Blundering on towards free trade…

John Key has expressed some frustration that world leaders are not as enthusiastic as he is to complete the so-called Doha round of free trade talks. At the APEC meeting in Peru our new Prime Minister expressed disappointment at the draft of the final communiqué. He wanted it toughened up to push free trade harder before the meeting finished.

It’s not surprising other countries are wary of free trade and highly ironic that New Zealand is the example most likely to convince them to be more cautious.

The effect here of our unilateral decision to reduce tariff barriers and subsidies has been to downgrade and stifle our local industries with floods of cheap imports. We are still losing a steady stream of manufacturing jobs with the enormous social costs ignored by politicians. We are the example of what not to do.

But New Zealand blunders on. We now want to negotiate free trade agreements but only after we have given away all our bargaining chips. Our latest negotiations will be with the so-called P4 countries – New Zealand, Singapore, Brunei and Chile. The US decided in September to join with Australia and Peru also now keen. Others may join before negotiations begin in March but whoever is there it will be the US which dominates. So what could we expect from an expanded P4 agreement?

Canterbury University’s Bill Rosenburg has analysed the free trade agreement between the US and Australia and points to the 2008 US annual report on “Foreign Trade Barriers” which lists what the US regards as New Zealand “trade barriers” that it wants modified or removed. So what can we expect?

For a start the US doesn’t like our Pharmac which bulk buys drugs and saves New Zealand hundreds of millions every year. This is money American drug companies believe should be in their pockets. The US will also argue for time extensions for medicine patents, again to bolster the profits of their pharmaceutical giants. In other words we are likely to face paying more for medicine.

Our schools, universities will face greater costs through paying more for copyright if the US has its way. This is a large cost to Australia in its free trade agreement with the US and is designed to increase income for American entertainment, publishing and IT corporations.

Our investment rules and regulations will come under serious and determined attack despite already being among the weakest in the world. The US will want their corporate investors to be able to buy strategic infrastructure such as our major ports and airports as well as less strategic assets. They will want unfettered access to purchase land and opportunities to take advantage of commercialisation of our public services such as health and education. Labour government ministers have previously requested the European Union to open up the public education systems of its member countries to foreign investment under GATS (The General Agreement on Trade in Services) so we don’t have much of a leg to stand on to prevent the US demanding the same from New Zealand.

The US will also argue for measures to protect their investments in New Zealand by opening up our government to compensation claims from American corporations. For example if New Zealand were to pass government regulation in areas such as tax laws or protection of the environment which result in decreased profits for the US investor then they would be able to claim compensation. Decisions on compensation are made by secretive trade tribunals at the World Trade Organisation in Geneva. Measures such as this are becoming a regular feature of trade and investment agreements. There are already dozens of examples when corporations have gained hundreds of millions in compensation from hapless governments.

A local example might be if a US company purchased a timber processing plant and the New Zealand government later regulates to clean up the local river from toxic chemicals released by the plant. The US investor could then seek compensation and we would be powerless to prevent it.

This is just one of the many ways free trade extends the powers of multinational corporations and decreases the powers of elected governments.

We would gain little in return. The US farming lobby is politically powerful and well resourced. It will vehemently resist allowing New Zealand agricultural products into its markets to undermine its own agribusinesses and family farmers.

Last year the Australians achieved agricultural access only many years into the distant future when they negotiated their own free-trade agreement with the US and for us the mirage will be no closer.

We have already sacrificed so much on the free trade altar with so little in return. In blindly pursuing free trade John Key is as blinkered as our previous government.