Trade deal row isn’t over yet
The merits of trade deals can lie very much in the eye of the beholder. Where some see opportunities, others see risks, and both sides tend to talk right past each other.
Last week, the release of the Ministry of Foreign Affairs and Trade evaluation of one of our most contentious trade deals – the so-called Comprehensive and Progressive Trans Pacific Partnership, or CPTPP – will do little to bring those arguments to an end. Labour, which opposed the CPTPP deal in opposition, is now its somewhat reluctant champion in government.
According to MFAT, the gains to this country from the current CPTPP deal are now smaller – entailing a boost of between .3 and 1 per cent to GDP, or $1.2 to $4 billion, by 2030 – when compared to the original TPP deal, while the United States was still on board. To critics, such amounts do not justify the concessions involved, being equal to only a relatively small fluctuation in the value of our dollar.
Moreover, some measures in the original text that (a) created extra costs for Pharmac and (b) extended our term of copyright have not been changed. Instead, they have merely been frozen, and could potentially be re-activated if and when the US rejoins the deal.
The jewel in the CPTPP crown for this country is that our beef exporters will now eventually enjoy the same tariff regime in the Japanese market as Australia - which has recently enjoyed a market edge, due to its bilateral trade deal with the Japanese. The downside, however, is that Canadian beef exporters are eyeing the same Japanese market, and will now be on the same tariff footing as us, too.
Trade Minister David Parker claimed to have made more solid gains on one highly contentious aspect of the deal – namely, on deterring foreign investors from being able to sue governments under the so-called investor state dispute settlement (ISDS) provisions. Henceforth, Parker argued, government contracts would be exempt from ISDS challenges, and the government was also negotiating side letters with an as-yet undisclosed number of countries to ensure that future New Zealand governments would be exempt from ISDS actions.
Even so, it remained unclear whether such safeguards would resolve the common ISDS situation whereby governments sought to regulate those contracts to which they were not an initial party. For instance, local government might well contract with foreign investors on projects to make use of regional resources and cheap labour to create local jobs – only to find central government then regulating to stop the project, on serious environmental grounds.
In Canada, that same situation has resulted in central government being successfully sued for hundreds of millions under the ISDS provisions of the NAFTA trade deal, even though the environmental concerns were deemed to have been genuine.
Parker is due to sign the CPTPP on March 8, in Chile. Subsequently, the public can express its views to a select committee prior to Parliamentary ratification, and before any finetuning of other laws affected.
Last week, Parker said the deal is unlikely to come into effect before early next year. Therefore, one can safely predict that the wrangling over the merits and risks of the CPTPP will continue through 2018, unabated.