The way we sign up to trade deals must change, and parliament needs to lead the process to prevent flawed agreements like the TPP getting through, write lawyer Oliver Hailes and academic Max Harris.
There has been sustained and vocal public opposition to the Trans-Pacific Partnership (TPP), a treaty that would bind a number of countries (including New Zealand) to a set of particular rules for trade and investment. It was that opposition, in part, that contributed to the United States’ withdrawal from the agreement in 2017, and the relabelling of it in early 2018 as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
The TPP has not yet been ratified. Before that happens, it’s important to cut through the acronyms and the bluster to take stock – and learn some lessons from what has happened.
The choice isn’t between being pro- and anti-trade
Some commentators have described critics of the TPP as “anti-trade”. That’s a loose and lazy potshot that doesn’t grasp the nub of the debate.
There’s no doubt that Aotearoa New Zealand needs trade, and that trade can be a valuable social and economic activity. As an isolated cluster of islands in the South Pacific, we have to embrace global cooperation to tackle issues that transcend territorial borders and to shore up sustainable prosperity at home and abroad. And this isn’t some new-fangled need. You only have to look at He Whakaputanga, the Declaration of Independence signed by 52 Māori rangatira between 1835 and 1839, to see that New Zealand’s commitment to the importance of trade is longstanding. He Whakaputanga commits:
“ki te wakarite ture”
“to make laws”
“te he kia tika te hokohoko”
“to make sure trade is fair”
The question is: how do we secure our ability to make laws in the public interest while facilitating trade? And, crucially, who gets to decide how the balance is struck?
How trade agreements are drafted matters
It is not trade itself, but the form that ‘free trade agreements’ have taken, that has motivated opposition to the TPP. In truth these are as much regulatory agreements – agreements defining how countries are to regulate (or pass laws) – as they are ‘trade agreements’.
And the particular kinds of international law-making and trade liberalisation that have been advanced over the last thirty years (and which are locked in by agreements like the TPP) have created a world economy that serves only the interests of a tiny sliver of society, as demonstrated by the rise of distributional unfairness, financial instability, ecological degradation, and a legitimacy crisis in trade policy.
Any serious attempt to address climate change and social inequality will require ambitious policies that protect the health of people and the planet rather than the wealth of foreign investors and multinational corporations. One of the worries expressed by critics of the TPP is that these treaties, at best, create opportunities for ambitious policy agendas to be obstructed, and at worst inhibit governments’ abilities to carry out such agendas at all.
For instance, the investment chapter protects the value of established industries, such as oil and gas extraction, whereas the electronic commerce chapter sets up the international legal architecture for tomorrow’s high-tech economy driven by big data. The chapter on government procurement would prevent local and central government from favouring local companies when contracting for goods and services, outlawing a time-tested technique for creating decent jobs in the regions.
Together, these chapters place handcuffs on future governments: investor rights threaten to place a frightening price tag on pursuing the policies we need to get out of last century’s fossil-fuelled economy by underwriting the value of exploration permits, while at the same time the rules governing data storage and source code could prevent public oversight of this century’s economy by empowering the multinational corporations (like Google, Amazon, Facebook and Apple) who hoard intellectual property and personal information, control the global tech infrastructure that underpins cloud computing, and avoid local obligations such as privacy laws and paying their fair share of tax. Yet we ought to be thinking hard about how to create a competitive advantage for New Zealand as a leading economy in renewable energy and information technology, which might mean a more active government that favours local businesses through subsidy or investment.
The TPP would give extraordinary protection to investors, financial services, and market mechanisms. And these agreements take a suspicious view of the role of government. They are agreements from another era, as demonstrated by the fact that they contain text recycled from old agreements (including rights that have permitted investors to sue for the erosion of their investments through changes in environmental regulations and labour laws, despite apparent safeguards for regulating in the public interest). The world is moving on from that era of full faith in markets and hostility towards governments. We need a new vision of trade and international cooperation that reflects our time.
It is precisely because we are reliant on trade, that we need to be careful that ‘free trade agreements’ are drafted in the right way. They need to maintain cooperation while not hindering the ability of governments to develop innovative solutions to pressing problems. The TPP does not strike the right balance.
Low-hanging fruit: let’s get the process right
Reaching consensus on a new vision of trade, and encouraging fuller debate on this, will not be easy – though the recent boost to funding for the Ministry of Foreign Affairs and Trade (MFAT) can allow work to start on that debate. In the meantime, as we rethink the substance of trade agreements, one thing that can be done is to improve the process by which they are negotiated and ultimately signed.
There’s a proposal on the table already.
On 8 March 2018, protestors gathered outside parliament in opposition to the signing of the TPP in Santiago, Chile. The event included groups including It’s Our Future, ActionStation, Unions Wellington, Generation Zero, the New Zealand Nurses Organisation, the Tertiary Education Union, TPP Free Wellington and tangata whenua. They called on the government not to sign the TPP until there had been the independent analysis the governing parties called for when they were in opposition. A parliamentary petition signed by thousands was handed over calling for a democratic overhaul of the process for negotiating, signing and ratifying international treaties dealing with trade, investment and economic integration.
The petition (now being considered, alongside the text of the TPP, by the Foreign Affairs, Defence and Trade Committee) recommends “a requirement for the government to commission and release in advance of signing an agreement independent analyses of the net costs and benefits of any proposed agreement for the economy, including jobs and distribution, and of the impact on health, other human rights, the environment and the ability to take climate action”. It also seeks to require “a two-third majority support for the adoption of any free trade, investment or economic integration agreement that constrains the sovereignty of future parliaments that is binding and enforceable through external dispute settlement processes”. But even that final sign-off would have dubious legitimacy if there was no consultation with parliament, the public and mana whenua throughout the lengthy process of negotiations, which in the case of mega treaties like TPP can last several election cycles.
A comprehensive review of treaty-making powers could involve an update by the Law Commission of its 1997 report, which led to the present process under standing orders requiring select committee examination of major treaties (but only after the government has signed up) and the preparation of a national interest analysis by MFAT (usually the very same government department that negotiated the treaty).
Why stronger parliamentary oversight is part of the answer
Ultimately, however, proper overhaul of treaty-making powers would require legislation transferring power from the executive branch (the government and its agencies) to parliament. Two of the parties sustaining the current Labour-led government have in the past supported this kind of move: in 2000, Green MP Keith Locke put forward an International Treaties Bill, and in 2017 NZ First MP Fletcher Tabuteau proposed the International Transparent Treaties Bill.
Here’s the problem. At the moment, treaty-making is governed by something called the royal prerogative, a source of legal authority that was described by a leading English judge in the 1960s as “a relic of a past age”. The prerogative is basically a set of powers that the executive government and its agencies have because (mostly British) courts in the past have said they are legitimate. But the prerogative has shaky legal foundations, is not constrained by written text or structured oversight, and is accordingly at risk of being abused. There is a need to move beyond prerogative to more modern forms of constitutional accountability.
An International Agreements Act?
The introduction of new legislation — which might be called the “International Agreements Act” — could set out a proper process for the entering into of all international legal agreements, involving roles for the executive, parliament, the courts, and others.
An International Agreements Act might include:
- different processes depending on whether an international legal agreement is a treaty with broad social and economic implications (like the TPP), a bilateral treaty, or simply a declaration or some other form of ‘soft law’;
- provisions ensuring Māori exercise tino rangatiratanga over the negotiation and review of international agreements where they are signed in New Zealand’s name;
- staged oversight by a parliamentary committee during negotiations; and
- a requirement of a parliamentary vote for full sign-off on international treaties prior to signature by the government of the day.
Full consultation, including with legal experts and affected parties (especially mana whenua), is required to ensure that an International Agreements Act honours our past, respects the views of key constituent groups, and is fit for the future.
Parliament could flesh out the details of this proposal. Some opponents to the TPP called for it to be put to a popular referendum that would be binding on the executive. That could be considered as a possible option for international agreements, where the anticipated impacts of a proposed treaty have such a significant influence over the future policy options of parliament to be a constitutional change. But whether this use of referenda is agreed to or not, the bottom line is: parliament as a whole should have oversight of international agreements, not the executive government. Parliament remains only a part of the ‘kawanatanga’ sphere (to adopt the language of Matike Mai Aotearoa), but empowering it to oversee international agreements is a valuable step forward.
A proposal that is consistent with policy trends – and our values
A parliamentary review of treaty-making powers would complement the impending Trade for All Agenda — MFAT’s consultation on the future of trade policy — as well as the government’s broader constitutional work, such as its intention to amend the New Zealand Bill of Rights Act 1990 to affirm the high court’s jurisdiction to grant declarations of inconsistency, the plan to legislate long-term targets for the reduction of greenhouse-gas emissions in line with the Paris Agreement (the Zero Carbon Bill), and the move toward civilian oversight of the defence force through the formal inquiry into allegations that a New Zealand-led raid in Afghanistan led to civilian deaths. This is a government that, to its credit, has started to get serious about sensible constitutional change (though the matters raised by Matike Mai Aotearoa have not yet been touched). The rules that govern the global economy (set by treaties like the TPP) impact upon major issues such as the future of work, regulation of fossil fuels and housing speculation, and the possible recommendations of the Tax Working Group. Improving the process for international agreements could be an important part of the government’s other constitutional and economic projects.
International economic treaties like the TPP expose the inadequacy of the present allocation of treaty-making powers. The process continues to be dominated by the executive branch of government in the interests of exporters, foreign investors and multinational corporations, while parliament and the public are kept in the dark. Strengthening parliamentary oversight might not remove the possibility that treaties are negotiated in flawed ways, and there is a danger that such oversight gives legitimacy to treaties that remain deeply problematic in substance. But the improved process should make it less likely that we sign away our values.
That would at least be a start towards a vision of trade fit for the 21st century and a new era.
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