Editorial: Fair basis of TPP removes cause of fear

British Labour MP Bryan Gould. Photo / Alan Gibson

When the noise level rises around an international trade negotiation it can be a sign of progress. A 12th round of talks in the United States this week on a proposed Trans Pacific Partnership has been accompanied by some alarmed comment in this country and no doubt others.

Critics here, 100 of them, have put their names to an open letter warning that the TPP might enable foreign investors to sue governments that break the terms of the treaty. The 100 include a retired judge, a number of Green MPs and legal academics such as Auckland University professor Jane Kelsey, who follows trade negotiations closely and raised the alarm.

One signatory, former British Labour MP Bryan Gould, summarised their concern in the Herald on Wednesday. "It is," he wrote, "the prospect that our Government is about to trade away - in secret - an important part of our powers of self-government."

He feared a future government could be "stopped" from doing things it was elected to do on issues such as the environment, health and safety and many other policies under threat of a crippling law suit from foreign companies "given far more extensive rights against our government than any New Zealand company would ever have".

The Australian Government appears to share their concern. But it is not unusual, or unreasonable, for any commercial investor to have a claim on a state when a change of public policy undermines the value of its investment. The only difference under the TPP would appear to be that the investor could appeal to an international arbitrator, not the New Zealand courts. This might explain the number of lawyers who have signed Professor Kelsey's letter.

They, and we, have sufficient faith in New Zealand's courts to believe a foreign company would get as fair compensation from them as a domestic investor could expect. But that is not the issue. If domestic courts were to be the arbitrator of the TPP, we would need to have the same faith in the courts of Australia, Singapore, Brunei, Chile, Malaysia, Vietnam, Peru and the United States - plus Canada and Mexico, who want to join the negotiations too.

It is not unknown for multilateral trade agreements to set up their own arbitration panels, the World Trade Organisation being the prime example. The difference may be that WTO panels hear disputes between governments acting for commercial interests whereas the TPP contemplates companies taking action directly. The implications warrant careful consideration but should not be overstated. Trade agreements are not threats to national sovereignty. There is ultimately no power to enforce them.

They are made in good faith, which is why the TPP is taking so long. It was initiated by reliable free trading nations, New Zealand among them, and was adopted by the United States when the Obama Administration turned its main interest from Europe to Asia. The US may have strategic as well as economic interests in a trade agreement that excludes China for the time being, but the TPP's originators remain equally determined that any pact will be a serious commitment to open markets. They have not encouraged interest from Japan.

For New Zealand, as John Key suggested last week, no deal would be better than a cosmetic one. New Zealand will insist on access and equal treatment for agriculture, the US wants fair protection of patents and copyright in pharmaceuticals and the like.

Every participant presents a problem but all can be resolved on the principle of non-discrimination against partners' products. Nations observing that rule have no reason to fear a joint panel of justice.