By Anonymous
Key points:
This article first outlines the WHAT, WHO, WHEN and WHY of the TPP, and then briefly explains some of the trade-offs New Zealand faces in the negotiations.
WHAT?
New Zealand is currently participating in negotiations to develop the Trans-Pacific Partnership (TPP), a preferential trade agreement. Preferential trade agreements are developed in order to facilitate cross-national trade, and give favoured market access to those countries party to the agreement. Preferential trade agreements are known more commonly as “Free Trade Agreements”, but this term can be a misnomer; some agreements do not remove many barriers to cross-national trade, and may place restrictions on the member-countries. The TPP is called a “21st century agreement” because it actually focuses less on “free trade”, in terms of reducing tariffs and barriers to trade, and more on “behind the border” issues.[i] These issues include investment, environmental, labour and intellectual property laws.
While this article refers to “the TPP”, it is currently unknown what the final TPP agreement will look like (if, indeed, negotiations ultimately result in an agreement). Firstly, this is because the negotiations of the final TPP draft are not yet completed. Secondly, the negotiations are being carried out in secret, so the only information available comes from leaked documents[ii] New Zealanders will not be aware of the content of the agreement until it is signed into law. While it is not unusual for a trade agreement to be negotiated confidentially between parties, what is unusual is the depth of the proposed TPP in terms of changes to legislation to ensure regulatory harmony; usually large changes to domestic legislation would be subject to public scrutiny and debate. This means that any models of expected multibillion dollar benefits for New Zealand are currently only speculation, as the final quality and shape of the deal is unknown.[iii]
WHO?
The TPP negotiations are currently between New Zealand, Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, Peru, Singapore, the United States, and Vietnam.
WHEN?
The TPP negotiations have been occurring since 2008, but appear to be taking much longer than anticipated.
WHY?
The TPP emerged from the 2005 P4 agreement between New Zealand, Chile, Brunei and Singapore. The Asia-Pacific region currently has a “spaghetti bowl” patchwork of overlapping bilateral trade agreements. It was hoped that the P4 would serve as a future model for a Free Trade Area of the Asia-Pacific; a single regional agreement with universal standards to facilitate investment and no significant exceptions to the removal of trade barriers.[iv]
ISSUES TO WEIGH UP
The discourse surrounding the TPP has been polarised. On the one hand, the National-led government, the Ministry of Foreign Affairs and Trade, and parts of the business community have portrayed the TPP as the route to greater prosperity.[v] On the other hand, Auckland University Law Professor Jane Kelsey, Trade Unions, charitable organisations, some political parties and other parts of the business community have portrayed the TPP as a potential catastrophe.[vi] There are a number of aspects to the TPP to consider, some of which are introduced below:
INTERNATIONAL RELATIONS: Economics and trade are not divorced from a political context, and the TPP can be seen as the economic side of United States efforts to contain China’s political and economic rise. The TPP offers the opportunity to develop important regional architecture that excludes China. Is an exclusive agreement in New Zealand’s national interest, given that China is our largest trading partner? Or is New Zealand able to sit on a geopolitical fence and keep both the United States (our security guarantor) and China (our largest market) happy?
MARKET ACCESS: Greater market access for New Zealand goods to overseas markets is the traditional rationale for participating in preferential trade agreements. However, since the United States (and later, Japan) joined the table negotiations, negotiations between parties have occurred bilaterally, and the agricultural sectors of these two states have pushed for continued protection. Bilateral negotiations are difficult for a small country with open markets like New Zealand; there are few bargaining chips to offer on the table and a situation of power asymmetry. The US negotiators are under pressure from powerful domestic lobbies to retain US protectionism for dairy farming (in the form of barriers to entry and export subsidies).[vii] Unfortunately, dairy is New Zealand’s largest export,[viii] and a rare area of comparative advantage.
INTELLECTUAL PROPERTY: The leaked TPP documents indicate more stringent intellectual property laws would be implemented in signatory states. New Zealand is a net importer of intellectual property; essentially purchasing more intellectual property from overseas than is produced domestically. Accordingly, more stringent regulations could increase the costs involved in accessing intellectual property. For instance, this could ban parallel importing of cheap consumer goods.[ix] Additionally, the TPP could potentially affect New Zealand’s pharmaceutical drug purchasing agency, Pharmac, which subsidises the cost of many drugs in New Zealand.[x] However, pharmaceutical companies challenge this claim. They argue that Pharmac’s dominance means the drugs available in New Zealand are often older, less innovative generics.[xi] The TPP could lead to more innovative drugs being available on the New Zealand market, although potentially at a far greater cost. Are these claims made by the pharmaceutical companies true? Or, even if increased intellectual property rights protection do raise costs in New Zealand, could this be conceded in return for greater market access for agricultural products?
INVESTOR-STATE DISPUTE MECHANISM: TPP laws may be enforced by an Investor-State Dispute Settlement mechanism, which would empower an offshore court to rule on perceived infringements of the TPP. However, unlike the World Trade Organisation, which only allows dispute settlement between countries, the TPP would allow investors (i.e. business interests) to take a country to court.[xii] Opponents of the TPP have claimed that this will erode New Zealand’s sovereignty, seeing dispute settlement as lacking accountability and transparency, and creating a “chilling effect”, where governments become afraid of the legal consequences of regulating. For instance, tobacco companies could potentially use this mechanism to prevent further regulation.[xiii] In contrast, proponents of the TPP claim that New Zealand has an open economy, considered by the World Bank to be the third most business-friendly country in the world.[xiv] Such an environment may not create any grounds for successful ISDS claims.[xv] Furthermore, Investor-State Dispute Settlement is a mechanism that could protect New Zealand investments abroad in TPP partners that lack impartial judiciaries. Should a degree of sovereignty be traded for potential economic benefit?
WHAT TO DO?
Deciding whether to sign the TPP sounds simple; the agreement is in New Zealand’s national interest if the benefits exceed the costs.[xvi] However, the secrecy of negotiations, and polarised nature of the debate, means it is difficult for the New Zealand public to gain a clear understanding of the issue. Lacking sufficient information, the public cannot convey their preferences to political parties. The agreement could be signed behind closed doors, and we would only find out the content of the TPP after the agreement has been signed. Perhaps then, the most pertinent questions regarding the TPP are: Will your interests be placed ahead of geopolitical expediency or businesses that make election campaign donations? Do you completely trust your government?
[i] MFAT. (2013b). Trans-Pacific Partnership (TPP) Negotiations. http://mfat.govt.nz/Trade-and-Economic-Relations/2-Trade-Relationships-and-Agreements/Trans-Pacific/index.php
[ii] For leaked documents, see :Wikileaks. (2013a). Intellectual property [rights] chapter. Consolidated text. (Leaked). https://wikileaks.org/tpp; Wikileaks. (2013b). State of play after Salt Lake City 19-24 November 2013 Round of Negotiations (Leaked). https://wikileaks.org/IMG/pdf/tpp-salt-lake-extracts-.pdf; Public Citizen. (2010). NZ submission: TPP: Intellectual Property Chapter: Horizontal Issues/Overall Structure, General Provisions and Cooperation (Leaked). TPP negotiation text released by Public Citizen: paper submitted by New Zealand. https://www.citizen.org/documents/NZleakedIPpaper-1.pdf; Public Citizen. (2012). Investment (Leaked): TPP negotiation text released by Public Citizen. http://www.citizen.org/documents/Leaked-TPP-Investment-Analysis.pdf
[iii] For a generous estimate of economic benefits: Petri, P. A. (2012). The Trans-Pacific Partnership and Asia-Pacific Integration: A Quantitative Assessment: Peterson Institute. For a less generous estimate of economic benefits: Bertram, G., Terry, Simon. (2014). Economic Gains and Costs from the TPP. Wellington: Sustainability Council. http://www.sustainabilitynz.org/wp-content/uploads/2014/02/EconomicGainsandCostsfromtheTPP_2014.pdf
[iv] MFAT. (2013). Trans-Pacific Partnership (TPP) Negotiations. http://mfat.govt.nz/Trade-and-Economic-Relations/2-Trade-Relationships-and-Agreements/Trans-Pacific/index.php
[v] For proponents of the TPP see the “Tradeworks” coalition, http://www.tradeworks.org.nz/company-we-keep/, National Party support,
https://www.national.org.nz/news/news/media-releases/detail/2012/11/29/new-zealand-welcomes-tpp-negotiators, the Ministry of Foreign Affairs and Trade position,
http://mfat.govt.nz/Trade-and-Economic-Relations/2-Trade-Relationships-and-Agreements/Trans-Pacific/index.php, and the position of the Labour Party, which is not opposed to the TPP per se, but desires greater transparency, http://campaign.labour.org.nz/our_position_on_the_tpp.
[vi] For instances of TPP opposition, see Professor Jane Kelsey’s explanation of her position on the New Zealand Herald website, http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11262157, the “A Fair Deal” anti-TPP coalition, http://fairdeal.net.nz/#story-about-us, the Green Party website, https://home.greens.org.nz/trade, the New Zealand First website, http://nzfirst.org.nz/news/tpp-secrecy-creates-serious-risks.
[vii] Lewis, M. K. (2011). The Trans-Pacific Partnership: New Paradigm or Wolf in Sheep's Clothing? Boston College International & Comparative Law Review, 34(1), 27-52.
[viii] Dairy products are by far NZ’s largest export: Statistics New Zealand. (2014). Overseas Merchandise Trade: April 2014. http://www.stats.govt.nz/browse_for_stats/industry_sectors/imports_and_exports/OverseasMerchandiseTrade_HOTPApr14.aspx
[ix] See the Dominion Post for the Warehouse’s perspective on intellectual property provisions: http://www.stuff.co.nz/dominion-post/business/7550025/Bid-to-protect-parallel-imports, or Consumer magazines’ analysis of the impact of intellectual property laws on consumers: https://www.consumer.org.nz/articles/trans-pacific-partnership.
[x] Australia signed a preferential trade agreement with the United States that has similar clauses to the TPP, and faces an estimated annual increase of $88 million USD to import technology protected by the agreement’s intellectual property laws. See Bitton, M. (2014). Examining the Trans-Pacific Partnership. Journal of Internet Law, 17(9), 25-38.
[xi] Wyber R, P. W. (2013). The Trans-Pacific Partnership: An analysis of the impact on health in New Zealand: Nyes Institute. http://www.pha.org.nz/documents/131129-tpp-nyes.pdf
[xii] Dispute settlement in the WTO: Evans, D., & Ridings, P. (2006). A Decade of WTO Dispute Settlement: New Zealand's Experience. New Zealand Yearbook of International Law, 3(1), 1-15.
[xiii] Kelsey, J. (2013). The Trans-Pacific Partnership Agreement: A Gold-Plated Gift to the Global Tobacco Industry? American Journal of Law and Medicine, 39(2/3), 237-264.
[xiv] World Bank Group. (2013). Doing Business 2014: Understanding Regulations for Small and Medium-Size Enterprises: World Bank Publications. http://www.doingbusiness.org/reports/global-reports/doing-business-2014
[xv] MFAT. (2012). TPP Talk: Investor-State Dispute Settlement – a balanced approach Retrieved 1 June, 2014, from http://www.mfat.govt.nz/Trade-and-Economic-Relations/2-Trade-Relationships-and-Agreements/Trans-Pacific/1-TPP-Talk/0-TPP-talk-3a-Dec-2012.php
[xvi] Although in addition to the net cost or net gain to the NZ economy, particular sectors of society will “win” more or “lose” more from an agreement.