It's now emerging just how strongly Treasury supported the Canadian bid to buy a stake in Auckland International Airport.
The Government's moves to block the sale were strongly opposed by Treasury who said it would breach international agreements, scare foreign investors and damage the economy.
Papers released todayshow that Finance Minister Michael Cullen initially considered rushing specific legislation through Parliament to restrict foreign ownership of AIA.
In the end amendments were made to the overseas investment regulations which bolstered the factors ministers could take into account when considering the Canadian Pension Plan's bid for a stake in the AIA.
Treasury wrote a scathing paper on the suggestions, saying the benefits of the Government's proposed policy were "likely to be small relative to the detriments".
It advised against any intervention in the share bid on three main grounds:
* Legal - "It is almost certainly a breach of our international obligations under various multilateral agreements".
* Commercial - "Such an intervention would create considerable disruption and uncertainty. By affecting investors' property rights and reducing value it may cause investors to be sceptical ... and more wary of investing".
* Economic - "It is likely negatively impact on international investors perceptions ... increase the risk premium for investment in New Zealand with potential to raise the cost of funds for all New Zealand companies".
Dr Cullen disagreed with the arguments, saying the bid would have the effect of allowing New Zealand's main gateway to fall into foreign hands.
He did not accept Treasury's arguments that foreign investors' interests in the airport would align with local interests.
Dr Cullen told Cabinet that many countries had similar legislation restricting foreign ownership in strategic assets and sensitive land.
"Media companies, aviation and infrastructure monopolies are also common targets," he said.
Dr Cullen said he did have concerns about the legislative path breaching international agreements and told ministers to change the regulations.
Papers show the changes were made the same day and later used to block the Canadians' bid for the airport.
