Editorial: Fairness key to free trade agreements

John Key. Photo / Getty Images

Opinion

Free trade agreements vary in value. Some are done for political or strategic appearances rather than a comprehensive removal of business barriers. The risk of ending up with a cosmetic deal is much less when it involves not just two countries of different power but many, all with a stake in making its terms fair.

That is the kind of deal under discussion in the United States-New Zealand Partnership Forum that opened in Christchurch yesterday. While the forum's interests range wide, a trade pact called the Trans-Pacific Partnership is its prime focus.

The TPP already has four signatories: Brunei, Chile, Singapore and New Zealand. The US, China, Australia and Vietnam are interested. So was Japan when it hosted an Apec summit in November where TPP was on the agenda. There New Zealand made an important stand. Welcome as Japan would be, Prime Minister John Key insisted the terms of the TPP should not be diluted to accommodate Japan's protectionist instincts.

The same message was given to the Americans yesterday. Trade Minister Tim Groser said the negotiators of the TPP wanted a "gold standard" free trade agreement. He said, "Does everyone understand what this means?"

Signatories to the TPP agree to reduce all tariffs to zero within 10 years. That is a tall order. Apec once set itself the same target and quickly forgot it. But Australia and New Zealand have a "gold standard" agreement in Mr Groser's terms and it is not too much to expect prospective Pacific partners to remove barriers to goods and services, if not labour, over a decade.

Every extension of free trade faces a scaremongering campaign, sometimes heard in unlikely places. The New Zealand Nurses Organisation recently worried that the TPP posed potential threats to the public health system. Presumably it was referring to American pharmaceutical companies' opposition to the Pharmac system of government purchasing. That is an argument New Zealand should win. Pharmac does not discriminate against any nation's suppliers. It seeks the best value for taxpayers' money.

Non-discrimination is the driving principle of all free trade agreements, a fact that inveterate opponents of free trade constantly ignore. They often claim that agreements will undermine the country's laws governing environmental standards, labour relations and much else. But no foreign company would be able to challenge those laws under World Trade Organisation rules unless it could show the law was being used to discriminate against competition from outside the country.

The real reason these people oppose free trade agreements is that they want the country to be able to discriminate against outside competition. They believe in protecting domestic industry. That is their economic creed and they are entitled to it. But they should make their position clear when they are raising fear about what a free trade agreement might mean.

They are fond of warning that a free trade agreement would give foreign companies the power to enforce rights against our Government in specially constituted international tribunals. If only free trade agreements were that powerful. It has taken decades for New Zealand apple growers to overcome an Australian quarantine ruling that was a blatant trade barrier. They would never have succeeded without recourse to WTO tribunals and Australia could have appealed forever.

Governments remain sovereign. Free trade agreements depend on honour, not enforcement. That is all the more reason to reserve them for partners that want them, need them and can be trusted to keep them.