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Keep investment provisions out of trade agreements

1st September 2011

Keep investment provisions out of trade agreements

"The government must keep investment provisions out of the Trans-Pacific Partnership Agreement and the Free Trade Agreement with Hong Kong" said John Ring, Democrats for Social Credit spokesperson on Foreign Affairs.

“The next round of negotiations for the Trans Pacific partnership Agreement between New Zealand, Australia, the USA, Chile, Peru, Vietnam, Brunei, Singapore, and Malaysia begins on the sixth of this month. The USA will want it to include investment provisions, as they have done in trade agreements since 1980.

“That includes a clause specifying that transfers of capital between the countries should be done "freely and without delay." Most countries in the negotiations appear to be opposed to that clause, but it is possible the USA might demand it.

“This would probably prevent the use of a financial transaction tax, which is gaining favour internationally, and controls on capital flows, which Malaysia used to shield itself against the Asian economic crisis of the late 1990s, and which the IMF now says should be used by developing countries in that type of situation.

“The USA will probably also want the agreement to permit companies to sue governments in international tribunals.

“These tribunals do not follow the principle of precedent, so unlike in the British legal tradition, tribunals are not required to make rulings consistent with those of previous tribunals. Thus it is hard to predict the outcomes of possible lawsuits there.

“Currently Philip Morris (a US tobacco company) is taking a case against the Australian government under an Australia/ Hong Kong treaty, and a case against Uruguay under a treaty between Uruguay and Switzerland, claiming that laws relating to tobacco unfairly discriminate against it.

“Hong Kong is one of the very few places with which New Zealand already has an investment agreement permitting this type of action, and we are currently in negotiations with Hong Kong for a trade treaty.

“It's not clear what New Zealand companies would actually benefit from the existing investment agreement with Hong Kong. New Zealand's investment there as of June 2010* was $634 million, but it is difficult to think of New Zealand-owned companies that would invest that much there, so it is probably mainly foreign companies who own New Zealand companies investing there, and they are covered by investment agreements between the two countries.

“In any case, the use of international tribunals is expensive, and only the very largest of companies could afford it. Most New Zealand companies are too small to benefit, so in effect this type of provision discriminates against our own companies.

“We can withdraw from the existing investment agreement with Hong Kong simply by asking to, but the withdrawal would take place fifteen years later. That is what the government should do, but there is a danger that instead they may build the existing agreement into the new trade agreement, as the last Labour government did in their free trade agreement with China.

"New Zealand would be better off not signing any trade agreements that have investment provisions in them," said Mr Ring.

*Statistics New Zealand(2010) Global New Zealand: Year ended June 2010, Wellington: Statistics New Zealand


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