Some questions about the Trans-Pacific Partnership?

I have an open mind regarding international trade.

I mostly blog about housing affordability and urban planning issues for Christchurch and New Zealand. In private, I have argued there is some parallels with how our rules, institutions and systems of governance with regard to housing and the way it excludes the interests of renters, the homeless and poor families struggling with cold, damp, overcrowded and unhealthy homes is comparable with the way in the past workers and consumers were prevented from accessing affordable food in pre-1840 Britain. The landed gentry through their control of Parliament had enacted -The Corn Laws -which prevented international trade in grain -thus hiking up the price of a staple -bread.

This situation was rectified by a campaign to repeal the Corn Laws and by the greater enfranchisement of the ordinary person. Gradually over time by electoral reform -workers, females and the disenfranchised gained the ability to be represented in Parliament and laws were made for the ordinary person not just for the rich elite. Aristocracy was replaced by democracy.

So broadly I am in favour of free trade reforms if the beneficiaries are spread throughout society.

I am not sure if the TPPA fits into the beneficial category for the ordinary person. I am not sure if trade and democracy are working together like they have in the past or against each other. I have some questions -not just for the supporters of the Trans-Pacific Partnership but also to those that oppose it.

Winston Peters a former Minister of Foreign Affairs writes the following about US, China and NZ trade deals.

They say a picture is worth a thousand words and President Barack Obama’s final State of the Union address drew nothing more than polite applause when he raised the TPPA.
In contrast to the whooping other parts of his speech drew, only about 20 people got to their feet and that included loyal members of Obama’s Cabinet.
This brings us back to the fiction being peddled by Prime Minister John Key and recycled by some in the New Zealand media who ought to know better.
Without the United States there is no Trans-Pacific Partnership, so why on earth is the Government getting away with its PR bluster over this “signing?”….
The TPP further opens up a diplomatic-economic Pandora’s Box. Whilst on foreign policy Key calls Washington, when it comes to trade and investment, he picks up the phone to Beijing.
When President Obama raised the TPPA in his State of the Union address, he never listed it among his key legislative priorities.
In the one-hour President Obama spoke, the TPPA merited only 39 seconds and this included him saying: “With TPP, China does not set the rules in that region; we do”.
So the TPPA is clearly about American interests and New Zealand has supplicant status within Pax-Americana.
This diplomatic-trade tightrope creates one or two problems and they are the free trade agreements China has with two TPP countries — namely New Zealand and Australia.
If President Obama views the TPPA as an economic version of the “Five Eyes” alliance, then Key has yet to disclose to him the full extent of the economic beachheads China has here and across the Tasman.
From ports, to farms, and that shameful takeover of our largest meat exporter, Silver Fern Farms, China is a de facto part of the TPP and we suspect that may not go down well on Capitol Hill….

So my first set of questions are:

Would someone who is familiar with both the US based Trans-Pacific Partnership and New Zealand’s earlier trade agreement with China explain how they differ and how they fit together?

Does the TPPA allow the US to set the global trade rules to benefit its multinational companies? When President Obama says the TPPA will allow the US to set the trade rules for our region is that true?

Is the TPPA the best vehicle for New Zealand to avoid being squashed by the fists of China or the United States? Would the World Trade Organisation be a better instrument? Are trade agreements the best tool for achieving non-trade objectives -international peace? In Europe, peace has been the driving force for ever closer unification, but that has led to a governance and economic crisis within the Euro-zone.

My second issue is about sovereignty. Senator Elizabeth Warren, a rising progressive politician in the US, believes the most concerning issue, is the tilting of the playing field towards multi-nationals and away from working families. She believes the issue of who sets the international trading rules -US or China is a diversion.

I understand New Zealand has the sovereign right to withdraw from international agreements, but practically -sometimes that is difficult -I think for instance, Finland (my wife is Finnish) would prefer to have kept its own currency, like Denmark and Sweden did. Especially, once events changed with the GFC and the debt problems of southern Euro countries became more transparent and worrisome to global markets. But it is not that easy to reclaim aspects of sovereignty -such as returning to your own currency -once you have given it away.

In New Zealand, Parliament has sovereignty over courts -I may be wrong (I am not an international law expert) but in other treaties and agreements it is only other sovereigns that can take New Zealand to international courts -individuals and companies can’t? I feel a sovereign versus sovereign dispute settlement process is different than a non-sovereign versus sovereign dispute process. Especially if the process is binding on our sovereign Parliament.

What worries me is that we are setting a precedent where a special group in New Zealand society -foreign investors can sue Parliament and for that ruling to be binding -Parliament cannot argue that constitutionally and morally as the most representative and democratic body they should be the final arbiter of the public interest. This seems to be a big loss to domestic businesses, workers, consumers and citizens in any future dispute with foreign owned companies.

Michael Reddell is an economist who has worked for the Reserve Bank and other institutions for thirty plus years. He also questions the merit of ISDS procedures, stating;

ISDS provisions mean, that for some matters, a foreign firm owning a company in NZ has access to different remedies against the NZ govt than a NZ firm in NZ owning a company in the same sector has. Same goes in other countries. That is wrong in principle — equal access to justice has been a tenet of our system for a long time.

Michael’s whole take on the TPP is rather neutral, which seems to be the position of many economists in New Zealand. He would want an independent inquiry by a body such as the Productivity Commission to tease out the gains from trade versus the losses due to regulatory and sovereignty issues.

When New Zealand has made other constitutional changes, especially with respect to courts we have not given up Parliamentary sovereignty. When New Zealand was debating setting up a new Supreme Court it was discussed whether it would have any authority over Parliament. Michael Cullen successfully argued that it should not in his speech titled -Parliament Supremacy over Fundamental Norms.

Maori have been prominent in the protests against the TPPA which is not surprising given their history. Many Maori believe their people lost sovereignty over New Zealand and this makes them particularly sensitive to issues of sovereignty. The Crown has long told Maori that the agreement between the Crown and Iwi/Hapu, being the Treaty of Waitangi is not binding on Parliament. That the court -the Waitangi Tribunal, adjudicating breaches of this agreement can only make recommendations because Parliamentary Sovereignty is supreme.

So my next set of questions are:

Why is that one treaty between the Crown and sovereign peoples -Maori tribes, the adjudicating court is not binding on Parliament, while another treaty -the TPPA the adjudicating court is binding on Parliament?

In the future, if New Zealand wants to reassert Parliament’s right to sovereignty over the Investor State Dispute Settlement court -will it be able to -or will New Zealand be like Finland and find it difficult to reclaim lost aspects of sovereignty?

Finally, Investor-state dispute settlement cases are exploding in number. A majority of the cases are against developed countries -even though these countries have established legal systems protecting the rights of all -including investors -domestic and foreign. As of now, no cases have been taken against the US or New Zealand. A great many of these cases overseas are instigated by US based multinationals -something that if the TPPA is ratified will expose New Zealand to 1000s of potential new litigants.

It is important to note that only foreign investors can take lawsuits to ISDS tribunals and only to sue governments. Domestic companies cannot use ISDS procedures and governments cannot sue foreign companies. This gives large foreign owned companies a structural advantage. A threat or an actual lawsuit may cause the government to back down from taking a particular course of action if foreign investors complain this is against their interests, even if the government had correctly taken into account the wider public interest and even if they would have eventually won the ISDS proceedings.

Some have described this as giving foreign companies a veto over New Zealand democracy or that ratification of the TPP will have a ‘chilling effect’ on democracy in New Zealand.

So to complete my set of questions -why do foreign owned companies need to use TPPA-like investor dispute processes against democratic countries which already have the -rule of law? What are these hundreds of cases about? Has the ISDS system gone rogue? If the ISDS system does go rogue what can we do about it? Have an election and throw the buggers out?

The last time in the Anglo-World a court was used as a weapon for a governing system was when the monarchy used the Star Chamber Court to defend itself against the aristocracy and the power of Parliament. It took a civil war in 1642 England to get rid of it. Parliamentary Sovereignty has been firmly established since the Glorious Revolution in 1688 and the Bill of Rights in 1689 in England. New Zealand inherited the Parliamentary sovereignty constitutional principle. The fifth amendment of the US constitution was enacted to protect citizens from the abuses of the Star Chamber.

What safeguards does the TPPA put in place to protect our Parliament and democracy, so it is unimpeded in determining the public interest? Or are we on a slippery slope between democracy and corporate plutocracy?

Since publishing this article nearly a month ago there hasn’t been answers relieving my anxiety coming from pro -TPPA supporters. Whilst anti-TPPA activists are putting out more material which adds to my anxiety.

Addit 30.3.16. Guy Standing -author of the Precariat Charter in a talk in Christchurch indicated the reason the US wasn’t been successfully sued was that the US President appoints the World Bank head and they determine who the third (and deciding) panellist is on ISDS tribunals. So the TPPA in a way becomes an extension of the US legal system.