Labour lurches to the extreme left over TPP

John Key must be sorely tempted to put the Trans-Pacific Partnership (TPP) to a formal ratification vote in parliament. If the prime minister did so, he would split the ridiculous rabble that sits across from him.

Two former Labour leaders, Phil Goff and David Shearer, would cross the floor to back the deal, along with Napier MP Stuart Nash, Te Tai Tokerau MP Kelvin Davis and Tāmaki Makaurau MP Peeni Henare, party insiders say. They alone would inherit Peter Fraser, Norman Kirk, David Lange and Helen Clark’s liberal-internationalist mantle.

Crowning achievement
The TPP is the crowning achievement of the Key and Clark governments, and also Jenny Shipley’s.

For 20 years, New Zealand’s number one foreign policy goal has been a free-trade agreement (FTA) with the world’s largest economy, the US. If the TPP is ratified – which remains a big if – that NZ-US FTA has now been achieved, and FTAs with the world’s third and 11th largest economies, Japan and Canada, both hitherto highly protectionist, have been thrown into the bargain.

As a diplomatic achievement, that exceeds what most would realistically have expected to see in their lifetimes. And despite the claims of the Office of the US Trade Representative, it is a deal made in New Zealand.

First steps
As a young Beehive staffer, I sat in on meetings when then trade minister Lockwood Smith plotted with his senior officials Alastair Bisley, Marteen Wevers and Tim Groser, the opposition trade spokesman Mike Moore and his Beehive private secretary Simon Tucker about how to lure the US into FTA negotiations.

The idea evolved of bundling together genuine free-traders within the Asia Pacific Economic Co-operation (Apec) region to provide a more attractive group for the US to deal with. All involved will no doubt now claim exclusive credit for the original idea – and fair enough; victory has a thousand fathers. But of the senior group only Mr Groser was there all the way through, along with David Walker, New Zealand’s lead TPP negotiator, Mr Tucker, now High Commissioner to Canada and of course Mr Moore, the former Labour prime minister and now Ambassador to the United States.

As a first tentative step in the long-term strategy, Dr Smith and Mrs Shipley launched negotiations in September 1999 for an FTA with Singapore, an agreement without economic significance but designed as a template for a wider 21st century deal.

The greatest share of political credit, though, lies with Ms Clark and her trade ministers Jim Sutton and Mr Goff.

Eccentricities
It was the Clark government that concluded the Singapore deal, launched and completed the initial TPP with Singapore, Chile and Brunei and then drew in the US, Australia, Peru and Vietnam in 2008, following Ms Clark’s successful 2007 meeting with George W Bush.

The New Zealand origins of the deal are why Wellington had the diplomatic honour of being the depository and administrator of the treaty.

Mr Key’s unique contribution has been establishing superb personal relationships with the US’s Barack Obama, Japan’s Shinzo Abe, Canada’s Stephen Harper and other regional leaders and – probably more challenging – tolerating the eccentricities of his trade minister, Mr Groser, for seven long years.

Chief among them was Mr Groser’s belief that bringing free-trade recalcitrants Canada and Japan into the talks was anything other than barking mad. In contrast to those, including me, who predicted disaster, Mr Groser believed that the benefits of including these larger economies – in terms of further encouraging the US to reach a deal and achieving liberalisation in two other G8 nations – outweighed the risk they would play their usual wrecking role in the negotiations.

Mr Groser judgment turned out to be right (just!), even though Canada and Japan will lag behind on dairy and beef.

Final deal
The final TPP deal, instigated by New Zealand all those years ago and pursued so diligently by Labour and National governments, is the biggest free-trade agreement in history, covering 40% of world GDP. But, unlike 20th century trade agreements it is not all about the point at which export commodities cross borders. Instead it deals with the whole value chain, from R&D to in-market servicing.

It envisages a New Zealand company inventing a new product, developing a brand, protecting its IP, carrying out its ongoing design activities in Auckland, obtaining raw materials throughout the Asia Pacific, manufacturing in Vietnam, marketing the product in the US, Japan and Canada, and returning the profits home.

That company can now do so with greater confidence about the stability of the business environment across 12 economies, including three from the G8.

Such a company can also now take enforcement action against foreign governments, whether or not it can hire the right Wellington lobbyists to get the New Zealand government to back it. There will be no repeat of the New Zealand apple case, where Mrs Shipley decided as a matter of policy that New Zealand would not take Australia to the World Trade Organisation (WTO) over its unscientific import ban, only for Ms Clark to rightly decide otherwise when she became prime minister, leading to New Zealand’s historic win. Under the TPP’s so-called Investor-State Dispute Settlement (ISDS) process, the apple industry would have been able to act itself.

The ISDS process will involve a panel of three independent experts from countries not involved in the dispute and will be carried out in public. If a New Zealand company were ever to sue the US government over unfair trade practices, the adjudicators would be from, say, Australia, Japan and Vietnam, and the hearings would be followed by the world’s media. The same would be true in reverse.

Not perfect
The TPP is of course not perfect but its major flaw – incomplete liberalisation for commodity milkpowder – will turn out to be good for New Zealand.

Mr Groser surely did not intend it, notwithstanding being privately appalled by Fonterra’s poor commercial performance despite all its advantages it has been given, but the TPP will gently tilt the New Zealand economy away from further expansion of commodity dairying towards higher-value industries.

To take one somewhat ironic example of the deal’s effects, given the music industry’s usual politics, the TPP’s copyright provisions mean the likes of Lorde, Tiki Taane, and SIX60 have ended up bigger winners from the TPP than Fonterra – which is surely fair enough given they actually bother to add value to their raw material and market it creatively offshore.

Even within dairy, however, the TPP’s $102 million of tariff savings tend to advantage higher-value products like cheese over bulk milkpowder sold at auction.

It was only a few months ago, before it bizarrely talked about subsidising Fonterra farmers to protect them from the low auction price, that the Labour Party used to advocate the very diversification of the New Zealand economy that the TPP’s incomplete dairy deal will deliver.

The TPP also includes rules demanding higher labour and environmental standards, which are enforceable through ISDS, a first for a trade deal of this nature. Pharmac is left alone. Tobacco companies are excluded from being able to benefit from the deal. The Treaty of Waitangi is protected. So are marine mammals and even sharks.

Corbynism
The union bosses, student politicians and former Alliance activists who now control Labour will have none of this.

Under Labour’s new rules that further empower its more fanatical grass-root members, the party has fallen under the spell of UK Labour’s Jeremy Corbyn, unwavering anti-globalisation activist Jane Kelsey, Marxist twitter addicts and extreme-left bloggers at The Standard and The Daily Blog.

The party’s antics over the TPP this week suggest its missing-in-action leader, Mr Little, and its woeful finance spokesman, Grant Robertson, have never moved on from their time leading student rabble as presidents of the New Zealand University Students’ Association.

Mr Little’s chief of staff is Matt McCarten, the former Alliance president who broke with Jim Anderton because the then deputy prime minister believed New Zealand should support the US in retaliating against al qaeda in Afghanistan for the September 11 attacks.

Insiders say that when Labour’s senior MPs and staff discuss policy and political positioning, the likely reaction of the left-wing Twitterati and blogsophere is given greater weight than that of any union, environmental group or social-policy advocates, let alone any industry association or business. The party’s hierarchy is now seriously considering actively campaigning against the TPP and making a manifesto commitment to activate the agreement’s withdrawal procedures should it become government.

You read that right: today’s Labour hierarchy is seriously considering promising to withdraw from a trade deal with 40% of the world’s economy, including the US, Japan and Canada, for which Ms Clark, its greatest prime minister for a generation and its first ever to win three elections, deserves the lion’s share of the credit.

Have nothing to do with these people. Do not give them money. Do not help them with their policy development. Do not let them visit your business for cute photo-ops designed to suggest today’s Labour is interested in listening to mainstream people. For all the current government’s usual purposelessness and drift, the lunatics now running Labour’s asylum must never be let near power.

RAW DATA: Ministry of Foreign Affairs and Trade's summary of the Trans-Pacific Partnership (PDF here)

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