TPP AND ELECTIONS - NEW ZEALAND

"The problem is if you lose land in this agreement [TPP] ... New Zealand would lose forever the ability to stop foreign buyers outbidding New Zealanders for our land."

David Parker

New Zealand Trade Minister

October 27, 2017

Last Thursday, October 26, New Zealand got a new prime minster, Jacinda Ardern, the 37-year-old leader of the Labor Party and the youngest person ever to hold the office of the prime minister. The election was held on September 23, and given that the National Party came in first, many may have been surprised by the fact that it was Ms. Ardern who came away with the brass ring, possibly including Ms. Ardern herself. That's an issue for another day. This entry is about TPP or rather New Zealand and TPP. If the National government had continued in office, they would have continued to support the effort to wrap up an agreement among the TPP 11, that is, with New Zealand and the other ten countries left in TPP after the United States withdrew. 

 
And the new coalition government - a government led by the Labour Leader Jacinda Ardern, made possible by NZ First leader Winston Peters, now Deputy Prime Minister, and including the Green Party - may well follow suit. There have been some mixed signals over the last few days. That said, New Zealand's new trade minister, David Parker, strongly indicated that the new government would seek modifications in TPP in two areas: land, that is the ability to limit foreign buyers, and ISDS, the agreement's investor-state dispute settlement provision. ISDS is big, but here we'll stick to the topic of land and possible restriction on foreign ownership of New Zealand property.

On Friday, October 27, Mr. Parker was interviewed by Mike Hosking of Newstalk ZB. Today's featured quote was taken from that interview. Here is a bit more of it. Asked if he thought New Zealand would end up signing a TPP 11 agreement, Mr. Parker said:

Picking up on the flow-through language, Mr. Hosking asked the trade minister about New Zealand's agreement with the Republic of Korea. Here is an excerpt from that exchange. 

 
Mr. Hosking: This has never been tested before has it. No one has ever gone back to a trade partner and gone, '"By the way, the deal's different now, here we go."

Mr. Parker: Well, the problem here is that the last government didn't even try to protect these land issues. Now the Korean one is interesting. Korea has the ability to stop New Zealanders buying their homes in Korea, and yet the agreement on its face...

Mr. Hosking: Oh no, no, no. We understand that but, of course, a deal's a deal's a deal., and we're looking now to change the deal.

Deadlines and Trade. The world has understandably grown skeptical about deadlines for trade negotiations. Yet, in fact, those who want to save TPP are operating on a very tight schedule. Today the negotiators are outside Tokyo, we assume feverishly working to reach a conclusion. We say "feverishly" because the goal is to complete those negotiations in time for the APEC Leaders' meeting in Da Nang, Vietnam, and that is just a week away (November 6-11). New Zealand's issues aren't the only ones on the table of course. The largest basket of potential changes is tied up with the question, what elements of TPP should be suspended in the absence of U.S. participation? 

 
New Zealand Land. But the New Zealand issues are potential deal breakers. As one Japanese official put it, "If exceptions are made for New Zealand alone, the whole thing will fall apart." 

And, in the end, New Zealand may not be a problem. Some press reports we have seen suggest that Prime Minister Ardern is searching for a way to finesse the issue, that is, to sign the TPP deal as is, while fulfilling her promise of land restrictions some other way. Domestic legislation in advance of the TPP deal has been mentioned as an option. 

 
Democracy and Trade. Whatever happens over the next month on TPP or the next year on NAFTA, this current flap raises a much larger question: What is the relationship between democracy and trade agreements. Each word is important here. We are talking about trade agreements, not trade. Trade is important to virtually all of the countries we mention in these pages. We'll take that as a given. That does not mean, however, that the world's electorates are content to live indefinitely under the terms of particular agreements struck at particular times. It is an issue that many would simply wish away, but it won't go away. Consider the following: 

No. 1. The New Zealand-TPP issue is about land use. Whether your preference is for the policies of the last New Zealand government or the new one, land use policies are a step beyond the questions of tariffs and quotas that one thinks of as the core elements of trade deals.

No. 2. Legislative bodies are the bedrock of democratic systems. They are the vehicles for change. To repeat the phrase that is the mantra of every winning party, "Elections matter."

The WTO.  In the World Trade Organization, the negotiating rounds had served as the global legislature for trade, but that system has dried up, and the WTO is struggling as a result. (Note that the focus is now on non-WTO agreements like TPP.)

No. 3. A Deal is a Deal. And yet, in the exchange quoted above, the interviewer cut off Mr. Parker when he was noting the lack of symmetry in New Zealand's trade agreement with Korea, arguing that "a deal, is a deal, is a deal."

No 4. NAFTA. If you are an American,  this all brings you to the hard question of NAFTA. Everything does. Our views are these. Whatever it was in 1994, it has become a critical pillar of the North American economy and needs to be preserved. And yes, we agree with those who have labeled a sunset clause for NAFTA a very bad idea. 

No. 5. Collision. All of that said, today's trade crises - whether in the WTO, TPP, BREXIT or NAFTA - are not the bizarre outcome of a bizarre American election. National democracies demand the possibility of change. The trade agreements of the last half century have all been built on assumptions of permanence. And those tectonic plates are now colliding.