A Second Bite at the Cherry
Audrey Young did us all a service when she laid out in yesterday’s Herald the origins of the Trans Pacific Partnership (TPP). She goes back to 1998 to describe how New Zealand’s keenness for a free trade agreement with the US prompted us to join a small group of Asian and Pacific countries in pressing for what eventually became a much larger group committed to free trade across the region.
As an exercise in genealogy, however, her account is sadly deficient. It does not go back far enough and it looks at only one part of the TPP’s family tree.
How many people remember something called the Multilateral Agreement on Investment (MAI)? It is scarcely recalled now because it long ago passed, unmourned, into history.
But in 1995, the MAI appeared as a draft agreement, negotiated by OECD members. As Wikipedia records “it sought to develop multilateral rules that would ensure that international investment was governed in a more systematic and uniform way between states.”
It was originally worked on in secret, but when the draft was leaked in 1997, it drew widespread criticism from civil society groups and developing countries, particularly over the perceived intention and danger that the agreement would make it difficult for governments to regulate foreign investors.
The protesters saw the agreement as a deliberate attempt to create not just a level playing field for investors (as the MAI’s proponents argued) but a free-for-all in which multinational corporations would be able to do whatever they liked and could cock a snook (whatever a snook is) at elected governments.
The strength of that global opposition, through protests, rallies and public debate, was so great that in 1998, the French government took fright and withdrew the draft. Protesters around the world heaved a sigh of relief.
But the big business interests were not done yet. Some immediately realised that there was another way to skin the cat. Instead of talking about investment, they reasoned, it might be better to talk about trade. They had recognised, in any case, that there were already in existence a number of trade agreements that contained the kind of provisions they were looking for.
The Germans, for example, unwilling to trust the judicial systems of third-world countries, had begun the practice of inserting into trade agreements with such countries provisions that disputes should be resolved in German courts, or possibly in specially constituted tribunals. And there was the precedent of the North American Free Trade Agreement (NAFTA) which had introduced in 1994 just such a provision into what looked like an ordinary free trade agreement.
It was, after all, easy to agree that free trade required that all parties should operate on a level playing field. It followed that anything that regulated or restrained the free play of market forces – and that included not just market arrangements such as cartels and price fixing but also action by governments – could be said to tilt the playing field.
What could be more natural, then, that a free trade agreement should include provisions to allow corporations to challenge individual governments if they tried to implement policies that would make life difficult for business interests? And wouldn’t the chances of winning over public opinion be much greater if those provisions could be carefully slid into what looked like a free trade agreement, since didn’t everyone think that free trade must be a good thing?
That is why, under the TPP, attempts to organise the market, through producer cooperatives like Fonterra and Zespri, or monopsonistic buying arrangements like Pharmac, are under threat. That is why a government that wanted to pursue policies in the interests of better health or protecting the environment could find itself before an international business tribunal at the behest of international companies that argued that such policies might reduce their profits.
The TPP is, in other words, a renewed attempt to succeed where the MAI failed. Globalisation has, after all, proceeded apace since 1998, and today’s voters are now much more used to the idea that business interests must always prevail – even over democratically elected governments.
It is the TPP’s dual parentage that makes it not just a free trade agreement (albeit one that delivers surprisingly few free trade benefits) but also a charter for multinational investors. The pity of it is that there is of course a pressing need for an international agreement on the rights and duties of international investors – a charter that establishes the duty to observe the laws and regulations of the host country – but the TPP takes us in the opposite direction.
It is that dual parentage, too, that explains why so many commentators on the TPP talk past each other. Those who see nothing but a free trade agreement proclaim its benefits; those who look deeper and understand the genealogy warn against the loss of democracy.
The disputants, though, are not all well-intentioned, even if misguided. The people we should really be worried about are those who understand the situation perfectly and who talk the language of free trade while deliberately seeking a much less benign outcome.
Bryan Gould
1 February 2016
Is Labour A Campaigning Party?
I had the pleasure of working with Deborah Mattinson during the 1987 and 1992 election campaigns when she undertook qualitative polling for the Labour Party. She was expert in interpreting what could be gleaned from focus groups, and those running the campaign, myself included, always listened attentively to what she had to say.
Politicians always listen carefully to what the pollsters tell them; indeed, it could argued that they are inclined to pay too much attention to poll findings, particularly in the middle of election campaigns when the apparent precision of the figures (if not of the facts behind them) can seem to be the only certain element in an uncertain world.
The problem for both politicians and pollsters, however, is that – even if the pollsters can accurately report what the voters are thinking (and they usually make a pretty good fist of that) – it is not at all clear what lessons should be drawn from that by the politicians.
The pollsters’ message may seem clear. They may report, for example, that the voters see the party as strong on issue X and weak on issue Y – but does that mean that the politicians should concentrate on issue X, to maximise their advantage, or should they make some effort to minimise or negate the handicap on issue Y? And if the latter, does that mean that they should change policy to align more closely with the voters’ perceptions or should they make a greater effort to persuade the voters of the merits of their policy on issue Y?
Much will depend on when, during the electoral cycle, the poll findings are reported. With a year or two to go, a change of policy or an increased effort to change public opinion on a given issue may make sense. But those are less sensible options during the campaign itself.
What all this means is that we should have no difficulty in accepting Deborah Mattinson’s assertions that Labour lost the last election because it was not trusted on the economy and did not do enough to change voter perceptions that the responsibility for the Global Financial Crisis should be laid at Labour’s door. The poll findings are all too clear.
The difficult part of the argument, however, is what should be Labour’s response to those factors? Should they concede management of the economy as territory inevitably held by their opponents, make no effort to counteract the false charge that they created the GFC, and concentrate instead on social and environmental issues that offer more promising terrain, which is roughly where the 2015 campaign ended up? Or do they face up to their problem (and the centrality of the economy as an issue in the minds of many voters) by either changing policy or the voters’ minds?
The pollsters’ answer to such questions is almost always the same; poll-driven politics seem to dictate that it is policy that must adapt to voters’ opinions, and not the other way round. That is why many in the Labour party will urge that, far from challenging Tory economic policy, the only path to electoral salvation lies in developing policy that looks more and more like current right-wing orthodoxy.
But that response is open to serious objection. A pale imitation will almost always be rejected in favour of the real thing. Why should the voters go for “Tory-lite” when it can only be seen as a reluctant and therefore unconvincing confirmation that no real alternative is available.
Even more seriously, where does that leave the whole thrust and purpose of left-of-centre politics? What would those who championed social justice, workers’ rights, full employment, public services have achieved if they had forsworn any attempt to change opinion? Is it not the role of those who believe that a better society is possible to challenge and change opinion and to do so by argument, debate and campaigning?
The pollsters’ message is in danger, in other words, of disabling any real attempt to bring about overdue change. And nowhere is this more urgently needed than in the management of the economy. If we want a healthier society and a more inclusive economy, a proper role for government, and a reversal of growing inequality, then we must argue for them and show how they can be achieved.
That is not a hopeless task. But it cannot be achieved if it is never attempted. The voters will never accept that what see today is not the best we can expect if they are never told anything different.
And it is not as though the time is not propitious. There is a growing body of expert and informed opinion that is clear that government can and should play a role other than simply imposing austerity, that inequality is the sign of a malfunctioning economy, that full employment is both desirable and achievable, that the deficit that really counts is not the government’s but the country’s.
How sad if Labour’s courage should fail it, so that it lags behind progressive opinion, just as a new mainstream is developing. A campaigning party has four years in which to persuade public opinion that their lives can be better than they are now. They should go to it.
Bryan Gould
27 January 2015
Eating the Seed Corn
Many people are concerned when they see New Zealand assets – land or infrastructure or businesses – sold into foreign ownership. But, we are constantly assured, that instinctive reaction is at best misplaced and at worst an expression of xenophobia. There is, we are told, no cause for concern; indeed, the reverse is true. The willingness of foreigners to pay good money for our assets should be seen as an expression of confidence in our economy and a welcome increase in the spending power available to New Zealanders.
Yet those concerns, those instincts, have considerable substance. Kiwis are naturally concerned when they see a large proportion of our national economy and productive capacity passing into foreign hands – a larger proportion, as it happens, than for almost any other developed country. They don’t need degrees in economics to understand that if the ownership of income-bearing assets changes, so too does the right to the income. Assets that used to benefit New Zealand owners now produce income for foreign owners – and the repatriation of that income overseas imposes a further burden on our already overstretched balance of payments.
The old analogy of selling off the family silver and then living off the proceeds is not easily dismissed. And it is not only the income stream that we lose; we also give up the rights of ownership and control over more and more of our economy, so that decisions of great importance to us are made in foreign boardrooms far away by people who know little and care less about our interests.
The issue is, in other words, not as straightforward as it is said to be. The first step towards a clearer understanding is to differentiate between two different types of inward foreign investment. An investment from overseas in a new factory would at least provide some new employment and tax revenue, even if the profits were sent back to the foreign owners. But where the foreign investment is to purchase existing assets, it has little to commend it, except to the vendors (who might receive a higher price than they would otherwise have done).
There may of course be cases where foreign ownership is a price we have to pay to keep an enterprise going; but even then, foreign ownership, especially where the buyers are overseas (and often Australian) private equity partnerships, is often just a stepping stone to asset-stripping, followed by a quick departure with the loot.
The reality, which is hardly ever spelt out, is that selling off our assets is a sign of weakness and not strength. We do it because we need to; the proceeds are needed to pay for the imports which we otherwise could not afford. It is hard to imagine a more classic definition of a rake’s progress.
Many people will intuitively understand that selling our assets is minus and not a plus, but there is a further downside that may escape the attention of even the well-informed.
The sale of our assets to foreign owners inevitably brings an increased inward flow of foreign capital – but without a corresponding increase in the volume of domestic production, so that the inward flow could be expected to have some (usually adverse) impact on issues like the inflation rate (though this is hardly an issue at present).
But the inflow of foreign capital will also mean an increased demand for New Zealand dollars so that the purchase price for our assets can be paid to the New Zealand vendors. That increased demand will in turn mean, as is true of any commodity for which there is an increased demand, a rise in the value of the New Zealand dollar.
Is this a bad thing? Ask New Zealand manufacturers and exporters. Ask the Reserve Bank. The answer is that a higher dollar hands a price advantage to foreign manufacturers and importers, reduces market share for New Zealand industry both at home and overseas, and – as our dairy farmers will testify – makes exporting more difficult and less profitable. And the net result is a worsening balance of trade.
That is why the recent fall in the New Zealand dollar has been welcomed as helping New Zealand exporters and manufacturers, and also why the Reserve Bank, which might normally want to raise interest rates in order to cool the housing market, has refrained from doing so – for fear that higher interest rates would push the New Zealand dollar higher and choke off the slight recovery in our productive sector.
It is the role of our high interest rates in pushing up the exchange rate and handicapping our producers that usually attracts all the attention. But it is less well understood that there is a further culprit – the inflow of foreign capital as we sell off more and more of our assets.
We have created for ourselves, in other words, a vicious circle. We sell assets because the high dollar means that we have a perennial trade gap and we need to bridge that gap; but selling assets helps to drive the dollar still higher, the trade gap widens further as a result, so we have to sell yet more assets. We are paying the price for failing to face our real problems.
Bryan Gould
24 January 2016
Covering All Bases
It is one of the peculiarities of a Westminster-style constitution that the power to conclude international treaties rests exclusively with the executive – in our case, with the Cabinet. The Trans Pacific Partnership (TPP) is no exception. While a National Interest Analysis will be prepared by the Ministry of Foreign Affairs and Trade, and will most likely be considered by a Select Committee, our elected representatives can – if the government wishes – be totally ignored.
This constitutes not only a potentially damaging side-lining of parliament but also a denial of democracy itself; it continues a process that has been throughout characterised by secrecy and the contemptuous refusal to take any account of public opinion.
Yet it is clear that the TPP is not just a run-of-the-mill trade agreement but a major concession of the powers of self-government to large, international (mainly US) corporations. The treaty provides those corporations with the power to over-ride elected governments and to re-write the laws of this country in their own interests. There can be no set of issues that should more importantly require the consent of parliament and people.
It is not as though these worrying downsides are to be offset by major trade gains. Our negotiators, having boasted of the improved access we would have for our dairy products, stood by impotently when the crunch came and our interests were almost totally ignored by the big boys. As Joseph Stiglitz, the Nobel Prize-winning economist, pointed out in these pages, the TPP is just about the worst “trade agreement” that can be imagined.
It is little wonder then that those who have taken the trouble to understand the issues and who are concerned at their implications should have looked for other aspects of our constitution that might come to their aid and ensure that the public does not sleep-walk into giving up its powers of self-government for no good reason.
A petition has accordingly been drawn up and signatures invited; the petition is to be presented, not to parliament, since that would be pointless, but to the Governor General. On taking his oath of office, Sir Jerry Mateparae undertook to protect the proper government of this country; the petition invites the Governor General to use his constitutional powers to do just that – to act as a constitutional guardian and to refuse assent to legislation that fails to uphold the rule of law and the principles of responsible government.
On the face of it, the petition would seem to stand little chance of success. Governors General are normally careful to avoid becoming involved in controversial issues and will leave political questions to the government of the day. But there are precedents, in other Commonwealth countries – Canada and Australia – for Heads of State intervening in matters that were seen to be of sufficient importance.
It is a fair bet that the organisers of the petition had no realistic expectation that Sir Jerry would respond positively; all they were hoping for, no doubt, was that he would agree at least to receive the petition and that the resultant publicity would help their cause in some small way.
But Sir Jerry did not respond positively – indeed, he did not respond at all; he may not even be aware of the petition’s existence. The letter to him from the organisers, asking him to receive the petition, was replied to by his Official Secretary – one Gregory Baughen. Mr Baughen made it clear that he would not even ask the Governor General to receive the petition, let alone act on it.
Who is Gregory Baughen? Until a year ago, he was a senior staff member of the Department of Prime Minister and Cabinet, and the head of the National Assessments Bureau, one of the three main intelligence organisations. He was, in other words, a senior member of the executive with special responsibility for a range of security and intelligence matters.
It is this official who has now been transferred across to a quite different, and supposedly independent, part of our constitution. The Governor General’s office is, in principle, above politics, but it now seems to be managed by someone who is best regarded as a representative of the executive. The nature of Mr Baughen’s appointment and his refusal to allow the Governor General even to receive a petition that is arguably on a matter of national (rather than party political) significance suggests that the authorities are anxious to cover all bases, and to take no chances.
Not content with conducting negotiations in secret, and with excluding any consideration of public opinion, the attempt has been made to close down even a scintilla of publicity that might indicate a degree of public concern. Even the public signing of the TPP in New Zealand on 4 February is being so carefully managed that we know about it only because the news was leaked in Chile.
Democracy is necessarily at times a messy and discomfiting business. But when such care is taken to deny it, we should be truly worried.
Bryan Gould
13 January 2015
Is All Fair in Love and War – and Politics?
Many people will agree with the old saying that “all’s fair in love and war”. Others, however, would be inclined to add “and politics” – a view that certainly seems to be taken by some politicians.
I have never accepted the notion that the ordinary principles of decent behaviour should for some reason be suspended when it comes to politics. Someone who lies and cheats in politics is no less a liar and a cheat. Indeed, such behaviour in politics is arguably an even greater offence than it would be elsewhere, since it is brazenly committed by those who owe a duty of trustworthiness to the public, and its significance is likely to have much wider connotations.
There is, nevertheless, no shortage of politicians ready to defy the normal conventions and to behave irresponsibly and dishonestly for the sake of personal or political advantage. The latest recruit – and on a massive scale – to these disreputable ranks is the US Republican presidential hopeful, Donald Trump.
Mr Trump is a colourful character, and nothing wrong with that – though one might have thought that his deliberate cultivation of an image more appropriate to a fairground might have been a disadvantage.
But where he has distinguished himself – if that is the right phrase – is in his readiness to make snap judgments in the most extreme terms on issues that surely require more careful consideration.
Donald Trump seems to have calculated that the only thing that matters is that he should stay in the headlines. He may insult women and virtually every kind of foreigner; he may propose outlandish “solutions” to complex problems, such as building a wall across the whole US-Mexico border to keep out Mexican “rapist and murderers” or banning entry to the US of anyone who could be described as or claiming to be “Muslim”; but his concern is not to make sense but to make news.
This leaves us with a dilemma. Is he to be taken seriously, or is he just a buffoon? The opinion polls suggest, for the time being at least, that he needs to be taken seriously. But that raises a different question. Does he do and say outrageous things in order to capture the headlines – is he, in other words, just a demagogue prepared to say anything – or, even more worryingly, does he really believe what he says?
It is a measure of how self-absorbed a large chunk of the American public is, and of how little they are aware of the world beyond their borders, that they seem completely unaware of the dire picture painted of their public life by the possibility that a Donald Trump could be elected to the Presidency. The rest of the world can only look on in disbelief at the prospect of the free world being led by such an apparently irresponsible loose cannon.
Before we become too self-righteous, however, we should acknowledge that our own public life is not immune from political leaders prepared to act – even if on a substantially smaller stage than Donald Trump’s – in a way that falls short of the standards we might reasonably expect. We might, sadly, not be overly surprised that this is the case – but what is perhaps surprising, and certainly disappointing, is that when such a lapse is brought to the attention of the public, and even more so of the media, the consequences for the wrongdoer are minimal.
This certainly seems to have been the case with the return to Cabinet of Judith Collins. The response has been, in general, a tolerably warm welcome for the return of someone seen as a repentant sinner. The “political comeback of the year” has been portrayed as a matter for congratulation. Her supposedly admirable qualities as a politician – exemplified by her cultivation of the sobriquet “Crusher” – have been celebrated. There is even renewed talk of the possibilities of her ascending to even higher office.
This is surprising, not just because of Judith Collins’ manifest errors of judgment and policy as a Minister (just think of Serco’s contract to run Mt Eden prison), but also because we know quite a lot about her approach to politics. Most people will not have read Dirty Politics but the journalists certainly will have done. We don’t need to rely on hearsay or reportage to judge Judith Collins, because we can turn (for good or ill) to the words she herself actually used in e-mail correspondence with Cameron Slater and others.
No one reading that correspondence can be in any doubt about the distorted view of politics, and political life, held by the returning Cabinet Minister. A political career is, according to this view, not a matter of principle and service, but of bitter and vindictive in-fighting, requiring dirty tricks, ambushes and plotting, all expressed in the language of the gutter.
Before we cast stones at other people’s glasshouses, should we not expect those who report on our own public life to provide us with the whole picture?
Bryan Gould
11 December 2015