our government to restructure our economy in ways that are beneficial for us.

Finally, and contrary to government contentions, signing up to the TPP far from being economically beneficial to us enables the unrestricted exploitation of our strategic economic assets by overseas multinational corporations.

Therefore it follows that the only way for us to have a sustainable economic future is to reject the TPP in its entirety.

References:

Senator Elizabeth Warren “Congress should Oppose the TPP Deal (11 March 2016) C-SPANZ-c-span.org
‘Japan-NZ Trade ,Investment and Migration: Year ended March 2017 Fact Sheet’ https://Stats.govt.nz
Phillip Inman ‘Japan enters Recession as Abenomics falters’’ http://theguardian.com/business/2015/nov/16/japan-enters-recession-as-abenomics-falters/
China Debt Clock National Debt of China”” www.nationaldebt clocks.org/debtclock/china
Larry Elliot ‘IMF warns China over “dangerous growth in debt” https://www.theguardian.com/business/2017/aug//15/imf-warns-china-over-dangerous-growth-in-debt
Canadian National Farmers Union ‘Save our Seed’ (UPOV 91 – Feb.2015) http://www.nfu.ca/issues/save-our-seed
Tim Hazeldine ‘No More than a Case of Beer? TPP Trade Liberalisation Benefits for New Zealand’ https://tpplegal.files.wordpress.com/2016/01/hazeldine-on-trade-models-021021.pdf
Simon Terry & Geoff Bertram Économic Gains and Costs from the TPP: Review of Modelled Economic Impacts of ther Trans Pacific Partnership http://www.sustainabilitynz.org/trans-pacific-partnership
Bill Rosenberg ‘NZCTU Economic Bulletin No. 192’ http://union.org.nz/
Office of the United Stares Trade Representative ‘TPP Full Text’ https://ustr.gov/trade– agreements/trans-pacific-partnership (includes country terms of accession)
Amokura Kawharu ‘TPP Expert Paper #2: ‘Chapter 9 on Investment’ http://tpplegal.wordpress.com/
Barry Coates, Rod Oram & Tim Hazeldine ‘The Economics of the TPPA’ http://tpplegal.wordpress.com/
James Ting-Edwards ,Melanie Johnson , Judge David Harvey , Debbie Monaghan ,Kate McHaffie & Jo Shaw ‘Expert Paper # 7: TPPA: Intellectual Property and Information Technology ’ http://ttplegal.wordpress.com/
Laila Harre Éxpert Paper #8 : ‘TPPA Labour Chapter’ http://tpplegal.wordpress.com/
OECD ‘Investor-State Dispute Settlement’ (2015} http://oecd.org/investment/international-investment-agreements/50291642.pdf
Bill Rosenberg ‘NZCTU Economic Bulletin 175: TPPA the Economic Case’-Feb, 2016 http://union.org.nz/subject/tppa