Prime Minister John Key’s claim that the Korea Free Trade Agreement could prohibit bans on overseas house buyers is being questioned by one trade expert.

It came after a day of news dribbling out of the final round of the Trans pacific Partnership Agreement negotiations in Hawaii which was mostly not good for New Zealand.

Charles Finny, a former diplomat and the original negotiator on the China Free Trade Agreement, is now a lobbyist with the Wellington firm Saunders Unsworth and has been appointed by the current Government to a number of positions.

In a message to POLITIK yesterday he said:  “I think the PM has it wrong. “ 

“Korea-NZ FTA would allow NZ to change the Overseas Investment Act in anyway it wishes so long as Koreans are not the sole target. 

“So long as the changes are not retrospective I can’t see any challenge succeeding.  

“This is not just my view but I have read a legal opinion essentially agreeing with my interpretation.” 

Even so Mr Key repeated his claim in Parliament yesterday afternoon. 

Asked by Labour Leader Andrew Little if we would still sign the Trans pacific Partnership if it made it impossible to ban foreigners from buying houses he said: “The reason that a ban may not be applied to a Chinese buyer of a residential property in New Zealand is as a result of Labour writing the most favoured nation provisions in the China free-trade agreement and the ratification of the Korean free-trade agreement.” 

In effect what he meant was that the Korea Free Trade Agreement contained the ban which automatically had to be applied to the China Free Trade Agreement. 


That’s because of what is called a “most favoured nation” (MFN) clause whereby if another country gets a concession in a trade agreement with New Zealand (such as a relaxation of controls on land sales to its citizens) then that must apply to those countries who have “MFN” clauses in their trade agreements with New Zealand. 

What Mr Finny suggested might be happening was that Mr Key knew that the Trans Pacific Partnership Agreement which is now in its final round of negotiations in Hawaii might make it impossible for New Zealand to apply a ban on foreign house sales. 

But the text of the Agreement is still “top secret” so there is still no way of confirming that or otherwise. 

Labour was also questioning the impact of the TPP on Pharmac after Mr Key conceded that the TPP might increase some costs for Pharmac. 

That is largely because of differences between the time limits New Zealand and the United States  impose on drug patents before they can be opened up to cheaper generic manufacturers. 

New Zealand has a limit of five years; the US is reportedly wanting that to be extended to 12 years. 

“”That means the Government will have to pay for the original drug rather than the generic for a little bit longer,” said Mr Key. 

However later in Parliament‘s Question Time he subtly changed his position.   

“I think that it is highly unlikely, actually, that the Government will have to pay any more through Pharmac. 

“But on the basis that it had to pay a tiny bit more, the Government would fund that increase, because, actually, what would end up happening is that the Government would earn a lot more revenue through tax revenue.” 

But the US Pharmaceutical industry has other issues with New Zealand’s Pharmac. 

The U.S. drug industry has long charged Pharmac’s determination process with being opaque and unpredictable. 

U.S. drug companies are primarily hoping that the TPP will put tighter rules on PHARMAC, which sets the reimbursement rates for drugs and medical devices on a national level. 

Although the New Zealand market is small, U.S. firms hope to ensure that its practices are not replicated in other markets, an industry source said. 

Mr Little was quick to jump on Mr Key’s original concession. 

“Today John Key finally admitted that medicines will cost more under the TPP his Government is negotiating, despite months of assurances by him and his Trade Minister,” he said. 

“As recently as last month Tim Groser said he wouldn’t sign up to ‘undermine a central pillar of our public health system – Pharmac’. Today John Key put the lie to that. 

“Pharmac’s purchasing power has saved New Zealanders more than $7 billion dollars since 2000. Multi-national Pharmaceutical companies will be cheering at this news and New Zealand taxpayers are the ones losing out. 

“It is disingenuous of the Prime Minister to say consumers won’t be affected – who does he think taxpayers are? 

“John Key must be straight with New Zealanders and come clean about what other New Zealand rights and institutions he is negotiating away in secret. “ 

And in comments to reporters Mr Little continued the move he began on Monday to position Labour further away from the TPP when he said: “We said Pharmac and its purchasing model had to be protected. 

“Extending the patents doesn’t protect the Pharmac model.”

Mr Little said: “We said Pharmac and its purchasing model had to be protected. Extending the patents doesn’t protect the Pharmac model.”

He said that if drugs remained under patent and cost too much, then Pharmac would not buy them and New Zealanders would miss out.

The NZ Herald reported him as saying if that bottom line wasn’t met, “then we don’t support the TPP.” 

Meanwhile the dairy industry is putting heavy pressure on Trade Minister Tim Groser and Chief Negotiator David Walker to get access to the United States market.

 They are doping in the wake of similar pressure being applied on behalf of United States milk producers on their negotiating team. 

Over the weekend 22 Senators wrote to the US Trade Representative Michael Froman calling for him to agree only to meaningful concessions on dairy exports to Canada and Japan. 

They also said they wanted him to “Ensure the domestic dairy industry gains significant market access in both Canada and Japan for key dairy commodities in a balanced wav compared to any new market access granted to New Zealand’s dairy industry into the United States.

“New Zealand exports 95 percent of its dairy products.

“If our dairy industry does not achieve comparable export gains in Japan and Canada as compared to those made by New Zealand into the United States, we are concerned that TPP could damage our industry’s current export opportunities and domestic market share.

“This is yet another reason why significant market access gains for U.S. dairy products into Canada and Japan are essential for TPP.”

New Zealand is thus caught in a three way dance between Canada, Japan and the United States over gaining access to the US and Japanese markets.

The New Zealand pressure comes in the form of a letter from the New Zealand Dairy Companies Association which was delivered to Mr Groser last week.

It says: ”We cannot accept a comparably less valuable outcome on dairy for New Zealand, than that delivered on autos for Japan, on beef and pork for the U.S., and on beef and grains for Canada.”

The TPP is the biggest trade negotiation engaged in by New Zealand since the famous “Protocol 18” which was part of Britain’s agreement to join the-then European Economic Community in 1972 and allowed continued access for New Zealand dairy products and meat to Britain.