1. Negotiations
2. CPTPP

Who wins if we get a free trade with the US?

Scoop | Monday, 29 September 2008

Who wins if we get a free trade with the U.S?

By Bill Rosenberg

As we have learned from the China FTA, we would be foolish to listen uncritically to the promises already being made for a trade deal with the US. The US drives a hard bargain.

As one of New Zealand’s most experienced trade negotiators, Dr. John Wood, has described the way the US negotiated: “The United States’ underlying stance was that the other negotiating party should either accept its proposals, or adjust to the reality of them anyway.” [1] In other words, take it or leave it.

The desperation shown by a succession of New Zealand governments for such a deal, plus our almost complete absence of bargaining chips in existing tariffs, will further undermine our weak position.

Figures of $1 billion in gains are being thrown around freely. They are a mirage and have no objective basis. We can be sure that the powerful, highly subsidised agriculture lobby in the US will bitterly resist free access for our dairy, meat and other agricultural products. For many important products (like the deal done with Australia) access will be decades from signing, and by then many other countries will also have access. It will not be a free trade deal except in name.

To obtain even such small concessions, the U.S. will making demands in return. We can deduce these from its official publications.

The U.S. government publishes an annual report on “Foreign Trade Barriers”. The 2008 report [2] lists what it regards as New Zealand “trade barriers” that it wants modified or removed.

The Overseas Investment Act provides for some screening of overseas investment. The US report states: “The United States has raised concerns about the continued use of this screening mechanism.” Removing it would allow overseas corporations and individuals a free-for-all in purchases of land, acquisition of strategic assets on sensitive land (such as Auckland International Airport), reversing the recent regulation that allows the government to scrutinise such acquisitions, and a free-for-all in purchases of fishing quota in our economic zone.

Huge US pharmaceutical companies resent the bargaining power of Pharmac which holds down the costs of medicines to New Zealand, saving us probably hundreds of millions of dollars a year. The US report makes clear it wants to reduce Pharmac’s power, and insisted on similar provisions in its FTA with Australia. It would also like us to lengthen the patent protections on those companies’ drugs, preventing competition for longer.

The US does not like our caution in allowing the introduction of GE products, and our biotechnology protections in general. It has raised concerns in meetings under an existing Trade and Investment Framework Agreement and will attack those protections in these negotiations. Neither does it like our requirements for labelling GE foods.

It also thinks our controls on agricultural imports to prevent entry of diseases — such as beef with mad cow disease, and diseased poultry — are too tough. It has repeatedly called for those controls be weakened. Watch out for further demands in the negotiations.

One of the big costs to Australia in signing its FTA with the US was in copyright. The US insisted on much more stringent rules which would protect the profits of its huge entertainment and software companies. Australian consumers, libraries, and educational institutions all face additional costs and bureaucracy as a result. The US report signals similar objectives.

Services will be a primary focus of negotiations. The U.S. has powerful transnational companies interested in further commercialisation of our public services such as education, health, and environmental services. The existing P4 agreement is structured so that all services are opened up in this way unless they are explicitly excluded.

The US will want its corporations to have access to central and local government purchases and contracts on an equal basis with New Zealand firms. That counts out use of these substantial purchases to assist New Zealand’s economic development. New Zealand companies will in theory have access to US government contracts in return, but will in fact be facing huge competition and a range of barriers at state and local government level.

A new and disturbing development is the intention to extend the existing agreement into investment. As well as the effects on our Overseas Investment Act already described, this would allow corporations to sue governments for compensation or rever-sal of laws when their profits are threatened. Hearings take place in secret, before private tribunals.

There is a growing number of cases that have been made public which frequently concern privatisations which (like several of ours) have gone wrong. Governments in North and South America have faced numerous claims, and some in the South are now withdrawing from these arrangements. Argentina for example, which had to take drastic action in the interests of its people during its recent financial crisis, has been subject to hundreds of millions of dollars of claims.

For more details on investment see http://nznotforsale.wordpress.com/danger-ahead.

These agreements would also further restrict our ability to manage our economy during financial crises such as that currently reaching a boil in the US, and make both central and local government actions vulnerable to expensive challenge in international tribunals.

Because this agreement will not only be with the US but also the existing P4 agreement signatories, New Zealand will find itself with little choice in who it is giving preferential access to when the agreement expands, as is anticipated. In theory it could do different deals with new signatories; in practice it will have limited choice.

In March, one of the world’s best-known economists, prize-winner Joseph Stiglitz, recently warned New Zealand off a trade deal with the US. “Most of these free trade agreements are not good deals... they’re managed trade agreements and they’re mostly managed for the advantage of the United States, which has the bulk of the negotiating power.” He said there was no real negotiation and “one can’t think that New Zealand would ever get anything that it cares about.” New Zealand’s agriculture interests are head to head against those of the powerful American agricultural lobby. Stiglitz warned: “you’ll lose”. [3]

Bill Rosenberg researches and writes on international economic matters.