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PM’s Claim Of $3b Benefits From TPPA Without Evidence

CTU Media Release

5 December 2012

PM’s Claim Of $3b Benefits From TPPA Completely Without Evidence

A claim by the Prime Minister yesterday that “a Trans-Pacific Partnership free trade agreement could boost New Zealand's economy by more than $3 billion a year” is completely without any evidence says CTU Economist Bill Rosenberg.

“It should be an embarrassment to the Minister of Trade, Tim Groser, who is on record as saying he was a “deep sceptic” as to such attempts to quantify the benefits of agreements. He noted that his Australian counterpart, Dr Craig Emerson, who has a PhD in economics from the ANU, was equally sceptical.”

“The only modelling of a possible Trans Pacific Partnership Agreement is one by the Hawaii based East-West Centre in October 2011. Its econometric model – of the type Mr Groser and Dr Emerson were deeply sceptical about – calculated that the trade benefits would be only US$300m (about NZ$375m) a year unless Japan and Korea joined. The largest calculated benefit would be if there was a full agreement covering the whole of the Pacific region including China and ASEAN, and even then the benefits were only US$1.7b (about NZ$2.1b). Negotiators are far from reaching even a limited agreement, let alone the whole Pacific region”, said Rosenberg. “The current proposals include ones that China for example would never join because it attacks their state owned companies and has intellectual property provisions it would never agree to.”

“But even those figures, which fall far short of the PM’s claim, are misleading on their own because they only look at goods and services trade.”

“For example, they do not include the costs of the extreme intellectual property claims the US is making. If Pharmac, which estimates it saved the country $937m in 2010 alone (and rising) was hamstrung by the big pharmaceutical companies as the US wants, and lost even half of these gains, the net benefits from the current grouping would be negative. Just one successful claim against the government by an overseas investor under the investment dispute procedure the government appears to be happy to accept could cost tens or hundreds of millions more.”

“If corporations are given the right in other proposals in the TPPA to influence our laws and regulations so that they are light-handed or “business-friendly”, we could find ourselves with further rounds of hugely expensive regulatory failure. Consider the leaky building disaster which is the result of “light-handed” regulation in the building industry and estimated to have cost the country between $11b and $33b – a similar magnitude to the Christchurch earthquake – and the crash of the weakly regulated finance company sector, which is estimated to cost the taxpayer a net $1b, and investors much more.”

Rosenberg says “in addition, even the goods and services calculations depend on assumptions that are open to debate – such as that the US will open its agricultural markets to New Zealand dairy and meat imports. Many observers, including supporters of the TPPA, doubt this will happen. Calculations on services are fraught with problems. It is interesting though, that the modelling shows a fall in New Zealand mining exports – one of the centre pieces of the Government’s economic policies – and further falls in textiles, clothing and footwear exports.”

An international group of trade unionists will be in Auckland from today until Sunday to observe the negotiations – to the extent they can be observed behind closed doors. They share deep concerns at the effects of proposals in the negotiations on decent jobs, labour rights, the impact of greatly extended investor powers, the effect on medicine prices, the loss of local preferences under government procurement, and many other aspects. They will be speaking to negotiators and taking part in activities being organised by allies in other organisations.


The Prime Minister’s statement is reported at
TPP worth $3 billion a year: Key
The Trade Minister’s speech referred to is
The Trans-Pacific Partnership: State of Play, 15 June 2011


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