Unfettered free trade is like having unprotected sex with strangers.

datePosted on 08:13, March 2nd, 2010 by Pablo

Like a sexual addict, New Zealand has a dark obsession with free trade. The obsession may speak to a larger issue rather than the value of trade per se. That issue may be the pathology of NZ political-economic elites fantasising about trade benefits rather than the real benefits to their constituents.

 Whatever the case, the number of free trade agreements (FTAs) NZ has negotiated is high for a small democracy (9–bilaterals with the PRC, Australia,  Malaysia, Thailand,  Singapore and South Korea, multilaterals with the Transpacific Partnership (P4) with Brunei, Chile and Singapore, and with ASEAN/Australia, as well as a regional agreement with the Gulf Cooperation Council (GCC) grouping several Arabian peninsular states). It has negotiations underway with India and Hong Kong  (bilaterally), on the Anti-Counterfeiting Trade Agreement (ACTA),  and with Australia, the US, Vietnam and Peru on joining the P4 in an expanded TPP. Further FTA negotiations with ASEAN and other partners are ongoing. NZ is an ardent champion of the virtues of free (unprotected) trade and open commercial borders in international fora such as the WTO.  In other words, if this were a sex survey, New Zealand is  promiscuous in its  approach to free trade.

To further the analogy, the pursuit of free trade under the National government is the macroeconomic equivalent of cruising for sex. It focuses on the immediate satisfaction of new market penetration and commodity exchange rather than on the potentially negative consequences of the liaison. Phrased politely as foreign market opening and reciprocal investment, the thrust of NZ’s FTAs gives much less regard to the “after-entry” (or “morning after”) consequences of sequentially engaging multiple partners with different strategic objectives born of varying cultural backgrounds, governance, resource bases and historical legacies. There is, in a word, a lack of prophylaxis when it comes to NZ’s approach to free trade.

FTAs are essentially tariff reduction, currency, investment and border control agreements. They are commonly referred to as “market opening” pacts. The focus is on the conditions and terms of entry. Although consensual, oftentimes these are largely determined by the interests of larger, dominant partners, particularly in bilateral agreements. But multilateral FTAs are like group sex–there is more room for individual manuever within the general rules of engagement, but the group dynamic may force the weaker partners to submit to advances that they may normally prefer to avoid (to bring things back to the subject, such as on issues like unorganised child or wimin’s labour, or open pit mining in conservation zones).

In either event, less concern  is placed in the rush to secure new FTAs on the environmental, labor market, gender, immigration, indigenous and security implications of trade opening. These are considered to be secondary consequences that are best dealt with based upon local market conditions.  It is the terms of the initial engagement that matters, not the morning-after effects.

This is what makes the indiscriminate New Zealand approach to free trade all the more alarming. Of  its new partners, many are authoritarian and most are bigger in size, with larger and more variegated economies of scale. The terms of NZ’s engagement with such partners, while legally equal, often leave it in a subordinate position where it is forced to accept practices that are unacceptable or contrary to community standards at home. In fact, if the analogy holds, then many of the NZ’s trade partners should have name suppression, if only becauseof their authoritarianism and systematic abuse of human rights at home.

Nor is NZs penetration of foreign markets pain-free. As Fonterra has learned, after-entry issues in foreign markets such as product quality control are not inconsequential. In fact, as far as the brand is concerned, the after-entry consequences of rapid market opening can often be devastating.

It is not just the brand that can be damaged by the rush to market opening.  Scholars have already begun to point to the negative consequences for the environment, indigenious groups, and labour rights when FTAs are negotiated without regard to after-entry consequences. I am currently working on a book chapter that highlights the security implications of the above-mentioned expanded TPP, to include its criminal and military-strategic and intelligence flow-on effects. 

For NZ, the longer term situation is not good. For example, even though NZ has opened its borders to increased aviation and martime-borne tourism, it has not increased the number of MAF or Customs dog-handlers to handle the increased volumes of tourist traffic in places such as Rotorua, Tauranga and Opua (all of the environmental security and drugs searchers have to be driven from Auckland) even though the volume of imported commercial goods has increased exponentiallyas well. This leaves gaping holes in bio-security as well as in narcotics interdiction in commercial ports of entry (think of an increase of thousands of containers worth of commercial goods entering NZ per year without the ability to scrutinise even a quarter of them). Nor have Police, Immigration or Customs resources been increased with an eye towards countering organized crime using newly opened trade borders as conduits for a bit of market penetration of their own (note recent reports of Chinese students serving as drug couriers–the PRC is the main source of the precursor chemicals for the manufacture of P). In addition, lax financial regulations and corporate registration laws contribute to making NZ an increasingly attractive destination  for money laundering ventures and business fronts originating in Asia. Again, no thought has apprently been given to these types of issues when FTAs are negotiated. 

In spite of the clear dangers of unprotected free trade, here defined as FTAs without negotiated after-entry provisos, the National government, Labour, and most minor parties believe in the mantra that the rising tide of free trade raises all economic boats. But, to continue the physical analogy, such an unprotected surge of free trade also brings with it potentially unhealthy (some might say deviant)  after-entry consequences when it comes to the socio-economic fabric of NZ society. That is why prophylaxis is necessary at the point of negotiations, not later.

John Key and Tim Groser may think of themselves as “players” on the world trading scene,  but they may be cruising for commercial love in all the wrong places, at least in terms of their choice of partners and neglect of morning- after effects.  Ill-conceived and lacking in consideration of longer-term impact beyond short-term aggregate growth, such an approach downplays overall societal welfare in favour of commerical and political elite satisfaction.  That may be exciting for the latter, but like victims of a night on the town gone wrong, it has the potential to leave the NZ political economy battered, brusied, postrate, supine and hopeless in the face of the manipulations of trade partners who seemed nice at first and promised many things, but whose subsequent behaviour proved less noble.

PS: remember, this post is about the potential negative effects of free trade. I realise that the cruising/unprotected sex analogy is a bit over the top, but I could not resist given how postively orgasmic the Key government waxes about free trade (sorry!).

PPS: In Wellington now. Went from 26 degrees and 99% humidity in AK to horizontal drizzle and wind at 15 degrees. Not quite dressed for it coming from my SE Asian redoubt. Looking forward to meeting Lew and (hopefully) seeing Anita again.

5 Responses to “Unfettered free trade is like having unprotected sex with strangers.”

  1. Andrew W on March 2nd, 2010 at 08:50

    I guess you’re saying trade without FTA’s is like multiple sexual partners, but always using a condom.

    the number of free trade agreements (FTAs) NZ has negotiated is high for a small democracy

    As a small nation with a small domestic market NZ has a greater incentive to trade, and implement FTA’s where possible, than larger nations.

    Because FTA trade is less prone to manipulation and arbitrary tariffs being imposed by the great nations, their implementation gives smaller nations more trade security.

    The great nations have always acted like gangsters, and the small nations like prostitutes.

    ~ Stanley Kubrick

  2. Pablo on March 2nd, 2010 at 17:41

    Actually Andrew W., trade before FTAs is like attempting to have sex with someone who wears a chastity belt (given the amount of protectionism during the 20th century), market opening FTAs are akin to having unprotected sex, while FTAs with negotiated after-entry provisions is like having sex with a condom. I shall now end this line of analogising less things descend into ribaldry.

  3. SPC on March 3rd, 2010 at 11:06

    The greater problem is a lack of follow-up in developing a domestic economic environment ensuring that we are able to become a successful exporting nation. The same idealistic and ideological premise which leads to our habitual fling with “free traders”, results in our failure to formulate an effective economic policy.

    The only sensible rationale for our policy is that we believe that the more our free trade seed is dispersed, the more it will bring about the fruit of free trade organised through global institutions – which will be rules based, and bring about protections for workers and the environment – including carbon tariffs for goods traded between nations. And that this free trade will ultimately raise up all waka and be associated with a wider global polity respectful of international multi-nationalism (and that this will replace the US super power era).

    Some sort of trickle down theory – where immediate gratification of the needs of a few sectors of our economy is for our greater good.

    But as you note what makes us a country, our sensibility about social justice amongst ourselves, preserving our physical environment and contributing in a positive way in the world has not been premised on subordinating the needs of the many to serve the ambitions of a few sectors of our society.

  4. Phil Sage on March 4th, 2010 at 10:15

    What are they putting in the Wellington water??
    Are you sure that Key and Groser are not the happy youngsters searching for true love and a blossoming family?

    Genetics mandates that you reproduce or become extinct. New Zealand Trade policy is more akin to dating friends and friends of friends in an effort to find undying love and a bountiful tummy. :^)

    I am looking forward to some comments from you on Argentina’s pursuit of the Falklands British oil wealth and Hilary’s faux pas in Buenos Aires

  5. Pablo on March 4th, 2010 at 15:46

    Phil: There is something about Wellington that brings out the randy in me. :-0

    I saw your post over at NM and of course diagree with you completely on the latest Malvinas resource row and Hillary’s comments on the matter (which I agree with). There will be no war (as Psycho Milt pointed out). But this is not the place to debate the issue, so I will either comment over at your place or post something about it here at a later date.

    It is good to hear from you.

Leave a Reply

Name: (required)
Email: (required) (will not be published)
Website:
Comment: