The TPP

Wikileaks Exposes the TPP as a Capitulation to Corporate Interests

The Real News

Kevin Zeese: Obama administration's Fast Track authority plan derailed by bipartisan outrage.

NZ politics

The Labour Party in New Zealand has chosen a news leader who promises to be more active in holding this government to account.

Cunliffe wants TPP draft in the public

As one of his first acts as leader of the Opposition, David Cunliffe has called on the Government to make public the draft of the Trans-Pacific Partnership (TPP) negotiations.

3News,

16 September, 2013

In his first full press conference, Mr Cunliffe challenged the Government to "have the courage of its convictions" and put the negotiating draft into the public domain so it can make up its own mind.

But Prime Minister John Key says that won't happen.

"We've given people a broad indication of the mandate and the Government is sticking to that mandate.

"I'm never going to sign New Zealand up to a deal unless I believe it's in the New Zealand's best interest to do that," he says.

Instead, during the final analysis the deal will become public and then will be ratified through Parliament.

Mr Key says the negotiation so far is "pretty positive", but more work is needed.

The TPP is a proposed free trade agreement between a number of countries, including New Zealand, Australia, the US, Japan, Singapore, Chile and Vietnam.

While Mr Cunliffe says he still needs a "detailed briefing" on the negotiations and the party has not seen the draft, he understood the concept of what the partnership could bring.

"There are some real fish hooks with it."

These include intellectual property issues and investor and state relations, he says.

Mr Key says the deal could be worth billions to the country's economy and also provide more jobs for Kiwis.

He believes the unions could sway Labour's position on the proposed deal because they helped decide the new leader and they "don't necessarily like free trade agreements".

"That could have implications on the way they handle the policy. If they do it will be quite sad."

He would prefer if both major parties were in "lockstep" over the negotiations because "we can all see the benefits".

Trans-Pacific Partnership

First, the “official version” and then a press release from Dr. Jane Kelsey

Japanese bid for TPP important - Joyce

The acting Trade Minister, Steven Joyce, says Japan's bid to be part of the Trans Pacific Partnership negotiations is important, as countries move towards completing an agreement by the end of the year.

Radio NZ,

16 March, 2013

The agreement, known as TPP, is a free trade deal being negotiated by eleven countries including New Zealand, the United States and Australia.

Japan wants to be the 12th country.

Mr Joyce says Japan is New Zealand's fourth largest trading partner, and any removal of trade barriers as part of the agreement could be hugely beneficial to New Zealand.

Mr Joyce says TPP ministers will want to discuss the next steps regarding Japan when they meet next month as part of the APEC Trade Ministers meeting in Indonesia.

Terms of Japan's entry to TPPA talks bad news for NZ Friday, 15 March 2013, 2:41 pm Press Release: Professor Jane Kelsey

Scoop,

15 March 2013

For immediate release:

Terms of Japan's entry to TPPA talks bad news for NZ, ‘surrender of sovereignty’ for Japan

‘Japan’s Prime Minister Abe will announce this afternoon that Japan will seek to join the Trans-Pacific Partnership agreement (TPPA) negotiations. He already has US endorsement to do so’, says Professor Jane Kelsey who has just returned from observing the Singapore round of the talks.

Several days ago Abe’s Liberal Democratic Party cleared the way for the announcement. However, the Party’s resolution also called for Japan to maintain tariffs on key farm products, especially rice, wheat, beef, dairy products and sugar, and defend the public health insurance system.

Yesterday, current and recent members of the Diet (Parliament) who have been campaigning against the agreement for several years released an open letter to Abe that said Japan would have to accept any text that was agreed by the time they joined the negotiations, sight unseen.

The letter objected that the denial of 'any right or opportunity to set the terms or to alter terms that undermine the national interests of Japan’ was ‘a fundamental surrender of sovereignty’.

They also revealed that the US Trade Representative had told other chief negotiators they needed to complete their bilateral pre-entry discussions with Japan and approve its entry by July. [An English translation of the complete text is below]

Once a 90-day notification period to the US Congress expired Japan would be able to join the talks in September, one month before the political leaders of the existing eleven countries hope to sign the completed deal.

‘If this is true, the US has effected a double play on New Zealand’, said Professor Kelsey.

Trade Minister Groser said New Zealand would welcome Japan’s participation ‘once we have established procedures for their entry that are acceptable to their governments and to ours’. That was widely taken to mean Japan’s agreement to comprehensive agricultural liberalisation in line with the statement of the TPPA leaders in Honolulu in November 2011.

Australia has been trying unsuccessfully to achieve that goal in a free trade negotiation with Japan since 2007.

New Zealand would have just over three months to get Japan to agree or give way to a timeframe that appears to have been imposed unilaterally by the US.

'Even if Japan agrees in principle to consider opening dairy market access, that is just the first step in the process', according to Professor Kelsey.

‘Assuming the US continues to delay any substantial discussion of dairy market access to its own markets until September, the US and Japan could then join forces in demanding flexibility and stymie the one gain that New Zealand government has said is a bottom line and without which it will walk away from the TPPA’.

--

Dear PM Abe,

It has been widely reported that this week you will announce a formal decision to join negotiations to establish a Trans-Pacific Partnership (TPP) free trade agreement.

We recognized the terms under which other countries, namely Mexico and Canada, have joined TPP negotiations were grossly unfair. Effectively, terms were dictated to these nations, which were told either they could comply or not join the talks.

In particular, these entrants were required to agree that they would not seek to reopen any matters that had already been agreed to during the previous three years of negotiations. Further, they were forbidden from offering new proposals with respect to the numerous subjects that had already been decided.

In sum, they were told that if they wanted to join TPP talks, they would be required to simply agree to all of the expansive terms negotiated by the other countries in any of the agreement’s 29 chapters of binding rules.

All of Japan’s current and future domestic laws, regulations and administrative procedures would be required to conform with these rules established by other countries. In addition to trade in goods, including agriculture, these rules would severely limit Japan’s regulation of a wide range of sensitive matters such as foreign investors, postal, banking, insurance, energy, telecommunications, medicine approvals and prices, food and product safety, and more.

In addition, the newly entering parties were denied access to the confidential negotiating texts that they were being required to accept. That means that they were required to agree to accept texts that they could not review in advance to assess the implications for their countries. Instead, they were required to rely solely on whatever informal assurances they had received from other TPP parties with respect to what the texts would require.

We understand that at the March Singapore Round of TPP negotiations, U.S. trade officials informed other countries’ TPP negotiators of a process by which Japan would be allowed to join the agreement. U.S. officials have indicated that Japan has agreed to the same disrespectful, unfair process imposed on Mexico and Canada for accession to the TPP. The U.S. instructed the other TPP countries to complete their bilateral consultations with Japan by July.

Japan would be allowed to join an agreement that has been negotiated by other countries, without any right or opportunity to set the terms or to alter terms that undermine the national interests of Japan. This is a fundamental surrender of sovereignty.

If Japan is about to announce its desire to enter these negotiations, we are seeking your assurance that Japan will not be required to comply with the unacceptable process imposed on Canada and Mexico. We ask you state publicly the process that Japan will follow and the terms that have been agreed with the other TPP negotiating parties and to table a written assurance to this effect in the Diet.

March 13, 2013

National Coalition for Commenting on TPP

Is the Trans Pacific Partnership a free trade mirage?

With thanks to Werewolf and Gordon Campbell 
Into The Cave of Dreams – Trans Pacific Partnership

Is the Trans Pacific Partnership a free trade mirage?

by Gordon Campbell

Werewolf

If the Trans Pacific Partnership (TPP) trade deal was a new car you probably wouldn’t buy it, or at least not from this dealership. There will be no chance of a test drive with this baby. The pre-conditions for the TPP trade pact mean that New Zealanders will not be informed what is in the agreement before it comes into force, even though some ingredients could well render central government liable to being sued for compensation (in so-called investor/state disputes) if and when an offshore arbitration panel decides that the TPP conditions have been breached.

If the investor-state mechanisms are passed in anything like their current form, the TPP will enable foreign investors to sue us before overseas tribunals if this government ever tried – or any future New Zealand government ever tried – to pass laws to protect health, work safety or the environment, but which happened to cause foreign investors to lose money. This happened to Brazil in the recent past where the trading interests of foreign tyre makers was deemed by an arbitration panel to over-ride the interests of ordinary Brazilians at risk of disease from the mosquitos hatching within discarded tyres. It may happen in future to Australia, with respect to the tobacco packaging regulations it recently passed to protect public health.

The arbitration panels tasked with resolving such disputes can be very cosy affairs. They do things that judges would never be allowed to do. The panels are commonly comprised of trade lawyers who sometimes serve as the arbitrators, and sometimes as the advocates for the claimants engaged in suing member governments. Chronically, there is a risk of capture by the most well-heeled litigant.

Australia – thanks perhaps to its salutary experience of being burned by its 2005 bilateral free trade deal with the United States – has baulked at the investor/state provisions that New Zealand has apparently accepted, according to versions of the TPP texts that were leaked in June, via the US Public Citizen organization. These leaks served the additional useful purpose of provoking a response from Trade Minister Tim Groser.

On RNZ, Groser gave firm assurances that New Zealand would never sign up to anything that would compromise our sovereignty: “The New Zealand government will not sign any agreement that stops us now, or any government in future from regulating for public health or any other legitimate policy purposes. We will protect New Zealand’s legitimate rights to regulate.”


Note however, the repetition of the weasel word “legitimate”, which renders Groser’s assurance virtually meaningless, since it would be the overseas panels – and not the New Zealand government – that would ultimately decide what it is “legitimate”, and what isn’t. Groser went on to make the case for signing up to “ well designed” clauses that restrict our sovereignty. If such concessions are well designed, Groser argued, they will serve to re-assure prospective foreign investors that we will obey the rules – while at the same time the rules will afford similar protections to New Zealand companies investing offshore. At base, Groser was asking us to trust that he’ll get the balance right, and that he’d ensure the gains overseas to firms such as Fonterra would outweigh the potential risks, liabilities and restrictions involved here at home.As it happens, Groser may not be around long enough to make good on his assurances. In September, Groser confirmed that he would be applying by year’s end for the top job at the WTO, to replace the outgoing Pascal Lamy who steps down in mid 2013. Arguably, as Labour’s trade negotiations spokesperson Clayton Cosgrove told Werewolf, this raises a conflict of interest:

“If he is [applying for the WTO job] one issue I think the government has to address immediately is who is going to lead the trade agreement negotiations around TPP. Because presumably there will be difficulties in a candidate running for the WTO and needing support, and at the same time trying to get the best deal he can for New Zealand. There’s a conflict of interest there. One of the things they are going to have to address if Mr Groser is going to toss his name in the ring, is how these negotiations are to be managed going forward.”

Indeed. To some, Groser’s apparent conflict of interest already hangs over the 15th round of the TPP negotiations, which are due to be held in Auckland in early December. Inevitably, the next TPP round will be a showcase for Groser to demonstrate his credentials for the top WTO post in front of key trade delegations from North America and Asia – at the very same time that he is meant to be fighting for New Zealand’s corner against the very same delegations. (Hard to be a beauty contestant and a cage fighter in front of the same crowd, at the same time.) At the very least, Groser should be taking his possible successor with him into the negotiating room in Auckland.

Is the TPP merely a pipe dream ? New Zealand’s own chief negotiator Mark Sinclair evidently thought so, judged by a leaked 2010 cable in which Sinclair lamented to US Deputy Assistant Frankie Reed there was a public perception a US free-trade agreement would be an ‘El Dorado’ for New Zealand’s commercial sector, but that ‘the reality is different’ and that New Zealand must ‘manage expectations’ about the benefits of such an agreement. At best, Sinclair indicated the TPP offered an opportunity to ‘put the squeeze’ on Japan and South Korea – to open up their agricultural markets, which the cable considered to be a remote prospect.

For a succinct summary of all the above in about four minutes flat, this is essential viewing – click here to view video

Is the TPP worth the candle to the US, in trade terms – such that the US would be inclined to make any meaningful concessions to New Zealand ? As this analysis helpfully explains, a TPP without Japan is relatively insignificant in any direct economic sense to the US, primarily because the US already has free trade agreements with the important TPP members (Chile, Singapore, Australia, Peru, Mexico and Canada) and with New Zealand, there is little need. This country chose to remove most of its trade barriers unilaterally in the 1990s, without receiving much in the way of tangible gain for doing so. True, the TPP offers the US minor trade openings in Malaysia and Vietnam but even these are problematic since Vietnam will only give ground on the TPP plans to reform state owned enterprises if the US drops its tariffs on Vietnam’s footwear exports.

Essentially, the TPP’s real value to the US appears to be as a forum for setting in place a number of non-trade practices – in government procurement, in patenting and copyright, in investor-state dispute arbitration etc – that would be of prime benefit to its own commercial lobbies. In that sense, the TPP is about securing and advancing the commercial interests of multinationals and their lobbyists – which have not been seen beforehand to be suitable subject matter for the trade obligations between nations. (Trying to get the WTO to sign onto these same kind of “Singapore provisions” created havoc a few years ago at the WTO’s Cancun meeting.)

Longer term, as US President Barack Obama made clear during the recent presidential debates, the TPP is of some use to the US in strategic terms to counter the rising power of China in the Asia Pacific region. Eventually, it may serve as a platform for a genuine Asia/Pacific deal that includes China, on terms the Americans can only hope will be satisfactory to them. Yet at present, neither China nor India would tolerate many of the current ingredients of the TPP.

The TPP is new territory for us, though. Unlike Australia, Canada, Peru, Chile, and several other members of the TPP, New Zealand is a virgin when it comes to free trade pacts with the United States. For the others, their FTA experience with the Americans – Canada inside NAFTA, the Aussies within their 2005 trade pact – has left even the trade lawyers and conservative analysts in those countries with a healthy scepticism about what the morning after might feel like. New Zealand has no such knowledge. As a result, even to query what we may be getting ourselves into with the TPP tends to be interpreted here as opposition to trade itself. It is as if New Zealand would rather be screwed by the US than never to know what it is like to be in a relationship with the most powerful economy on earth. Pure free traders at heart ourselves, we have a thing for the Bad Boy of the trade blocs. Maybe with us, it will be different.

In Canada, Peter Clark [pictured left] is one such prominent free trade advocate and conservative analyst, well known there for his advisory role to and for the federal government, during the passage of NAFTA. In recent months he has become increasingly critical of the TPP process and its prospects for Canada. Werewolf interviewed Clark by phone from his law firm in Ottawa. At heart, New Zealand is assuming that any trade offs it makes will be rewarded with greater access to farm markets in North America and Asia. Does Clark believe our faith in the TPP’s ability to make progress on agriculture is well founded ?

“I believe that its based on hope,” Clark replied, “ which is never a sound negotiating strategy. There is a lot of opposition in the United States to providing greater access to Fonterra…[which] has an uphill battle. The United States will play them [the New Zealand negotiators] along. We live next door, we know how they operate. They’ll play them along for as long as possible. If they do get access its going to be some sort of additional carve out from the TRQs (tariff rate quotas). It won’t be free and open access – and it will come with a 15 or 20 year phase out of the tariffs and the quotas. There’s a strong dairy lobby in the United States, and its mixed between what you see based on what the dairy exporters in the US want, and what the dairy farmers want.”

In other words, New Zealand will be promised much, yet may ultimately get little that’s tangible from the TPP on farm access in North America – and that little will be coming a long way further down the track. Nor is there much prospect of the US granting dairy access to New Zealand as a consequence of Canada dismantling its extensive dairy and poultry subsidy schemes and thus opening North America farm markets up to unfettered free trade. Gordon Ritchie, one of the architects of NAFTA and a former Canadian trade ambassador has recently written about the unlikelihood of Canada doing anything significant about its farm support subsidy scheme. The Americans didn’t get it under NAFTA, and won’t get it this time, either. Mainly because it would be political suicide for Canadian PM Stephen Harper. Ritchie ‘s words will read quite poignantly to any New Zealand farmer forced to go cold turkey by Roger Douglas in the 1980s:

I suspect that very little of the [Canadian dairy] quota is today owned by the original recipients. Most is owned by newcomers, often including the sons and daughters of the original quota holders, who have paid in full for the quota they have obtained, often by borrowing heavily. These inflated capital costs have weighed heavily on their financial performance, depressing returns in the industry despite some modest efficiency gains in recent years. It would be interesting to see a current analysis of the total value that has thus been baked into the system, but past studies have calculated amounts in the billions of dollars. To suggest that these producers (and investors) who have bought and paid for these quota rights could simply be stripped of their property overnight through a [TPP] trade negotiation is patently absurd.

Democracy likes sunlight. Apart from the negotiating teams though, only the business lobbies that stand to profit from the pact’s provisions have enjoyed any two way access to the TPP’s relevant documents. The public have been forced to rely on leaked drafts of the TPP texts for any insight at all into the nature of the discussions. Peter Clark has described the secrecy surrounding the TPP as “bizarre and unprecedented” and elsewhere as “a theatre of the absurd”.

As mentioned, the TPP in its current form would seem to restrict our ability to pass health and environmental legislation here at home that might affect foreign investors in future – a trade-off we would be making in the hope of winning access to similarly dubious investment opportunities in other countries. Even so, our Parliament will be unable to verify those alleged net benefits before or even after it comes into force – because incredibly, there is a four year freeze on public access to the TPP documentation. Logically, the role of our Parliament would merely be to re-align our laws, regulations and entitlements to comply with the TPP’s provisions.

This is not only absurd, but unsustainable. Once the US Congress seeks to ratify the TPP contents, all will need to be revealed. That process is still far in the distance. After four years and some missed completion deadlines already, the TPP has made little substantive progress. Hope springs eternal, regardless. According to Australian PM Julia Gillard, the expected completion date is now October 2013 – but in the immortal words of The Castle, tell her she’s dreaming. ToWerewolf, Clark confirmed that only three of the TPP’s extensive list of chapters has so far been completed – the ones on Small and Medium Size Enterprises, Co-operation and Administration. – and these largely have to do with only administrative matters. In saying so, he assured me, he was not reliant on leaks but on asking friends involved in the negotiations. “I say “Well how’s it going, how many chapters have you really finished? [Answer :] Just this one, this one and this one.’ What does it mean ? Oh, next to nothing. They’re fluff.’

The agreed content of the really contentious issues (which are to repeat : on copyright and patenting, investor/state provisions, state owned enterprises, agriculture etc) remain only half done, at best. This is worth keeping in mind given that reportedly, the much derided Doha Round had reached an 80% level of completion before hitting the wall. After four years of very slow progress, the TPP has yet to prove it will not go the same way, and it would be for the same reasons : some countries simply aren’t buying what the US business lobbies are trying to peddle them.

What makes the TPP even more of a gamble than some trade arenas of the past is that while the US and its business lobbies are driving the pace and the content, they are doing so in something of a legal vacuum. As Clark confirmed to me, Congress has not formally authorized US participation in the TPP. As he has said:

Negotiating trade agreements with the US if the administration has not secured Trade Promotion Authority (TPA) from Congress is fraught with risk and with uncertainty. It is folly. That the Obama administration has not yet asked Congress for their blessing and guidance makes the TPP negotiations a crap shoot.

Clark expanded on this situation to Werewolf. The White House, he says, hasn’t had fast track Trade Promotion Authority since 2007, which is the same year that Congress released its bipartisan demands on trade in five separate areas, all of which must be met by any trade agreements seeking ratification. Normally though, Congress attaches even more conditions. Very recently, Clark says, he’s seen correspondence from a number of US Congressmen to US Trade Representative Ron Kirk asking him to address [within the TPP] some of Canada’s recent court decisions on pharmaceutical patents. The Congressional scrap on the TPP, Clark predicts, will be over Big Pharma patents and dairy access. Both these areas are of major significance to New Zealand.

Faced with the prospect of an ever-proliferating set of Congressional conditions, the Obama administration signalled in February this year that in order to pass the TPP, the President would need to renew the Trade Promotion Authority. This would put all of the US eggs in one basket and expose the TPP to a straight up and down vote in Congress within 90 days of the deal being signed, and with no amendments.

Obviously, that is a highly risky path. “But if he waits to do it until its finished,” Clark says, “ we’re negotiating in Las Vegas. It will be a casino. That’s how they operate. They build Christmas trees and they hang wishlists from these things. And the only way you can keep this more or less under control is to get Trade Promotion Authority, where you know what you’re dealing with. With the TPP as it stands,” Clark concludes, “we really don’t know what we’re dealing with.”

Good to know. It means that any credulous TPP boosters in New Zealand need to remain aware of the capacity of Congress to either amend the gains and the trade –offs that New Zealand thinks it may achieve, or to vote down the deal in its entirety. “Ignore the risks of negotiating without Trade Promotion Authority at your peril,” Clark advises.

As for us….as is common with our international treaties, the TPP will be passed in New Zealand by an executive order in council, and not by a parliamentary vote. “Treaty making is a heritage, believe it or not, of the royal prerogative,” says Auckland University constitutional law expert law professor Bill Hodge. “ “Indeed in the American Constitution it is expressly given to the President to sign treaties and declare war, but there is a check and balance and they have to be ratified [by Congress]. ” That’s not the case here. “It is a direct lineage of unfettered, totally discretionary royal prerogative to exercise treaty making power overseas, because that’s something the executive does, historically.” Ultimately that ability is based on holding a majority in Parliament. Parliament’s main role will be to subsequently bring laws into alignment with such treaties – whose provisions, Hodge adds, are increasingly being recognised by the courts as forming a part of the notional, common law, even without those provisions being explicitly embedded in domestic law.

The level of degree of secrecy surrounding the TPP text and negotiations would – in the unlikely event that the intended levels of secrecy can be sustained – render any informed debate on the TPP in Parliament impossible. Both Groser and Labour’s Clayton Cosgrove have tried to portray the current cone of silence as being normal practice in trade negoitiations. To Werewolf, Cosgrove likened the TPP secrecy measures to the ‘behind closed doors’ practices of union/employer bargaining, and as a necessary part of our “nothing ruled out, nothing ruled in” approach to the negotiations.

This will come as news to the Americans, who have already stipulated that the TPP’s rules on government procurement will apply only to the federal level, and not below it. (Thankfully this should mean that our local city and regional councils will therefore be safe from being hauled in front of an investor-state dispute tribunal in Geneva.) Given the political realities, the Obama administration will also almost certainly yield no ground on changes to its footwear, domestic textiles and sugar tariffs, and to the protectionism around shipbuilding and coastal crewing enshrined in the Jones Act of 1920. Not to mention its high tariffs on car and truck imports that serve to protect jobs in the US auto industry directly on pricing, while also creating US jobs indirectly, by forcing Asian car and truck makers to re-locate their plants to the American mainland. There are any number of other “no go” areas for the Americans. Here’s a small example by Greg Rushford called “Obama’s Double Standard On TPP” from that well known left wing news outlet, the Wall Street Journal. And if you can’t behind the WSJ’s paywall, the gist of Rushford’s article can be found here.

The TPP doesn’t lack ambition. Its more than 20 chapters aim to set new binding rules on – to name just a few – foreign investment, intellectual property patents and copyrights, pharmaceutical purchasing, government procurement, how financial markets should be regulated, how state owned enterprises should operate, and what core labour and environmental standards should be recognized by signatory governments. This is in addition to the more traditional stuff of how goods and services are to be traded, and what tariff, quota and phytosanitary standards should be allowed to govern access to markets.

That last point is worth remembering. The TPP negotiations on agriculture are something of a double-edged sword for New Zealand. Any moves to enhance our dairy access overseas are bound to attract counter-claims to lower our bio-security and food safety provisions here at home – with respect to pork and poultry in particular. “Phytosanitary barriers are a big issue for Canada, “ Clark says. “ There’s a pretty strong belief that’s there no real scope – given these barriers – to increase agricultural exports [to New Zealand] in other areas. That’s a problem. People look at where’s the balance ? “

The Pork Board will not be the only target in the TPP negotiations. New Zealand agencies that stand to be affected by the TPP include the drug-buying agency Pharmac, the multinational dairy co-operative Fonterra, and our existing systems for protecting the environment, consumer rights and labour rights. If New Zealand wants to make gains in agriculture the trade-off could also entail swallowing some US-driven copyright and patent demands on intellectual property that go well beyond our WTO TRIPS obligations. Such concessions could conceivably hobble our new and innovative, value-added digital industries. In particular, the US seems to be using the TPP to force on member nations the very same (or worse) mechanisms to deter online copyright infringement that New Zealand has just fought so hard to jettison from our Copyright Act.

Thankfully, the leaked texts in June indicate that New Zealand is currently holding its ground on IP, against US pressure. On other fronts though …the US business lobbies and their political allies in New Zealand are certain that you’ll be very, very happy with the TPP. So many opportunities if you’re just prepared to give a little, here and there. So lie back and enjoy!

One corporate that stands to lose from the TPP changes to IP rules (and the related practices of parallel importing) is The Warehouse. There have been concerns expressed here and also here that (in the name of a crackdown on piracy) the TPP will compel major changes to the practices of parallel importing that are central to the Warehouse’s business. Not to mention to its continued ability to deliver its “everyone gets a bargain” prices to customers, on genuine branded products.

It is not only retailers who stand to lose. Everyone who buys online – DVDs, music, books, cosmetics, jeans, shoes etc – would be affected by any substantive change made in this area. Parallel importing currently enables retailers and ordinary citizens to purchase lawfully made items directly from legitimate licensees situated offshore, rather than via the local franchise holders. This ability delivers genuine competition between suppliers of the same or similar goods, and offers real benefits to consumers.

New Zealanders have enjoyed the right to parallel import since 1998, when the Copyright Act was amended, thereby allowing non-pirated goods made lawfully overseas to be imported without the express consent of local copyright owners. It is called free trade, and the TPP – in the name of free trade – appears bent on restricting it. As Mike Powell, chief executive of The Warehouse toldWerewolf : “ If anything was done in TPP to impact that, I would see that a restriction of trade, and I thought the TPP was about freedom of trade. I’d be surprised if it the TPP did [impact on parallel importing] and I’d be concerned if it did. “

And what reassurances has he been given by government after he contacted them with his concerns? ”Well, they won’t give re-assurances in total, and I respect that. Trade negotiations are always fairly confidential. We’ll find out.” As Powell explains, The Warehouse goes to other countries and buys genuine products legitimately. “Basically, we’re taking advantage of either currency differences, or of the multinationals own pricing policy in different markets…If that got stopped, it would be a restriction of trade. And I would be shocked.”

In his view, the competition keeps the suppliers honest. Without parallel importing, would New Zealand revert to the way it was before the Copyright Act got changed in 1998 to allow it – essentially, a Sleepytown where the local rights holder was virtually able to use their position as an exclusive import licence ? “Well, by default,” Powell says, “ you almost end up there, don’t you?”

Regardless, the Key government has been seriously considering making changes to the parallel importing regime:

The Ministry of Economic Development commissioned Australian economist Henry Ergas to carry out a study on the parallel importation regime last year, spurring further fears that a change is being considered as one possible trade-off in the [TPP] negotiations. The Sunday Star-Times was denied access to the document, completed in August 2011 and described in parliamentary papers simply as “an assessment of the likely impact of changing NZ parallel importation laws”, under the Official Information Act.

Some of the debate about whether parallel importing abets counterfeiting has arisen in Australia and appears to be being driven by copyright holders trying to use the TPP ( and the piracy/counterfeiting issue) to maintain their commercial grip on the supply chain. Yet the issue of counterfeits being sold via retailers, Powell believes, has no relevance to New Zealand’s retailing situation.

It didn’t start out with all these worries. The TPP began life in the mid 2000s as a tentative agreement between four small and quite different economies : Brunei, Chile, New Zealand and Singapore, aka the P-4. Today, the TPP club now consists of the United States, Australia, New Zealand, Brunei, Chile, Peru, Singapore, Vietnam and Malaysia, Mexico, Thailand and Canada with Japan as an interested onlooker and potential joinee.

Prime Minister John Key has promised that New Zealand will not agree to any deal that does not deliver us gains in agriculture. Yet he also accepts that in some areas, there will be a long phase-in period for some countries. Ultimately, Key has said, the deal may also need to be “shoved” over the line by political leaders during its final phase.

As another conservative analyst – Dr Stephen Grenville of the Lowy Institute in Sydney – pointed out earlier this year, the TPP agenda is not about the kind of matters (eg quotas, tariffs, phyto-sanitary standards etc) that usually form the agenda of formal attempts to free up global trade:

[These] ‘add-ons’ to the trade liberalisation agenda are intrinsically different in character. Is the TPP the best forum and are these the right set of issues? The TPP seems an ad hoc and accidental forum into which the US has inserted its own priorities. . Will the mix of issues in the TPP suit Australia’s interests? It may…. if they coincide with America’s. But we need to go into these negotiations recognising that our bargaining power to influence the rules is minimal and pointing to America’s many instances of protection will do us no good.

Even its best friends would probably concede that the TPP has something of an identity problem. Not even the US team speaks with a single, unified voice about key items on the TPP agenda. Over the intellectual property copyright and patent provisions in the TPP for instance, Hollywood is already at war with Silicon Valley.

That dissent over IP is merely the tip of the iceberg. As mentioned, the TPP will face ratification problems at home, especially if the final version requires significant concessions by US farmers, manufacturers and service providers. The fact the Obama administration is supportive of the TPP will cut little ice with a Republican-dominated lower House. This is especially so, given that any TPP deal struck in late 2013 would be lining up for ratification in the midst of the mid-term elections of 2014. Signing off a major trade deal that contains fish-hooks for US farmers, auto companies and Rust Belt manufacturing looks even less likely when you consider the geography of the Senate seats up for grabs in those 2014 mid-terms.

Totting them up is very instructive. According to the Washington Post,20 Senate Democrats will face re-election in 2014, and 13 Senate Republicans. Six of those 20 Democrats come from red states and another six from swing states, while only one of the 13 Republicans comes from a state that isn’t a red state. So out of 33 Senate races, 24 will be being held in either red or swing states – and yet New Zealand is blithely expecting to derive TPP concessions that allow New Zealand greater access to the farm markets in red and swing states, slap bang in the middle of closely fought mid term election battles ? Good luck with that.

It is very nice that Obama likes the TPP. Yet his own Democrats currently occupy nine out of the ten Senate seats most in danger during the mid terms and the Democratic Party is already wary about the likely labour standards chapter and overall implications of the TPP. The outcome of the 2014 Senate races hold out the prospect of the Republicans winning an upper house majority. Is Obama really likely to risk having to run the last two years of his presidency with both houses stacked against him, in order to pass the TPP? Incidentally, the ‘highly endangered’ Senate list happens to include Max Baucus of Montana, who was out in New Zealand this year trying to woo New Zealand into making concessions on the TPP.

In other words, we probably need to get real. And the reality is that the political climate in the US appears poisonously opposed to ratifying a TPP deal anytime before….oh 2015, or even later. Keep that in mind when we’re being told how New Zealand may need to make concessions on IP or on Pharmac or on Fonterra to win access to North American farm markets – or when TPP cheerleaders cite how many zillion dollars New Zealand potentially stands to gain from the negotiations. To all intents, the TPP looks like a mirage.

For now, China is the immediate target of what is a security pact as much as it is a trade pact. Here’s Stephen Grenville of the Lowy Institute again :

There is another worrying aspect of the TPP negotiations. It is widely accepted that China will be unable and unwilling to accept the rules on intellectual property rights and state-owned enterprises. The US discussion downplays this issue, seeing it as just a matter of time before China will change in ways that enable it to meet the TPP’s ‘platinum standard’. But with China initially excluded, it would be easy to interpret TPP as an element of a China containment strategy, especially as Vietnam (which would seem to have the same issues on intellectual property and state-owned enterprises) has been accepted as an inaugural member.

The China aspect needs urgent clarification. Unless a way can be found to signal that there is a realistic prospect of China joining and that China would be welcome to do so, we need to recognise that this will be seen by China as containment. Is this our intent?

In New Zealand, something close to bipartisan agreement exists between the two major parties on trade issues, says Labour’s trade negotiation spokesman Clayton Cosgrove : “You don’t play politics with it. [trade]. Labour he adds, “has a proud history back to Mike Moore and beyond of being free traders.” In Cosgrove’s view, “The TPP potentially offers massive opportunities in terms not just of agriculture, but government procurement.”

All the same, bottom lines do exist for Labour on the TPP, though. “Pharmac has to be protected,” Cosgrove says. “ IP. Investor /state. SOEs, and how they are treated. The treatment of the foreign ownership of land is obviously a large one for us. So is agricultural access. And we’ve always said New Zealand must always retain the ability to legislate and regulate in the public good…”

Cosgrove wouldn’t be drawn into discussing anything that has emerged to date about the negotiations. “I’m not going to get into speculation about texts, based on leaked texts or draft texts or old texts that haven’t been verified and that have come out from that rather strange group [Public Citizen] in Washington – and they are – who’ve leaked what they alleged to be text. The Minister’s response was well, I won’t be stupid enough to facilitate those things happening. I would have to say – and some would accuse me, which is not correct, of siding with the government – that’s a very very high level of commitment. You could argue the Minister has boxed himself right into a corner. “

Since no one is talking about scrapping Pharmac, Labour’s commitment to Pharmac amounts to what, exactly ? Cosgrove : “To its core ability to bulk purchase in a single desk fashion medication, as it does now…” .So does that mean protection for Pharmac to do its job as it currently does ? Not really. “ It may mean if you look at the Aussie example, that issues are negotiated around transparency and decision making …I’m not offended by that, because transparency and accountability need not necessarily impact on what Pharmac does.” [ See the Werewolf story in this issue on TPP and Health for signs of how the TPP’s ‘transparency’ goals could well impact severely on Pharmac, and on the health budget.]

Labour, Cosgrove confirms, supports the TPP with the reservations mentioned. Given that Labour and National both support the TPP process, any subsequent TPP deal would become a serious bone of contention in any prospective Labour /Greens coalition government – and in election year 2014, to boot. The outcome of that conflict would determine whether New Zealand could ever muster the political will to exit the TPP at some future date, and wear the consequences. As constitutional law expert Bill Hodge points out, the TPP may contain provisions that bind future governments – but as with any international treaty, it will also almost certainly contain exit clauses that could be activated by any future government prepared to ride out the consequences.

“They may have to give a certain amount of notice, but generally future governments can get out, ” Hodge says. Anzus strikes him as a classic example. ”A new government can say we’re opening the books on these things, and are giving notice that we no longer consider ourselves bound.” On current indications however, the Labour parliamentary caucus seems to be far more united behind the TPP than it ever was behind Anzus.

Such debate on the TPP are still to be had, both inside and beyond the Labour Party. Come December, battle will be rejoined in Auckland in the next round of the negotiations. Negotiators, analysts, business lobbyists and politicians from all points of the compass will be there, including Peter Clark from Canada. To Clark, the style of the negotiations signifies its intended outcomes. “The Americans are running this as a ‘hub and spoke’ type deal. They’re negotiating separately with everybody, on nearly everything. They occasionally have sessions where they get together to deal with the text, but there’s a big, big element of bilateralism in the United States approach.” It is a bait and switch, potentially. “If I was a US negotiator, I would be making New Zealand hang on until the very last minute, to keep them co-operative and complacent on the other issues. “

ENDS

TPPA: Corporate right to sue NZ

This news dates back to June, but I am posting it because this information rarely gets the light of day..

National Says ‘Yes’ to Investor Rights to Sue

New TPP Leaked Text: National Says ‘Yes’ to Investor Rights to Sue

Professor Jane Kelsey.

Scoop,

14 June, 2012

Another chapter of the secret Trans-Pacific Partnership negotiations has been leaked, heralding “another bad news day for National”, says TPP critic Professor Jane Kelsey.

The draft text of the investment chapter, including the section on investor-enforcement, is undated, but is understood to be recent. A copy is here: http://tinyurl.com/tppinvestment

It confirms that National has agreed to let foreign investors like Philip Morris, Pfizer, Warners, Exxon Mobil or Microsoft sue New Zealand for damages in private offshore tribunals, claiming that new laws or policies breach their rights under the agreement.

“My preliminary analysis confirms the concerns raised by lawyers in a recent letter calling for the exclusion of investor’s rights to sue, and much more”, Professor Kelsey said.

“Philip Morris confirmed on the weekend it will use so-called free trade treaties to challenge our smoke free laws. At present, it would need to find a backdoor way to use an existing agreement. This TPP text would throw open the front door to them and all the other US firms that want to block new laws they don’t like.”

Almost half the investor-state disputes currently before the World Bank’s tribunal at present relate to oil, mining or gas projects.

“Last week the government opened tenders for oil and gas exploration in 23 onshore and offshore sites, when we have weak regulation. You can guarantee those oil firms would threaten to sue if new regulations hit their share value or profitability. Whether they have a good legal case is beside the point. They can tie governments up for years in massively expensive legal battles. Just that threat can ‘chill’ the regulatory decisions.”

Jane Kelsey warned the draft text “should worry the heck out of Labour, if it is serious about reversing National’s privatisation policies and introducing taxes on capital gains or speculative financial flows”.

“Earlier leaks revealed what was being proposed for intellectual property, transparency on pharmaceuticals, and regulatory coherence. We now have another piece of the TPP jigsaw. More is bound to come.”

“National should drop its opposition to a select committee inquiry and allow political parties and citizens to examine what the TPP means for New Zealand”, Professor Kelsey said.

The leak also sends a message to TPP negotiators as a whole that “obsessive secrecy is its own worst enemy – it simply confirms they have something to hide”.

“They should wave the white flag when they next meet in San Diego on 2 July and release all current texts so the whole proposed deal can be subject to full and informed scrutiny.”

Ends.

IMPLICATIONS OF THE LEAKED TPP INVESTMENT TEXT FOR NZ

The draft text for the investment chapter of the Trans-Pacific Partnership Agreement negotiations has been leaked. From midnight 13 June (NZ time) it will be available onhttp://tinyurl.com/tppinvestment. The text has been authenticated. In standard style, it indicates in square brackets where aspects of the text have not been agreed. However, references to which countries support particular bracketed text have been removed.

Significance of this text for NZ: Unlike most other countries, New Zealand is not a party to many international investment agreements. This leaked text would impose much more extensive and less flexible obligations that those existing agreements. That is especially dangerous in the hands of US investors, who are notoriously litigious.

NZ has agreed to TPP investor rights to sue: Section B of the text sets out the rights of investors from TPP countries to sue governments directly in private offshore tribunals where they allege a breach of their (expansive) rights under the agreement and seek taxpayer funded compensation. These tribunals are unaccountable, there is no appeal, and the “judges” are mainly investment lawyers who also act for clients in bringing such claims. Some countries are suggesting a limited degree of transparency, but nothing like a normal court hearing, and other TPP parties are resisting even that level of openness. Prime Minister John Key initially described the idea as “far-fetched”. But footnote 20 to Section B makes it clear that only Australia has refused to give foreign investors these powers under the TPP.

Similarities to CER Investment Protocol but that is unenforceable: The text is closest to the CER investment protocol between Australia and New Zealand, which has not yet come into force. But the TPPA goes much further because CER is not enforceable by states, let alone by investors in private offshore tribunals. The Protocol also contains general exceptions for public health, conservation, public morals, historic sites, and balance of payments emergencies that are not in the TPPA investment text. There is no exception in the text that excludes investors from Australia or New Zealand from suing the other government, although that has been promised.

Sweeping definitions of “investment”: The rules cover any asset that is owned or controlled by an investor, directly or indirectly whose characteristics include a commitment of capital or other resources, expectation of gain or profit, or assumption or risk (Art 12.2). That covers shares (in mixed-ownership model SOEs, Mediaworks), enterprises, including subsidiaries and branches (insurance companies, News Corporation), contracts (charter schools and PPPs), licenses and permits (mining or water rights), trademarks (as per tobacco packets), land and property (mall developers, aged care chains), bonds and loans (mortgages, Earthquake Kiwi Bonds), futures and derivatives (foreign exchange, tradeable Fonterra dividend units, securitised fisheries quotas). The US wants sovereign debt, such as Government Bonds, covered as well, but that is opposed.

Sweeping coverage of “investors”: an investor just needs to “attempt” to make an investment by a concrete action, such as “chanelling resources or capital in order to set up a business” or applying for permits and licenses.(Art 2.2, fn8). The benefits of the TPP rules could be denied to an investor from non-TPP country that was manipulating its nationality to come under the agreement (Art 12.14). This is meant to stop treaty shopping of the kind the tobacco companies are notorious for doing. But once a firm can claim “substantial business activities” in the TPP country, which can be pretty minimal, it can sue. NZ firms could try to do this too, so they get better treatment than domestic laws allow and can bypass the NZ courts.

What the NZ government cannot do: The standard rules guarantee investors will get at least as good, if not better, treatment than local firms and do not have special conditions imposed on their investments. The government could not:

• discriminate against TPP investors or their investments in favour of NZ counterparts, ie no preferences for NZers and no foreign investment restrictions, unless the right to do so is explicitly reserved in an Annex that is very hard to change (Art 12.4, 12.9).

• discriminate against TPP investors or their investments in favour of those from other countries –this means they can take advantage of any better provisions that are in any of NZ’s other investment agreements, including some sweeping ‘umbrella’ clauses in the China NZ FTA and the Hong Kong New Zealand bilateral investment treaty. Again, the government could retain the right to discriminate in specific circumstances if that was explicitly reserved in an Annex that is very hard to change (Art 12.5, 12.9).

• impose performance requirements on foreign investors or investments about use of locally produced goods or services, ie Buy NZ (Art 12.7)

Additional protections for investors: TPP investors would also have special treatment that is not available to local firms and investors. They are guaranteed:

A “minimum standard of treatment”, including “fair and equitable treatment” (Art 12.6). This sounds benign but is the most common ground for investment disputes, and has been interpreted to mean a legitimate expectation of a stable and predictable business environment that is not impaired by new regulatory or taxation measures. This might be argued if the government introduced stricter regulations than applied when a mining company made its initial investment, or imposed a major new tax, such as a capital gains tax on large scale property developers (unless there is a tax exception elsewhere in the agreement). Attempts to clarify its meaning use different words from other agreements, and is fertile ground for lawyers and investment tribunals to interpret (Art 12.6.2 and 3, Annex 12-B).

Protection against expropriation or indirect expropriation (Art 12.12): government measures that reduce the value of the investment or its expected future profits, such as re-regulating the broadcasting market to break the stranglehold of SkyTV or seriously cutting the number of pokie machines allowed in a casino. 

There are two versions of Annex 12 that seek to limit the use of ‘indirect expropriation’. One follows the standard US line; the other has two options, like the Annexes in NZ’s agreements with China and Malaysia. They are treated by defenders of these agreements are protecting the government’s right to regulate for public policy goals, but the are far from watertight. The one that NZ seems to have proposed would treat a measure that discriminates against a class of investors or breaches a contract the government had made with the investor, including in a mining license, as likely to be an indirect expropriation. Public policy measures that ‘may be reasonably justified’ in the protection of the public welfare’ are presumed not to be indirect expropriation – but again that is a license for investors to challenge a new regulation or law.

Contracts can be enforced even if TPP rules are not breached: Investors from TPP countries could be able to enforce an investment agreement or investment authorization even where the government’s action does not breach any of these rules (Art 2.2) The US has this in previous agreements. It targets certain kinds of contracts: 

• those relating to natural resources a government controls, such as contracts for “exploration, extraction, refining, transportation, distribution or sale” of those resources;

• for the supply to the public on behalf of the government of services like power generation or distribution, water treatment or distribution, or telecommunications; and undertaking infrastructure project, such as construction of roads, bridges, dams or pipelines, that are not solely for the use of the government.

High risk in a financial crisis: Three articles will seriously restrict what can be done in a financial crisis.

NZ could not restrict transfers of money in and out of NZ, when even the IMF now says capital controls are a valid tool for financial stability. The government would not even be allowed to impose controls in a balance of payments emergency (Art 12.11).

If government bonds are treated as investments, as the US wants, it would affect sovereign debt restructuring as in Argentina and Greece, giving speculators rights to recover the full value of distressed bonds they bought at bargain prices (Art 12.2).

Banks that grew too big to fail, the insurance companies that gambled on shonky securities, the finance companies that were barely regulated, and the toxic financial products themselves, would all be protected as investors and investments if they came from TPP countries. Without the financial service chapter it is not clear what rules would apply to their operations, but they could sue under the investment chapter if government re-regulated in ways that eroded their value or profitability (Art 12.2, Section B).

No guaranteed exceptions for the environment or public health: The TPP investment text is modeled on US FTAs and the general exception for public morals, public health, environment, conservation, etc in those FTAs does not apply to the investment chapter. That text has not been leaked yet, but it could be presumed the same applies in the TPP. Some countries have proposed a limited exception for public health and conservation that would let governments require foreign investors to use NZ content or locally produced goods or reward them for doing so – provided the same rules apply to New Zealand investments (Art 12.7.3(c)). But only some governments support that. Several countries are also proposing a rhetoric provision on corporate social responsibility (Art12.15bis)

The right to do what governments can already do: There is a circular provision that allows a government to ensure investment activity is sensitive to the environment – where that would be permitted under the agreement. So it adds nothing (Art 12.15). Some countries want to mention health, safety and labour as well – but that is opposed …

Assessing the risks: There is no apparent reason for New Zealand to adopt this text and there are abundant reasons not to. The risk of enforcement is only one concern. Threats of investors or states to sue are widely known to have a chilling effect on government decisions. In addition, the leaked TPP text on Regulatory Coherence shows that foreign firms will have a right of input from the earliest stages of policy and regulatory reform. That provides ample opportunities for leverage, especially when that is backed by a threat to sue.

What next? This is very much a preliminary analysis. It is subject to the frustration that annexes of ‘non-conforming measures’ that might limit New Zealand’s exposure are not available, nor are many of the other chapters in the text that might heighten or lessen the concerns raised here. Hopefully, a number of people with legal expertise will engage in a debate a more detailed analysis of the text, building on the speculative debate that followed the jurists’ letter that called for the exclusion of investor-state disputes from the TPP. A preliminary assessment from Public Citizen in the US can be found here.