The Future of Trade Agreements

Given a long history of numerous trade agreements, why has the public become especially concerned about the TPP?

At a recent public meeting, a retired Secretary of Foreign Affairs pointed out that although he had been involved in negotiating many free trade agreements, the TPP was the first one about which the public had showed any significant interest.

The official MFAT website records New Zealand has nine FTAs (with 15 countries) in force and we have recently settled one with Korea. Collectively they cover 27 percent of the world economy.* Additionally we have SPARTECA with South Pacific island nations, and have signed up to multilateral deals under the GATT and WTO known as the Kennedy, Tokyo and Uruguay rounds (but the Doha round is still to be settled).

Adding the new economies in the TPP would increase coverage to 51 percent of the world economy. We are also negotiating other FTAs which would take the total to 82 percent. (The big ones involve bilateral deals with EU – the first or second biggest economy in the world – and India – the fourth biggest.) Additionally we are also in negotiation over RCEP (Regional Comprehensive Economic Partnership) which is largely with existing free trade partners in Asia (but also Japan, which is in the TPP, and India); it would further reduce barriers with them. Given all this past activity why, ruminated the ex-Secretary, has there been this reaction to TPP?

An initial problem was that the National Government did not involve the various interest groups (in the way the Labour Government did in the China deal). This has since been corrected so it does not explain the subsequent public disquiet.

Undoubtedly there is some resistance to any deal which includes the US. Perhaps New Zealanders dislike the American government or hegemonic economic power (whichever country has it). Not far from this is antagonism to the giant corporations which have driven some of the provisions. America is seen as the representatives of their bullying, although on some matters Japanese corporations have made similar demands.

Concerns have arisen because the TPP was to be more ambitious than the earlier deals, pushing into new areas. The totality of the ambitions were not reached, but American economist, Jeffrey Sachs, nicely illustrates the complexity by dividing the proposed agreement into four separate deals.

‘The first is a free-trade deal among the signatories. That part could be signed today. ...

‘The second is a set of regulatory standards for trade. Most of these are useful. ...

‘The third is a set of regulations governing investor rights, intellectual property, and regulations in key service sectors, including financial services, telecommunications, e-commerce, and pharmaceuticals. These chapters are a mix of the good, the bad, and the ugly. Their common denominator is that they enshrine the power of corporate capital above all other parts of society, including labor and even governments.

‘The fourth is a set of standards on labor and environment that purport to advance the cause of social fairness and environmental sustainability. But the agreements are thin, unenforceable, and generally unimaginative.’ [Some observers are more optimistic about some aspects but would acknowledge they are not especially comprehensive.]

So the public has some proper concerns about the TPP deal. It always had them, even with the simplest free trade deal. The political rhetoric has been that each was good for the country, but the reality is that some benefited, some lost out and that usually, under certain political assumptions, there was a net benefit to the country as a whole. So when we abolished car tariffs, car workers lost out but I don’t recall car owners, car dealers or even car manufacturers (who switched to importing) on the barricades.

The final critical feature of the New Zealand unrest has been Jane Kelsey, personably and publicly articulating concerns about the TPP deal. I do not always agree with her analysis, but even some trade negotiators have admired her energy and grasp of the issues (although on occasions she has depended upon leaked old documents when things had moved on). It is instructive that the media automatically go to her for comment, ignoring most of the other private sector experts (many of whom represent particular interests and hardly speak for the ‘public’).

Given this background of public resistance, the government faces the challenge of implementing the provisions of the deal including passing bills through parliament. It cannot back down. It is not just its political credibility in New Zealand that is on the line, but to walk away now from the TPP while certain sector groups would lose real benefits (to them). More fundamentally, all our partners in the free trade deals we are negotiating would pull back because they could not trust the New Zealand government to deliver. (We are never high among their priorities anyway.)

Undoubtedly the government’s strategy will be to use its thin majority to ram the required legislation through parliament. (I don’t think there is any Mike Minogue or Marilyn Waring to derail it.) It may do so slowly because it looks as though the US Congress will take its time. I shant be surprised if the deal is ultimately signed by President Clinton. I shant be surprised if it is never implemented in the current form – the critiques from Sachs and other American heavies are quite compelling, although ideas can get overwhelmed by corporate interests in the medium run.

My advice to the government would be to look for internal policies which would moderate the harsher TPP provisions. (I tried to indicate how one might do that with the pernicious copyright provisions,here.)

An even more important step is to try to win the public over to an open economy strategy. We have had one for three decades, but the commitment has been very much from the national elite, who have little connection with the wider community and have hardly tried to convince them – except arrogantly – or deal with their concerns. It was this challenge that the ex-Secretary was mulling over.

Recently Kelsey received a $600,000 Marsden Fund grant ‘to refine options and strategies for transcending embedded neoliberalism in international economic regulation’. (It is not as much money as you might think after the university has top and bottom sliced its share, and probably done a bit of surgery in the middle too.)

All power to her, but supporting the open economy does not make one a neoliberal. There needs to be an intellectual centre – perhaps a research centre for globalisation studies – that analyses the open economy. It should not be dominated by the elite or interest groups but reach out to all New Zealanders – just as Kelsey has.


* I have measured the contribution to the world economy by GDP measured in common prices (PPP). Other measures might give different proportions but they would not take away the main message. We already have FTAs with big chunk of the world economy; the TPP would substantially increase that chunk; but we are also after FTAs with a big chunk of the remainder.