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A free trader critiques the CPTPP

Pro-free-trade economist Michael Reddell argues the new version of the TPP is full of fishhooks and there's little evidence it will benefit New Zealanders.

I write from the pro-trade, pro-market side of the argument. Which, of course, is not the same as a “pro-business” perspective.

Sadly, the TPP and its replacement the CPTPP, like the welter of preferential trade agreements various governments have been signing over recent decades, isn’t necessarily a step towards free-trade at all.  That is a point the Australian Productivity Commission has long been making about such trade agreements –  probably since around the time of the Australia-US agreement which many independent experts concluded made Australia worse off economically (having been signed for political signalling purposes more than anything else).   

These agreements keep MFAT officials busy, and ministers of trade looking as if they are “doing something”, but there isn’t much evidence (net) that they are making New Zealanders as a whole better off.

There were always arguments about how we couldn’t really afford (in some political sense) to stay out if everyone else in the region did a deal of this sort.  And there might be some force to that –  we aren’t the United States, say –  but it would be good to see the arguments made in the context of a robust independent assessment of the costs and benefits of the deal to New Zealanders. 

There was nothing like that done here for the ill-fated TPP deal.  The new government has claimed to be interested in more-open government.  This would be a good opportunity to demonstrate that it was serious.

There were all sorts of things that concerned me about the earlier agreement.

Investor-state dispute settlement provisions should be an affront to every citizen of a functioning democracy with a decent legal system.   We allow foreign investors access to binding dispute resolution procedures against the New Zealand government that are not open to our own companies operating here (people complain, sometimes reasonably about discrimination against foreign investors, but the ISDS procedures invert the arrangements, preferencing non-citizens non-residents over our own people). 

And it is no consolation to argue, as government do, “oh, but our own businesses get the same advantage in other countries”.  If we care at all about nurturing democratic values and the rule of law in other countries, it shouldn’t be a ‘gain’ we are happy with our politicians negotiating.   If you want to do business in (communist) Vietnam, that is your affair, not that of the New Zealand government.

Regulating domestic labour markets

Then there are the labour provisions under which governments declare that domestic labour market regulation is a matter for international negotiation and associated dispute settlement procedures.  A minimum wage might or might not be a good idea, but there is no sound reason why a requirement to have one should be made part of a binding international treaty.  

At the more wishy-washy end of the scale there are the provisions for Cooperative Labour Dialogue and the new Labour Council (and its associated “general work programme”).

It isn’t clear why we would want to enter such arrangements even with other advanced countries, let alone with Vietnam or Peru. A recipe for small and lean government it is not.

I won’t bore readers by listing the items (a to u) which the parties agree they might “caucus and leverage their respective membership in regional and multilateral form to further their common interest in addressing labour issues – except to note that “work-life balance” appears on the list, and corporate social responsibility pops up again).

More work for bureaucrats and politicians

Real resources will devoted to paying for all these new bureaucratic and political overlays.

There are also unsatisfactory provisions around financial crises.   For example, the TPP agreement required any country considering using direct controls (on foreign exchange flows –  of the sort used by several countries in the last crisis) to preference all flows associated with foreign investment over any other financial flows (including those relating to an identical asset owned by a resident.

Then there’s the weird provision which appears to bind governments to have to compensate foreign investors just as much as citizens in any cases of losses resulting from wars or civil strife.  It would have appeared to require the British government, after the Blitz in 1940, to have compensated Swiss or Swedish owners of property on the same terms as it helped its own citizens.   Sometimes that might be appropriate or prudent, but probably not always, and why should it be subject of a binding international treaty, unable to envisage all contingencies.

It isn’t clear how New Zealanders –  or, indeed, citizens of most of the other parties to the new deal –  are going to benefit from the new agreement, which seems to extend the regulatory net even further, and further reduce the ability of citizens/voters to direct and control the activities of their own governments.

Among US commentators who were in favour of TPP it was common to talk of TPP as some sort of instrument in the rivalry with China; that TPP would somehow ensure that “we” would “write the rules of trade for the 21st century etc”. 

I’m not sure these “rules of trade” look particularly attractive anyway, and of course if the TPP were in any way a threat to China, one could be sure that our craven governments (past and present) would not be in such a hurry to sign.

And, of course, if the government was really seriously about free-trade –  itself, a lofty and generally beneficial vision –  it could now unilaterally remove the remaining tariffs New Zealand keeps on imports from other countries; imposts that may benefit a few New Zealand firms, but almost certainly at the detriment of the New Zealand population as a whole.

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