The 'Free Trade' horse is already bolting on residential property sales
On Tuesday David Parker wrote in the NZ Herald that the government's signing of the South Korea Free Trade Agreement creates risks for NZ. Yesterday the Labour Party has withheld support until certain guarantees are made. However the specific risk of losing the right to legislate for New Zealanders is already in chain in residential property.
National's “free trade” deals - South Korea, Taiwan (and Parker says he has been told the TPPA is also included) – have wide ramifications. Purchasers headquartered in “free trade” countries (such as South Korea) who feel their speculative business could be damaged by new limits on overseas buyers will be at liberty to take an Investor States Dispute Tribunal (ISDS) case. A single buyer may not have the resources to do this but a commercial property owner wanting to buy up blocks of apartments or multiple houses might consider it. But it gets worse than that. These new trade agreements contain not only ISDS options they also give governments the right to take claims against New Zealand. There would be nothing to stop the government of a free trade country advancing the interests of its property investors and using these provisions.
In contrast, and ironically, given the recent heated debate on trying to derive data where no reliable source exists, the NZ-China free trade agreement has until now given protections to NZ residential land and property (as well as agricultural land) by allowing the government to create new restrictions on non-resident overseas buyers. These rights were reciprocal, and Parker explains that under the FTA China has introduced bans on non-residents, including New Zealanders, buying houses in their main cities and Hong Kong has added hefty stamp duties for overseas buyers.
However the "most favoured nation" (MFN) status in the China FTA requires NZ to treat China no less favourably than other countries with whom it subsequently might sign FTAs and so the new rules in the South Korea agreement will apply there as well.
This runs right to the heart of the reason why the National government are being so tardy on creating a comprehensive register of overseas buyers. The FTAs currently underway would allow for unlimited purchasing of NZ residential property by overseas interests forever.Parker argued that it might be difficult to prove a loss sufficient to create a successful case. However the National government has recently compensated a Saudi Arabian businessman for failing to legislate in his favour, even without a free trade deal, so an environment where companies can seek compensation for perceived losses of profit by government action is becoming normalised.
ISDS are the principal cause of concern for NZ as trade agreements come into force and international commercial lawyer tribunals are given preference over the courts of local jurisdiction and are given astonishing power to make awards against local democratically agreed legislation. In fact just threatening to take a case would have a chilling effect on a government's willingness to regulate (and New Zealand voters would likely remain in the dark about such threats). Finally it appears that aggrieved speculators could in fact be located anywhere in the world. For example, when Phillip Morris wanted to take the Australian government to a tribunal to claim for losses caused by plain cigarette packaging legislation, it simply moved its ownership of its Australian operations to Hong Kong - a country with which Australia had an existing FTA – in order to legitimise its claim.
New Zealand Herald David Parker: Nats bet house on trade deals Tuesday Jul 21, 2015 http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11484069
NZ Herald NZ's Saudi farm designed to 'compensate' for live sheep ban: Nicholas Jones Tuesday May 26, 2015 http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11455035
NZ hands tied on foreign home buyers under Korea FTA
Vernon Small May 24 2015