TPPA: Three reasons to say no way

As select committee hearings on the TPPA draw closer... the arguments against ratification, all together in one place

It's a dangerous strategy for a government to denigrate those who don't agree with them as misguided or ignorant, especially if they are in the majority. A TV3/Reid Research poll last November revealed that a clear majority of the public oppose the Trans-Pacific Partnership Agreement (TPPA).

The government's response has been that it needs to do a better selling job, alongside big business and the media. But, as people prepare their submissions for a select committee deadline next month, it's clear that's not the problem.

Although much of the public on either side of the debate are hazy on the details (6000 pages of dense legal text is daunting), they understand the big issues. The battle over the TPPA revolves around three hard truths about the impacts of the TPPA on New Zealand.

First, the government says there are gains for the economy from TPPA. This needs unpacking. According to the government’s own figures, our national income (GNP) would be 0.9% higher by 2030 with the TPPA.  Without the TPPA, GNP would increase by 47% by 2030. With the TPPA, it would be 47.9%. This is not a significant benefit.

So much for all the claims of being part of an agreement that comprises 40% of the world economy, and playing with the big boys. The reality is that most tariffs are already low around the world, and the ones that aren’t (like beef and dairy) haven’t been reduced.

The results of research that I co-authored with Professor Tim Hazledine from University of Auckland, Dr. Geoff Bertram from Victoria and the business journalist Rod Oram showed that even the 0.9% increase in GNP is grossly exaggerated, since most of the increase results from removing ‘non-tariff barriers’.

But the modelling studies were unable to distinguish between protectionist barriers and legitimate regulation to protect our environment, public health, workers, communities, etc.  Removing unspecified regulations will, according to the assumptions in the modelling, reduce costs on business and help the economy. This is a recipe for more ‘light’ regulation, and more risk of leaky buildings, Pike River disasters and finance company collapses.

The savings that resulted from the economic modelling were so speculative that the government arbitrarily halved the number. Even after doing so, the gains from removing ‘non-tariff barriers’ still accounted for most of the projected benefit from the TPPA. These are ideologically-driven, speculative numbers that have little credibility. The real benefits are far less than the 0.9% of GNP.

It's true to say that there would be some tangible savings from tariff reductions, primarily in agriculture; but these are tiny. For example, by the time it's phased in by around 2048, savings on dairy tariffs will be 2.2% of exports to the TPPA countries. Earlier this month, the price of butterfat solids on the GlobalDairyTrade auction dropped 7.4%. The TPPA is virtually irrelevant in terms of additional income for farmers, the main beneficiaries.

There are also downsides. The TPPA locks in continued tariffs for sectors such as dairy and beef sold to Japan, Canada and the US, making it harder to remove them in future.

Further, the deal also allows the US, Japan and Canada to continue to use massive agricultural subsidies that enables them to compete unfairly. The US Congressional Office has estimated US agricultural subsidies may total $1 trillion over the next decade, accounting for up to 40% of costs of production for dairy farmers. This is unfair trading that is allowed under the TPPA.

The only viable forum to restrict agricultural subsidies is the World Trade Organisation (WTO). The US has been under pressure to give concessions on agricultural subsidies, but has had an incentive to negotiate to secure trade advantages such as stronger patent rights and longer copyright periods. The TPPA now provides these benefits to the US without them needing to negotiate in the WTO.

The ink had hardly been dry on the TPPA before the US announced that it wanted to end the current WTO Doha Round negotiations focused on agriculture. The TPPA is an own goal. New Zealand just gave away the best chance to tackle the serious trade distortions arising from agricultural subsidies.

The TPPA would deliver tiny economic benefits, and government spin has tried to make them look as good as possible by not only exaggerating the benefits but also by excluding any of the costs in their modelling. When the government talks about benefits of $2.7 billion from the TPPA, this ignores the costs!

Those include extension of copyright from 50 to 70 years, additional costs for longer data exclusivity for biologic medicines, costs to consumers from internet restrictions, additional legal fees and administrative charges for central and local government, the costs of being sued by foreign corporations and of defending cases. There needs to be a proper cost-benefit analysis of the TPPA. It is likely that the costs will far outweigh the benefits, even before non-economic impacts on the environment, health, quality of life, inequality and the loss of democratic rights and sovereignty are considered.

Second, the government says the TPPA is just a Free Trade Agreement and we have lots of FTAs, they have been good for us and we haven’t yet been sued.

This needs unpacking. The TPPA is mostly not about trade in terms of tariffs and quotas, but about so-called ‘internal barriers’ to foreign companies. These are the laws and regulations that get in the way of business, even if they also have a role in protecting the public interest. Removing the government’s right to regulate may be good for business but it’s not good for the environment or public health or human rights.

The government has given assurances that exceptions in the TPPA retain the rights of government to regulate in the public interest, but research papers on the environment, public health and Treaty of Waitangi show these exceptions are likely to be ineffective.

It is particularly risky not to have any carve out for action on climate change. References to climate change in earlier drafts of the TPPA were removed, and the absence of even a mention of climate change anywhere in the 6000+ page agreement creates real regulatory uncertainty for the future.

The agreement has a powerful and controversial way of getting rid of regulatory ‘barriers’ in the form of an Investor-State Dispute Settlement (ISDS) mechanism that allows investors the right to sue governments in an international tribunal.

This may have made sense when Third World dictators were nationalising foreign investment, but that’s not the case for New Zealand or the other TPPA countries. Under ISDS, foreign investors are able to take cases in an international tribunal without going through New Zealand’s judicial system. To make matters worse, the tribunals have rampant conflicts of interest, no appeals mechanism and little transparency.

In a 2014 article, the Economist called ISDS implementation “disastrous”. Most of the 696 ISDS cases so far have been against environmental regulations and have included cases on mining, renewable energy, fracking, toxic chemicals, workers’ rights, affirmative action in post-apartheid South Africa, the Philip Morris case against Australia’s law on plain packaging for cigarettes and recently, the claim for US$15 billion over President Obama’s rejection of the Keystone XL pipeline.

The Key government has tried to reassure the public that New Zealand already has ISDS provisions in free trade agreements, but we have never been sued. But this is mainly because investors from those countries have made 11 ISDS claims compared with 111 from TPPA countries, including the US with the most litigious corporations. It is misleading to say that we won’t be sued because we haven’t yet been sued.

The Key government also justifies the TPPA by pointing out that trade rose significantly after we signed the China Free Trade Agreement (FTA). But all commodity producers expanded exports significantly to China over the past decade, whether or not they have had an FTA. And the experience of Australia should give a warning. The Australian Productivity Commission study in 2010 found that Australia had gained no benefit from their FTA with the US, and had assumed additional risks. It is misleading to say that we are likely to gain huge benefits from the TPPA because we exported more after agreeing the China FTA.

In reality, we are opening ourselves to the potential of costly and damaging claims by foreign corporations. Even if we win the cases, there is a chilling effect. Defending itself cost against Philip Morris cost over A$50 million. Future governments will shy away from any laws that might adversely impact on the profitability of foreign investors, even if there are benefits for New Zealand society.

Third, the government has said the TPPA is a 21st Century agreement. This also needs unpacking. The agreement favours deregulation and privatisation, and would push New Zealand further towards the US model of extreme protection of intellectual property, high costs for medicines and other patented products, privatised public services and corporate influence over policy making. This is not a good model for New Zealand to follow. Far from being an agreement for the 20th Century, this is an attempt to lock in the failed policies of the 20th Century.

The TPPA is not even good for business overall. It gives new rights and opportunities to foreign corporations, while further disadvantaging small and medium enterprises that already have to compete with far larger multinationals that are able to avoid paying tax, use predatory pricing and other anti-competitive practices that are not regulated internationally. Policies to support local businesses and create local jobs are severely curtailed under the TPPA, undermining the potential for local government to support local economic development.

If you asked most people whether the priority should be to give more advantages to foreign corporations or whether it should be to better regulate the multinationals and help local business, it is unlikely that the answer would be the TPPA. We need very different kinds of agreements for the 21st Century.

Other countries are moving away from these sorts of agreements. Brazil has never signed agreements with ISDS provisions; South Africa, India, and a number of Latin American countries are unwinding ISDS agreements; France and Germany are opposed, and the EU has proposed significant changes to ISDS.

There are alternatives. We could be developing agreements that support trade on fair terms, but also allow governments to regulate foreign corporations in the public interest, that support environmental protection, climate change, public health and human rights, and that create space for thriving local business and local communities.

But first we need to reject the TPPA; its signing in New Zealand was largely symbolic. Ratification by countries representing 85% of its combined GNP is required to bring the deal into force. It's unlikely to be ratified in the US until the new President is in office, or it may be rejected (leading candidates oppose the TPPA). And Canada has undertaken to consult widely and undertake objective analysis before deciding whether to ratify.

The government and much of the media are sounding increasingly desperate as they launch expensively designed web pages and go on a roadshow. What they don't understand is that the government’s problem isn’t a failure to ‘sell’ the TPPA, but that the public doesn’t want to buy. It won’t come into force before the next New Zealand election, and it will then be a crucial issue. New Zealanders will finally have an opportunity to decide on the TPPA, and by implication, the kind of society we want for the future.

Barry Coates is spokesperson for It’s Our Future – Kiwis against the TPPA, a candidate on the Green Party list (next into Parliament), developer of a sustainability programme at the University of Auckland Business School and former CEO of Oxfam New Zealand 2003-14.