There is a cautious optimism within the Government that it can stop the sale of existing houses to foreigners but stay within the TPP at the same time.

The new Government will be under pressure from long time allies and friends like Australia, Singapore, Japan and Canada to remain part of the TPP.

A decision to leave the agreement could provoke New Zealand’s most challenging foreign policy crisis since the ANZUS breakup in 1985.

Cabinet this Tuesday is to consider proposals to stop the sales.

Trade Minister David Parker was reluctant to comment on any specifics last night, but he told POLITIK he was reasonably confident a solution could be found.

The issue is both legally and politically complex.

On the face of it, TPP rules do not provide the ability for the government to ban TPP nationals from buying property in New Zealand. 

In May last year Labour Leader, Andrew Little, gave the inability to impose a ban and the loss of sovereignty he said that implied as the main reason Labour was voting against the legislation implementing the agreement. 

However, New Zealand would be able to impose some types of new, discriminatory taxes on property and continue to require approval to require approval for foreign investments in sensitive land.

New Zealand would also retain the flexibility to make the approval criteria under the Overseas Investment Act more or less restrictive. 

Finance Minister Grant Robertson told TVOne’s “Q+A” yesterday that the Government’s goal was to ensure New Zealanders were able to get into the property market.

“We’re working on the design of that right now,” he said.

Asked if was possible that it wouldn’t be a straight-out ban so the Government could get round the TPP issues. Robertson replied: “There are a number of options on the table that we’re looking at, and we’ll have something to say about that very soon.

Q+A: “Is stamp duty on the table?”

Robertson: “There are a number of options.”

The new Government is beholden to a Labour Caucus resolution of July 2015, which set out five principles or bottom lines which Labour required to be satisfied on before it would support the TPP.

They were:

  • Pharmac must be protected
  • Corporations cannot successfully sue the Government for regulating in the public interest
  • New Zealand maintains the right to restrict sales of farm land and housing to non-resident foreign buyers
  • The Treaty of Waitangi must be upheld
  • Meaningful gains are made in tariff reductions and market access.

POLITIK understands that the Caucus is more or less satisfied that only two of those conditions have not been met — the foreign land sales ban and the issue about foreign corporations suing the New Zealand Government, the Investor-State Dispute Settlement, procedures.

A Caucus source told POLITIK that of these, the house sales ban was the most important.

The Government’s coalition partner, NZ First, however, holds stronger views.

Not only does it oppose land sales to foreigners but in 2015 its Trade spokesperson, Fletcher Tabuteau, introduced a Private Members’ Bill, the  Fighting Foreign Corporate Control Bill, which required that New Zealand must not enter into an agreement with one or more foreign countries that included provision for investor-state dispute settlement.

Though the Bill never went beyond its first reading, it was supported by Labour.

Then trade-spokesperson, David Parker (now the Minister) said: “The Labour Party thinks that this bill should go to select committee, even though we think that the provisions in it are too broad in absolutely outlawing all investor-State dispute settlement clauses.”

Parker said The Labour Party was not saying that investor-State dispute settlement clauses were always bad, particularly with Third World countries.

“We are saying, in respect of First World countries, that we would be willing to rely upon State-to-State resolution and to forgo investor-State dispute settlement clauses.”

If the  Labour Government decides to swallow the dead rat that is the ISDS provision (which seems likely), then NZ First do have the ability to involve the “agree to disagree” provision in their coalition agreement.

That would be a controversial decision to make at the new Government’s first working Cabinet.

But faced with a potential international crisis, Jacinda Ardern and her Labour Ministers might well prefer to let NZ First go their own way.

Whatever they do, this is shaping up as a huge test of the new Government.