National slow to learn new trade lessons post TPPA

November 30, 2016 Barry Coates

Yesterday, the Minister for Trade misused economic data in order to try to make the case for more so-called ‘trade agreements’ like the TPPA which are actually deregulatory straitjackets in disguise.

In welcoming a Ministry of Foreign Affairs and Trade commissioned report on non-tariff barriers, Todd McClay called Government laws and policies “unfair obstacles” that cost New Zealand business US$5.9 billion per year. He is committing New Zealand to be a “big driver” of work to deregulate other economies.

The Minister’s overall approach is wrong on several counts.

Firstly, he has misinterpreted the research. The NZIER study is a theoretical analysis of the costs of all forms of regulation (non-tariff measures) that can have an effect on trade. It does not identify trade barriers. Most regulations are neither unfair nor obstacles. They are legitimate regulations that have a benefit for society, such as biosecurity rules, food safety standards, environmental protection, animal welfare standards, and workers’ rights. Removing most of these laws and regulations is not for the benefit of society as a whole, a point made in the NZIER report, but ignored by the Minister for Trade.

Secondly, McClay’s statements reveal the gaping hole at the heart of National’s Business Growth Agenda.

The Trade Minister points out that a group has been set up to get rid of non-tariff barriers. But any trade deal focused on removing non-tariff measures would also result in stripping out regulations here in New Zealand. This extremist approach that regards any regulation as a target is not good for New Zealand business, and certainly not good for most food exporters who benefit from New Zealand’s clean green reputation.

The future for New Zealand farming is to move from low cost, lightly regulated production of agricultural commodities towards high value products that assure customers of our high quality standards of food production and processing, capturing value from the growing numbers of consumers who care about sustainability, food quality, and high standards of animal welfare. Government regulation is crucial. It is not a barrier to trade.

The Business Growth Agenda is failing to recognise this pathway to higher value for New Zealand’s exports. It is one of the reasons New Zealand’s exports are relatively flat as a percentage of GDP, rather than rising to meet the Government’s own target of exports as 40% of GDP by 2025.

Thirdly, the approach to stripping out all forms of regulation shows the emptiness of the Minister’s assurances that countries have the right to regulate in the public interest under treaties like the TPPA. For National, any regulation is a target, irrespective of its public good. This is the way that the advantages for investors under trade treaties are allowed to trump democratically-agreed policies that are in the public interest.

The Minister for Trade seems to have learned nothing from the rejection of the TPPA and the increasing concern from governments, business, and civil society over the rights of government to regulate in the public interest.

Reducing our regulation would be the inevitable result of trying to reduce regulation in other countries. This is the approach that has led to a deregulated economy with the risks of further disasters like Pike River, finance company collapses, and leaky buildings.

If the Minister wants to strip out the rights of other governments to pass laws and regulations, what will be offered up in exchange here in New Zealand? Biosecurity? Freshwater standards? Food safety?

This is ideological nonsense that regards any form of regulation as a barrier to be removed.

Todd McClay promised a ‘refresh’ of trade policy in the wake of the rejection of the TPPA by more than half of the New Zealand public. This is not a refresh. This shows that National has learned nothing from the TPPA debacle.

McClay continues the extreme, ideologically-driven approach that any regulation is a cost to business and should be removed. He also shows the continued exaggeration of the benefits of these treaties using misleading economic analysis — a key issue in the analysis undertaken for MFAT to support the TPPA, critiqued in peer reviewed research, Economics of the TPPA.

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