Most people think that trade deals are good for business, but that is not always the case. The government is currently negotiating a controversial trade deal with the US and 10 other countries – the Trans-Pacific Partnership Agreement (TPPA) - that is likely to leave many New Zealand businesses worse off, as well harming citizens and undermining our democratic rights.
One reason is that very little of the TPPA is about trade issues like tariffs and quotas. Most of the TPPA is about our domestic laws and regulations, covering issues like patents, copyright, investment laws, State-owned enterprises, government procurement, internet and e-commerce.
Another reason is that the TPPA is in the interests of large multinational companies, not the small and medium sized enterprises (SMEs) that make up 97% of the New Zealand economy. For example, the TPPA is likely to offer multinationals improved access to central government contracts, and potentially also to local government contracts, while restricting preferences for local firms. This is a problem for many SMEs that rely on public procurement to support their early stages of growth.
The TPPA will also extend patents and copyright. This benefits patent and copyright owners (mainly US and Japanese corporations), but it will increase costs for New Zealanders. The medicine-buying agency PHARMAC has saved $5 billion over the past 12 years from using generic medicines wherever possible, rather than the more expensive patented drugs, but PHARMAC will be forced to buy more expensive drugs in future. Businesses, universities, schools and library will also bear higher costs.
There are other disadvantages. Developing New Zealand’s future advantage in innovation will be more difficult if patents and copyright are extended. The NZ Institute for IT Professionals describes the US proposals as ‘stifling innovation rather than supporting it”. Copyright rules would require internet service providers to police their customers and make criminals out of people who share files.
The TPPA will also give multinationals the right to take our government to an international tribunal to challenge laws and policies. Under a similar agreement to the TPPA, Phillip Morris is challenging the Australian government’s plain packaging of cigarettes. These cases can only be initiated by foreign investors, potentially putting domestic companies at a disadvantage, as well as undermining democracy.
Against these potential costs, the gains from trade are likely to be very small. At best, New Zealand will benefit by 0.01% of GDP by 2025 from agriculture, according to the US Department of Agriculture. And it is clear that Canada, the US and Japan will not remove their tariffs on dairy products or eliminate their subsidies. So there is little to gain.
But our government seems to have decided that it will sign the TPPA. Once signed, it cannot then be altered by Parliament and it will be difficult for a future government to exit. Shockingly, the draft TPPA agreement is secret and we have been forced to rely on leaks for our analysis. The Green Party is calling for a halt to negotiations. There needs to be an objective analysis of the costs and benefits, public debate and Parliamentary scrutiny. This is an important agreement and our democracy must be respected.
Barry Coates, Green Party list candidate and former Executive Director of Oxfam New Zealand.