Jacinda Ardern and Canadian PM Justin Trudeau at the ASEAN summit in Manila. (Photo: Twitter)
The revamped deal is now on track for sign-off in early March, and it deserves support by progressives and conservatives alike, argues Stephen Jacobi of the NZ International Business Forum.
Good things come in small bundles. And occasionally in large ones, even with a mouthful of a name – the Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP), now concluded in Tokyo, brings together 11 economies with a combined GDP of US$10 trillion or 13.5% of world GDP. That’s big by any standards, but what this breakthrough shows is that it is still possible to achieve trade liberalisation – even without the United States. What’s more, it shows that the notion of progressive trade policy increasingly has currency. Safely delivered in Tokyo is an agreement which is now referred for signing in Chile on 8 March.
How did the Tokyo agreement come about?
Last November at the APEC meeting in DaNang the 11 remaining members agreed – with some last-minute theatrics on the part of Canada – on a deal to suspend certain provisions in the earlier TPP and to continue work on four other outstanding areas. This work has now been completed. Canada appears to have got over its reservations which were doubtless driven largely by the shadow of other important negotiations with the US and Mexico over the future of the North American Free Trade Agreement (Nafta). Other participants have concluded that even without the United States, CPTPP is worth completing. With regard to those four outstanding areas, two of them have been added to the list of 20 other items suspended from the former TPP and two have been settled by side-agreement. None of the four impacts on New Zealand interests.
What has changed for New Zealand?
Importantly, from New Zealand’s perspective, the integrity of the market access deal – the conditions under which our products will enter TPP markets – has been preserved, especially with regard to Japan, but the rough edges of the former agreement have been shaved off. The latter include highly contested (if, for New Zealand, relatively benign) intellectual property provisions and aspects of the infamous investor state dispute settlement (ISDS). ISDS remains in CPTPP (not entirely to the satisfaction of the Labour-led government) but its application has been further restricted (the chapter and verse on this can be read on the MFAT website here). New Zealand had very little to do to implement the former TPP and will have even less with CPTPP. The safeguards built into the original agreement which protect New Zealand’s right to regulate in areas like the environment and public health are all preserved. The Treaty of Waitangi remains fully protected.
How progressive is it anyway?
The Labour-led government can rightly point to a number of progressive elements in CPTPP beyond the new name. The more contentious elements of TPP applying to intellectual property have been suspended. The agreement is one of the most forward-looking in history in terms of enshrining environment and labour provisions which will be subject to enforcement. There are new provisions to give a helping hand to small and medium sized businesses. The scope of ISDS has been restricted. The government is committed to the development of a new progressive and inclusive trade agenda and CPTPP marks a start along this path.
What’s in it for New Zealand?
The real benefit to New Zealand comes from the improvements in market access in Japan, as well as Canada, Mexico and Peru, all being economies where we do not have free trade agreements, as well as improvements to trade rules more generally. In Japan, New Zealand’s market position has been eroded as a result of our competitors, especially Australia, Chile and the EU, having better market access than us. The playing field will be levelled progressively on entry into force. Beyond this, TPP was always seen as a pathway to a broader Free Trade Area of the Asia Pacific (FTAAP) and CPTPP should perform the same role. Expect to see other economies expressing interest in joining this new arrangement.
What’s next?
More Reading
The new agreement will need to go through the ratification process in all 11 members: it will enter into force when six of the 11 members have completed the necessary domestic ratification steps. In New Zealand’s case, a new ratification process will be required including a national interest analysis, a Treaty examination by parliament and the passage of implementing legislation. Because CPTPP adopts or suspends the former TPP there is a wealth of information about CPTPP now published – we hope to see the final elements of text published as soon as translation is complete. We can expect some robust debate in months to come – and we welcome the chance to explain how this agreement will benefit New Zealanders.
Despite its long and difficult gestation, CPTPP has been birthed at this point precisely because of the elements which made it a good idea in the first place. Trade creates jobs. It and trade depends on access to markets and rules under which trade is carried out. New Zealand’s economic future depends on our ability to trade internationally as well as the environment we create for business here in New Zealand. CPTPP deserves support by progressives and conservatives alike. Let’s hope they all agree that it’s a beautiful baby.
This section is made possible by Simplicity, the online nonprofit KiwiSaver plan that only charges members what it costs, nothing more. Simplicity is New Zealand’s fastest growing KiwiSaver scheme, saving its 10,500 plus investors more than $3.5 million annually. Simplicity donates 15% of management revenue to charity and has no investments in tobacco, nuclear weapons or landmines. It takes two minutes to join.
Keep going!
Jacinda Ardern and Winston Peters get into governing mode. Photo by Hagen Hopkins/Getty Images
Jacinda Ardern and Winston Peters get into governing mode. Photo by Hagen Hopkins/Getty Images
It’s easy to forget pledges of the past. Ben Smith looks at a selection of policy areas, what was promised, and the tangible outcomes that might tell us whether they’re being honoured.
As the new political year dawns with a freshly elected government, it is a good time to take stock of the promises that were made. It is not always easy to track pledges made in the past. Who remembers, for example, National’s targets in 2008 and 2011 to boost NCEA pass rates, boost average incomes to $70,000+, and boost exports above 25% of GDP? At every election we hear the government of the day spinning to defend its record, and the opposition spinning to criticise.
In that spirit of seeking a more objective gauge of performance, this article is a record of some of the new government’s major promises over the last election. Not just their promises, but the tangible outcomes we can expect from those promises, because election promises really matter only insofar as they impact on people’s lives.
These are things New Zealanders are entitled to expect from the Labour, NZ First and the Greens over the next three years. If the government doesn’t deliver the tangible wins for kiwis they pledged, we are right to ask why the hell not.
More affordable homes
Housing was probably the biggest issue Labour campaigned on. But for more affordable living, New Zealanders need more affordable rentals as well as more affordable homes. Labour promised 100,000 affordable homes built over 10 years, with affordable defined as $500,000-600,000 houses in Auckland, with Auckland apartments and homes outside Auckland below $500,000. Let’s say it takes a year to get cracking; then we’d want to see 20,000 affordable homes at least consented by September 2020, and overall no increase in median housing prices at least within Auckland, where the market has now reached an average asking price of $916,900.
This all should translate to lower rents, within Auckland and nationwide, too, because if policies like banning foreign buyers push up rent prices, what’s the point? Rents were broadly stable over the last year with National in office, at $450 nationwide and $520 in Auckland. Kiwis should be demanding more affordable rentals by 2020 – if Labour are serious about building more houses, the increased supply should translate to lower rental prices.
Labour pledged a 10% reduction in material deprivation; in 2016 about 135,000 children lived in material hardship. In 2016, 290,000 children lived in poverty, that’s 60% of the contemporary median after housing costs. Bill English promised in the middle of a televised debate that he could reduce child poverty by 100,000. The next morning, under pressure from Guyon Espiner, Jacinda Ardern also pledged to take 100,000 children out of poverty (she clarified, below 50% median income) by 2020 – in 2016, 210,000 children lived in households below that level. Already the Labour government appears to be taking very tangible steps to achieve this target. National’s tax cuts were slated to move 55,000 children out of poverty. Last month, Labour scrapped the plan and replaced it with one targeted directly at families, and will lift 88,000 children out of poverty once it has been implemented (though both the Labour and National figures are now in question thanks to a Treasury coding error).
A tangible decline in carbon output
The government has promised to pass the Zero Carbon Act. But can they achieve a lower carbon output over the next three years? Carbon output dropped over the eight years National was in office from 8.8 tonnes per person in 2008 to 7.7 tonnes per person in 2015 according to Ministry for the Environment and Statistics NZ data, a small decrease driven chiefly by the 2008 financial crisis. Considering the emphasis Labour has placed on reducing carbon output, a low bar for Labour to pass would be to see carbon output continue along the trend since 2008, which would set it to 7.2 tonnes per person by 2019 – though that wouldn’t get us to zero until 2088.
Health: Tackle NZ’s shocking youth suicide
Under the new Greens’ counselling policy, under-25s will get free counselling services. Shockingly, New Zealand’s youth suicide rate is higher than all other OECD countries, roughly double that of the United States and about five times the rate in the UK. The tragedy isn’t just all the young people who lose their lives every year, but also the life circumstances for youth that must be leading to this kind of statistic. Health department statistics indicate it’s young Māori men who are really the most at risk.
Those counselling services are a much-needed attempt to address the problem and the Greens deserve credit for bringing it to the table. But making election promises is one thing – carrying out the policy in an effective way is another. Kiwis should demand a significant decrease in youth suicide rates from the 2015 rate of around 17 people per 100,000. If the free counselling doesn’t address the suicide rate the government may need to think about more effective ways of addressing mental health issues for our youth.
Education: What do young people get with their year of free tertiary education?
Labour has introduced one year’s free tertiary education. A lot of people think this is good in its own right – more educated citizens are good for the whole country. But youth unemployment (more than one in eight young people in 2016) remains high and a problem that really needs to be addressed to ensure all young people, not just those attending university, can succeed. There might be other positive effects of the policy, like a rise in general education levels or rise in young people’s incomes after they graduate. But if the change doesn’t at least lower youth unemployment (allowing for other influences like the wider economy), we can fairly ask whether this is the best value for money in helping New Zealand’s youth.
Incomes: will Kiwi workers really get a raise?
Labour has promised to raise the minimum wage and to reform workplace relations to get NZ workers paid more. If Labour’s policies really will bring higher wages, median weekly earnings of $959 should rise higher by 2020, without increasing unemployment. If that median doesn’t rise while unemployment stays low, it’s questionable whether the new government’s reforms have led to a rise incomes for the majority of New Zealanders.
Community safety
Violent crime has really hit small shop owners hard over the last few years, with migrant business owners feeling particularly vulnerable. Labour has promised 1000 more police officers on the beat, but as with anything else, the proof of the pudding is in the results. We’d hope to see deaths by assault, at least not to increase in 2018-2019 over the historically low levels we’ve had in the last half decade 2011-2016.
Labour has also promised to increase access to the justice system by people on moderate incomes and reduce the amount of time people spend in prison. Their targets are over long time frames so it is difficult to know what to expect just three years from now, but in 2020, more New Zealanders should expect to receive legal aid than they did in 2017.
Gender equality: women in senior roles and getting paid for it
Labour has put equality for women at its heart by ensuring more women are within the ranks of its own government. If they’re serious about this, by 2020 there should be a greater proportion of government ministers (not just associate ministers!) who are women than when National left office in 2016. It’s not necessarily about putting women into top positions just for benefit of women MPs, who are already doing very well, but it is about making sure that the group of people making decisions for our country include lots of people who understand, personally, what it’s like to be a woman.
In July 2017, nine of 27 ministers in the outgoing National government were women, and with the government’s big promises about giving women a bigger place in their party, we can expect a greater proportion of women ministers by 2019. As the new government comes into office, 10 of 28 ministers are women, just barely an improvement on the outgoing National government. The Labour government is off to a slow but definite start.
Another key measure of gender inequality is the pay equity gap, which Labour has previously rebuked National over. It would be good to see further progress on reducing the gender pay gap, currently at 9.4% in June 2017.
Regional development
The government has promised to invest $200 million in “the regions”, which seems to mean parts of the country other than main centres Auckland, Wellington, and Christchurch (sorry, Hamilton!). People in those cities have almost always got more than people in other regions.
More interestingly, GDP per capita in the regions has stood still since 2013 while it has continued to climb in the main centres.
The numbers that’ll show the government has succeeded? Higher median incomes and a higher GDP per capita for the regions outside the main centers and Southland (which in recent years has leapfrogged all the main centers – well played, Queenstown!) by 2019, too.
Māori jobs and homes
Labour enjoyed strong support from Māori in September. After a focused campaign with high profile Māori candidates, voters decided this year to ditch the Māori Party in favour of Labour. That’s a lot of trust being put in Labour – that Labour will do better for Māori than Māori parties – and Labour will need to rise to the occasion.
Median weekly earnings for Māori in June 2017 was $884 compared to $959 in the general population. This rate is 93% – could be worse – and it is made worse by high Māori unemployment – 14% of Māori lived in a jobless household compared to just 6% of Europeans. The unemployment gap for Māori will need to get much lower than it is currently and see median weekly earnings at least keep up (but preferably increase) relative to the rest of the population.
Finally, Labour specifically promised to address Māori home ownership. That plummeted 32% between 1991 and 2013 – Labour should ensure their action on housing reverses that trend and sees Māori home ownership rates increase.
Immigration
Labour promised to reduce immigration by 20,000-30,000 from its current high of 70,000. That is a massive reduction of up to 90,000 fewer people over just the three years from 2017 to 2020.
Can we not have more than a 30,000 decline in immigration rate? This should be achievable and if it somehow did happen, it’d be a colossal cock-up – either NZ became a much less attractive place or they really made it hard to get in.
Aside from that, the rationale for reducing immigration was to fix the housing market and reduce pressure on social services. If we can see lower housing costs for New Zealanders in 2020, and no increase in classroom sizes or hospital wait times, perhaps we can consider the intent of government’s immigration reduction target achieved.
Labour also promised to raise the refugee quota to 1500. Greens promised to raise the quota to 5000 over six years. This promise may have been walked back during their negotiations with New Zealand First, because the only thing the Green-Labour confidence and supply agreement has to say about refugees is a promise the new government will “review, and adequately fund and support, the family re-unification scheme for refugees”. If this is the only result of such bold policies, that would be a pity and might suggest Jacinda Ardern’s offer to take the Manus Island detainees is more driven by an impulse to make a good move on camera than to actually help more people in need.
Conclusion
When we come back and calculate the success of these targets, all monetary targets should be considered with the inflation rate in mind. That makes it easier to achieve some targets, like housing affordability, and harder to achieve others, like income increases. Some of the targets, like the carbon output target, are based on baselines a year or two prior to 2017, so in fairness we should reconsider those targets when 2020 comes around and we have a full picture of the state of the nation in 2017 when Labour came to power.
Finally, some things are just out of any government’s control. If there’s another global financial crisis in the next three years, income targets are going to be missed and we can hardly blame Labour. But a good starting point for measuring the new government’s success three years from now is to remember how well they kept the promises they made in 2017. If they fall short, we’re entitled to ask why.
This section is made possible by Simplicity, the online nonprofit KiwiSaver plan that only charges members what it costs, nothing more. Simplicity is New Zealand’s fastest growing KiwiSaver scheme, saving its 10,500 plus investors more than $3.5 million annually. Simplicity donates 15% of management revenue to charity and has no investments in tobacco, nuclear weapons or landmines. It takes two minutes to join.
