GUEST BLOG: Why I’m Opposed to the Trans Pacific Partnership Agreement – a Conservative Perspective

Something that anyone who knows me, and who knows anything about my politics, no doubt finds surprising is the fact that I am opposed to the controversial TPPA.

Why would I – a right-wing conservative, who shuns the radical protest movement and ordinarily extols the virtues of globalisation and free trade – have an apparent change of heart and find myself siding with the same bunch of long-haired, barefoot, soap-avoiding hippies that I am usually so vehemently at odds with?

Afterall, it was my experience in the United States that turned me to the political right – while there I became enamoured with private enterprise and convinced of the evils of high taxation and too much government regulation. And upon my return to New Zealand, I became very pro trade simply as a result of considering how much we could gain as a country if we had access to that giant of markets.

And yet here I am, apparently turning down the holy grail itself, rejecting the very prize I have sought for so long, like meeting my dream girl in a bar only to decide I’m not ready for a relationship just now. (And also, to make the metaphor more fitting to TPPA, said dream girl is drunk and wants to fleece me for all I’m worth).

National Sovereignty

There are a multitude of reasons to oppose the TPPA and if you’ve read this far then chances are you’re probably opinionated or politically motivated enough to have heard most of them already – the main one being the national sovereignty argument.

I’m no exception to this: Of course it comes down to national sovereignty and my own unwillingness to give it up. And of course it comes down to values – does one value trade more or sovereignty more?

I make no bones about the fact that I am a nationalist (or at least I make very few bones about this fact – I’m like the nationalist equivalent of a frozen packet of supermarket fish in that regard: I do my best to remove all the bones but occasionally a few appear.)

However my own brand of ‘nationalism’ may well differ to another’s brand of ‘nationalism’: Other nationalists may view national sovereignty as sacrosanct, non-negotiable, the bottom line and maybe even view globalisation as an evil to be shunned and avoided. These people are the “anti-trade” crowd that John Key has (with some success) tried to paint all opponents of the TPPA as being.

I’m not anti-trade or anti-globalist. My brand of nationalism is about promoting our national interest above all else – especially above the interests of foreign entities, multinational corporations and the types of people Sir Robert Muldoon once referred to as “the Greedies”.

Why then have I chosen to oppose the TPP? After all, every agreement we enter into incurs some loss of sovereignty: From joining the United Nations, to the CER, to more recent deals with China, Malaysia and South Korea.

There was even a time, back in 1961, when about half of the National Party’s backbench revolted against the Holyoake government for signing New Zealand up to the IMF and World Bank, such was the strength of their conviction that our national sovereignty should never, ever be given away (a position a world away from that of the modern National Party…)

Broadly speaking, I would agree that most of the free trade deals New Zealand has entered into previously – including those containing controversial ISDS provisions – have been beneficial to us and have therefore been worth the trade off between economic benefit and loss of sovereignty.

The Costs of the TPPA Outweigh the Benefits

The TPP is a different kettle of fish. My opposition to the deal isn’t just about the assault on our democracy or our national sovereignty: It’s about the fact that signing up to the TPPA is bad economics.

New Zealand stands to lose far more from the deal than it gains, despite the numbers which proponents of the deal are churning out to try and convince us that it’s a good idea.
The first number to be thrown at us was $4 billion by 2025 – a number which came straight from the National Party’s propaganda department and has yet to be verified by any independent source beyond an anonymous “US Professor”. The other number we were offered was $5.5 billion, which certainly would not be a bad deal, and 1% GDP growth by 2025.

Here’s what they forgot to mention, though: The models that were used to generate these numbers assume full employment (something that New Zealand hasn’t had since the early 1970s) and no major fluctuations to wages and incomes.

We’ve since had MFAT revise the number to a more modest $2.7 billion by 2030 as a result of savings on reduced tariffs but even this doesn’t take into account the real effect on the NZ economy, other than to predict a 2.3% growth in exports, nor does it take into account the cost of changes to IP laws ($55 million a year – $770 million by 2030) or the increased cost to taxpayers (hang on – that’s us!) as a result of extended patents for new drugs.

Of far greater concern is the prediction that 5000 jobs will be lost in New Zealand – and we’re considered the lucky ones, having already suffered through the pain of transitioning to economic openness during the 1980s. Job losses in more protected economies – Japan, Canada, the United States – are predicted to be even more severe.

Not only will there be job losses in those countries, but wages will drop too – one of the adverse effects of free trade is that wage costs are lowered in order for firms to become more competitive (the positive trade-off being lower costs to consumers).

But this begs an important question given that we are so reliant on exporting goods: Who do we expect to buy our goods considering that lower wages and fewer jobs overseas will mean less consumer capital – and therefore less people to purchase our exports?

The TPPA is not a trade deal

It’s important to note that, as much as we’d like to think of this as being – at long last – a free trade agreement with the United States and others, it isn’t. Trade is included in the deal, but it’s not the main focus of the deal.

This is an investment agreement.

Put another, and possibly more confusing way, the TPPA is far more concerned about what happens to our capital account than what happens to our current account.

The reason we have signed up to this agreement is thanks to the dangerous doctrine that we have followed since 1984 – all foreign investment is good investment. Until then were far more cautious about investment, recognising its potential to bring technology not available in the domestic market, and with it bring jobs and growth but also recognising its potential to represent a foreign takeover of our resources, with the profits flowing overseas.

It was actually a right-wing government in 1964 that first introduced restrictions on foreign investment – due to the fact that they had noticed a current account deficit despite a growth in exports. The reason for this, in short, is because any capital account surplus (that is, money invested in New Zealand from abroad) means a current account deficit – usually as a result of profits from said investment flowing overseas. (We’ve had a current account deficit for quite some time now – as a result of an economy that is built on foreign investment and consumption, rather than exports and production and in my opinion this is very dangerous and makes us vulnerable to any economic shocks that may occur in the future.)

Foreign investment, and its effect on the current account balance shouldn’t be anything to worry about if we are exporting and producing enough to offset any imbalance. So surely the TPPA, in providing greater access to overseas markets for our exporters, is a good thing?
Well… no. Because one of the bitter pills we’ve had to swallow (even though the prevalent economic doctrine likes to suggest it’s not bitter at all) is that the TPPA makes it easier for foreign (especially, American) multinationals to invest overseas. In fairness, this also means that New Zealand firms will also have an easier time setting up shop in foreign markets but let’s be honest here: New Zealand isn’t exactly home to a huge number of multinational corporations. We can’t really compete when it comes to investing overseas, and as such we face continued swamping of our market by foreign companies and with that a continued flow of our money into foreign hands.

The result of this will be that it will become harder for New Zealand to export what it needs to export: value-added products, as opposed to raw commodities. This is the international equivalent of New Zealand agreeing to remaining an unskilled worker rather than gaining qualifications that could one day earn us more money.

The TPPA in short will lead to even more current account deficits, more foreign debt and therefore more risk the next time a big global recession strikes.

“Take it or leave it” – Access to markets

Speaking of exporters – while they stand to gain in the short and medium term, in the long term this deal could come back to bite them.

Rather than boldly break down trade barriers as we would we like it to, the TPP actually enshrines many of them, leaving us in a “take it or leave it” position.

Three of the big markets that our dairy exporters seek access to – the United States, Canada and Japan – will all continue to protect their dairy industries, which means we actually gain very little despite those markets probably being the ones we want to export to the most.

Not only that, by signing the TPP, we’re essentially accepting that it’s perfectly okay for these countries to continue to protect their dairy industries, leaving our exporters with very little recourse and our country with very little room to negotiate a better deal in the future.

We’re so desperate to gain a deal with the Americans that we’re failing to see how bad a deal it is – like a sycophantic intern so desperate for their dream job that they fail to read that their contract entitles them to less than minimum wage.

The Partnership is Broken

It gets worse – two of the biggest partners in the TPPA are starting to look like they won’t be joining in afterall.

Since the election of Justin Trudeau in Canada, his new Liberal government has not yet given a position on whether or not it supports the deal.

Even more importantly, the United States – who we have effectively eaten dirt for just to be part of their agreement – are looking like they won’t be joining either. In Congress they are short of the necessary levels of support to ratify the agreement once signed and, with a Presidential election approaching, it’s worth noting that very few Presidential candidates on either side have endorsed the agreement.

This could leave us with a bit of a conundrum. Two of the biggest markets are gone, and the third big market (Japan) won’t let us export our products to them. We already have a free trade agreement with Australia and Malaysia. And what kicked off the whole thing was the original P4 agreement between New Zealand, Singapore, Brunei and Chile – a deal that didn’t contain many of the nasty provisions over IP, medical costs and ISDS that the TPPA does.

Are we really going to adopt a whole lot of detrimental US laws for a deal that might not even contain the US, and for benefits that are probably no greater than we would have received under the original P4 agreement?

Don’t get me wrong – market access to Mexico, Peru and Vietnam is nice, but are we that desperate to trade with them? Really? They’re not exactly our leading trade partners…

A quick word on ISDS

The most controversial part of the TPPA, by far, has been the ISDS provisions and while I don’t seek to add to the already numerous articles on this issue, I will add my two cents as briefly as I can:

ISDS, per se, is not a bad thing.

It is designed to protect the assets of investors (including New Zealand investors) in developing countries with court systems that can’t be trusted and governments who might steal (“nationalise”) your assets on a whim, leaving you with no compensation.

We have ISDS provisions in many of our agreements, given that many of our agreements are with developing countries, and those provisions are fine: They haven’t harmed us and exist to protect us.

The problem with ISDS in the TPPA is that, aside from sloppy wording and the fact that it would prevent us from banning non-residents from purchasing property, and could potentially prevent us bringing in environmental and health protections if necessary, is that it puts us into an ISDS agreement with the world’s most litigious country.

ISDS cases have become considerably more numerous over the last 10 years and 80% of those cases have been from firms based in the US and Europe, often for “indirect” threats to investment (rather than for the more serious threats to investors that ISDS is designed to protect from).

The most notorious case, that of the Phillip Morris Tobacco company against Australia for plain-packaging laws, was an example of American litigiousness and greed: Australia has an FTA with the United States that doesn’t contain ISDS provisions, but does have one with Hong Kong which does.

What did Phillip Morris do? They claimed to be a Hong Kong based company in order to use ISDS to sue the Australians. (Note how “Phillip Morris” isn’t a particularly Cantonese sounding name?) I ask you: Considering that this company was willing to go these lengths just to bypass an agreement without ISDS, can you imagine what they would have done if the American FTA had contained ISDS?

And even if the case is dismissed (and the pro-TPP folks argue that it will, or that the TPPA excludes tobacco products), it must be remembered that the tribunals are paid by the hour – which means they’ll drag it out as long as they can. Even if we win the case, the taxpayers still lose – because it’ll be you and me footing the government’s legal bill, just so that we can have the right to our own laws.

The ISDS provisions are justified on the grounds that the deal includes Vietnam – a developing country and a constitutionally communist, one-party state.

But as far as I can see, to quote Roger Waters, there’s “No need to worry about the Vietnamese” – it’s the Americans who I’m most concerned about.

Bottom Line

The reason most scam victims fall for scams is not because they’re stupid, or greedy: It’s because the scammer offers them something that they strongly desire, and persuades them that it’s possible to have that thing if only they do a series of increasingly difficult and costly acts for the scammer.

Let’s not mince words here: The TPPA is a scam. It’s not a trade agreement, it’s disguised as a trade agreement but it will result in large sums of money flowing out of the pockets of consumers and taxpayers alike for no real benefit.

The costs of changes to Pharmac (changes just to appease the pharmaceutical industry of the only industrialised country in the world without a public healthcare system) – be that to the taxpayer or to the quality of our healthcare system – should be a cause for alarm.

The changes to IP laws and cost to consumers is also concerning, as is the potential not just that the government could be sued, but even that it could be dragged into a costly dispute.

And while these costs are large, the benefits are minimal: We don’t gain market access to the markets we really want access to, and the negative economic effect on all 12 countries could well mean that consumers won’t have the money to buy our export products anyway.

In conclusion, the Trans Pacific Partnership Agreement is not in New Zealand’s national interest and as such I am opposed to it.

Alex Eastwood-Williams is a failed artist turned to politics (…because when in history has that ever turned out badly?)

A disillusioned former National Party Party member, he is currently affiliated with NZ First. His views are his alone and do not represent the views of either party.