First symbolic sign of economic nationalism
They were supposed to be immovable objects. Our free trade deals, such as those with China and South Korea, were supposed to preclude any attempt by Labour and its partners to impose a ban on foreign buyers of residential homes.
Ministers mocked the idea ever since Labour first mooted it. And there are even suggestions National set things up that way intentionally to ‘‘wedge’’ Labour, by not leaving the door open in the free trade pacts for such a move.
The theory runs that former prime minister John Key and his team were explicit to former trade minister Tim Groser to close off that option.
After all, if National never intended to do it and Labour did ... then why not set up an irreconcilable clash between Labour’s foreign buyers policy and its – admittedly at times lukewarm – backing for the TPP?
But then along came a new Government with Jacinda Ardern and Trade Minister David Parker determined to impose the foreign buyers ban, and armed with advice that, contrary to the outgoing government’s suggested ‘‘compromise’’, a discriminatory stamp duty on foreign buyers could not be used as a de facto ban in the case of the South Korean pact.
The demands of a new Government perhaps helped persuade officials to look that much more closely and broadly at the options. Suddenly the problem almost dissolved.
(Australia was never going to be affected, because of the mutual recognition of rights and the CER
The solution Jacinda Ardern unveiled on Tuesday is elegant in its simplicity: Redefine all existing residential property as ‘‘sensitive’’ under the Overseas Investment Act.
agreement, and Singapore remains an issue, though apparently not an insurmountable one.)
So at least we now know the answer to the age-old paradox: When an irresistible force for change meets the seemingly immovable object of the status quo, then the object moves.
That is especially so when it comes down to a public service having to choose between the ‘‘truths’’ of an ex-government and the desires of a shiny new administration.
The solution Ardern unveiled on Tuesday is elegant in its simplicity: Redefine all existing residential property as ‘‘sensitive’’ under the Overseas Investment Act.
As currently worded that requires a buyer to be ‘‘a New Zealand citizen, ordinarily resident in New Zealand, or intending to reside in New Zealand indefinitely’’.
If not, then the relevant minister must decide whether the overseas investment will, or is likely to, benefit the country or (in the strangely flexible wording of the act) ‘‘any part of it or group of New Zealanders’’.
Parker has signalled the criteria may be tightened further as he moves also to further restrict the sale of farm land to foreigners.
Which brings us to why this first major decision by Cabinet is so significant.
Yes, there was the pressure for a fix before the TPP 11 talks (now minus the US) on the margins of Apec in mid-November. There was also the need to get the law passed quickly, before a potential TPP 11 came into effect.
As Parker put it: ‘‘If you don’t do it now, you can never do it.’’
But it also puts an important marker in the ground on economic nationalism – a force that in various forms binds the three coalition parties together, although not always in the same way philosophically.
For Foreign Minister Winston Peters it is more about protecting New Zealand as it is. Not so much a fortress as a well-designed redoubt that resists Peters’ enemies, including his hated ‘‘globalist bureaucrats’’ .
For Ardern, Parker and Greens leader James Shaw, who are liberal internationalists, it is more about protecting the future New Zealand and heading off the instincts and sense of exclusion that elected Trump, fuels the antiimmigrant Right in Europe and sat behind the Brexit vote.
On that score, the thinking goes, if you allow foreign buyers to force up the price of farms or homes, or outbid battling Kiwis, you are nurturing a far more damaging shift into isolationism and bitterness.
Curbing immigration comes with a similar economic nationalist stripe.
But the foreign buyers ban is not the end of the game for the Government.
Assuming there will be no kick-back from our TPP 11 partners over the foreign buyers move, the next test will be whether Ardern, Peters and Parker can make meaningful changes over Investor State Dispute Settlement (ISDS) provisions, which allow an investor to bring a case directly against a host country.
The domestic protests against the TPP, dominated by this Government’s supporters, focused far more on the alleged loss of sovereignty from those provisions than they ever did on the march of foreign speculators in Pakuranga and Petone.
The Government has begun the softening-up process, pointing out how hard it is to make changes in regard to ISDS clauses at this late date. Ardern’s ‘‘do our utmost’’ falls some way short of a stake in the ground.
But the Government has stressed how the provisions are not pivotal between countries with respected and robust legal systems. However, they can provide useful protection for New Zealand companies operating in some countries, including where foreign companies are not treated equally with locals.
If there is a similar ‘‘elegant solution’’, along the lines of the foreign buyers side-step, it could involve a variation on the deal struck between Australia and New Zealand. In 2016 then-trade minister Todd McClay and his Australian counterpart Andrew Robb exchanged letters effectively setting aside the TPP’s ISDS provisions as they applied between the two countries.
Experts think it is unlikely, but not completely beyond the pale, that the current Canadian Government, which harbours big reservations, and perhaps some others in the group of 11 would consider similar ‘‘carve-outs’’.
That might help soothe, if not remove, some domestic unease, which in New Zealand’s case was heavily influenced by a fear that huge and well-resourced US companies would use the ISDS provisions against little ol’ Aotearoa.