Tag Archives: International relations

Are FTAs OK?

The Feb 27 announcement that NZ and Australia have signed a Free Trade Agreement (FTA)  with the ten member Southeast Asian regional grouping known as ASEAN has been hailed as another triumph for NZ’s economic openness, especially coming at a time when protectionist and nationalising policies have re-emerged in response to the global market crisis now ongoing. Although Trade Minister Tim Grosser signed the AANZ-FTA agreement at the 14th ASEAN summit in Thailand, it was MFAT officials working under instruction from the 5th Labour government who sealed the deal (after 4 years of negotiations), and it is these officials who are now beginning talks with India on a bilateral FTA similar to the one signed last year with the PRC. Yet, amid all the self-congratulation by government officials and business leaders, the nagging questions remains: are such FTA’s always good for the average Kiwi?

Pro-trade advocates will say yes on three counts. First, increased markets for NZ exports means more jobs in those sectors as well as their subsidiaries and ancillary industries. Second, increased foreign investment opportunities for NZ firms will eventually increase dividends for Kiwi shareholders. Third, access to a wider range of import markets means more competition and lower prices for Kiwi consumers. But there is more to the picture than this seemingly positive sum outlook.

The AANZ-FTA, like the FTA with the PRC and the P4 FTA signed earlier by NZ with Brunei, Singapore and Chile, is more properly seen as a tariff reduction scheme. In the case of the AANZ-FTA, the goal is to reduce common tariffs by 96% by 2020, thereby paving the way for the development of a a EU-style common market along the Western Pacific Rim that can compete with the EU, the US and emerging giants like the PRC, India and Brazil. NZ estimates are that it will eventually enjoy a 99% reduction in tariffs on its exports to ASEAN while ASEAN members will receive an 85% reduction on their imports to NZ. With US$ 31 billion is ASEAN exports to Australia and NZ  and US$16.8 billion of Australian and New Zealand exports to ASEAN members in 2007 (75% of that volume being between Australia and ASEAN, with NZ exporting US$4.6 billion to ASEAN members in 2008)), the objective is to raise the flow of goods and services ten fold over the next decade. Tariff reduction is seen as the key to achieving this goal, as it will lower transaction costs and remove fiscal impediments to investment within the partnership.

The problems with this arrangement stem from the asymmetries in the respective economies involved, from the lack of “after-entry” provisos, and from the dubious character of some of the regimes involved. With regard to the latter, the AANZ-FTA includes Myanmar and Brunei, two despotic regimes whose trade reliability and fiscal responsibility, much less human rights records, are open to question. It includes Thailand, which has the appearance of a politically failing state where sex tourism weirdness competes with highly exploitative labour-intensive low-cost production as the primary source of GDP, all amid grave ethnic conflict in its southern regions. It includes Laos and Cambodia, two states that barely meet the criteria for inclusion in a globalised trade regime. Its leading members, Singapore, Indonesia, Malaysia and the Philippines, have issues of political and/or corporate governance (be it in a lack of corporate transparency and/or a lack of political accountability), and the remaining member, Viet Nam, is a one party authoritarian regime that, if not as retrograde as Myanmar, has yet to exhibit the developmental potential of some of its most proximate neighbours. ASEAN is, in other words, a polyglot of corruption, nepotism, economic underdevelopment and exploitation mixed with crass materialism and indifference towards basic human rights and civil liberties in a highly charged ethnically diverse and stratified demographic, with a profoundly unequal distribution of resources and reliability amongst its members. Is that what NZ wants in terms of preferential trading partners?

Not surprisingly, the AANZ-FTA, which is due to go into effect on July 1 2009, has no common labour standards, including provisions regarding collective bargaining, right to organise, female and child labour, occupational health and safety and quality control. It has no environmental clauses. All of those are left to the industries involved. The Fontera PRC subsidiary’s Melanin scandal gives an indication of what can happen when such is the case.

Then there is the issue of size asymmetries and economies of scale. Is it plausible to think that with Australia coupled to NZ on one side of the AANZ-FTA ledger, NZ is going to be an equal beneficiary of the new tariff regime? If Australia turns out to be the major focus of ASEAN trade, will that not accelerate worker exodus and capital flight from NZ to Aussie under the terms of the CEP? Is it plausible to believe that with the lack of labour and other standards, NZ businesses in a variety of value added or service sectors will not have an incentive to re-locate their workforce in ASEAN countries where wages and benefits are lower? Is it plausible to think that NZ, with an export base in relatively inelastic primary-good industries and their derivatives (say, milk powder or paper pulp) will enjoy an equitable balance of trade with more elastic value-added importers? Is it plausible to think that foreign investors will not use the opportunity provided by relaxed investment regulation to assert direct control over NZ productive assets (which is an issue that also is at play with regards to the FTA with the PRC)? What NEW productive activities will actually  be created in NZ that will help diversify the economy while providing new employment opportunities that require so-called “knowledge-based”  skills? (For an earlier discussion of the problems of asymmetric trade, with specific regard to the PRC FTA, see http://scoop.co.nz/stories/HL0803/S00263.htm).

These are the questions that need to be asked in the parliamentary debates leading up to the July 1, 2009 ratification date. It is important that the Greens and other groups with concerns about FTAs avoid the appearance of knee-jerk protectionism that they have been saddled with in the past (as was the case with NZ First). Instead, the emphasis must be on the hidden “F” in an FTA–the FAIR aspect of trade, which for a small democracy such as NZ is as important as its free aspect. After all, free trade is not necessarily synonymous with fair trade, and it behooves the political Left to make that point since no one else (to include Labour) will.

Framing fires

Parliament is sitting today, and the 2009 session rightly opened with a unanimous motion of support for those affected by the Victoria bushfires. The events themselves have been very thoroughly covered on NZ media and internationally, but what I’m interested in is the way in which our politicians have been speaking about them. So, a quick look at each party’s contribution to the debate of the motion this afternoon.

John Key, National: Emphasised close cultural, economic and military relationship – “like no other”, and history of mutual support in times of need. Strong sporting rivalry means strong cultural ties. Firefighters as heroes who care not for borders and are an example to us all. Top-level links between himself and Rudd. Closed with “kia kaha”. Focused on the magnitude of the events on Australia, though a questionable choice of words with “the enormity of what is happening has burned into our consciousness”. Strongly-worded, statesmanlike, decisive.

Phil Goff, Labour: Spoke for “all New Zealanders”, focusing on impact on families of victims and the “human tragedy” and loss of property. Used family and sport metaphors for the strength of the relationship, like Key. The offer of 100 firefighters “was a good first step”. Generally somewhat procedural, lacked the bite of Key’s speech.

Russel Norman, Green: Very brief. Ticks off main points re support for the motion and assistance, and “respectfully note” the debate on climate change in Australia – but perhaps wisely doesn’t make too much of this.

Rodney Hide, ACT: “All New Zealanders” and “brothers and sisters”, again. Moved quickly to Rudd’s “hell on earth”, then to the possible criminal element behind the fires, hoping that those who committed the “evil” of the arson receive their “just desserts”. He’s angry, first and foremost.

Tariana Turia, māori party: Expressed sympathies in the first place to “the Australian Prime Minister Kevin Rudd” and then to those “families and communities” who have suffered – formally, she’s speaking as ariki ki te ariki, I think. Rather than using family as a metaphor, highlighted the fact that many New Zealanders actually have relatives in Victoria. Fire is “merciless”, families are “scarred’. Said her party would “support the role that this government and this country will play” as if she’s not involved or hasn’t been consulted about it.

Jim Anderton, Progressive: “Brothers and sisters” again, emphasising global and historical magnitude of the fires. NZ being “compelled to share [victims’] grief”. Focused on rebuilding and the resilience and “Aussie dauntlessness”. Firefighters as heroes. Amazingly, he compared the fires to September 11 2001, rationalising it on the basis that the same proportion of population have supposedly been killed. Irony of flooding in Queensland at the same time. Generally a strong speech, but – September 11, WTF! At least he didn’t refer to the supposed arsonists as “terrorists”.

Peter Dunne, United Future: “Kith and kin”. Enormity of the events – “Australia’s worst peacetime tragedy”, which is rhetoric reminiscent of post-9/11. Warns that life will take a long time to return to normal. Talks about media imagery a lot. Encourages people to be “as generous with their resources as they are with their sentiments”.

I see a few true colours there, I think.


Out of Their Depth

John Key’s awe–or was it dumb–struck performance at the 2008 APEC meetings in Lima and recent comments made by his Ministers of Foreign Affairs and Defence (Murray McCully and Wayne Mapp, respectively) do not portend well for the conduct of New Zealand’s foreign affairs. Key quivered about meeting that lame duck named George W. Bush. He gushed about having the opportunity to meet people “he had read about.” He then turned preacher. In his public presentation Key lectured his larger partners about the financial crisis, seemingly oblivious to the fact that his currency speculator past made him especially unsuitable to lecture anyone on the virtues of finance capital–particularly when several APEC partners have already moved away from the neoliberal prescriptions he so fervently embraces. His call for resumption of the Doha round of WTO talks was little more than showboating given that major actors such as Brazil, India and China have made clear that there are limits to openness when it comes to their strategic industries, and the US and other advanced economies continue to subsidise a number of agricultural sectors for political rather than economic purposes. Given that state intervention, in the form of financial bailouts, has become the primary rescue vehicle used by advanced democracies to prevent the utter collapse of their economies, Mr. Key’s pro-market rhetoric rang both hollow and hypocritical–or profoundly naive.

New Zealand media made much of Key’s APEC trip, but no one else did. No deals were struck or progress made on issues of significance to the country. To the contrary. Mr. Key and his “posse” did not even receive audiences with many of the leaders attending the summit. Judging from foreign reports none of Key and co.’s performances with foreign leaders made New Zealand look particularly impressive. From abroad, Key’s APEC sojourn appeared to be a a matter of personal hubris rather than political necessity, or more charitably, a convenient debutant stopover on Key’s trip to meet the Queen. Continue reading