Winning the trade war

A Government working group has come back with a report which more or less vindicates the original critics of the Trans Pacific Partnership.

The 22-person Trade for All Group chaired by former diplomat and “Sneaky Feelings” guitarist and singer, David Pine, was established by Trade Minister David Parker last August.

Parker has argued that the study was part of his pushback against the kind of nationalist anti-trade forces seen under Trump in the US and with Brexit in Britain.

He told the Otago Foreign Policy School in June that  trade policy needed to deliver for all New Zealanders,” including women, Māori, rural communities” and was “a crucial element in our push back against anti-globalisation sentiments and associated scepticism around the benefits of trade.”

Parker’s own pushback against anti-globalisation however included having to confess to EU Trade Commissioner Cecilia Malmström that he stole the “Trade for All” title off a similar EU programme.

Pine’s report touches all the hot buttons that were touched during the anti-TPP campaign.

And it confirms that New Zealand was the subject of an Investor-State Dispute Settlement (IDS) in 1986 over the Motonui Synthetic Fuel Plant.

When Sir Robert Muldoon launched the programme to build the plant in 1982, he allowed Mobil Oil, who held a 25 per cent shareholding in it, to purchase its petrol output at preferential rates.

The Lange-Douglas Government in 1987 passed the Commerce Act and attempted to restrict Mobil from accessing the preferential rates.

The matter was referred to an ISDS process, and after secret hearings, the Government lost and a settlement which remains confidential to this day was reached in favour of Mobil.

That case was brought under the contract between Mobil and the Government (who held the remaining 75 per cent of the shares).

Pine’s report says ISDS clauses in New Zealand’s Free Trade Agreements have various safeguards aimed at protecting the Government’s right to regulate “and to date, no ISDS claim has been brought against the New Zealand Government under a free trade or investment agreement.”

Pine says that dissatisfaction with ISDS was a major theme of anti-TPP protests.

“Whatever view one takes of the merits of the argument, there is little doubt that the inclusion of ISDS clauses in FTAs has damaged public trust and confidence in trade agreements,” his report says.

There were two other big themes to the protests; that the TPP could foster unbridled free trade and that could further inequality in New Zealand and accelerate the destruction of the environment.

There were also concerns — in part fostered by Parker himself — over overseas investment in land.

The report, however, devotes only one paragraph to it.

“New Zealand’s (trade) policy recognises sensitivities associated with some types of foreign investment in New Zealand, including categories of some land (farm, coastal), water resources and residential housing,” it says.

“At present, the operation of the Overseas Investment Act is under review.

“Given that foreign investment can result in benefits or costs to the economy, it is important that the Government has the powers to maximise the benefits from foreign investment and minimise the costs.”

On foreign investment more generally the report says – a growing population, a warming planet, and the pressures these will bring – “create potential for tensions between what New Zealand wants from the world and why the world is interested in us.

“Control of natural resources will be increasingly attractive to foreign investors.

“The decisions of future governments will need to be clear-eyed about that.

“Commitments in our agreements need to leave appropriate space for future governments to make decisions in the national interest.”

National’s Trade spokesperson (and former Trade Minister) Todd McClay is sceptical about the ability of trade agreements to deal with issues like climate change.

“If the Government wants to do more internationally on the environment, they should go out and negotiate environmental agreements,” he told POLITIK last night.

“They should leave our trade negotiators to open up access to important markets where New Zealanders are restricted and treated unfairly.

“So we do run the risk of asking a trade agreement trying to fix everything.

“ Trade deals are blamed for everything.

“But they shouldn’t also, therefore, be used to try and fix everything.”

And the report leans in that direction too.

Rather than pretend New Zealand could make an impact on global climate change measures through trade deals it suggests the main concern will be to preserve flexibility for domestic changes that new Zealand might want to introduce to cope with climate change.

“An important part of a new framework will be giving clear direction to our trade negotiators on the need to maintain policy space for the types of actions that will be needed to address climate change in the years and decades ahead,” it says.

“ This will, in the first instance, require a review of the flexibility that we do have under trade agreements and trade policy settings to regulate in respect of climate change. “

The report says that the proposed changes to the Resource Management Act could mean that in the future companies would ill have to demonstrate how they intended to mitigate or offset greenhouse gas emissions in order to gain regulatory approval under a revised resource management system.

It also has some practical points to make.

Notably, it raises a number of questions about the Ministry of Foreign Affairs and Trade which it says needs to better understand public attitudes towards trade and should commission regular polling on public attitudes towards trade and disseminate those findings widely.

And in a clear hint at the Ministry’s propensity for privacy, it says it needs to ensure its policies relating to the Official Information  Act “conform to evolving notions of best practice, especially the shift towards greater proactive disclosure of information.”

“MFAT needs to change internally so that its people and practices better reflect New Zealand’s diversity and it is better able to engage Māori and Pasifika businesses domestically and connect with ethnically diverse emerging markets,” it says.

It should engage the public early on in the formation of trade policy before key decisions have been made.;  generate and examine alternative policies before finalising a negotiating mandate; make greater efforts to ‘go where people are’, including going into rural communities, workplaces, pubs and schools and engage other ministries earlier in the process, and more effectively.

The report argues that the National Interest Assessments which guide the approval of trade agreements should not be produced by MFAT.

”Placing responsibility on MFAT to be the judge of its own work is unfair on the Ministry and at odds with one of the most fundamental principles of natural justice. This needs to change.”

It also wants a separate Select Committee with specialist staff to approve Trade Agreements.

Welcoming the report, Parker said: “The report builds on existing work while also providing new insights and ideas.”

He intends to provide an all of Government response in the first quarter next year.