Dialogue: Proposed free-trade agreement with Singapore defies Govt's commitment to nation-building

By JANE KELSEY*

If the Government proposed a domestic law along the lines of the free-trade agreement it has been negotiating with Singapore since last December, all hell would have broken loose by now.

Yet it is only in the past fortnight that media commentators and others have started to appreciate the agreement's significance.

Secrecy has quarantined the negotiations from effective public or parliamentary scrutiny. Despite this, a number of clues have emerged. These suggest that the Government is about to sign an agreement that locks in many of the free-market policies of the past 16 years.

These commitments will make it difficult, and in some cases impossible, to deliver on the Government's core commitments to regional economic development, nation-building in services like education and broadcasting, settlement of Treaty of Waitangi claims, and "closing the gaps."

For Labour, this reflects the intrinsic contradiction of its policies that seek to embrace both globalisation and nation-building. Support from the Alliance would mean abandoning that party's fundamental principles and a major point of demarcation with Labour, leaving the Greens to carry the banner of economic nationalism.

The agreement will basically require New Zealand's central and local government to treat Singaporean products, service providers and investors as well as, or better than, our own. In theory, Singapore will promise to do the same.

That seems doubtful, however, given Singapore's strong state oversight of economic and social life. The playing field will be far from level, especially given the huge disparities of economic power between investors and producers in the two countries.

Ministers and officials discount such concerns because both countries are virtually tariff-free and operate liberal economic regimes.

Why, then, put so much effort into securing an agreement? First, to lock in the levels of zero tariffs, market-driven service regimes, and the largely unregulated foreign investment regime. Secondly, to establish a model agreement to cover a broader band of countries, notably Australia and Asean.

The promise not to discriminate in favour of New Zealand interests is hard to reconcile with the Government's much-heralded commitment to regional economic development, which seeks to reintegrate business, investment, jobs and local communities.

Indeed, even though the options for regional development will be fettered by this agreement, local government has not been "consulted" until last week, and at its request.

That inconsistency is highlighted by the proposal to exempt Singapore from the tariff freeze on textiles, clothing and footwear, which the Government legislated several months ago to support the struggling domestic industry.

Negotiators say only a small quantity of such goods is imported from Singapore, so it will make no difference. But they have also agreed to lower local-content requirements than apply to Australia under CER. That and slack enforcement mean that Singapore will be used as the back door for products made elsewhere, just as it was for stolen second-hand Japanese imported cars.

Even a small increase in tariff-free clothing imports could tip the balance for the domestic industry. Given that most of its workers are Maori and Pacific Islands women, located in the regions, it is hardly a contribution to economic development and closing the gaps.

Many positive initiatives for closing the gaps, such as the recent privileges for Maori in the auction of radio frequencies, are also likely to breach the commitment not to discriminate. The Government has proposed a clause that would reserve its ability to implement its Treaty of Waitangi obligations, but recent reports suggest even that is in jeopardy because Singapore wants to exempt its investors from the impact of any treaty settlements.

Singapore has also played hardball on labour standards. Despite the Government's stance at the World Trade Organisation ministerial meeting in Seattle last November that core labour and environmental standards should be written into international trade agreements, Singapore has rejected such demands.

That's not surprising, given that many of its exports are produced under conditions that breach core International Labour Organisation labour codes, especially goods produced within offshore free-trade zones.

The real gains for Singapore lie in the areas of services and investment, raising further contradictions with the Government's domestic policies.

Without the text, it is impossible to identify the range of public services that will be affected. We do know that it will extend present WTO commitments not to discriminate against foreign tertiary education providers, thereby limiting the prospects for rebuilding a strong public education system.

Officials say that simply reflects the present education regime. But the Government asked a tertiary education advisory commission to advise it on how to replace the market model of education with one committed to nation-building.

Another potential casualty is the much-heralded, but yet to be delivered, introduction of local-content broadcasting quotas. Both the WTO services agreement and CER already prohibit the introduction of such quotas, without compensation. That problem will be compounded if similar promises are reiterated in this agreement.

The Multilateral Agreement on Investments-style investment commitments are also expected to lock the present regime into an enforceable international agreement for the first time. That means a threshold value of $50 million before foreign investors need to apply for approval and the absence of any national interest criteria. Hence, the unique restriction on foreign ownership of fisheries quotas that allowed the Government to reject recent foreign bids for Sealord could not be extended to other natural resources, public utilities or strategic industries.

A further influx of Singaporean investments in property and existing businesses will also fuel the account deficit of 104 per cent of gross domestic product and a foreign debt of 106 per cent.

Agreements like these make a mockery of democracy and sovereignty. It is not enough to consult people without telling them the content, or say that they can make submissions to the select committee after the agreement is signed.

By then, the Government has committed itself irrevocably, and the cabinet retains the final say. Labour has to recognise that it can't have global free markets and nation-building. The Alliance has to remember what it stands for.

* Jane Kelsey lectures in law at the University of Auckland.