At the very least we should concede the recent signing of the Trans- Pacific Partnership agreement for 12 Pacific trading nations trumpeted with such fanfare by the New Zealand Government offers the promise of clear advantages.
On the other hand these advantages are unequally distributed in the partnership. Because New Zealand has to surrender some current freedoms and because in buying the US cooperation China’s situation as a trading partner in the Pacific is correspondingly weaker, the jury is still out on what the agreement will mean for New Zealand. What appears to have caught the government by surprise is: first the apparent fury of the agreement’s opponents – and second that the protestors should include those who appear unexpectedly well-informed.
The most thought provoking criticism comes from the Nobel Prize winning economist Joseph E Stiglitz who examined the wording of the Agreement last October. His conclusion is that the Agreement was designed not for the trading interests of the respective nations but rather the emphasis is on handing control of trade over to big business.
A significant economic analysis paper entitled “Research paper: The Economics of the TPPA” has recently been posted on the TPP Legal website. This ought to be carefully considered if only because the authors and the reviewers have a reputation for knowing what they are talking about.
This paper was co-authored by Tim Hazledine, Professor of Economics from the University of Auckland Business; Rod Oram, business journalist and author; Geoff Bertram, Senior Associate at the Institute for Policy and Governance at Victoria University; and Barry Coates, researcher and former Executive Director of Oxfam New Zealand. The peer reviewer was John Quiggin, an Australian Laureate Fellow in Economics at the University of Queensland.
Consider the following excerpt. “It is striking how little the TPPA will deliver. Without the TPPA, our GDP will grow by 47% by 2030 at current growth rates. The TPPA would add only 0.9%”…. “Even that small benefit is a gross exaggeration. The modeling makes unfounded assumptions, and the real benefits will be far smaller. If the full costs were included, it is doubtful that there would be any net economic benefit to the New Zealand economy.”
Given the eminence of Stiglitz and also the level of expertise of the New Zealand team who analysed the research paper on the Economics of the TPPA it seems highly probable that the Government advisors must have told PM John Key and his senior ministers that there are some very serious questions being raised. Under those circumstances, the Government insistence that the media focus on the more flaky protestors who may indeed be more easily dismissed as ill-informed, is hard to interpret as anything other than cynical point scoring.
At superficial first sight, that anyone should want to oppose the lifting of trade barriers when virtually every government of the world appears united in claiming they would like to have better access to overseas markets is puzzling enough yet on reflection several major warning signs should have been obvious.
The first obvious red flag is that the World Trade Organization representing 161 of its member states has been totally frustrated in coming up with anything approaching a global trade arrangement, and it has been in the trade negotiation business since 2001.
The next problem is one of simple logic which has ethical consequences. Each nation is looking to improve its balance of trade so that it earns more from its exports than it spends on its imports. Just as within a nation, it is the rich players who finish up with the advantages because in the real world some nations have more going for them than others. Those with highly prized natural resources and well developed production are at a clear advantage whereas a country with a lack of resources and inefficient means of production simply falls further behind when the trade barriers are removed.
Because in New Zealand some of our exports are traditional money spinners it is natural that we assume the removal of protective subsidies in our overseas buying market sectors is the priority. We should note that where a partner trading nation has natural disadvantages in that same production area they feel a need to protect their producers. For example New Zealand would like to open up the Canadian market to our dairy products. Because our climate is milder than that encountered in Canada it is hard for Canada’s dairy farmers to be competitive without the barriers and subsidies and Canada has already been forced to respond to the proposal to remove a trade barrier to dairy by coming up with an substantial subsidy for its own dairy farmers by way of compensation.
When we extend that argument we should remember that there will need to be a trade-off for every deal within the agreement we manage to set into our legislation. Tim Groser put this rather graphically when he referred to some dead rats we had to swallow on the way. He diplomatically failed to refer to the dead rats we were offering to our current trading partners, which includes trading partners outside the proposed agreement. The US as the biggest single economy in the TPPA has already made it clear that the only way they will be able to sell the agreement to the major players in their nation is to allow those powerful multinational sectors to impose their own trading conditions.
In the real economic world there is never a level playing field in that there are more sellers than buyers. A banana republic can’t sell its bananas unless it has the money to produce a superior disease free banana.
President Obama has taken considerable time even to get Congress to consider the Treaty and has only been able to bring it to the initial signing point by manipulating its structure in such a way that it wrests some control of the Pacific trading markets away from China. Because China has turned out to be one of our major trading partners and one where we currently trade with reduced tariffs, disadvantaging China can be expected to place a substantial proportion of our current trade more at risk. The other cloud on the horizon is that Hilary Clinton (a previous supporter of TPP) has been discovering that US voter’s support for the agreement is weak and as a consequence has changed her position and does not currently support the Partnership. If she then wins the Presidency, the expected two year process of pushing the required legislation through Congress and Senate would then become much more problematic.
Presumably customs and excise which currently adds over $11 billion to our GDP each year will require considerable adjustment as we remove those tariffs.
We need to be very clear that a direct consequence of completing legislation required by the terms of the Partnership will be to disadvantage the health systems for those in poorer areas of the Pacific. A spokesman from Doctors without Frontiers (MSF) Judit Rius Sanjuan, legal policy advisor at MSF has already warned that the TPPA sets a worrying precedent for future trade agreements. “The objective is to really create new monopolies for pharmaceutical companies and to strengthen and lengthen the monopolies they already have…At the end of the day, the big losers here are nations, ministers of health, and humanitarian treatment providers like MSF that work in developing countries.”
Sanjuan also goes on to remind us that MSF is a heavy user of generics and notes that the yearly cost of treating one HIV/AIDS patient has dropped from something like $10,000 in 2000 to $100 today. Under TPPA Sanjuan expects these and other treatments to revert back to being unaffordably expensive.
Tim Groser and John Key have already admitted there will be some inevitable rise in the costs of some medicines but say that, at least in the short term, local patients won’t be asked to cover such costs. However the real point is that when the generics for new drugs are banned, someone (ie the taxpayer!), has to shoulder the costs. In the poorer nations there is no pool of spare tax money to cover the costs and when the cheap alternatives are removed the patients simply go without.
We only need to look overseas to note how this might play out with a recent CEO of a major drug company being asked to explain to a public Government enquiry why one of their drugs had a 5000% profit. In the US the “Big Pharma” companies have already forced substantial extensions on the time before drug alternatives are allowed to be introduced and as a consequence in New Zealand patients are simply unable to afford the new life saving treatments. In Canada a major Drug Company (Eli Lilly) has been suing the Government in a $500 million lawsuit for loss of profits, for providing cheap alternatives for their drug Zyprexa. While it is hard for us in New Zealand to understand why a Drug Company would have such negotiating power, it is as well to remember that some of the larger companies would have budget turnovers approaching the size of New Zealand’s entire GDP.
The last minute and apparently unexpected exclusion of requirements on major tobacco trade from the wording of the Agreement flags a hint of just what a large set of multinationals can do.
NOW OVER TO THE READERS
I stress that I am trying to make sense of what is happening as a non expert. It could well be that I have forgotten some more important issues. Use the comment box at the end and have your say.