N O O R D I N A RY D E A L

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NO ORDINARY
DEAL UNMASKING THE TRANS-PACIFIC
PARTNERSHIP FREE TRADE AGREEMENT

EDITED BY
JANE KELSEY
First published in 2010 by Bridget Williams Books Ltd
PO Box 12474, Wellington 6144 New Zealand. www.bwb.co.nz
First published in Australia, North America and the UK by Allen & Unwin
in 2011

© 2010 The introduction, Jane Kelsey; the essays, the contributors.

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This book has been published with the support of the Bridget Williams
Books Publishing Trust, the G & N Trust and the New Zealand Law Foundation. These grants
are gratefully acknowledged by the publishers. The kind permission of Mike Moreu to
reproduce the cover cartoon is also acknowledged.

The New Zealand Law Foundation is an independent charitable trust that supports the
dissemination of legal research and scholarship through its grants programme. The views
expressed in this book should not be attributed to the Foundation.

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Contents
Preface 7

Introduction 9
Jane Kelsey

1. Political Implications for New Zealand 29

Bryan Gould

2. The Politics of the TPPA in Australia 40

Patricia Ranald

3. US Politics and the TPPA 52

Lori Wallach and Todd Tucker

4. The TPPA and Indigenous Peoples: Lessons from Latin America 70

José Aylwin

5. Security Implications of the TPPA 82

Paul G. Buchanan

6. Lessons from the Australia–US Free Trade Agreement 98

John Quiggin

7. The TPPA, Agribusiness and Rural Livelihoods 109

Warwick Murray and Edward Challies

8. Quarantine and Food Safety Issues in a TPPA 124

David Adamson

9. Border Carbon Adjustments and Climate Change Policy 136

Geoff Bertram

10. Public Health and Medicine Policies 149

Thomas Faunce and Ruth Townsend

11. Intellectual Property in New Zealand and the TPPA 163

Susy Frankel

12. Culture and Information 176

Jock Given

13. Government Procurement and Labour Issues 189

Ted Murphy
14. International Capital and Investment 199
Bill Rosenberg

15. Trade in Services 214

Jane Kelsey

16. The TPPA and Financial Sector Deregulation 231

Nan Seuffert and Jane Kelsey

Epilogue 246

Endnotes 248

List of Abbreviations 273

List of Figures and Tables 277

List of Contributors 278

Index 281
Preface

This is a book about much more than ‘free trade’: it is about the political
futures of New Zealand and Australia, about national sovereignty, democracy
and indigenous self-determination, about the potential of local culture and
grassroots political movements, about what people want and what they need
to know.
No Ordinary Deal had its genesis in a colloquium, mainly of academic
lawyers and economists from Australia and New Zealand, hosted at the School
of Law of the University of Auckland in June 2009. The gathering shared
their insights on the potential implications of a Trans-Pacific Partnership
Agreement for their specialist areas, drawing on experiences of other free
trade agreements. Detailed papers were developed and additional experts
were invited to contribute to this book of essays.
A book that has nineteen contributors and aims to maintain academic
rigour within a tight timeline can only come to fruition if everyone shares a
commitment to the objective of generating informed debate that can make
a difference. It also depends on a publisher who is willing to invest the time,
energy and resources in a venture that is intensely important to the future of
the nation but has uncertain commercial returns. Through Series 21, Bridget
Williams Books leads the way in that regard.
This project was made possible through a grant from the Faculty Research
Development Fund at the University of Auckland. In addition to the colloquium,
the grant has supported a website that acts as a clearing house for information,
media feed, legal texts, commentary and other resources relating to the TPPA
negotiations. Readers can find the comprehensive bibliography relating to
this book on the website (www.tppdigest.org).
The New Zealand Law Foundation also made an invaluable contribution
toward the publication of the book, as part of their mission to generate informed
debate on the development of law in New Zealand. Obviously, neither funder
is responsible for the views expressed by in the book.
Special thanks go to a number of students who have provided research
assistance over several years: Stephen Parry, Caroline Fergusson and Edward
Miller; and to Joe Nunweek for creating and managing the TPP Digest website.
John Lloyd’s administrative assistance ensured the colloquium ran smoothly.
We hope that the information and analysis in these pages will contribute
to an essential debate not only about this agreement but more broadly about
the future direction of our countries and our global relationships.

Jane Kelsey
September 2010
Introduction
Jane Kelsey

The Contradictions of the TPPA

On 15 March 2010 trade negotiators from eight countries met to begin formal
talks on a free trade deal, dubbed the Trans-Pacific Partnership Agreement
(TPPA). Seven were fully fledged participants: Australia, Brunei Darussalam,
Chile, New Zealand, Peru, Singapore and the United States. Vietnam had
associate status for the first three meetings, after which it could decide to stay
or withdraw. Several other countries may join – Malaysia, Thailand, Canada,
South Korea and Colombia have all been mentioned.
This is no ordinary free trade negotiation. The domestic economies of
most of the participating countries are already heavily liberalised, deregulated
and privatised. Moreover, there are already twelve free trade treaties among
them, including comprehensive free trade agreements (FTAs) between the US
and the four parties that are the most significant trading partners of the US
(Australia, Chile, Peru and Singapore); New Zealand, Brunei and Vietnam1
are the leftovers. However, New Zealand has FTAs with all the other TPPA
negotiating parties except Peru. Australia lacks only Peru.
The TPPA negotiations are exceptional for another reason. They are not
occurring at just any moment in history. The first steps took the form of talks
among five of the parties to extend the deregulation and liberalisation of the
financial sector and unfettered flow of capital among them. These talks began
in March 2008 – less than six months after the collapse of Lehman Brothers.
Since then, a highly contagious global financial crisis, emanating from the
US, has generated a devastating recession that reverberated around the world.
Neo-Keynesian policies were positively embraced as the solution to that
recession. Governments in many countries began the process of re-regulating
their financial markets, with some even restoring controls on capital flows
in the hope of preventing future meltdowns.2 The scale and severity of this
latest crisis should have prompted a reality check. Instead, the governments
of several countries (including New Zealand, Australia and the US) have
proceeded with negotiations for a free trade agreement that, if it follows the
standard path, would deepen their binding obligations to a neoliberal market
model that has failed and is widely expected to do so again.
10 JANE KELSEY

To compound this contradiction, the most ambitious free trade project

for a decade has been promoted by the same political leaders who have
denounced the folly of unfettered global markets in forthright terms. In 2009
then Australian Prime Minister Kevin Rudd declared that:

The time has come, off the back of the current crisis, to proclaim that the
great neo-liberal experiment of the past thirty years has failed, that the
emperor has no clothes. Neo-liberalism and the free-market fundamentalism
it produced have been revealed as little more than personal greed dressed up
as an economic philosophy. And, ironically, it now falls to social democracy
to prevent liberal capitalism from cannibalising itself.3

Barack Obama, as a US senator, slated the inhumanity of the market model

with equal vigour in his acceptance speech at the Democratic Convention
in August 2008:

For over two decades [Republicans] subscribed to that old, discredited

Republican philosophy: Give more and more to those with the most and
hope that prosperity trickles down to everyone else.
In Washington, they call this the ‘Ownership Society’, but what it really
means is that you’re on your own. Out of work? Tough luck, you’re on your
own. No health care? The market will fix it. You’re on your own. Born into
poverty? Pull yourself up by your own bootstraps, even if you don’t have
boots. You are on your own. Well, it’s time for them to own their failure. It’s
time for us to change America. And that’s why I’m running for president
of the United States.4

Even New Zealand Prime Minister, and former Merrill Lynch currency
trader, John Key told the Asia-Pacific Economic Cooperation (APEC) CEOs’
Summit in November 2008 that ‘state-supported bank bail-out packages,
fiscal-stimulus packages worldwide, co-ordinated reduction in interest rates,
and the special G20 summit to address the crisis’ were ‘a step in the right
direction, although more may be needed’.5
Somehow, the lessons of the crisis appear simply to have been set aside
and the seductive lure of ‘free trade’ has prevailed.
In another paradox, even the champions of a TPPA seem unsure what it is
meant to be or do. The most common rationale given by the political leaders
is the aspiration that a ‘high quality’ agreement might be expanded into an
Asia-wide FTA some time in the future. But there are mixed messages about
its likely content and orientation.
When President Obama confirmed the decision of George W. Bush to
participate in the TPPA process, he said the goal of the US was to work with
partner governments to shape ‘a regional agreement that will have broad-based
membership and the high standards worthy of a 21st century trade agreement’.6
 INTRODUCTION 11

Obama’s high standards are presumably very different from those that his
predecessor espoused when the negotiations were first announced. Obama’s
Trade Representative Ron Kirk has described the equally opaque objective of
‘shaping a high-standard, broad-based regional agreement’ that will benefit
workers, manufacturers, service suppliers, farmers, ranchers, small business
and consumers.7 His deputy talks of the prospects for important new access
for US exporters into the markets of the original and future participants, and
as a means to increase US engagement in the Asia-Pacific region to counter
the proliferation of agreements by US competitors.8
Australia has played down the prospect of significant economic gains from
the TPPA itself. It has little realistic chance of rolling back the protections
for sugar, beef and dairy that the US retained in their bilateral agreement of
2005. The Labor government will also be concerned to pre-empt a resurgence
of the nation-wide campaign against the Australia–US Free Trade Agreement
(AUSFTA) that defended the Pharmaceutical Benefits Scheme (PBS) and local
content for broadcasting and opposed an investor–state disputes process, as
Patricia Ranald describes in Chapter 2. Australia’s Trade Minister Simon
Crean bypassed this minefield when the first TPPA negotiations were held
in Melbourne in March 2010. Instead, he heralded the talks as ‘a major
milestone, as the agreement would pave the way to the long-term goal of
APEC, a region-wide free-trade zone’.9
The New Zealand government has taken a much more parochial and
instrumentalist approach, reflecting the fact that it is one of only three original
negotiating parties that does not already have a free trade agreement with
the US. Trade Minister Tim Groser hailed the TPPA process as bringing ‘one
step closer New Zealand’s long-held goal of a free trade deal with the United
States’.10 He declared the first meeting as

… an historic occasion for New Zealand. For over 30 years, successive

governments have worked to gain better access to the US market – today
negotiations on the framework for that access become a reality. As well as
access to the US market, the eight-nation TPP aims to pave the way for a
potentially much bigger prize – a free trade area of the entire Asia-Pacific
region .… I am hopeful the TPP can evolve into a ‘new generation’ trade
deal – one that achieves greater economic integration in our region while
maintaining our right to regulate important public services.11

New Zealand officials talk of this being a broader ‘principles-based’

agreement than the prescriptive liberalisation approach of existing US FTAs.12
But it is doubtful that the principles of a National-led government, which has
reactivated the radical neoliberalism of the early 1990s, would be the same
as those that Obama’s supporters expect him to espouse.
12 JANE KELSEY

The Power of the US

There is really only one certainty about the TPPA – that US trade strategy and
negotiating demands will determine the shape of the negotiations and the
prospects for a final agreement. In fact, it is the presence of the US that has
drawn other countries into this ambitious project, and it was the need for the
Obama administration to decide if the US would continue to be involved that
saw the negotiations put on ice in 2009. Realistically, the proposed ‘partnership’
is between the US and seven to ten other countries. Lori Wallach and Todd
Tucker in Chapter 3 regard the fate of the TPPA as resting on three overriding
considerations: the mandate according to which the President negotiates, the
ability to secure the passage of an agreement through both houses of Congress
and the imperative to get a Democrat re-elected as president.
All three factors rest on Obama’s ability to deliver a TPPA that appeals to
the Democrat constituency. Those who worked for his election expect the
new administration to embrace a socially responsible and responsive trade
policy – what free traders condemn as protectionism and overburdening
the trade agenda. The key elements of the progressive trade agenda are set
out in the Trade Reform, Accountability, Development and Employment
(TRADE) Act, a bill before Congress that enjoys the support of key Democrats
whose approval would be required for any TPP deal. The unions are another
crucial constituency. The powerful Teamsters Union set out its expectations
in January 2010:

These proposed negotiations and the agreement that emerges will be the
first manifestation of President Obama’s approach to international trade
policy. The whole world is watching what will emerge. The transnational
corporate and investment elites will be following the negotiations closely,
but so also will civil society including family farmers, consumers, workers,
and advocates for a clean environment and human rights. People all over
the world have a stake in U.S. trade policy reform. The TPP agreement will
be controversial and historic.13

Obama’s critics see his decision to make the TPPA the centrepiece of trade
policy – rather than pressing for ratification of the unpopular FTAs with
Colombia, Panama and South Korea that are already before Congress – as
succumbing to the quagmire of sectoral politics. Sallie James argues in the
Free Trade Bulletin, published by the right-wing Cato Institute in Washington,
that the choice

… to pursue a politically safe but economically marginal deal instead of

promoting agreements already signed and ready for passage does not
engender confidence in the administration’s commitment to economic
liberty and international engagement. The burden is on the administration
to demonstrate that TPP negotiations are not a stalling tactic designed
 INTRODUCTION 13

to distract policymakers (or, for that matter, trade advocates) from the
more promising gains to be made from broader multilateral or, preferably,
unilateral trade liberalisation.14

Meanwhile, the corporate lobby (organised in the US through the Business

Coalition for the TPP and in the various participating countries principally
through a network of US Chambers of Commerce) is treating the TPPA just
like any other FTA, irrespective of which president is in power. They have
already laid out their demands in forthright fashion during several formal
consultations. Beyond those hearings, big business has an intimate relationship,
and often a revolving door, with the Office of the US Trade Representative
(USTR), and its allies enjoy privileged access to negotiators in most other
TPPA countries.
Business commentator Bernard Hickey recognised a brutal reality when
he wrote in the New Zealand Herald on 23 March 2010: ‘These FTAs are never
about free trade from an American point of view. They are about creating
another opportunity to strong-arm smaller countries into granting trade
concessions to large American businesses.’ In Chapter 6, John Quiggin
describes the ‘bargaining chip’ approach, by which the US secures maximum
concessions in return for minimum commitments, and holds back the golden
carrot to use again in the next negotiations.
The US has already used that approach to maximise the gains from its
existing FTAs with countries involved in the TPPA negotiations; deals with
the remaining three countries (Vietnam, New Zealand, Brunei) would have
marginal economic significance. Vietnam, the fiftieth largest trading partner
of the US, already signed a Trade Promotion Agreement with the US in 2001
and was required to make extensive commitments as the price of accession
to the World Trade Organization (WTO). The remaining two countries, New
Zealand and Brunei, ranked 58th and 142nd respectively as US export markets
in 2009.15
This accumulation of factors and competing pressures gives the US ultimate
leverage in the TPPA negotiations. Joseph Stiglitz, economic adviser to former
US President Bill Clinton, remarked in 2008 that ‘one can’t think that New
Zealand would ever get anything that it cares about’ in a free-trade agreement
with the US. Such agreements are ‘managed trade agreements and they’re
mostly managed for the advantage of the United States, which has the bulk
of the negotiating power .… There’s no negotiation’, aside from a few minor
details.16
This reality makes Bryan Gould’s opening essay on the politics of New
Zealand’s participation in the TPPA all the more disturbing. Gould comments
on the lack of critical reflection on what economic integration means for
New Zealand – in stark contrast to the intellectual and popular mobilisations
14 JANE KELSEY

against US FTAs in Australia, Latin America and the US itself (documented

in Chapters 2 to 4). A bipartisan consensus between the Labour and National
parties has closed political and policy debate on these issues for almost three
decades, stifling discussion on the seminal question of how New Zealand’s free
trade agreements, from the Closer Economic Relations (CER) agreement with
Australia onwards, relate to the country’s chronic trade and current account
deficits and declining OECD ranking. While the Labour opposition has begun
to break the consensus on key fundamentals of neoliberalism, starting with
monetary policy, it has remained ideologically wedded to free trade deals.
Australian and New Zealand governments tend to act in tandem within
the trade arena, but domestic politics may make that complicated with the
TPPA. John Quiggin observes that even the Liberal government in Australia
read its obligations under the AUSFTA quite narrowly, reflecting a decline
in ideological commitment to neoliberalism. However, the resurgence of
such policies in New Zealand suggests the opposite might occur, with a
National-led government using its FTA obligations to justify maintaining
and extending its agenda.
The dearth of critical debate in New Zealand is reinforced by naïve
complacency that the global financial crisis has somehow bypassed the
country and that future energy, climate and financial crises will do the same.
Gould’s chilling prognosis for a TPPA has New Zealand moving from a branch
economy of Australia to an even more remote outpost of the US economy,
with policy driven from offshore and enforceable by US corporations.

What is the TPPA?

Formally, the US, Australia and Peru (with whichever other countries end
up in the final mix) are acceding to the Trans-Pacific Strategic Economic
Partnership Agreement between New Zealand, Chile, Singapore and Brunei
known as the P-4. The origins of that agreement go back several decades and
follow two parallel tracks.
When viewed through an Australian and New Zealand lens, the TPPA
can be traced to the APEC initiative that Australia launched in 1989. Both
countries have been more committed to APEC than most of its other member
‘economies’,17 largely because of their geographical and economic marginality.
But APEC has been troubled since birth.18 Its Anglo-American members
equated ‘economic cooperation’ with trade and investment liberalisation,
as in free trade. That approach was reflected in the ‘Bogor goal’ – adopted
in Indonesia in 1994 – to achieve free trade and investment among APEC’s
richer economies by 2010, and by 2020 for the poorer ones. But the goals
were ‘voluntary and non-binding’. Most of APEC’s Asian members were more
interested in an economic integration approach to regionalism. Members of
the Association of Southeast Asian Nations (ASEAN), especially Indonesia,
Philippines and Malaysia, were intent on strengthening their own solidarity.
 INTRODUCTION 15

APEC became internally paralysed by the divergence between these trade

liberalisation and economic integration paradigms. The tensions came to a
head at the annual meeting in Vancouver in 1997, which coincided with the
East Asian financial crisis. The countries that were most directly affected
moved to consolidate their strategic economic relationship. The ASEAN+3
dialogue with China, Japan and South Korea was institutionalised in 1999.
APEC’s Anglo-American members became increasingly concerned about
exclusive engagements within Asia, and especially the emergence of China.
In an attempt to restore the primacy of the liberalisation agenda, the US and
Singapore promoted an ambitious proposal for a Pacific 5 (P-5) agreement
involving Singapore, New Zealand, Australia, Chile and the US. However,
US President Clinton had no trade negotiating authority and Australia was
reticent, especially without Korea’s involvement.
The idea of a P-5 kept percolating during 1999, when New Zealand was chair
of APEC. Senior trade official (now Trade Minister) Tim Groser articulated
a ‘Trojan Horse’ strategy, which advocated a series of WTO-plus agreements
that could catalyse regional free trade from below and become consolidated
over time.19 However, growing hostility to free trade in the US, symbolised
by the failed WTO ministerial meeting in Seattle in late 1999, ruled the US
out of the process.
New Zealand and Singapore, as small-country free traders, had already
begun to negotiate bilaterally. Singapore was especially keen to distance itself
from the ‘failed’ East Asian economies. The Singapore New Zealand Closer
Economic Partnership Agreement was signed off in 2001. Negotiations to
expand it to a trilateral partnership including Chile were announced at the
APEC meeting in 2002. The Trans-Pacific Strategic Economic Partnership
Agreement, shortened to the Pacific 3 or P-3, became the P-4 in June 2004
when Brunei was accepted as a founding member. The agreement came into
effect on 1 January 2006.
New Zealand also developed a separate strategy to advance its ultimate
ambition of a free trade agreement with the US. The New Zealand United
States Council was set up in 2001 to lobby for a deal. Its counterpart in the
US has existed since 1986. In 2002 the US arm of the Council commissioned
a study to make the case for an FTA and helped to orchestrate letters in early
2003 from fifty House members and nineteen Senators urging President
Bush to initiate negotiations.20 The ostensible reason for the US not to do
so was New Zealand’s anti-nuclear policy, compounded after 2003 by the
New Zealand government’s decision not to send troops (officially) to Iraq.
The more substantive reasons were New Zealand’s peripheral economic and
strategic relevance, and the political minefield for negotiations on access to
US markets for New Zealand dairy and lamb.
By this time, Australia, Thailand, Mexico and Hong Kong, China had all
embraced the bilateral strategy. Australia began negotiations with the US in
16 JANE KELSEY

2003. In 2004, at the annual APEC trade ministers meeting in Chile, there
was a renewed push from New Zealand, Chile and Singapore, along with
Australia, Chinese Taipei, Canada and the US, to blend various free trade
initiatives into an Asia-Pacific FTA – something the official APEC Business
Advisory Council (the APEC business lobby) argued would help to overcome
the ‘spaghetti bowl’ of an expanding number of inconsistent FTAs in the
region. China, Japan, Malaysia and Indonesia sunk the idea.21
Lori Wallach and Todd Tucker recount a complementary history of the
TPPA from the American side, driven by the US’s geo-political strategy. Shortly
after the passage of the North American Free Trade Agreement (NAFTA) in
1993, the Clinton administration launched ambitious initiatives to establish
NAFTA-style ‘free trade’ blocs through a Free Trade Area of the Americas
(FTAA) and in the Asia-Pacific region based around APEC. Once Clinton’s
‘Fast Track’ negotiating authority expired in 1994, any deal was liable to
dissection by Congress. The FTAA stalled in the face of popular mobilisations
across Latin America. By 2003 it had imploded, as newly elected progressive
leaders denounced the FTAA as an attempt by the US to legalise its hegemony
over the entire continent.
The US embarked on a new wave of FTAs as President Bush secured a
Fast Track negotiating authority for five years from 2002, and the prospects
for the WTO Doha round slowed. The Bush administration pursued FTAs
with ‘the willing’ in the American continent, resulting in the Central America
Free Trade Agreement (CAFTA) in 2005, and FTAs with Chile and Peru in
2003 and 2006 respectively. Further agreements with Colombia, Panama
and South Korea were signed, but remain parked in the Democrat-controlled
Congress.
The Latin American agreements met with steadfast resistance in their
‘partner’ countries. José Aylwin gives a moving account in Chapter 4 of the
struggles of indigenous peoples against these FTAs in Mexico, Chile and
Peru. Whereas the complaints in Australia and New Zealand focus on the
‘democratic deficit’ in the negotiations and the constraints they impose on
governments, for the indigenous peoples in Latin America the US FTAs have
literally been a matter of life and death. Those who resisted the loss of land and
corporate plunder of their natural resources have suffered brutal repression
in return. Aylwin draws an interesting contrast to the strategy of successive
New Zealand governments to recruit Māori businesses and iwi corporate
bodies to support its free trade deals, a move that has largely supplanted the
opposition from Māori activists in earlier years.
These parallel paths in America and Oceania intersected during the final
phase of the Bush presidency. The negotiations on financial services and
investment in the P-4 had been deferred for two years at Chile’s request,
as it took stock of the concessions that the US had required in its FTA. In
February 2008 the Bush administration announced that the US was joining the
 INTRODUCTION 17

negotiations on that unfinished business. These negotiations began in March

2008. Three rounds were held involving the US and P-4 parties during 2008.22
The lack of any formal mandate for those negotiations caused ripples in
Washington. The rumblings intensified in September 2008 when Bush’s
USTR Susan Schwab notified Congress that the United States would expand
its participation beyond the two sectoral issues and start negotiations to
become a full party to the agreement, which was subsequently referred to as
the Trans-Pacific Partnership.23 At the APEC leaders’ meeting several months
later, the host country Peru, along with Australia and Vietnam, announced
they would join the process.24
At the suggestion of the Bush administration, the first round of TPPA
negotiations was scheduled for March 2009 in Singapore. As this was only
a matter of months after the November 2008 presidential election, a new
administration would not have time to get itself organised. Shortly after
President Obama’s inauguration, the Office of the USTR published a notice of
intent to initiate negotiations on a TPPA, a request for comments and notice
of a public hearing.25 Defensive Obama officials claimed that the notice was
teed up before the election and that no decision had been made with respect
to the negotiations by the newly elected government.
On 24 February 2009 the Obama administration asked the TPPA negotiating
parties to delay the March negotiations indefinitely, so officials could be
appointed to the Office of the USTR and the new administration could review its
trade policy.26 Leading Democrats in the Congress wrote to Obama expressing
their opposition to the proposed TPPA and accused Bush of attempting to
ambush the new President.27 Supporters of the TPPA in the Congress then
issued their own letter, urging the President to remain committed to the cause.28
Speculation about Obama’s agenda continued with his appointment
of trade novice Ron Kirk, one of the few Democrats who had supported
the passage of NAFTA, to the position of USTR. There was a dearth of
pending free trade negotiations, and the permanent officials at the USTR
were champing at the bit to proceed with the TPPA. Tensions between the
President and USTR on one hand and the Democrats in the Congress on the
other, and higher priorities of health care and the climate change summit,
meant the TPPA process remained stalled. Prior to the presidential trip to
Asia in November 2009, various stakeholders were assured that no TPPA
decision was expected. However, on 13 November 2009 President Obama
announced at an event in Tokyo that the United States would ‘engage’ with
the Trans-Pacific Partnership.29
The same day, Kirk issued a slightly more detailed statement that had three
notable features. First, it promised close consultation with US Congress and
domestic ‘stakeholders’, which for the Democrats includes everyone from
mega-corporations to its core labour and social democratic constituency.
Second, the TPPA was envisaged as the foundation for an APEC-wide free
18 JANE KELSEY

trade agreement. Third, the US approach would address ‘gaps in the previous
approach to FTAs to recognise the new challenges that confront American
workers, farmers, ranchers, manufacturers, and service providers’.30
Throughout all this, ministers and officials continued to meet informally,
especially on the fringes of APEC meetings. The first official round of
negotiations took place in Melbourne from 15 to 19 March 2010, the second
round in San Francisco in mid-June, and the third was scheduled for October
in Brunei, with an ‘inter-session’ meeting to try to resolve market access issues
in August in Peru.

Negotiations in Search of a Rationale

One objective of this book is to evaluate the possible rationale for a TPPA.
Even when free trade negotiations are straightforward, the secrecy surrounding
them makes it very difficult to critique their content and likely impact until
after the texts are signed. In making their assessments, the contributors to
this book have had to make a number of assumptions. The first is that the
existing US free trade agreements will constitute the minimum that is likely
to be required of a TPPA. Second, the demands that the major corporations
have already made in their various submissions will principally frame the
negotiating positions of the various parties. Third, a TPPA that builds on
the existing FTA platform would require its signatory parties to maintain a
pro-market and light-handed regulatory regime for future decades. Those
obligations would severely restrict the ability of governments to respond
to future crises and effectively embed neoliberalism in perpetuity, despite
widespread disillusionment with the paradigm.

The Economic Rationale

Even commentators who are sympathetic to free trade are sceptical about the
economic value of an agreement between eight countries that are already bound
by a web of interlocking free trade deals. There are several reasons for this.
First, the participating countries are, by the nature of the project, already
highly liberalised in their merchandise trade, services and foreign investment,
and their remaining sectors are jealously guarded.
Second, most of the participating economies are of limited regional
importance in Asia and the Pacific Rim or to the US. An article in the Wall
Street Journal on 22 April 2010 noted that the total merchandise trade of
TPPA countries with the US in 2009 was just US$110 billion out of total US
imports and exports of US$2.6 trillion. ‘The TPP, in other words, accounted
for 4.2% of America’s global trade.’
Third, governments have made no attempts to commission the usual
studies that project fantastic economic gains from pending free trade
deals. John Quiggin explains in Chapter 6 that these wild projections have
become seriously discredited, especially among economists. A study that
 INTRODUCTION 19

predicted a bonanza from a TPPA would be even less plausible, given the
points just raised.
The credibility of the economic argument has been further undermined
in Australia by the deterioration in the trade balance with the US since the
AUSFTA came into force in 2005. Indeed, an ex post study conducted by
the Australian Parliamentary Library showed a deteriorating trade balance
following each of Australia’s FTAs.31 Quiggin cautions that some of those
trends may be attributed to factors like the exchange rate, but Australia’s
free trade agreements have clearly not delivered their promised windfalls.
The economic arguments for a TPPA have even been muted in New
Zealand. A document that the New Zealand US Council produced in 2008 in
support of the deal refers to a study that was commissioned in 2002 by the US
New Zealand Council.32 Surprisingly, no copies of the completed report are
publicly available. A draft of the report projected a NZ$732 million increase
in New Zealand’s exports to the US, although it is unclear if this was a one-
off or annual gain. That figure appeared to be premised on the (untenable)
assumptions of the computable general equilibrium method that all tariffs
affecting New Zealand exports would be removed and this would occur at the
time of signing the agreement.33 US exports to New Zealand were expected
to rise by 25 per cent, but by much more if Australia were included. The
report gave equal emphasis to the strategic benefits from ‘helping to restart
and accelerate the momentum of trade liberalisation’, especially in APEC.34
A more recent commentary from the deputy head of the New Zealand
Institute of Economic Research (NZIER) has given a basic estimate of around
NZ$650 million in gains per year.35 That calculation used the NZIER’s GTAP
general equilibrium model of the world economy, which operates on similarly
unrealistic assumptions. Significantly, there has been no formal study.
Instead, the Ministry of Foreign Affairs and Trade (MFAT) has relied on the
numerical value of trade between the countries to sell the economic benefits
of a TPPA,36 as if those figures automatically translate to economic value from
an agreement. The numbers are often bolstered by spurious references to the
value of trade within the Asia-Pacific, on the presumption that the TPPA will
eventually seed an APEC-wide FTA.

The Agricultural Rationale

Despite the subdued claims of economic benefits from a TPPA, all parties
will seek some tangible outcomes for their agricultural exporters. The gains
for Australia would be a review of the exclusion of sugar from the AUSFTA, a
reduction in the long phase in periods for tariff reductions on beef and some
dairy exports, and the expansion of tariff-rate quotas that apply to various dairy
products. The US is resistant to re-opening those market access schedules.
New Zealand is preoccupied with access for its giant dairy cooperative
Fonterra to US markets. As always, Fonterra’s interests are conflated with
20 JANE KELSEY

the national interest. The US and New Zealand repeatedly blocked Canada’s
participation in the talks because it insisted that dairy and poultry, which
are governed by a supply management system, would be off the table.37 As
Warwick Murray and Edward Challies report in Chapter 7, there has been
mounting pressure on the USTR from the US dairy lobby, especially the
US National Milk Producers Federation and the US Dairy Export Council
and their political supporters, to exclude dairy from the negotiations with
New Zealand, on the grounds that Fonterra benefits from a monopolistic
structure. Even if those demands are rebuffed, there is a consensus among
US commentators from the Cato Institute to Joseph Stiglitz that New Zealand
will not gain any meaningful concessions on dairy.38
There has also been unprecedented scepticism in New Zealand’s business
press about the gains for agriculture. In an article entitled ‘Why an American
Free Trade Deal is Ludicrous and Dangerous Idea [sic]’, written in September
2008, Bernard Hickey described the ‘idea that somehow our dairy, beef and
sheep exports would suddenly be granted free access to the monster markets
in America’ as ‘just ludicrous’.39 Hickey repeated those sentiments in March
2010, following a letter from thirty US Senators to President Obama outlining
the threats that granting easier entry for New Zealand dairy imports would
pose to US interests. He cautioned that ‘[m]any New Zealanders simply don’t
understand the brazenness and the power of the industry lobby groups in
America to influence their government and get involved in foreign affairs’.40
As Murray and Challies remind us, the agricultural component of the TPPA
also has social, environmental and development implications that are rarely
acknowledged in New Zealand. Drawing on their research in Chile, they point
to the destructive impact on small farmers of the rapid growth of agri-export
production, driven by foreign investors such as Fonterra. They urge a delay in
the negotiations so that research can be conducted into sustainable agriculture
that could then inform an alternative approach in the TPPA.
That research could also benefit New Zealand. The growing foreign
ownership of corporate farms, the potential introduction of tradeable shares
in Fonterra, and the possibility of joint venture operations in New Zealand
with agribusinesses like Nestlé raise the prospect that foreign corporations
may come to dominate New Zealand’s dairy industry. The ‘national interest’
as perceived in 2010 may end up principally benefiting the balance sheet of
foreign investors, while the investment rules in a TPPA leave the government
with very few tools to reassert New Zealand’s interests. In a further twist,
US dairy interests might well object that concessions to New Zealand are
effectively opening US markets to the benefit of Chinese investors who are
currently seeking to buy up large clusters of New Zealand farms.
Geoff Bertram’s analysis of climate change policy in Chapter 9 reinforces
concerns about the shortsighted perception of ‘trade’ issues. Agricultural
 INTRODUCTION 21

producers have been granted long-term exemptions under New Zealand’s

emissions trading scheme. That will open New Zealand to accusations of
unfair competition if the Obama administration or other TPPA parties
impose heavier burdens on their own producers, and the country could face
carbon charges at the border as a result. Bertram warns that New Zealand’s
‘emissions trade surplus’ will attract attention, as international trade negotiators
increasingly focus on carbon-footprinting and the emissions-intensive nature
of exports compared to imports, and calls on government to take a longer-
term perspective on the trade and climate change linkage.
The US also has offensive interests related to agriculture. David Adamson
explains in Chapter 8 that Australia and New Zealand insist on a strict
evidence-based standard for quarantine and food standards in both their export
markets and at their own borders. The P-4 takes a strong ‘principles-based’
approach on those issues. Adamson cautions that pursuit of export interests
through the TPPA negotiations must not induce governments to cede their
right to protect public health and the right of consumers to know the content
and origins of food and products, including genetically modified organisms.
The US expectation that other countries should harmonise their quarantine
and standards to those of the US suggests that a range of significant border
protection measures will come under pressure in the TPPA negotiations.

The APEC-FTA Rationale

For those who know the history of previous extravagant plans for an APEC free
trade agreement, a Free Trade Area of the Americas, a Multilateral Agreement
on Investment and the WTO Doha round, the TPPA appears to be another
over-ambitious project that is driven by trade ideologues and avaricious
corporations and may end up parked in a cul-de-sac, like its predecessors.
Even if the TPPA does not collapse under its own weight, its anticipated
expansion to include the emerging economies of Asia ignores the troubled
history of APEC and the commitment of Asian countries to their own dynamic
integration. While the countries of ASEAN, as well as India, China, South
Korea and Japan, are all now engaged in inter-regional FTAs, their primary
focus is intra-regional, through the Asian Cooperation Dialogue. Their ultimate
vision of an Asian community that integrates West Asia (Middle East), North
Asia (large parts of the old USSR), East Asia and Southeast Asia does not
include Australia and New Zealand, and certainly not the US. The idea that
successive clusters of Asian countries will seek to accede to a pre-packaged
TPPA designed by the original parties is fanciful.
Paul Buchanan (Chapter 5) puts this ambition into a geopolitical context.
The traditional linkage of trade and security in inter-state alliances has
become more complex and often spurious in the post-Cold War era. Buchanan
concludes that the TPPA has little to do with trade per se and more to do with
the diminishing influence of the US in Asia. The building bloc approach to an
22 JANE KELSEY

APEC-wide agreement is a proxy battleground for US attempts to neutralise

China’s growing dominance in the Western Pacific. At the same time, he
warns that the TPPA could potentially facilitate unintended security risks –
such as cross-border crime, espionage and arms trade.

Negotiating Hurdles
The process of negotiation and ratification of a TPPA could well become an
exercise in herding cats. All parties will need to agree to the architecture and
substance of any agreement, secure support for the passage of the outcomes
from their domestic constituencies, and steer the final text through their
constitutional processes.
Table 1 shows the complex web of free trade treaties that already involve
different configurations of countries. The more states that become involved,
the more complex the process will be. Ten participants is probably a maximum.
Vietnam has three meetings to decide whether to remain. Any others would
have to join in 2010. If Malaysia participates, it will have to concede ground
on the areas that stymied its bilateral negotiations with the US, principally
services, investment and government procurement.41 Canada would have to
put its supply management regime for dairy and poultry on the table.

Table 1. Agreements among TPPA negotiating partners

Agreement Signing date Entry into force

Australia and New Zealand Closer Economic Relations 28 March 1983 1 January 1983*
US–Vietnam Bilateral Trade Agreement** 13 July 2000 10 December 2001
Singapore–Australia Free Trade Agreement (SAFTA) 17 February 2003 28 July 2003
US–Chile Free Trade Agreement 6 June 2003 1 January 2004
US–Singapore Free Trade Agreement (USSFTA) 6 May 2003 1 January 2004
Australia–US Free Trade Agreement (AUSFTA) 18 May 2004 1 January 2005
Trans-Pacific Strategic Economic Partnership Agreement (P-4) 18 July 2005 1 January 2006
(includes Brunei, Chile, Singapore, New Zealand)
US–Peru Trade Promotion Agreement 12 April 2006 1 February 2009
Peru–Singapore Free Trade Agreement 29 May 2008 1 August 2009
Peru–Chile Free Trade Agreement 22 August 2006 1 March 2009
Australia–Chile Free Trade Agreement 30 July 2008 6 March 2009
ASEAN–Australia–New Zealand FTA (AANZFTA) (includes Brunei, 27 February 2009 1 January 2010
Burma, Malaysia, the Philippines, Singapore and Vietnam)

Source: Data compiled by Public Citizen, 2010.

* The CER agreement came into force before it was signed.
** This agreement was negotiated as a precursor to Vietnam’s accession to the WTO, formalised in 2006, and is less
comprehensive than the other FTAs.

A project that already bears the weight of numbers, overlapping existing

obligations and potentially stroppy opposition is also subject to US electoral
 INTRODUCTION 23

timetables. USTR Ron Kirk has ambitions to conclude a deal by the time
the US hosts APEC in Honolulu in November 2011, which would take the
ratification process dangerously close to the 2012 presidential elections. A
reality check suggests that any conclusion would come well into the reign of
another president, who may expound yet another, contrary set of principles
to Obama’s.
The first meeting in March 2010 established working groups to deal with
clusters of issues affecting sectors, rules and market access. Lead negotiators
focused on ‘horizontal issues’ that would arise from a regional approach, the
implications of emphasising regulatory integration as well as liberalisation,
a means to advance the interests of small and medium enterprises, how to
create a ‘living’ agreement that could accommodate new issues and members,
and development issues affecting Vietnam and potential future parties.
A number of crucial questions had to be resolved before any substantive
negotiations could begin. One was the status of the existing arrangements
between the parties. Would the existing FTAs continue to exist alongside the
TPPA, with the highest standard of liberalisation prevailing, as the Singapore
New Zealand agreement does with the P-4? If so, renegotiations would be
required only where the existing agreement directly conflicted with the TPPA.
Two more prior questions remained unresolved. The first involved access
to countries’ (especially US) markets for goods, textiles and agriculture. The
US argued that the schedules of existing FTAs should not be re-opened and
negotiations on more liberal market access should be limited to countries
that have not yet concluded FTAs. That would allow the US to retain the
exclusion of sensitive products, such as sugar in the AUSFTA, and take a
different approach on dairy with New Zealand than it did with Australia. Peru,
in particular, supported the US position. Not surprisingly, Australia, New
Zealand and Singapore argued for re-opening the existing schedules. A second,
related question was whether all countries would engage in the negotiations
collectively and produce a single set of market access commitments for all, or
negotiate bilaterally, which would result in different levels of market access
between various parties. Australia and New Zealand wanted the former, the
US the latter.42
The parties were agreed on a single set of rules for the other substantive
chapters of the agreement, dealing with services, investment, government
procurement, sanitary and phytosanitary measures, technical barriers to trade,
and intellectual property. Partial or full draft chapters were to be available for
the third negotiating meeting in Brunei in October 2010. However, a number
of obstacles stood in the way of agreeing on a single set of rules.
First, there needed to be an agreed starting point. The TPPA notionally
involves four countries acceding to the existing P-4. But, as the US corporate
lobby points out, the P-4’s liberalisation provisions are the weakest of the
agreements among the parties. In particular, the P-4 lacks financial services
24 JANE KELSEY

and investment. New Zealand officials have argued that other countries are
technically acceding to the P-4, so its text should be departed from only where
the argument is convincing.43 Yet USTR Ron Kirk reportedly told the US
agriculture lobby that members of Congress were ‘more open and receptive’
to a TPPA because they could negotiate the agreement from scratch.44
There have also been inconsistent statements about the basic framework of a
TPPA. New Zealand negotiators advocate a ‘principles-based’ approach, which
they see as the strong point of the P-4. ‘Principles-based’ could hypothetically
accommodate either a more socially progressive twenty-first century agreement,
or the demands of the all-important US corporate lobby for a swathe of new
market-based ‘disciplines’ that restrict how governments can regulate their
commercial activities. 45 At the same time, the Obama administration is
firmly focused on increasing market access as a means to advance the goal
of doubling exports and trebling services exports by 2015 (even if that seems
unattainable through a TPPA among already liberalised and economically
insignificant states) and according to USTR Kirk ‘will look to be more creative
when securing market access, such as through improved enforcement of
trade deals and settling trade disputes’.46 That would favour a variation on
the more prescriptive NAFTA template of existing US FTAs.
Specific chapters will also face stumbling blocks. The standard approach of
US free trade agreements has been to guarantee the right of foreign investors to
take disputes directly against governments. That applies in all TPPA countries
except Australia, which rejected investor–state disputes in the AUSFTA, and
New Zealand, which has no FTA or bilateral investment treaty with the US.
Lori Wallach and Todd Tucker (Chapter 3) explain that investor–state disputes
have also become highly controversial in the US and are currently the subject
of vigorous debate in a review of US policy on investment treaties. Agreement
on a TPPA text could pre-empt that review.
The treatment of labour issues will be equally problematic. The USTR has
invoked the precedents of its existing FTAs to support the politically crucial
inclusion of a labour chapter to deal with labour protections, workplace safety,
job creation and skills enhancement.47 As Ted Murphy explains (Chapter
13) that would require re-opening the P-4 and other FTAs that are seen to
have ‘sub-optimal’ provisions. Some existing TPPA participants are likely
to baulk at the US’s political imperative; such demands seem certain to sink
the prospects for any APEC-wide FTA.
Conversely, the USTR does not want the US agreements with Singapore and
Chile that guarantee a quota for workers in specialty occupations the right to
enter the US temporarily to create precedents for other TPPA countries. The
Congress has made it clear that it will not accept that kind of liberalisation
of immigration in future free trade agreements. As a further complication,
the P-4 presumes the development of a chapter on temporary labour mobility
for business people.48
 INTRODUCTION 25

A final issue is particularly important for Australia and New Zealand. US

free trade agreements routinely apply ‘most-favoured nation’ (MFN) treatment
retrospectively; this means that a country is entitled to the better treatment
that a party gives to any other country currently and in the future. Australia
and New Zealand have already signalled that they want a special provision
that would exclude their deep integration arrangement under CER from the
MFN condition. This would open the door for other countries to claim similar
exceptions and dilute the objective of a comprehensive, multiparty TPPA.

Sectoral Impacts
The suggestion that the TPPA should move beyond the traditional focus on
reducing tariffs, which in New Zealand and Australia are virtually nil, to more
extensive ‘principles-based’ approaches to domestic policy and regulation
has particular implications for intellectual property, foreign investment,
government procurement and services, including financial services.
The contributors to this book assess how those behind-the-border rules
might restrict the policy choices available to governments and the purposes
for which they can regulate. Most draw on lessons from past negotiations
involving Australia and New Zealand and the demands that powerful and
well-organised corporate lobby groups have already made. Different chapters
show how the entrenchment of market-rule through a TPPA can impact
on every aspect of everyday life, ranging from public health and access to
medicines, the promotion of local culture, and provision of quality public
services, to management of the country’s economy. For example, various
neo-Keynesian responses to recession, chronic unemployment and financial
instability can be regarded as creating barriers to free trade, and could therefore
be prohibited under a TPPA.
In Chapter 2, Patricia Ranald, a key player in the vigorous contest in Australia
over the AUSFTA, draws on case studies of the Pharmaceutical Benefits Scheme
(PBS), local control of blood products, and the shelved privatisation of the
Snowy Mountains Hydro-electric Scheme to illustrate how deeply the rules
on intellectual property, services, investment and government procurement
can intrude on the policy decisions of central and State governments.
The public health implications of the battle over the PBS – Australia’s
version of New Zealand’s Pharmac – are expanded upon by Tom Faunce
and Ruth Townsend in Chapter 10. They cite numerous examples where
powerful tobacco, pharmaceutical and chemical companies have directly
sued governments in international tribunals to prevent the introduction
of public health policies and regulations to show why Australia and New
Zealand must resist US demands to give corporations such powers under
the TPPA.
Jock Given (Chapter 12) addresses another key area of controversy in
all US free trade agreements: the erosion of cultural diversity and rights
26 JANE KELSEY

of governments to support their local cultural industries in the face of the

overwhelming impact of the US entertainment industry.
The Australian authors expect all these issues to be revisited during the
TPPA negotiations, as the US seeks to claw back the concessions that Australian
negotiators obtained in AUSFTA.
The issues for workers and trade unions are explored by Ted Murphy from
the Australian union movement (Chapter 13). Reflecting on the Australian
Labor government’s response to the global financial crisis, he argues that it
is critically important for workers and society that central, State and local
governments retain the right to use taxpayer-funded public procurement for
the benefit of the country. The formation of a coalition of peak trade union
bodies across most TPPA countries also signals a concerted campaign for
guaranteed labour rights as part of any TPPA.
The New Zealand contributors have had to speculate on the basis of
the Australian experience, and other indications from the USTR and the
corporations. One priority for the US is to secure ever-more rigorous protections
of intellectual property rights-holders, especially in the pharmaceuticals and
entertainment industries. Susy Frankel (Chapter 11) cautions against trading
off the right to design intellectual property laws in ways that benefit New
Zealand’s economy and society in the hope of securing other trade gains.
Another US priority will be the foreign investment regime. Bill Rosenberg
(Chapter 14) catalogues the legacy of several decades of investment liberalisation
and unrestricted capital flows in New Zealand and warns that binding future
governments to an even more open regime in perpetuity will make it almost
impossible to tackle New Zealand’s chronic private foreign debt and current
account deficits, its volatile and overvalued exchange rate, and its vulnerability
to financial instability.
Jane Kelsey (Chapter 15) extends that discussion with reference to ‘disciplines’
on the right of governments to regulate their services for social, rather than
purely market, objectives. She uses the examples of Telecom New Zealand
and public private partnerships to run schools and hospitals to illustrate the
likely constraints on policy space and the risk that powers granted to foreign
investors will have a chilling effect on a government’s pursuit of the national
interest.
The final chapter by Nan Seuffert and Jane Kelsey exposes the recklessness
of tying governments to a light-handed and pro-market approach to the
regulation of financial services and investments at a time when the latest
global financial meltdown has stripped that model of any claims to legitimacy.

The Challenge to Democracy

Important as these sectoral impacts are, they must not distract us from the
underlying issue: these agreements embed a neoliberal model that has already
 INTRODUCTION 27

failed. In Chapter 6, John Quiggin urges us to use the TPPA as an opportunity

to engage the debate on alternatives.
This call is not just anti-free trade rhetoric. In Chapter 3 Lori Wallach and
Todd Tucker explain the political risks if the Obama administration does not
pursue a TPPA that embodies the new TRADE Act. José Aylwin, in Chapter
4, predicts ongoing battles between indigenous peoples and governments
in Latin America if these agreements continue to trample on indigenous
rights and human rights law. Australian activists, academics and unions are
gearing up to enjoin the battle against the TPPA where the AUSFTA left off.
Only New Zealand seems inert, although a resurgence of Māori challenges
to commercial exploitation of forestry, geothermal resources and minerals in
national parks and on the seabed could see a revival of indigenous opposition
in New Zealand as well.
The Obama administration has understood these political risks and
taken unprecedented steps to pre-empt allegations of secrecy and corporate
dominance.49 In addition to several formal hearings of submissions on the
TPPA required by US law, the USTR launched a number of initiatives as part
of an Open Government Plan. The chief negotiator and her team maintained a
blog to respond to questions during the week of the San Francisco negotiations.
‘Stakeholders’ that had expressed an interest in the TPPA were given daily
updates on developments in the negotiations and the agenda for the coming day.
They were even provided with a room to meet with negotiators to discuss issues
and priorities; many took advantage of this, including the most prominent
non-governmental organisation (NGO) critic, Public Citizen, along with the
Centre for Public Analysis on Trade and Health, the International Forum
on Globalization, and the American Federation of Labor and Congress of
Industrial Organizations (AFL–CIO). Those briefings and facilities also ensured
that the US Business Coalition for the TPP, which came to San Francisco
in force, had a formal opportunity for engagement with negotiators. There
was no commitment that this openness would be replicated for future TPPA
negotiating meetings in Peru, Brunei and elsewhere.
Many of these initiatives had been proposed in a letter signed in May 2010
by union leaders from all the TPPA negotiating countries except Vietnam.50
The unions also urged the trade ministers to create a joint TPPA website that
would convey information on the negotiations, including white papers, draft
texts, offers and counter-offers, press statements and declarations, as well as
papers from civil society.
Such a democratisation of the negotiations has the potential to generate a
broader popular understanding of what is at stake, and foster a twenty-first
century approach to trade that is genuinely progressive. It would also bring
questions about the costs and benefits of the TPPA, and the failings of the
free trade paradigm, right into the negotiating domain – a move that would
28 JANE KELSEY

have important flow-on effects for other orthodox FTA negotiations and for
the Doha round. For that reason alone, participating governments seem
likely to resist.
Indeed, after three rounds of negotiation, the prospects for a progressive
agenda taking hold seem remote. The New Zealand government has made no
efforts to engender an informed public engagement with the issues, preferring
quiet consultations with ‘stakeholders’ and no commitment to public hearings
that can put its claims about the benefits of a TPPA to the test. There has
been somewhat more, but still limited, engagement in Australia. Unless these
practices change, it seems likely that people (as opposed to corporate lobbies)
will again have little idea what our governments have agreed to do until the
deal is done and will have to rely on a second-hand flow of information from
the US. Australian columnist for The Age, Kenneth Davidson, attributes this
tradition of secrecy to the fact that

… the new trade agreements are fundamentally undemocratic. The

negotiations are conducted in secret and the agreements are structured
in a way that will make it virtually impossible for future governments to
rescind agreements that are found to be unpopular. Behind the mantra of
the superiority of the market – reinforced by privatisation, low taxes and
small government – is the aim of shifting the decision-making process from
the one-person, one-vote democratic formula to the one-dollar, one-vote
market formula.51

It would be possible to conceive of a twenty-first century trade agreement

that reflected this realisation and embraced a socially progressive and
democratic agenda where governments put their people centre stage in the
negotiations. The failure of governments to seize that opportunity means
the TPPA negotiations are destined to become a fraught arena in which
ideologies, interests and agendas compete.
1. Political Implications for
New Zealand
Bryan Gould

For New Zealand, British entry to the Common Market in 1973 meant the
abandonment of over a century of almost completely managed trade and a
rapid move towards one of the most far-reaching free trade regimes in the
world. New Zealand unilaterally cut tariffs and scaled down or removed other
protections in the apparent belief that its trading partners would rapidly
follow suit. The change was hardly debated at the time and has been little
questioned since. The proposed Trans-Pacific Partnership Agreement is the
latest and perhaps most significant attempt to secure the supposed benefits of
free trade by extending the P-4 agreement with Singapore, Chile and Brunei
to Australia and three other parties, Peru, Vietnam and, most importantly,
the United States.
The prospect of a free trade agreement with the US has long been held out
as the holy grail of New Zealand trade policy. Almost all the main political
parties support the initiative. Little attention is paid to the possible downsides,
which include a considerable loss of democratic control over New Zealand’s
economy, and the forced abandonment of particular policies that have served
New Zealand well. There is no awareness that current domestic economic
policy would further increase New Zealand’s vulnerability in a free trade
arrangement that includes the United States. There is instead a worrying
degree of näivety and a failure to recognise that New Zealand’s own experience
and that of other small and marginal countries in similar circumstances make
it very unlikely that the country can secure an agreement that will serve its
interests. The negotiating positions already being adopted by the Americans
affirm this.

The Historical Context

When the United Kingdom acceded in 1973 to what was to become the European
Union, a long history of managed trade for New Zealand came to an end. As
a bridging measure to meet the new situation, the government subsidised
30 BRYAN GOULD

domestic primary production while new types of product for export were
developed. But this was not a sustainable solution. Change came with the
election in 1984 of a Labour government committed to what became known
as ‘Rogernomics’, a belief that allowing the ‘free market’ to operate might
produce short-term pain but would offer benefits in the long run.
An essential element in what was virtually an article of faith – that prices
should ‘tell the truth’ – was that tariffs and other forms of protection should
be reduced or dismantled altogether, so that domestic production could,
by facing up to international competition, become more efficient and
competitive. Free trade, or at least much freer trade, became an essential
but virtually unstated, let alone debated, concomitant of a free-market
domestic economic policy.
The stance was strongly supported from all parts of the political spectrum.
The election of a National government in 1990 further marginalised any
substantial debate about free trade. It was accepted by that government as
axiomatic that, as tariffs came down and protections like domestic subsidies
were removed, virtue would be rewarded, and that New Zealand’s trading
partners, both actual and potential, would soon offer the country free access
to their markets in return.
The Closer Economic Relations (CER) arrangement with Australia was
already in place and remains the most intensive single step New Zealand has
taken; it replaced, in 1983, an earlier free trade agreement with Australia and
ushered in a deliberate attempt to go beyond free trade and to achieve a much
closer integration of the two economies. Other trading partners, however,
were rather slower to respond.
The Labour government of 1999 to 2008 nevertheless resumed its push
to advance the cause of free trade with a free trade agreement in 2001 with
Singapore that was extended, in what became known as the P-4 agreement,
to Chile and Brunei in 2005. It is this agreement that has become the basis
of a further extension to a proposed eight-nation Trans-Pacific Partnership,
including not only Australia, but also Peru, Vietnam and the United States.
A further significant step was taken when New Zealand signed a free trade
agreement – the first developed country to do so – with China in 2008. This
was then supplemented by the New Zealand–Hong Kong, China Closer
Economic Partnership Agreement in 2010. Agreements have also been
signed with Thailand, Malaysia and in the Association of Southeast Asian
Nations (ASEAN) countries, and are at varying stages of negotiations with
India, Korea and the Gulf Cooperation Council, and potentially with Japan.
None of this has produced much significant expression of concern; each
successive step was widely welcomed as a move in the right direction. Indeed,
the success of each new arrangement has been proclaimed, and possible
downsides ignored, almost as soon as the agreements have been signed.
A case in point has been the free trade agreement with China. The fact is,
 1. POLITICAL IMPLICATIONS FOR NEW ZEALAND 31

of course, that New Zealand’s trade with China was already flourishing, by
virtue of China’s rapid economic growth, without the benefit of a free trade
agreement; and China’s value as a trading partner has been further enhanced
in recent times by the increased appetite of China’s growing middle class for
New Zealand’s premium food products at the same time as the rest of the
global economy has been mired in recession.
Typically, little attention is paid to the fact that China has become New
Zealand’s second largest source of imports, after Australia, and that imports
from China, which are more than 60 per cent higher in value than New
Zealand exports, have more than tripled over the past decade and are likely
to go on growing. New Zealanders are invited instead to focus solely on the
export side of the trading relationship, and to believe that an agreement that
took effect as recently as the end of 2008, and will take a decade or more to
implement fully, should nevertheless take the credit for a rapid rise in New
Zealand exports to China.1

Free Market Orthodoxy

With the election of the 1984 Labour government in New Zealand, the country’s
politics and economic policies in particular were belatedly and unexpectedly
converted to a simple yet powerful idea that had already begun to dominate
the world’s economic and political thinking. The doctrine that the unfettered
market will always arrive at the best outcomes was adopted with unusual
speed and zeal by New Zealand’s political establishment.
The doctrine was, of course, as much political as economic. It significantly
re-drew what had been regarded hitherto as the obvious boundary between
government and the private sector, to the point where government, it was
argued, should be limited to basic functions like the defence of the realm
and the maintenance of law and order, while private interests got on with
the business of running the economy.
The political consequences were far-reaching. The whole point of democracy,
after all, is that the political power and legitimacy of a democratically elected
government is deliberately set up as a counterforce to the overwhelming
economic power of those who dominate an unfettered market economy. If the
infallibility of the market means that it must never be second-guessed, what
then is the point of electing governments to do exactly that? The withdrawal
of governments from the attempt to defend the wider and common interest
against the claims of the increasingly powerful cabal who dominate the global
economy has meant that confidence in government and in democracy itself
has suffered a body blow.2
In New Zealand, as one example of this development, we have increasingly
seen democratic policy-making being sidelined in favour of government
by appointed oligarchies, often representing business interests unwilling
to have their wishes over-ridden by wider concerns. The proposals for the
32 BRYAN GOULD

new Auckland Super City authority and the replacement of the Canterbury
Regional Council by appointed commissioners are recent cases in point.
But, it might be thought, times have changed. Twenty-five years have given
us ample time to make an accurate evaluation of the long-term consequences
of this deeply entrenched orthodoxy. The conclusive judgment that has been
unequivocally delivered by the global financial crisis and ensuing recession
has demonstrated that entrusting our economies and our politics to the
unfettered market leads not only to economic disaster but also to damaged
societies, endangered environments and an enfeebled political system as well.
All of this makes it all the more surprising that many political and most
business commentators in New Zealand have greeted the opening of talks
about a TPPA as a piece of unalloyed good news. It seems to be assumed that
the mere geographical extension of an unfettered market will of itself produce
benefits to all concerned. Yet, if the benefits of free trade are so self-evident,
we should surely have seen them by now.
A consideration of the strictly economic consequences of a TPPA will be
made elsewhere in these pages. Suffice it to say that, in New Zealand’s case,
there is a surprising disconnection between the constantly repeated lament
at the country’s slide down the OECD economic tables3 on the one hand, and
the supposed benefits delivered by free trade over that period on the other.
We must, by way of preliminary conclusion, register that, whatever the case
for free trade might be, it is not to be found in the economic statistics or in
the actual facts of New Zealand’s economic performance.

Current Political Attitudes

Hitherto, scepticism about the benefits of free trade has been limited to
the fringes of the political debate. Among the political parties represented
in Parliament, only the Greens4 have expressed substantial reservations.
The other smaller parties have either been strongly in favour, in the case of
ACT, or, in the case of the Māori Party, have expressed concerns on grounds
not necessarily related to trade policy. A resurgent New Zealand First, if it
were to regain representation in Parliament, might stand to one side of the
consensus. United Future, though, has followed the conventional line, while
the Progressives have stayed close to the Labour position.
That position is, for the first time in twenty-five years, however, possibly
showing signs of some movement. Labour has given notice through its new
leader that it is ready to depart from the major-party consensus on domestic
economic policy.5 Both Phil Goff and the party’s economics spokesperson,
David Cunliffe, have made it clear that they are ready to re-evaluate free-
market policies, and this would seem in principle to extend to trade policy.
We should not, however, assume too much. Until the Labour opposition
addresses the issue of free trade specifically, it remains to be seen whether the
caution that inhibited Labour in government from straying significantly from
 1. POLITICAL IMPLICATIONS FOR NEW ZEALAND 33

current orthodoxy on domestic economic policy, for fear of being attacked

as being ‘anti-business’, might again operate on an issue where the received
wisdom is so strongly established. We might expect a kind of guerrilla warfare
on points of detail, rather than any frontal assault on the issues of principle
and overall policy.
National in government, though, shows no sign of second thoughts. Prime-
ministerial6 and ministerial statements are clear that the conclusion of a free
trade deal with the US will be greatly beneficial and, while there is perhaps the
beginning of an understanding that achieving an agreement that meets New
Zealand’s interests might not be easy, there is a general optimism that any
negotiable agreement will be better than no agreement at all. An agreement
on almost any terms would be represented as a triumph for New Zealand’s
negotiators and a boon to the country’s exporters.
We have to look to extra-parliamentary opinion before we see a wider range
of views about free trade and a more prominent expression of scepticism. The
trade unions, principally through the New Zealand Council of Trade Unions
(NZCTU)7 and its economist, Bill Rosenberg, have been consistently effective in
pointing to the potentially adverse impact on investment and jobs, and on New
Zealand’s ability to control its own economic (and therefore political) destiny.
The Maritime Union expressed concern about what the New Zealand–China
free trade agreement would mean for jobs; while the Engineering, Printing
and Manufacturing Union, New Zealand’s largest industrial union, said the
agreement would emphasise the need for more investment in New Zealand
industry. Campaigning groups, like the Campaign Against Foreign Control
of Aotearoa (CAFCA) and the Action Research and Education Network of
Aotearoa (ARENA), have also been prominent in developing arguments
against the easy assumption that a free trade agreement will automatically
bring benefits.
Other groups, however, especially those representing business interests,
like Business New Zealand, the Manufacturers and Employers Association,
Federated Farmers and the Chambers of Commerce, have enthusiastically
welcomed the opening of negotiations. An exception has been the New Zealand
Manufacturers and Exporters Association, which has at least recognised the
possibility of adverse consequences for New Zealand industry. The reactions
of individual firms have varied according to the products they sell and
the markets they address; the dairy giant Fonterra, for example, has been
enthusiastic, but Fisher and Paykel Appliances expressed concern about the
free trade deal with China.
It is significant that some of those who have led and will lead the debate in
New Zealand are those who have formerly filled substantial professional roles
in the World Trade Organization (WTO). The New Zealand Trade Minister,
Tim Groser, is a well-regarded former New Zealand negotiator in world-
trade talks, as is the current chief executive of the Wellington Chamber of
34 BRYAN GOULD

Commerce, Charles Finney. The newly appointed ambassador to Washington,

with clear instructions to ease the way to successful free trade talks with
the Americans, is Mike Moore, not only a former prime minister but more
significantly a former director-general of the WTO. His political career has
been defined by his commitment to free trade and the global economy, and
he has recently published a book called Saving Globalization8 which, not
surprisingly, constitutes a paean of praise to free trade.
Public opinion has been little engaged and is only occasionally tested by
polling organisations. The evidence so far suggests that the proposition that
increased free trade will benefit New Zealand is broadly accepted by a smallish
majority, but that there is little awareness of what the downsides might be.
The free trade deal with China was supported by 45 per cent but opposed
by 32 per cent in a poll9 conducted just before the agreement was signed.
The TPPA has not yet attracted the pollsters’ attention. As the reality of the
negotiations and the difficulty of the issues raised become apparent, however,
it might be expected that the level of public awareness and concern will rise.

The Broad Political Implications of a TPPA

Issues of economic policy and management (and particularly of what happens
to the fruits of economic activity) are among the most important political
issues with which New Zealand has to grapple. A free trade agreement will
exercise a major influence on those issues because a free trade area operates
very much like a single economy – and in a single economy, skills, talents,
capital and resources will move inexorably to where superior productivity
will produce the best returns.
We see this very clearly if we look to what has happened in other large
and diverse economies like the United States or the European Union. The
outcomes for the less favoured, smaller and poorer, geographically marginal
regions are not encouraging. Just ask Greece or Portugal. They end up either
dependent on the generosity of their richer neighbours, as recipients of typically
ineffective policies such as regional aid, or being compelled to deflate and
retrench in a vain attempt to squeeze costs down.
We are, in other words, deluding ourselves if we believe that an enlarged
free trade area will deliver wider markets and better returns for New Zealand’s
exports, but will somehow spare us the obvious downsides. The likelihood is
that New Zealand’s already depleted reserves of capital, talent and natural
resources will be attracted to more promising prospects elsewhere in the
wider free trade area, with the result that the country’s overall economic
performance is more likely to decline in comparative terms than to improve.
A wider free trade area including the US, added to New Zealand’s existing
free trade arrangements, would mean that New Zealand must compete, in what
would be in effect a single large economy, on labour costs with the Chinese
and other low-cost countries, on access to venture capital with the United
 1. POLITICAL IMPLICATIONS FOR NEW ZEALAND 35

States, on the availability of mineral wealth with Australia, on the reach and
efficacy of its research effort and levels of productivity with Singapore, and
on New Zealand’s ability to attract international talent from some of the
richest countries in the world.
We have already seen that successful New Zealand enterprises are
increasingly compelled to move their operations overseas or are sold off to
foreign owners. We can expect to see much more of that if New Zealand’s small
and marginal economy is subsumed into a wider free trade area dominated
by major players.
We do not need to speculate about the consequences for New Zealand’s
political independence if it joins a significant free trade area. Even if it chooses
not to understand how customs unions and free trade agreements have typically
treated other weaker economies, we have our own direct experience of how
New Zealand has fared under the CER agreement with Australia.
This has not just been a matter of the growing divergence in this country’s
economic fortunes. It is also a matter of the progressive integration of New
Zealand into the Australian economy, the fate that usually awaits a smaller
and weaker economy that dissolves the boundaries between it and a stronger
economy.
The evidence for that absorption is overwhelming. New Zealand governments
are increasingly obliged to follow the lead established by Australia in a whole
raft of policies, ranging from tax rates to food standards. A customs union
can work only if all major issues that might affect trade are aligned. Almost
any economically significant factor can be argued to fall into this category.
As a prime example, tax rates (and business tax rates in particular) must be
set in line with each other. The New Zealand government has constantly
proclaimed the need to bring business tax rates down to Australian levels,
for fear that failing to do so would lead to the flight of capital to Australia,
but no sooner does it attempt to do so than the Australians indicate that
they will reduce them further. New Zealand tax policy, in other words, is
now being made in Canberra. If these pressures are difficult to resist in the
case of Australia, imagine how powerful they would be if New Zealand had
to contend with the United States.
What presents itself, in other words, as a simple free trade agreement would
rapidly transform itself into something more fundamental. Any factor that
could be argued to provide domestic production with an unfair advantage will
be seen as a non-tariff obstacle to free trade and as distorting the level playing
field that is sought across the board. The criteria for deciding what is or is not
a non-tariff barrier will typically be identified by the most powerful members
of the free trade area or their corporations. That means that New Zealand will
end up having to defend apparently unrelated policy issues, such as access
to tertiary education, or benefit entitlements, or the provision of health care,
against attack from countries that have different norms from its own.
36 BRYAN GOULD

New Zealand’s negotiating partners are quite open about their ambitions
in this regard. It is clear from the statements made by US officials and
commentators that the United States in particular sees a new agreement
as not only extending free trade but also as promoting greater economic
integration throughout the region. In fact, this is the main attraction of a
TPPA.10 We have been warned.

Free Trade Deal with the United States

We do not need to look far to identify the kinds of policy areas that have hitherto
been seen as the prerogative of New Zealand’s own elected government but
which would, under an extended free trade arrangement, pass from domestic
control. One of the most obvious is the way in which New Zealand sells some
of its most significant primary produce into overseas markets. Efficient
cooperative marketing entities like Fonterra or Zespri would immediately
come under attack as being anti-competitive on the ground that they organise
the market rather than leave it to individual operators.
New Zealand has, of course, been put on notice of what is in store by the
intense lobbying already undertaken by the US National Milk Producers
Federation (NMPF); it is quite clear that not only is any significantly increased
access for New Zealand dairy produce to the US out of the question, but that
the NMPF’s goal is the exclusion of such produce altogether from a free trade
agreement with New Zealand.11 Lobbying like this will, of course, be of major
importance in driving the US negotiating position in free trade talks.
But that would only be the beginning. There are many other instances
where New Zealand’s ability to decide policy in its own interests would be
challenged. For example, its ability to purchase drugs and medicines from
international suppliers through a government agency like Pharmac (which
has saved taxpayers hundreds of millions of dollars) would be targeted as a
monopsonistic affront to a free market. The Australians, again, have been
there before New Zealand, having been made to give ground on a very similar
issue when they completed their own free trade agreement with the US.12
The list goes on. New Zealand’s control over products created by genetic
engineering would be at risk; government procurement policies would not
be allowed to favour local suppliers; the screening of overseas investment
in strategic assets like Auckland airport would be weakened or prohibited
altogether. New Zealand’s ability to resist a major incursion of foreign
ownership into its productive industries, like dairying, would come under
attack. It would become quite possible for powerful investors in capital-
rich overseas economies to buy up most of New Zealand’s wealth-creating
capacity, with the result that, while New Zealanders retained relatively
low-paid jobs, the best jobs went to the foreign owners and the real benefits
from that wealth went to overseas investors. In those circumstances, New
 1. POLITICAL IMPLICATIONS FOR NEW ZEALAND 37

Zealand would become no more than a satellite economy, with little ability
to decide policy or derive wealth from its natural resources for the benefit
of New Zealanders.
Direct or indirect government subsidies to particular industries, companies
or service providers would come under scrutiny. Thus challenges could be
made to government support for manufacturing companies (through schemes
like TechNZ, Global Expert and the new Technology Voucher scheme) and for
industry sectors like primary industries and energy (through the partial funding
of Crown Research Institutes), as well as for service providers like universities
(through measures like contestable funding for research and the per capita
funding and subsidised student loan schemes for New Zealand, but not
overseas, students). Measures to protect local industries against pests and
disease, such as foot and mouth or mad cow disease, would have to be
justified. Competition policy would be made to serve interests and conform
to policy established in larger economies than the domestic one. Esoteric
areas such as the rules governing the protection of intellectual property or
the operation of New Zealand’s financial markets and stock exchanges would
have to be aligned with overseas and largely American practice. A TPPA
might well impose a so-called ‘investor–state’ dispute settlement process
that would allow US multinationals to sue the New Zealand government
when they believed that laws such as those protecting the environment or
public health had damaged their investments; the government would have
to justify its actions.
If companies can freely access the New Zealand market from elsewhere
in a free trade area, many of them will move, as the CER with Australia
demonstrates, to be closer to their major markets and to take advantage of a
greater scale of everything from professional services to capital markets. New
Zealand would become even more than it is now a branch-office economy.
Headquarters would be moved, not just to Sydney or Melbourne as they are
at present, but to New York or Los Angeles as well. Major decisions that
affect New Zealand’s economy would increasingly be taken overseas rather
than at home.
New Zealand’s enthusiasm for the global economy has already meant
that it has sold off more of its economy to overseas interests than any other
comparable country.13 The repatriation of profits to foreign owners has imposed
a burden on New Zealand’s current account and forced a greater volume of
borrowing from overseas, requiring higher interest rates to be paid across the
foreign exchanges, and increasing New Zealand’s already excessively high
indebtedness to overseas lenders. And the more the national economy is run
from overseas, and the less control New Zealanders have over it themselves,
the more threatening the political consequences will be and the more at risk
its ability to maintain its independence and power of self-government.
38 BRYAN GOULD

Conclusion
So, what is to be done? New Zealanders should first disabuse themselves of
the idea that free trade is the only game in town and that it is the only option
a country intent on improving its economic performance would choose. The
opposite is the case.
The classic instance of a country seeking to step up to the economic mark is
that of a developing economy. If we look to Japan and Korea, and now China
and India, which have all been developing economies over relatively recent
times, we can see that they all chose to protect their economies behind tariff
walls and other obstacles to free trade, so that their less-than-competitive
industries had a chance to develop and gain strength. Once they had done
that, they were increasingly able to free up their trade. The Japanese economic
miracle of the 1960s and 1970s was built on this basis; the Chinese version
is similarly based today.
Although New Zealand does not see itself as a developing country, it should
do. Many of the countries that New Zealand has traditionally regarded as
developing are now out-performing it by comfortable and growing margins. It
would be helpful for New Zealand to identify itself correctly, not as a developed
country and only perhaps as a developing one, and to frame its economic
policies accordingly. On that basis, New Zealand would recognise that it does
not have the economic strength to go head-to-head with some of the strongest
economies in the world. Indeed, it is the last thing New Zealand would do.
Before New Zealand should even contemplate a TTPA, in other words, it
needs to do some hard self-analysis. It could contemplate the risks only if it
approached a free trade deal with an important range of reservations in mind
and an understanding of the essential conditions that would have to be met.
New Zealanders would delude themselves if they thought that their
bargaining power in negotiations would be enough to protect them against
the obvious dangers. The history of free trade negotiations with the US shows
clearly that the power of lobbyists for domestic American industries will mean
that, whatever the rhetoric, the Americans see such negotiations as a means
of extracting concessions for themselves while fiercely protecting their own
markets. Just ask the Australian sugar and beef exporters, and many others
before them.14 New Zealand cannot even be confident that the promised gains
to its exports would be delivered, let alone that it would be able to withstand
the assault that would be made on its existing positions and interests.
Unfortunately, it is all too likely that, far from making adequate preparations
for increased competitive pressures, New Zealand will bone-headedly adhere
to policies that will totally disable the country from meeting those pressures.
It will insist on ignoring the role of the exchange rate in determining the
competitiveness of its productive industries. It will refuse to recognise
that every cent added to the international value of its dollar by its short-
sighted domestic monetary policy raises its prices in international markets,
 1. POLITICAL IMPLICATIONS FOR NEW ZEALAND 39

reduces its market share and the profitability of its exports, and weakens
its productive industry.
New Zealand could consider a TPPA only if it were to undertake an ‘agonising
re-appraisal’15 of its economic policy over the past twenty-five years. It is not
as if New Zealand needs to look far to see the dangers that it will run. Whole
domestic industries, such as clothing, footwear, carpets and steel, have been
virtually wiped out over recent years by international competitors whose
governments well understand the importance of price competitiveness and
its impact in the long term on investment and productivity.
Free trade may have its attractions and offer benefits to countries at a
particular stage of development, but those countries do not include New
Zealand. If we allow an ideological commitment to blind us to the reality of
our situation, then the outcomes will not only be economically disastrous; they
will also have the gravest political consequences that are likely to range from
a weakening of democracy to the loss of independence and self-government.
It may be that only political opposition from within the United States – and
from the Democratic Party in particular – will save New Zealand from itself.
2. The Politics of the TPPA
in Australia
Patricia Ranald

The negotiations for a Trans-Pacific Partnership Agreement between the US,

Chile, Peru, Brunei, Singapore, New Zealand and Vietnam resurrect many
of the issues that were debated in the Australia–US Free Trade Agreement
(AUSFTA). The politics of the TPPA in Australia can best be analysed through
the prism of the AUSFTA.
This chapter analyses the significant public debate and opposition to the
AUSFTA negotiated by the Liberal–National coalition government in 2003–4,
and assesses the impacts of that agreement in three areas of public policy:
access to medicines, the processing of blood products, and water and energy
policy. It then assesses initial political responses to the TPPA, the policy of
the Australian Labor Party (ALP) government and the implications of this
political context for the negotiations.

The Australia–US Free Trade Agreement

The conservative Liberal–National coalition Howard government negotiated
the AUSFTA in 2003–4 with the US Bush administration. Both governments
were enthusiastic proponents of neoliberal policies (also known as the
Washington Consensus) promoted vigorously through international financial
institutions and trade agreements like the North American Free Trade
Agreement (NAFTA).1 However, the market failures exposed by the global
financial crisis and climate change have led to increasing public questioning
of neoliberalism, and calls for a greater regulatory role from government,
including from the previous Australian Labor Party Prime Minister, Kevin
Rudd, who wrote in February 2009:

The current crisis is the culmination of a 30-year domination of economic

policy by a free market ideology that has variously been called neoliberalism,
economic fundamentalism, Thatcherism or the Washington consensus. The
central thrust of this ideology has been that government activity should be
constrained, and ultimately replaced, by market forces.2
 2. THE POLITICS OF THE TPPA IN AUSTRALIA 41

This questioning of neoliberal policies creates a more critical atmosphere for

debates about the TPPA.
US bilateral trade agreements have followed the NAFTA template that
supports US-style legal frameworks that increase the legal rights of corporations
and reduce the rights of governments to regulate corporate activity. The
agenda includes greater protection of corporate intellectual property rights that
lead to high prices for medicines; removal of restrictions on levels of foreign
investment; elimination of industry and procurement policies that favour
local firms; reduction of government rights to regulate services, including
the reduction or abolition of local content laws in audio-visual services; and
challenges to food regulation and quarantine law where they are seen to
harm US agribusiness interests. Bilateral agreements also have the advantage
of leaving US agricultural export subsidies intact, since subsidies can only
be reduced on a multilateral basis. In addition, the US agenda includes an
investor–state complaints process that enables corporations to sue governments
if their investments are harmed by government policy or regulation. Under
this process in NAFTA, US companies have sued Mexican and Canadian
governments for millions of dollars (see Chapter 10).3
This agenda raises questions about democracy, because it targets social
policies that are normally decided through the democratic process by national
or state governments, not through trade negotiations conducted behind
closed doors. A letter from the US Trade Representative to the US Congress
before the negotiations,4 and publications of the US pharmaceutical industry,5
alerted Australian community organisations to the fact that price controls on
medicines through the Pharmaceutical Benefits Scheme (PBS), Australian
content laws for audio-visual services, quarantine laws, labelling of genetically
engineered food and the Foreign Investment Review Board were all seen by
the US as barriers to trade.
Community groups feared that the unequal bargaining power between
the US and Australian governments would result in these policies being
traded away in the hope of increased access to agricultural or other markets.
Public health groups; churches; unions; pensioner, environment and other
community organisations linked through the Australian Fair Trade and
Investment Network (AFTINET); and other community networks campaigned
against all of these aspects of the agreement.6 The investor–state complaints
process was a major target of community campaigning, on the grounds that it
would be a dangerous weakening of Federal, State and Territory governments’
ability to regulate for social and environmental goals. This debate received
widespread media coverage, and influenced the Australian government to
resist the inclusion of that process in the agreement.7
The AUSFTA prompted the biggest critical public debate ever held in
Australia about a trade agreement. There were hundreds of community
meetings; public rallies in many cities; many articles in community, union,
42 PATRICIA RANALD

local and specialised media; over 700 submissions to parliamentary inquiries

in 2004; and thousands of letters, postcards and emails sent to politicians.
Two books critical of the agreement were subsequently published.8
The claimed economic benefits of the agreement were contested fiercely
by many economists, ranging from Australian National University Professor
Ross Garnaut9 and other prominent academics, to economic journalists in the
Sydney Morning Herald, The Age and The Australian.10 Most of these predicted
correctly that Australia had little to gain from the agreement because the
US agribusiness lobby would prevent significant increases in access to its
agricultural markets.
There was widespread media coverage about the possible impact of the
AUSFTA on the price of medicines, including an episode of the prestigious
ABC National Four Corners television programme featuring health experts.11
There was also much debate about the impact of changes to Australian
content rules for audio-visual media, with prominent actors and producers
challenging the agreement at public events like the Logie television awards
and the Australian Film Institute awards.12
This assertion of community interests influenced public opinion. Polls
conducted by Hawker Britton showed a steady decline in support for the
AUSFTA, from 65 per cent before negotiations started early in 2003 to 35 per
cent in February 2004 when the deal was concluded. This lack of support
was confirmed by a Lowy Institute poll in February 2005 showing only 34
per cent supported the agreement.13
The public debate and decline in support prompted the opposition ALP and
the Democrats and Greens to adopt policies critical of the AUSFTA by the end
of 2003. These parties had a majority in the Senate and so had the possibility
of blocking the implementing legislation presented in parliament after the
ratification of the Agreement. The leader of the opposition announced in
February 2004 that the ALP would refer the AUSFTA to a Senate Committee
and would not support the AUSFTA implementing legislation if the agreement
did not meet specific national interest criteria. The Senate Committee in fact
found that the AUSFTA did not meet many of the criteria.14 After a fierce
internal debate, the ALP parliamentary caucus finally decided to endorse
the AUSFTA implementing legislation with some amendments. Community
concerns about the cost of medicines and Australian media content rules
were reflected in the amendments, which sought to protect current levels
of Australian content in film and television and to prevent pharmaceutical
companies from making spurious legal claims to extend patents.15 This was
the first time the parliamentary ALP had decided that it might oppose a
particular trade agreement16 or had amended the implementing legislation
for any trade agreement.
In summary, an assessment of the outcomes of the AUSFTA shows that
US negotiators did not achieve all that they wanted in several areas of policy.
 2. THE POLITICS OF THE TPPA IN AUSTRALIA 43

The exposure of the negotiating process to public debate and lobbying, and
the change in public opinion, influenced the government to resist some
US demands. The impact of these oppositional campaigns can be seen in
the lack of an investor–state complaints process, the limited changes to the
Pharmaceutical Benefits Scheme, preservation of some local media content
policy and the retention of regulation of genetically engineered food.

Impacts of the AUSFTA

The economic outcomes of the agreement support the assertions of its critics.
The evidence to date shows that the US gained far more access to Australian
markets than vice versa. In agriculture, there was no additional access to the
sugar market, and increased access to dairy, beef, lamb and wine markets was
phased in over twelve to seventeen years. Australia’s trade deficit with the
US has increased every year since the agreement came into force in 2005.17
Media publicity and debate about this and about AUSFTA impacts that have
been visible on health and other policies have kept the negative impacts of the
AUSFTA in the public domain. This has set the scene for political responses
to the TPPA.
The first example of negative impacts concerns the changes made to
the PBS. The pharmaceutical lobby groups and US negotiators identified
the price control mechanism of the PBS as a target from the outset of the
AUSFTA negotiations. In the US, the wholesale prices of common prescription
medicines were three to ten times the prices paid in Australia.18 Under the
PBS, the Australian government controls the wholesale prices of medicines
by using a panel of health experts on the Pharmaceutical Benefits Advisory
Committee (PBAC) to compare the price and effectiveness of new medicines
with the prices of comparable but cheaper generic medicines whose patents
have expired. This is known as reference pricing. The listed medicines are then
made available for sale at regulated subsidised retail prices. The difference
between the wholesale price and the subsidised price is the cost of the PBS
to taxpayers.
Pharmaceutical companies argued that Australia’s system prevented
them from enjoying the full benefits of their intellectual property rights by
comparing the price of new drugs with cheaper generic drugs.19
The strong community campaign outlined above helped to retain the PBS
reference pricing system. However, the AUSFTA resulted in changes that
could undermine the effectiveness of the system over time and lead to higher
wholesale prices for medicines and therefore higher costs for government.
The AUSFTA set up a joint Medicines Working Group (MWG) based on
the commercial principles that contribute to the high cost of medicines in
the US. These principles give priority to the ‘need to recognise the value of
innovative pharmaceutical products through strict intellectual property
rights protection’.20 The principles effectively reduce the importance of the
44 PATRICIA RANALD

Australian public health goal of affordable access to medicines for all. This
working group ensures that the US government can continue to influence
future policy.
Following the signing of the AUSFTA, the Howard government made
specific changes to medicines policy that enable pharmaceutical companies
to receive higher wholesale prices for some medicines.
The government legislated in June 2007 for two categories of medicines to
be listed under the PBS. The F1 category applies to single-brand medicines
that are judged to have unique health benefits and not to be interchangeable
in their health effects with other medicines. These medicines are not subject
to reference pricing, and higher wholesale prices are paid for them. The F2
category includes single-brand medicines that are judged to be interchangeable
in their health effects with other medicines, and generic medicines. These
are subject to reference pricing to obtain the best value for money. The
legislation also included mandatory price reductions for F2 medicines as
patents expired. The government claimed that savings from a large number
of medicines coming off patent from 2007 would offset the higher prices for
the medicines in F1, resulting in net savings to the PBS overall.21
These proposed changes to the PBS were discussed at the AUSFTA Medicines
Working Group held in January 2006, well before the government’s public
announcement about the changes. Documents distributed at the meeting
obtained under Freedom of Information legislation include an editorial
opinion article written by a government Member of Parliament that outlined
the F1/F2 changes as a desirable model.22
These changes clearly open the way for the PBS to allow higher wholesale
prices for some new medicines, and there is evidence that this is having an
impact on the cost of the scheme as a whole.
A preliminary academic study published in 2010 comparing the prices of key
F1 drugs with F2 drugs with similar therapeutic effects since the 2007 changes
shows that government ‘has been paying an increasingly disproportionate
amount for the F1 classified medication without the necessary expectation
(according to the National Health Act 1953) that they are paying for increased
cost-effectiveness, or a greater level of objectively demonstrated therapeutic
significance’23 (see Chapter 10 for more details).
A study of the cost of statin drugs (very widely prescribed to lower blood
cholesterol levels), published in the Medical Journal of Australia, found that
the proportion of more expensive patented statins in the F1 category is a
growing share of the Australian market, in contrast with England, where the
proportion of cheaper generic statins is increasing. The article estimates that
savings of at least A$3.2 billion could be made on statins over the next ten
years if the British policy of using generic drugs were adopted.24 The article
concludes that:
 2. THE POLITICS OF THE TPPA IN AUSTRALIA 45

The key question is whether the health benefits resulting using statins
under patent … justify the substantially higher subsidies from the PBS
.… while this has been examined in other countries, there has been little
consideration of this question in Australia.25

A government review of the impact of the 2007 PBS changes published in

February 2010 confirms that the F1 category is contributing to higher costs
for the PBS than were predicted. The study showed that the actual savings
from the implementation changes were less than estimated in 2007. This is
partly because of implementation costs, but also because of the growing share
of the higher-cost medicines in the F1 category. The report predicts that the
future costs of the scheme would be higher than estimated at the time of the
changes, and that this would place increasing pressures on the health budget.26
The Labor government attempted to reduce these costs in the May 2010
Federal budget by announcing some new therapeutic groups of medicines,
which would enable the PBS to apply reference pricing to a wider range of
patented medicines, thus effectively bypassing the F1 category, and allowing
negotiation of lower wholesale prices.
Medicines Australia, which represents the major pharmaceutical companies,
made submissions to the Senate References Committee strongly opposing
the new therapeutic groups, on the grounds that they were a violation of their
intellectual property rights. Their submissions were supported by Liberal–
National coalition senators. This debate shows that the post-AUSFTA changes
to the PBS continue to have an impact and are still strongly contested.27
A second example regarding health policy deals with the impact of the
AUSFTA’s government procurement rules on the processing of blood products
supplied to the health system in Australia. The AUSFTA sought to change
government policy on the supply and regulation of blood products. In Australia,
blood is donated by individuals through a national voluntary scheme run by
the Australian Red Cross and is processed into blood products by an Australian
company, CSL. The scheme is regulated through the National Blood Agreement,
a joint agreement between the Federal and State governments, as the hospital
system that uses most of the blood products is run by State governments. All
blood and blood products are supplied free of charge to patients.
In 2001 the National Blood Authority Committee of Inquiry recommended
that Australia’s blood products continue to be processed by CSL, for both
health and national security reasons.28
The government procurement chapter of the AUSFTA29 exempted blood
products from being opened up for competitive tendering by US firms. However,
late in the negotiations a Side Letter was added that required the Australian
government to conduct a review and to recommend to State governments that
the rules of the AUSFTA procurement chapter be applied to blood products.
46 PATRICIA RANALD

This would open up the supply of blood products to tendering by US firms,

directly contrary to the findings of the 2001 Report. This Side Letter was
the result of lobbying by Baxter Healthcare (the Australian subsidiary of US
Baxter Health Corporation).30
The AUSFTA Side Letter required a review of Australia’s blood processing
arrangements in 2006, but also pre-empted the outcome of the review by
stating that the Federal government ‘will recommend to Australia’s States
and Territories that future arrangements for the supply of such services be
done through tender processes consistent with the government procurement
chapter of AUSFTA’.31 However, the wording of the Side Letter did not bind the
States and Territories to agree with the Federal government’s recommendation.
The review was conducted in 2006. Health and community organisations,
health academics and the Australian Red Cross made submissions to the
review, urging retention of the current system, and there was a public media
debate.32 The Australian State Health Ministers’ Conference also made a
public statement in April 2006 re-asserting the national policy principle of
self-sufficiency in blood products.33
The review report recommended against tendering, concluding that
the voluntary collection of blood in Australia and self-sufficiency in blood
products should remain key objectives of Australian policy. Tendering could
involve substantial additional costs for transport and return of Australian
blood plasma, substantial safety compliance and risk-management costs,
increased lead times between the collection of blood plasma and its clinical
use, and the risk of interruption to supply.34
Despite these recommendations, Federal Health Minister Tony Abbott
announced that the terms of the AUSFTA obliged him to recommend the
application of AUSFTA tendering rules and to open provision of blood products
and services to competitive tendering by US firms. He then forwarded the
review to the States and Territories for consideration.35
A meeting in March 2007 of all State and Territory health ministers rejected
the Federal government recommendation for tendering. Tony Abbott then
announced that, since there was no consensus for change, the current
arrangements would continue without competitive tendering.36
The US Embassy criticised the findings of the review.37 It remains to be
seen whether the US will use the government-to-government disputes process
to argue that Australia has not met its AUSFTA obligations.
This issue is a clear example of the way in which trade agreements can
undermine the democratic process of policy-making. The Federal government
was bound by the AUSFTA to conduct a review by health policy experts and
was then bound to ignore its findings. Because of a prior Commonwealth–
State Agreement, the State governments remained free to decide the issues on
the basis of health policy as indicated in the review findings, and refused to
accept tendering. The Federal government then declared that it had met its
 2. THE POLITICS OF THE TPPA IN AUSTRALIA 47

AUSFTA obligations. However, the US government can still use the dispute
process to challenge the outcome.
The third example is in water and energy services. The AUSFTA has
a ‘negative list’ structure for both services and investment. That is, all of
Australia’s laws and policies on services and investment at all levels of
government can be affected by the agreement unless they are specifically
listed as reservations.
US service companies must be given ‘national treatment’ and full market
access to non-government services, meaning that US companies must be
treated as if they were Australian companies, and that there can be no limits
on levels of foreign ownership, no requirements to have joint ventures with
local firms, no limits on the number of service providers and no requirements
on staffing numbers for particular services.38 Regulations could be challenged
through the government-to-government disputes process if they do not
conform to these terms. These obligations apply to all services unless they
have been specifically reserved.
Social welfare, public education, public training, health and childcare are
reserved, but the list of reservations leaves out key essential services that were
included in a similar list of reservations in the Singapore–Australia Free Trade
Agreement (SAFTA). Water and energy services and public transport were
omitted at the insistence of the US. The lack of reservation of these services
means that Australian governments now have restricted rights to regulate
them in the ways described above.
The impact of the inclusion of water and energy services in the AUSFTA
became visible in 2006 in the public debate about the privatisation of the
Snowy Mountains Hydro-electric Scheme, jointly owned by the Australian
Federal government and two State governments. The Federal government
held shares valued at A$450 million. So long as the scheme remained in public
ownership, AUSFTA rules would not apply to it. However, if it were sold into
private ownership, the trade agreement rules would apply.
The sale of the scheme was agreed by the two State governments and the
Federal government. However, Federal legislation was required to complete
the sale. A very broad community campaign developed against the sale, on
the grounds that private and possibly foreign ownership would reduce the
ability of governments to regulate both water flows and electricity supply for
public interest and environmental reasons. The campaign was led by the
Federal government MP in whose electorate the scheme was located, and
supported by other government backbenchers and a former conservative
prime minister, the National Farmers’ Federation, members of the opposition
ALP and minor parties, unions, and a broad range of prominent individuals
and community and environmental groups.39
Prime Minister Howard sought to defuse the campaign by announcing
that the government would amend the sale legislation to limit transnational
48 PATRICIA RANALD

investment to 35 per cent of total shares, and require the management to be

located in Australia and include Australian nationals. However, the Prime
Minister’s Department then reportedly received legal advice that such regulation
could be directly contrary to AUSFTA services and investment chapters,
which did not exclude water or energy services and forbade any limits on
foreign ownership of assets worth less than A$800 million. The Federal
government share of the scheme fell below this threshold. The AUSFTA rules
also excluded nationality requirements for management and requirements
about where management could be located. The government was reportedly
highly embarrassed by the prospect of any public discussion of the possibility of
its own proposed nationalist safeguards being in conflict with the AUSFTA.40
John Howard hurriedly withdrew the amended sale legislation altogether,
announcing that he was responding to community concerns about privatisation,
and the sale did not proceed.41 This was a victory for the community campaign.
However, it also showed that the AUSFTA placed clear restrictions on the
government’s ability to regulate privatised water and energy services, which
the government was not willing to debate or defend publicly.

The TPPA Negotiations

These debates about the AUSFTA and its ongoing policy impacts influenced
the reaction of Australian unions and many other community groups to the
announcement that TPPA negotiations would start in Melbourne in March
2010.
Preliminary discussions about the TPPA were initiated by the US Bush
administration through the Office of the US Trade Representative (USTR)
in 2008, and were continued after some delay by the Obama administration
in 2009. Chapter 3 of this book describes the pre-election trade policy of the
Obama Democrats, which was critical of the NAFTA model, and the debates
within the administration about the TPPA since the election.
The USTR sees gains from the TPPA because the US only has bilateral
agreements with Australia, Singapore, Peru and Chile, and none with the
larger countries in the Asian region. It has not been successful in securing
legally binding NAFTA-style agreements through the APEC Forum, which
only has non-binding voluntary goals. From a US perspective, the TPPA is
an opportunity to construct a building bloc for a NAFTA-style legally binding
agreement that will expand US exports to other Asian countries with larger
markets.
In contrast, Australia already has bilateral agreements with four of the
seven TPPA governments, and also has a free trade agreement with the ten
ASEAN countries, which include Brunei and Vietnam. It is difficult to see
any significant additional market access for the Australian economy in the
Asia-Pacific region from the TPPA. Moreover, the US is likely to demand
more concessions on health and other sensitive social policies before it would
 2. THE POLITICS OF THE TPPA IN AUSTRALIA 49

consider additional Australian access to US agricultural markets, especially

in the context of the unemployment resulting from the global financial crisis,
which is much higher in the US than in Australia.
US business groups are indeed making such demands. The USTR received
public submissions from US industry groups in 2009 indicating that they
wanted further changes to Australian policies on the PBS,42 media content,43
labelling of genetically engineered food,44 and quarantine45 and procurement
policies, and that they supported the inclusion of an investor–state disputes
process in the agreement. 46 Submissions to the USTR from agribusiness
groups advocate against further opening of US agricultural markets.47
The USTR National Trade Estimate Report on Foreign Trade Barriers
in Australia in 2010 also lists pharmaceuticals, intellectual property rights
protection, treatment of blood products, local media content regulation and
government procurement as trade barriers.48
The policy differences between the Howard government and the ALP on
the AUSFTA in 2004 are described above. The ALP came to office in 2007
with explicit trade policies to protect public health systems, local Australian
media content, regulation of essential services and core labour standards in
trade agreements. The policy also committed to improved consultation and
parliamentary debate about trade negotiations.49
However, despite this policy, there is pressure from Australian business
organisations, which want greater access to US markets than was achieved
under the AUSFTA, for all issues to be on the table in the TPPA negotiations.
This is also the advice from the Department of Foreign Affairs and Trade
(DFAT), which has carriage of the negotiations. That advice was reflected in
the following statement by the Trade Minister, Simon Crean:

The Trans-Pacific Partnership represents a pathway toward achieving

APEC’s long-term goal of a Free Trade Area of the Asia-Pacific. The TPP
will be an ambitious, 21st century agreement that will strengthen economic
integration in the region. The Australian Government will be seeking a high
standard, comprehensive agreement .… The participation of the US is an
important signal of the Obama Administration’s commitment to the region,
and an encouraging sign of broader US engagement on trade policy issues.50

The minister also stated that ‘everything would be on the table’ in the
negotiations.51
As the negotiations began on 15 March 2010, over thirty Australian
organisations coordinated through the Australian Fair Trade and Investment
Network issued a public statement, noting that:

The government has said that they will try to use the agreement to improve
Australian access to US agricultural markets, but the danger is that further
changes to the PBS and the other policies will be demanded as trade-offs.52
50 PATRICIA RANALD

The statement called on the Australian trade minister to adopt the following
principles in the negotiations:

• No further changes to the Pharmaceutical Benefits Scheme which

would reduce affordable access to medicines
• No investor–state disputes process which would give special rights to
international corporations to sue governments for damages
• Full rights to regulate labelling of genetically engineered food and to
regulate GE crops, including existing moratoria
• No further weakening of Australian Government power to regulate
audio-visual media for Australian content purposes
• Retention of the Foreign Investment Review Board, and of its powers
to review foreign investment in the public interest
• No weakening of quarantine regulations
• No reductions in the ability to have local content requirements for
government purchasing and industry policies that support local
employment
• Strong labour clauses that require signatories to enforce the core
International Labour Organization’s (ILO) standards in the ILO
Conventions, with trade penalties for non-compliance
• Strong environmental clauses that require signatories to meet all
applicable international environmental standards including those
contained within UN environmental agreements, with trade penalties
for non-compliance.53

The supporting organisations included the Australian Council of Trade

Unions, the Australian Conservation Foundation, the Australian Catholic Social
Justice Council, the Australian Pensioners and Superannuants Federation,
and the Public Health Association of Australia; eleven national unions; and
several other church community and environment organisations. At the
same time, a statement dealing with some of these issues in an international
context was issued by the national trade union centres of Australia, the US,
New Zealand and Singapore.54 The two statements were reported widely in
the media.55
There is some evidence that the ALP government is reacting to these
statements. Before the March 2010 negotiations, both Australian Ambassador
to the US Kim Beazley and Australian Trade Minister Simon Crean responded
in answer to questions about the investor–state disputes process that ‘everything
was on the table’. However, later on March 15 Crean qualified this statement
by saying, ‘We continue to have serious reservations about the inclusion of
investor state dispute settlement provisions … and Australian negotiators
will be making this clear.’56
These reservations may be strengthened by the reaction of the Philip Morris
Company in May 2010 to the Australian government announcement that
 2. THE POLITICS OF THE TPPA IN AUSTRALIA 51

it will follow a World Heath Organization recommendation to legislate for

plain packaging of cigarettes. Philip Morris has used an investor–state dispute
process to sue the Uruguayan government for damages because it introduced
similar legislation, and the company threatened to take similar legal action
against the Australian government. Fortunately, it is unable to do so because
the AUSFTA has exceptions for regulation of tobacco products and has no
investor–state disputes process. If the Australian government did agree to an
investor–state dispute process in the TPPA, it would be handing the company
a weapon for legal action against its own plain-packaging legislation.57
Following the March negotiations, the government also announced that a
series of public consultations about the TPPA would be held in various state
capital cities from May 2010.

Conclusion
The TPPA raises in Australia many of the issues that were bitterly debated
in the AUSFTA at the height of neoliberal economic policy ascendency. The
loss of credibility of neoliberal policies following the global financial crisis,
combined with examples of the impact of the AUSFTA on public policy since
the agreement came into force, reinforce ongoing public opposition to the
AUSFTA which is spilling over into the TPPA.
The ALP government, now a minority government led by Julia Gillard and
supported by the votes of a Green and three independent Members of the
House of Representatives, faces contradictory pressures. On the one hand,
the US, its most powerful ally, wants the TPPA as a building bloc for greater
access to Asian markets. The advice from DFAT and business interests is to
negotiate for greater market access to the US than was achieved in the AUSFTA.
This will be difficult if not impossible to achieve, given the impacts of the
global recession in the US, and would almost certainly be met by demands
for further concessions in sensitive public policy areas.
On the other hand, the government is facing political pressure against such
concessions from unions and community groups which are a significant part
of its electoral support base, and which can cite ALP policy that is opposed
to concessions on public policy issues. The Greens and the independents,
who hold the balance of power, also have a more critical approach to trade
agreements. This suggests that the TPPA negotiations could be as controversial
and difficult for the Gillard Labor government as the AUSFTA negotiations
were for the Howard coalition government.
3. US Politics and the TPPA
Lori Wallach and Todd Tucker

In the United States, the Trans-Pacific Partnership Agreement has taken

on significance far beyond its economic implications. TPPA talks are being
closely watched because, as President Barack Obama’s first trade agreement
negotiations, they have become the venue in which his approach to trade
and globalisation policy will be (at last) revealed. This makes the policy and
political stakes extremely high for a diverse set of American interests. Will
Obama use the TPPA process to deliver on his campaign commitments to
create a new trade pact model that works for more people and is consistent
with his domestic goals and priorities? Or, will he continue the TPP approach
inherited from George W. Bush that extends the failed North American Free
Trade Agreement (NAFTA) model established by Presidents Bill Clinton and
George H. W. Bush?
In order to rebuild US public support, and thus to rebuild bipartisan
consensus for trade expansion, a new American trade policy that is perceived
to offer benefits to more people and avoid the past pitfalls will be required.
However, a powerful set of business interests is devoted to maintaining the
status quo. TPPA talks have become the venue for this battle.

Shifting US Trade Realities, Shifted Politics

US trade politics have become extremely fraught since the 1990s. The bipartisan
consensus that marked decades of congressional trade votes was shattered
with the advent of the 1994 North American Free Trade Agreement. Pacts
such as NAFTA and the 1995 World Trade Organization (WTO) exploded the
boundaries of past trade treaties, which focused on tariffs and quotas. These
new deals included enforceable constraints on an array of domestic non-trade
policies such as investment, procurement and service sector regulation;
product and food safety standards; patent policies and more. This incursion
into domestic policy-making space gradually drew a range of new (and angry)
constituencies, including more unions, public interest organisations, and
state and local officials, into the trade debate.
 3. US POLITICS AND THE TPPA 53

Fifteen years later, American public opinion has shifted dramatically

against such agreements, as the resplendent promises made by proponents
have been replaced by the dire lived reality. Among the many measurable
outcomes since NAFTA and the WTO went into effect:

• The United States has lost net 5 million manufacturing jobs (one out
of four in that sector).
• American median wages remained stagnant despite productivity gains,
as companies arbitraged their labour costs by offshoring production
to low-wage countries and faced no global floor of basic labour rights.
• Numerous US corporations used the investor protections in the NAFTA-
style free trade agreements, which eliminate many of the major risks of
operating in low-wage developing countries, to relocate and import back
an array of goods, including high-end products such as automobiles and
sophisticated electronics that were previously produced domestically.
• More offshoring, which is estimated to have resulted in 2.4 million
total US job losses,1 occurred after China’s entry to the WTO provided
corporations with new guarantees.
• The US trade deficit exploded from US$102 billion to a height of US$807
billion. It remains massive despite stagnant global trade flows, with dire
consequences for global economic stability.
• The level of imported foods has doubled, much of it from countries
without effective domestic safety systems, while trade agreement rules
limit safety standards and inspection. US news programmes regularly
feature new exposés of hazardous imported food, toys and other products.
• The US agriculture trade surplus shrank, and in 2005 the United States
became a net food importer for the first time since 1959. Nearly 300,000
US family farms have gone under.
• US clean air, endangered species, dolphin protection and other non-
trade laws with broad support were successfully challenged at the WTO
and weakened. Now, mere threats of challenges result in Federal and
State-level consumer safety, human rights and environmental laws
being undermined.2

Quite simply, the old model has not worked for most Americans.
Not surprisingly, US polling shows bipartisan opposition to the trade
regime characterised by NAFTA and the WTO. Majorities oppose NAFTA
across every demographic, with the most targeted electoral blocs – Catholic,
swing, independent and Hispanic voters – among the most anti-NAFTA
groups.3 While a majority of Democratic voters have long opposed the trade
status quo, now even Republican voters, by a two-to-one majority, agree that
‘[f]oreign trade has been bad for the U.S. economy, because imports from
abroad have reduced demand for American-made goods, cost jobs here at
54 LORI WALLACH AND TODD TUCKER

home, and produced potentially unsafe products’.4 Indeed, many in the newly
formed conservative ‘Tea Party’ movement have joined lefties in extreme
scepticism about current trade deals.5
As a consequence, the ‘trade policy’ composition of the US Congress has
been transformed. In both chambers of Congress, successful candidates in
the 2006 and 2008 elections, including a growing number of Republicans, ran
on a platform of fundamental overhaul of US trade policies. In the last two
election cycles, seventy-two House and Senate members who campaigned
against NAFTA and other elements of the failed status-quo model replaced
those who had voted for NAFTA, the WTO and the Central America Free Trade
Agreement (CAFTA).6 In the 2008 election, over 140 television advertisements
were run attacking the trade status quo, including by both Democrats and
Republicans.7
Not least among these candidates was Obama himself. During the
presidential primary campaign, Obama, Hillary Clinton and others engaged
in an extended contest to be most anti-NAFTA.8 The candidates were pressed
by key Democratic base constituencies critical to their election (and future
re-election) to provide written trade reform commitments. Here is a sampling
of Obama’s responses:

Foreign Investor Rights. Obama answered ‘yes’ to the question:

Will you commit to renegotiate NAFTA to eliminate its investor rules that
allow private enforcement by foreign investors of these investor privileges
in foreign tribunals and that give foreign investors greater rights than are
provided by the U.S. Constitution as interpreted by our Supreme Court
thus promoting offshoring? 9

He also said:

While NAFTA gave broad rights to investors, it paid only lip service to the
rights of labor and the importance of environmental protection. We should
amend NAFTA to make clear that fair laws and regulations written to
protect citizens in any of the three countries cannot be overridden simply
at the request of foreign investors.10

Labour Rights. Obama said:

We’ll add binding obligations to protect the right to collective bargaining

and other core labor standards recognized by the International Labor
Organization. And I will add enforceable measures to NAFTA, the World
Trade Organization (WTO), CAFTA and other Free Trade Agreements
(FTA’s [sic]) currently in effect.11
 3. US POLITICS AND THE TPPA 55

He also noted:

The rights of working people should be equal to those of commercial interests

and their protections in trade agreements should be the same. Again, this
was a fundamental failing in the NAFTA and CAFTA agreements.12

Environment. Obama stated:

We must add binding environmental standards so that companies from one

country cannot gain an economic advantage by destroying the environment.13

And:

The protection of the environment is just as critical as the protection of

commercial interests and must be subject to the same mechanism for
protection.14

Procurement. Obama answered yes to the question:

Do you support renegotiating trade agreements so they will allow us to use

‘Buy America’ and ‘Buy Local’ procurement policies?15

Agriculture and Immigration. In a Fortune Magazine interview, Obama said:

… not only did [NAFTA] have an adverse affect on certain communities

that saw jobs move down to Mexico but for example our agricultural section
pretty much devastated a much less efficient Mexican farming system. But
from a pure economic [sic], you know if you’re just an economist looking
at this in an abstract way you would say well a more efficient producer
displaced a less efficient producer in Mexico, there’s nothing wrong with
that. As a practical matter those [sic] are millions of people in Mexico who
are displaced. Many of whom now are moving up to the United States,
contributing to the immigration concerns that people are feeling. And
so, those human factors should be taken into account .… if we manage
trade more effectively, if we’re better partners, if we are thinking about the
dislocations that occurs [sic] as a consequence of it, if were [sic] true to our
belief that labor and environmental standards should be a part of raising
living standards around the world instead of a race to the bottom, then
we can have free trade and it will be sustainable and we will have political
support over the long run.16

Since the Election – and Towards the TPPA

How will these US political realities affect the TPPA’s prospects and content?
Obama will be judged based on the extent to which he breaks with the old
US FTA model – and with anything having to do with ‘trade’ that is related
to President George W. Bush.
56 LORI WALLACH AND TODD TUCKER

This is true for three reasons. First is the re-election imperative. Differ-
entiating Obama from Republican Party candidate John McCain on trade
was the main strategy used to move sceptical white male union voters in
swing states such as Pennsylvania, Ohio and Indiana that were essential
for Obama’s victory. An enormous amount of grassroots outreach and mil-
lions in paid advertising and mailings by Obama’s campaign and unions
were used to rebrand the US trade debacle as Bush’s fault in an attempt to
shift these voters’ still-hot anger about Democrat Bill Clinton’s passage of
NAFTA. The post-NAFTA experience of Clinton blurring the party lines on
trade showed that if this decisive bloc does not see clear economic benefits
for voting Democratic, many will stay home. And in 1994, others in this bloc
voted Republican to promote a conservative social agenda on abortion, guns
and more, given they do not see any difference to their personal economic
wellbeing between the parties.17 Betraying his trade reform commitments
would pose considerable peril for Obama’s re-election (to say nothing of
congressional Democrats).
Second, if Obama does not demonstrate a new trade agreement approach
with the TPPA, it will be very difficult for him to obtain trade authority from
Congress. Under the US Constitution, each branch of government has exclusive
authorities with various ‘checks and balances’ intentionally constructed to
avoid one branch making important decisions unilaterally. Congress has
exclusive authority over trade policy, while the executive branch has exclusive
authority to conduct international negotiations. Thus, over the history of the
country, various mechanisms have been used to coordinate these roles with
respect to trade agreements. However, it is critical to understand that the
key trade authority resides with the US Congress. A US president is unable
to enact a trade pact without an express vote of approval by Congress, and
for most of US history, Congress maintained such tight control that it voted
on every tariff line change.18
The mechanism Congress has most recently used to delegate trade authority
to US presidents was the ‘Fast Track’ process, which was initially cooked up
by power-grabbing President Richard Nixon. The Fast Track mechanism
delegated vast swaths of congressional authority to the president – allowing
the executive branch unilaterally to pick trade partners, decide pacts’ contents,
and negotiate and sign them all before Congress had any vote. In a perversion
of normal operating procedures, Congress’ only vote was then on a package
that included both the finished, pre-signed agreement and every change to
US law that was needed to implement it. This vote was conducted under
extraordinary terms with a short set timeline and no amendments allowed.
The last delegation of Fast Track expired in 2007 and, as Congress has
become increasingly unhappy with the expansiveness of the Fast Track
delegation mechanism, Bush’s requests for a renewed authority were rebuffed.
For a variety of reasons (not the least of which are George W. Bush’s heavy-
 3. US POLITICS AND THE TPPA 57

handed use of Fast Track and Obama’s campaign commitment to replace it),19
a treacherous debate is already in the offing over how to replace Fast Track if
and when Obama requests trade authority from Congress (perhaps in 2011).
Further, although Obama has no special authority, Fast Track or otherwise,
that can sideline Congress (and no US president is likely ever to obtain such an
expansive delegation of authority again), officials within the Office of the US
Trade Representative (USTR) have to date largely continued their past mode
of marginalising Congress. Obama’s USTR, Ron Kirk, wrote to Congress when
Obama announced his decision to join TPPA talks that ‘the development of
our negotiating positions will be a collaborative effort with elected leaders
and stakeholders here at home’.20 However, Kirk engaged in practically no
consultation prior to the first TPPA talks in Australia in March 2010. Nor
had consultations occurred before the administration announced its earlier
decision to join the TPPA talks. Ironically, the Obama administration generally
and the USTR specifically have bragged publicly about a new commitment to
transparency and inclusiveness. The gulf between rhetoric and practice with
regard to the TPPA is already drawing considerable attention.
Since the Obama administration has no delegation of trade authority
from Congress, the outcomes of TPPA talks have become enmeshed with its
ability to secure it. If the administration ever hopes to get trade authority, it
must conduct TPPA negotiations in close coordination with Congress and be
extremely careful to obtain results that build congressional support, especially
among Democrats.
This reality is thanks to another facet of the American political system: there
is minimal party discipline. The President and each member of the House of
Representatives and Senate stand for election individually, not according to a
party roster. American trade battles occur in the House of Representatives and
representatives generally vote according to their districts. Therefore, even if a
Democratic president requests that a Democratic-majority Congress approve
a trade initiative he supports, the White House must enter the lobbying fray
to build a majority member by member. And, as described above, voting for
what the American public perceives to be a ‘NAFTA-style’ trade agreement
has become a severe political liability for most congressional Democrats
and a significant bloc of Republicans. Moreover, to obtain ultimate House
support for a new Fast Track authority and for passage for any prospective
TPP agreement, the administration must satisfy a group of trade campaigning
validators inside and outside Congress.
Thus, we arrive at the third reason for Obama to break with Bush’s legacy.
If he does not, he will not be able to get the TPPA through Congress.
Key congressional trade reform leaders and Democratic base groups, such
as labour, consumer and environmental organisations, are closely watching
the TPP talks and could create enormous political problems in and out of
Congress by publicly branding a request for trade authority or a TPP pact
58 LORI WALLACH AND TODD TUCKER

as another NAFTA or a continuation of the Bush trade agenda. This is easy

to imagine, and has happened in the past. Clinton’s attempt to obtain Fast
Track authority in 1998 was defeated in the House after it was linked by these
groupings to NAFTA expansion.
One could foresee this scenario developing for Obama: congressional
Democrats and some Republicans vote ‘no’ on the merits and other Republicans
vote ‘no’ to deny a Democratic president a victory on a high-profile fight.
(While the analogy is not perfect, something similar happened in the 2009–10
debate over health care.)
However, obtaining a congressional majority for TPPA passage is not the
only concern for the Obama administration. The President must also obtain
support from a majority of Democrats. In theory, the administration could pass
a trade authority for TPPA based largely on the NAFTA model with almost
all congressional Republicans voting ‘yes’, and a few corporate Democrats
providing a squeaker margin by utilising various superficial political covers.
However, the prospect for that approach is slim. The terrible political fall-out
of the 1993 NAFTA vote, in which Democrat President Clinton relied mainly
on Republican votes to push through a trade pact opposed by the Democratic
base and congressional wing, remains legend in Washington. Democrats
lost control of both the House and Senate in the next congressional election;
Congress denied Clinton Fast Track for his remaining six years in office; and
Clinton’s number-one priority (but second-in-line-after-NAFTA) vote, health
care reform, imploded. His administration reverted to modest small-scale
initiatives that could be passed in the context of a fractured congressional
Democratic caucus and Democratic base.
Since then, the US Congress has repeatedly proved its reticence to support
anything that can be linked to NAFTA. CAFTA passed by a two-vote margin in a
House of Representatives comprised of 435 members, even though Republicans
had a significant majority. Bush obtained Fast Track authority only by slim
margins following a two-year effort and various procedural shenanigans. In
these debates, there was almost no Democratic congressional support for
NAFTA-style FTAs. Only fifteen House Democrats voted for Bush’s CAFTA.
(Then-Senator Obama opposed CAFTA.) A majority of House Democrats also
opposed Bush’s 2007 Peru FTA. And the long-awaited arrival of the Democratic
president significantly raised expectations for a new approach on trade.

New Deal or No Deal on TPPA

Obama’s top economic advisor from the Democratic primaries called the US
debate over the US–Peru Trade Promotion Agreement a ‘bloodbath’.21 Indeed
it was, in more ways than one, and is an important context for the domestic
US political debate about the TPPA.
The Peru FTA included some initial reforms with respect to labour and
environmental standards and drug-patent rules, but was otherwise almost
 3. US POLITICS AND THE TPPA 59

word-for-word the same NAFTA–CAFTA text. The reforms came after a

2007 deal made without consultation with most congressional Democrats.
It was approved by key Democratic congressional leaders, but the rank and
file revolted – resulting in one of the rare instances in US history in which a
House Speaker lost a majority of his or her party’s votes.
Many of the Democrats voting ‘yes’ on the Peru FTA stated that they would
not support future pacts unless the issues unaddressed in 2007 – extreme
special foreign investor protections and their private enforcement, limitations
on procurement policy and import safety constraints that replicated the past
NAFTA–CAFTA terms – were remedied. Since the passage of Peru’s FTA, a
series of deadly protests has taken place against FTA implementation in Peru,
all around the sensitive subject of foreign investors’ access to Amazonian
land, and whether indigenous groups should have the right to block or
condition that access – matters that touch squarely on the content of the
FTA’s investment chapter.22
No Democratic base organisations, such as unions, supported the Peru FTA.
Since then, both US labour federations and an array of politically relevant
environmental, farm, faith and other organisations have explicitly stated
that they will oppose future agreements that do not remedy the investment,
service-sector, procurement and other issues left altogether unaddressed in the
initial reforms. They also require further improvements to the initial reforms
made in 2007 to the Peru agreement’s provisions on medicine access, labour
and environmental standards. Democratic members of Congress, including
some on the trade committees, have also demanded the same.
This is of special note, given that many of the USTR staff present during the
Bush administration remain in place and oppose changes to the TPPA relative
to the past US FTA model. Yet, the more-of-the-same approach, if pursued,
would be a disservice to US negotiating partners, as it would guarantee a train
wreck with Congress. It is worth watching closely what the USTR actually
does, as in the past the agency’s zeal to claim credit for signing agreements
has sometimes outweighed its attention to political viability.
While the USTR has attempted to brand the TPPA as a new ‘twenty-first
century trade agreement’, many in and out of Congress are aware that US
involvement in the TPPA is in fact premised on Bush’s past initiative to join
the existing Trans-Pacific Strategic Economic Partnership Agreement, or the
P-4. And the P-4 is seen as a Pacific Rim version of CAFTA – a pact among a
coalition of Central American countries willing to take up the NAFTA-style
agreements that President Bill Clinton simultaneously pushed through the
APEC and FTAA processes. The FTAA and the APEC FTA unravelled, as
major countries in each region came to loggerheads over the scope of the
agreements and the model on which the pacts should be premised. Bush’s
Plan B for the Americas was the 2005 CAFTA and the FTAs with Chile and
Peru. Similarly, three of the APEC countries (Singapore, New Zealand and
60 LORI WALLACH AND TODD TUCKER

Chile) that signed the P-4 in 2006 were part of the coalition of the (neoliberal)
willing that promoted the APEC FTA. Bush then joined the 2008 negotiations
that were initiated to add investment and financial service chapters to the P-4.
Obama’s challenge is to make a clean break with Bush’s TPPA initiative
and its ties to the Clinton NAFTA expansion agenda of the 1990s.

The Content of Change

The TPPA talks have become the proxy for these broader policy and political
battles. Large US-based agribusiness firms and job-offshoring multinationals,
which were the few beneficiaries of the old model, have continually attacked
Obama in the press claiming his trade agenda is stuck. In fact, these interests
oppose establishment of an Obama trade policy. They seek continuation of
the status quo, starting with the adoption of three NAFTA-style pacts with
Colombia, Korea and Panama that were left over from the Bush administration
and that most Democrats oppose. They then seek negotiation of a TPPA
along the same model, but with aspirations for even more grandiose corporate
rights and more extreme limits on consumer safety, and financial, labour
and environmental regulatory policy. Their main policy – and political – goal
with the TPPA is to make sure that there is no change that Obama’s base can
believe in.
On the other hand, Congress and the American public expect a new Obama
approach – one based on Obama’s commitments. This was clear in a letter
sent by a group of Senators to USTR Kirk before the first TPPA talks:

As the Administration’s first major trade policy initiative, the TPP will be
the venue for President Obama to bring his message of change to the issue
of trade and to begin creating a new trade agreement model that boosts
prosperity and security at home and around the world. We see the TPP as
an opportunity for the Obama Administration to re-shape our use of trade
policy as a tool to create good American jobs while promoting economic
opportunity and fundamental human rights and democratic principles
among trade partners.23

This followed a letter to USTR Kirk from members of the powerful House
Trade Working Group (HTWG):

As members of the HTWG, one of our primary goals is to create a new

U.S. trade agreement paradigm, one that benefits America’s workers,
consumers, farmers, and firms. … Thus, we are eager to work with the new
Administration to help deliver President Obama’s campaign commitments
on trade reform.24

Moreover, congressional critics of the past trade agreement model

worked hard in 2009 to develop legislation that explicitly translates Obama’s
commitments into policy. They built consensus around such a new approach.
 3. US POLITICS AND THE TPPA 61

Their Trade Reform, Accountability, Development and Employment (TRADE)

Act (a Bill in Australian and New Zealand legislative terminology) now enjoys
the support of a majority of House Democrats.25 Remarkably, this includes
the support of senior leadership members, with twelve full committee and
fifty-four subcommittee chairs – strong majorities – formally sponsoring the
bill. The bipartisan legislation is also sponsored by members of an unusual
array of Democratic House caucuses that typically are at odds: half the fiscally
conservative Blue Dogs who almost sunk Obama’s health-care bill; a third
of the corporate-allied New Democrats; and majorities of the Congressional
Black, Progressive and Hispanic Caucuses.
By laying out a new roadmap for trade expansion, the legislation eviscerates
the claim by defenders of the status quo that critics of the past model are
anti-trade. Rather, the TRADE Act puts squarely on the table the fact that
the real question is trade under what terms – and lays out a new way forward.
Not surprisingly, rather than engaging to promote its alleged goal of trade
expansion, the US Chamber of Commerce launched a campaign against
the initiative. The Chamber also announced a US$100 million campaign to
pressure the administration and Congress to implement ‘free market’ policies.26
Meanwhile, the State and local affiliates of the US national trade justice
campaign, Citizens Trade Campaign (which itself represents over sixteen
million combined members) and 350 individual US civil society organisations
sent a letter to the Obama administration that identified the TRADE Act
as the roadmap for reforming the existing trade agreement model.27 The
national grassroots coalition brings together a powerful array of US unions
and environmental, consumer, faith, human rights and farm groups that
comprise the base of the Democratic Party. Citizens Trade Campaign has
used the TRADE Act as its metric against which the outcome of TPPA talks
will be measured:

If the TPP if it [sic] is to represent a more balanced way to expand trade, and
garner broad support from the public, labor and civil society organizations
and thus Congress, it must address the core issues below which are also
central to the TRADE Act. For a prospective Trans-Pacific Partnership Trade
Agreement to be successful, it cannot merely mirror past U.S. agreements,
including those negotiated with Peru, Colombia, Panama and Korea.
The FTAs negotiated under the Bush Administration do not represent an
acceptable trade agreement model.28

Congressional trade reformers and the outside organisations have laid

out specific criteria, based on the TRADE Act, for what would comprise a
TPP pact that they could politically support. Such an agreement must build
on the initial improvements made in the Peru FTA with respect to labour,
environment and access to medicines. And, it must also address the significant
problems in past US trade agreements that were not reformed in 2007,
62 LORI WALLACH AND TODD TUCKER

including the excessive foreign investor privileges and private enforcement

systems, limits on domestic procurement policy, service sector provisions
that can undermine the regulation needed to ensure affordable access to
quality services, limits on imported food and product safety protections
and agriculture terms which have harmed independent producers. These
were the issues that Obama himself identified as needing change relative
to the NAFTA model and have been the basis of Democratic congressional
opposition to NAFTA-style pacts. The TRADE Act provides the specific
detailed policy prescriptions that have formed a consensus among the
Democratic House bloc and US labour and civil society groups over several
of those issues, including labour and environmental standards and their
enforcement, foreign investor rights and private extra-judicial investor–state
enforcement, food and product safety, public procurement, service sector
deregulation, agricultural provisions, access to medicines, democracy and
human rights issues and job creation.

Labour and Environmental Standards and their Enforcement

The Peru FTA and the three leftover Bush free trade agreements only require
countries to implement in their domestic laws the vague terms set forth in the
International Labour Organization’s Declaration on Fundamental Principles
and Rights at Work, a two-page description of the labour rights established
by the ILO Conventions. Indeed, business interests were able to obtain a
footnote in the Peru FTA text explicitly forbidding reference to the core ILO
Conventions themselves, the jurisprudence and specific protections of which
are necessary to interpret the Declaration.
Labour standard provisions of a prospective TPP agreement must require
signatories to enforce domestically the core ILO standards, as set forth in the
ILO Conventions. Similarly stringent rules are needed for the environment.
These new standards must also include terms that make a failure to enforce
or moves to weaken labour and environmental policies a violation of the
trade pact, for which the consequences would be as stringent as commercial
violations.
The record of implementation of the Peru FTA demonstrates why better
enforcement of trade pact labour and environmental terms must be a goal
of a prospective TPPA. Despite inclusion of the 2007-revised labour and
environmental language, the Peru FTA went into effect in 2009 without
Peru fully implementing its labour commitments as required and after
its government rolled back existing environmental protections. Given the
disconcerting labour rights records of Vietnam and Brunei, the issue of
enforcement will be closely scrutinised in the TPPA negotiations.

Foreign Investor Rights and Private Extra-judicial Investor–State Enforcement

The TPPA must not include the same foreign investor terms included in
 3. US POLITICS AND THE TPPA 63

NAFTA, CAFTA and the Bush FTAs that led many Democrats to oppose
these pacts. These past rules:

• afford foreign investors operating in the United States greater rights

than those enjoyed by US investors operating domestically (the 2002
Fast Track bill explicitly had a ‘no greater rights’ standard to address
this issue, which Bush promptly violated, infuriating Congress);
• allow foreign investors and corporations to enforce their special FTA
investor rights and privileges directly by suing governments in foreign
tribunals to demand cash compensation;
• create incentives for US firms to move their US production offshore
to foreign jurisdictions where they can operate under privileged FTA
foreign investor status, rather than be forced to deal with that country’s
regulatory policy and courts;
• subject the domestic environmental, zoning, health and other public
interest policies of signatory countries to challenge.

This system of extraordinary new rights and privileges and the privatised
enforcement of the terms of an international agreement are among the most
controversial aspects of the past trade model and were criticised by Obama
during the campaign. The Australia–US FTA (AUSFTA) does not include
the investor–state enforcement system, so it provides the starting place from
which substantive reforms to the foreign investor rules must be built in to
TPPA talks. The TRADE Act also provides a useful model for trade agreement
investment rules that can ensure security for firms investing abroad, while
avoiding the overreach of past pacts. This includes narrowing the definition
of covered investments; carving out non-discriminatory environmental,
safety and health laws; and altering the guaranteed ‘minimum standard of
treatment’ to cover only procedural due process rights.

Food and Product Safety

NAFTA and the Bush FTAs contain language requiring signatory countries
to accept imported food that does not meet domestic safety standards, while
limiting import inspection of food and products. There is a strong consensus
that, rather than trade pacts setting ceilings on safety standards, the rule
for a TPPA and any future trade pact must simply be that all products and
food, whether domestically produced or imported, must meet the consuming
country’s standards, with challenges allowed only on the basis of de jure
discrimination against imports.

Public Procurement
Past US FTA procurement rules subject many common US Federal and
State procurement policies to challenge, and directly forbid other common
procurement policies. These procurement rules ban anti-offshoring policies
64 LORI WALLACH AND TODD TUCKER

and expose renewable energy, recycled content and other environmental safety
requirements to challenge. These terms must be changed in the TPPA, if only
to provide the policy space to implement some of Obama’s ‘Green Economy’
proposals that many believe are needed to revive the US economy.

Service Sector Deregulation

Future US trade pacts must not limit domestic policy regarding the regulation
of health, energy and other essential services. Also, the financial crisis has
shown the perils of locking in deregulation of banking, insurance and other
financial services, as has occurred in past pacts. The financial service provisions
of any prospective TPPA will be closely scrutinised, given that Bush’s initial
impetus for entering TPPA talks was to deepen deregulation in this sector
after his efforts to do so through the WTO Doha round were delayed by the
deadlock in those talks.

Agriculture Provisions
Past FTAs contain the NAFTA-style agriculture trade rules that have
simultaneously undermined US producers’ ability to earn a fair price for their
crops at home and in the global marketplace. Multinational grain-trading
and food-processing firms have made enormous profits, while farmers in the
countries involved in these trade pacts have been hurt. The trading firms have
played them off against each other and gamed global commodity markets
to lower farm-gate prices. If this model is continued, hunger is projected to
increase (as the livelihoods of farmers in developing countries are destroyed
by dumping of traded commodities), along with illicit drug cultivation and
undocumented migration. Failure to establish new agriculture terms would
intensify the race to the bottom in commodity prices, pitting farmer against
farmer and nation against nation to see who can produce food the cheapest,
regardless of labour, environment or food-safety standards. In addition, with
respect to the TPPA, various US farm organisations and Congress members
have specific commercial concerns, discussed below, especially with respect
to imports of dairy products from New Zealand, farmed catfish and shrimp
from Vietnam, and sugar from Australia.

Access to Medicines
While the most egregious, CAFTA-based terms that limit access to affordable
medicines were removed from the Peru FTA, the pact still included NAFTA-
style terms that undermine the right to affordable medicines, a right contained
in the WTO’s Doha Declaration on the TRIPS Agreement (the Agreement
on Trade-Related Aspects of Intellectual Property Rights) and Public Health.
The TPPA negotiations must build on the 2007 reforms in the Peru FTA on
medicine patents rules.
 3. US POLITICS AND THE TPPA 65

Democracy Issues
Considerable attention is now focused on the fact that two countries involved
in TPPA negotiations – Vietnam and Brunei – are undemocratic and have
serious human and labour rights problems. This point was noted by leaders
of the House trade committee,29 among others. The State Department’s
2009 Report on Human Rights Practices notes of Vietnam that ‘Workers are
not free to join or form unions of their choosing. The Communist Party of
Vietnam controls the single trade union ….’ On political freedoms, the State
Department reported that ‘[t]he government [of Vietnam] continued to crack
down on dissent, arresting political activists and causing several dissidents
to flee the country’.30 In Brunei, there is virtually ‘no trade union activity
in the country and there is no legal basis for either collective bargaining or
strikes’, according to the International Trade Union Confederation.31 The State
Department has also cited Brunei for ‘arbitrary detention; limits on freedom
of speech, press, assembly, and association; restrictions on religious freedom;
discrimination against women; restricted labor rights; and exploitation of
foreign workers’.32
Various letters from blocs in Congress, civil society and organised labour
that set out their criteria for a TPPA have called for the agreement to include
a democracy clause, which would require parties to have democratic forms of
government. Several of the TPPA negotiating countries are members of the
Commonwealth, whose charter includes the following democracy clause: ‘We
believe in … the individual’s inalienable right to participate by means of free
and democratic political processes in framing the society in which he or she
lives.’ Zimbabwe had its Commonwealth benefits suspended in 2002, when
the Mugabe regime used targeted violence to ensure its re-election. In contrast,
when the democratically elected Honduran government was overthrown in
a coup, the benefits of CAFTA, which has no democracy clause, stayed in
effect for the coup regime.33

Job Creation
In Washington, with lingering 10 per cent unemployment causing severe pain
across the country and imperilling future political prospects for Democrats,
every proposal is measured according to its impact – real and perceived – on
employment. Indeed, in his 2010 State of the Union address, Obama announced
a goal of doubling American exports and thus creating 2 million jobs.
Yet there already are US FTAs that zero out most tariffs and maximise access
for US exports with the four countries (Australia, Singapore, Chile and Peru)
that comprise more than 86 per cent of the combined US$1.6 trillion GDP of
the TPP countries. Thus, some in Congress have inquired why TPPA talks
are a good use of the USTR’s limited resources.34
The USTR hopes other countries would join a TPPA. But past attempts to
negotiate free trade agreements with Malaysia and Thailand – and approaches to
66 LORI WALLACH AND TODD TUCKER

Indonesia – failed over objections in those nations to NAFTA-style investment,

intellectual property and procurement terms. Thus, these countries joining
the TPPA would require either a prospective TPP agreement containing
significantly altered terms relative to what the United States had on offer in
the past, or for these countries’ governments to succumb to pressure to agree to
terms that in the past were deemed to be detrimental to their national interests.
Congress has also honed in on the limited prospects for US job creation
from zeroing out tariffs with the other three remaining TPPA negotiating
nations (Vietnam, Brunei and New Zealand). On the export demand side,
Vietnam’s gross domestic product (GDP) is US$91 billion with a per capita
annual income of US$1,024; while on the import side, Vietnam is increasingly
becoming a lower-wage-than-China export platform for multinational firms’
production. The country also presents significant currency manipulation
issues similar to those Congress is now intensely focused on with respect to
China. The population of Brunei is 388,000 – half that of the medium-sized
US city of Milwaukee – with a GDP of US$11.5 billion, similar to the annual
government budget of Washington, DC. The population of New Zealand is
around 4.4 million – half that of New York City – with a GDP of US$112 billion,
which equates to the GDP of a small US state such as Utah. Further, it is hard
to understand the mercantile gains to which US interests would aspire when
New Zealand already has effectively no tariffs and minimal restrictions on
foreign direct investment. Given the limited prospect that a TPP pact would
provide for expanding exports or job creation, the debate around the TPPA is
becoming focused instead on the policy model the administration employs. The
political implications of Obama’s involvement in the TPPA process are being
weighed against the limited economic gains a prospective pact could offer.

‘Architectural’ Challenges
The political imperative for the Obama administration to deliver a new trade
agreement model through the TPPA process is complicated by the fact that
formally the US, Australia, Vietnam and Peru are joining negotiations on the
expansion of the existing 2006 P-4 pact between Singapore, New Zealand,
Chile and Brunei. However, the existing P-4 text is a NAFTA-style pact, minus
even NAFTA’s unenforceable labour and environmental terms; it does not
reflect Obama’s campaign commitments to trade reform or the position of
many congressional Democrats. Thus, many congressional Democrats and
their constituents have insisted that TPPA talks begin with a clean slate –
creating a new agreement that they could be in a position to support that
would replace the P-4 and the eleven other FTAs now in effect between TPPA
negotiating countries.
For US domestic consumption, the USTR has stated that it intends to start
TPPA talks with a clean slate. Just prior to the initial TPPA negotiations in
March, the USTR briefed Congress and various constituency groups that it
 3. US POLITICS AND THE TPPA 67

would not negotiate a TPPA based on modifications to the existing P-4 text,
pre-existing TPPA texts or an amalgam of the many free trade agreements
now existing between the eight TPPA parties. Rather, USTR has informed
domestic audiences that it would insist that the participating countries table
new texts for all of the TPPA.
While a clean slate approach is critical to the political viability of a TPPA
in the United States, it is also complicated. There are eleven other trade
agreements between the various proposed TPPA partners – a ‘spaghetti bowl’
of differing rules – that include provisions to which various countries are wed.
For instance, extremely controversial immigration provisions in the existing
agreements with Chile and Singapore provided new ‘FTA visas’ (5400 per year
from Singapore and 1400 for Chile). However, on a bipartisan basis, leaders
of the congressional committee that sets immigration policy and an array of
other powerful representatives and senators (including a bloc that typically
supports NAFTA-style pacts) have repeatedly insisted that no future trade pacts
may contain visa or other immigration policies. A TPPA with immigration
provisions would be dead on arrival in Congress. Meanwhile, Singapore and
Chile would likely oppose losing these unique visas.
Further, as noted above, of the four US free trade agreements in the TPPA
spaghetti bowl, only the AUSFTA meets the demand of US congressional
Democrats that the procedural rights to private investor–state enforcement
be omitted. In any case, all four pacts contain the substantive foreign investor
protections and privileges that many congressional Democrats also opposed.
The Peru FTA contains the initial labour, environmental and medicine patent
floor on which congressional Democrats have insisted that further progress
be built; the other implicated US free trade agreements do not.
In addition, various mercantile interests are keen not to lose the safeguards
they achieved in past trade pacts, or use of domestic anti-dumping actions for
trade enforcement. For instance, after strong pressure from US sugar interests
– and despite significant unhappiness from Australia – the AUSFTA did not
provide Australia with any additional US market access for sugar. The AUSFTA
also limited dairy imports using tariff-rate quotas. Under US anti-dumping
laws, shrimp from Vietnam are subject to countervailing tariffs ranging from
4.13 per cent to 25.76 per cent. As well, in 2009 the US International Trade
Commission extended anti-dumping tariffs on Vietnamese catfish fillets
initially put in place in 2003 at an average rate of 66.34 per cent.
Finally, the P-4 was envisioned as a ‘docking agreement’ that other countries
could join after the agreement went into force. The USTR has stated that this
is also its intention for a TPPA. However, the US Congress would be highly
unlikely to support a docking agreement, unless the pact provides explicit
criteria that Congress supports for determining future possible TPPA entrants,
and a role for Congress to approve accession terms.
68 LORI WALLACH AND TODD TUCKER

Concluding Thoughts
Whether the current TPPA negotiations will result in a new agreement or
will disintegrate like the APEC FTA talks will be determined by the nexus
of policy decisions about the pact’s prospective form and content – and the
political reactions to various approaches. In the United States, there are
high expectations among key Democratic constituencies in Congress, State
legislatures and civil society that Obama will use the TPPA negotiations to
provide a long-overdue transformation of the past NAFTA model for trade
agreements.
As we outline above, key US constituencies expect the administration to
set out certain new criteria for remedying the past model’s establishment of
extreme new corporate rights and limits on domestic public interest policy,
and to put in place safeguards that are missing in past pacts. It is critical that
prospective TPPA partner countries understand there are certain terms that
must be and must not be included in any future US trade agreement for it to
obtain US public and thus congressional support.
There is the danger that US officials proceed on the TPPA using the past
US FTA model, and thus the process leads to Obama betraying his ‘new-day-
on-trade’ promises to the American public by taking up Bush’s job-killing
NAFTA-expansion trade agenda – with Vietnam no less. If this happens,
a lot of time could be wasted on negotiations that will never come to full
completion. This would repeat what happened after Clinton administration
negotiators spent years on the hemisphere-wide NAFTA expansion talks to
create the Free Trade Area of the Americas and on the Multilateral Agreement
on Investment, which would have extended NAFTA-style investor rules to
scores of countries.
Unfortunately, there are reasons to believe this could happen. Many of
the USTR negotiating staff carried over from the Bush administration, while
several key Obama economic advisors were also prominent in formulating
Clinton’s trade approach. Indeed, in Obama’s first year in office, senior
White House political staff needed to intervene repeatedly – often at the last
minute – to halt USTR adventurism aimed at reviving Bush’s leftover free
trade agreements. Thus, it is possible that the initial US positions in relation
to the TPPA will continue the trade pact model rejected by the American
public and many in Congress.
This would be a perilous course for the prospects of a politically viable
TPP pact emerging from the negotiations.
Alternatively, USTR officials could suppress their opposition to reform. Or
the White House could closely monitor talks throughout, to ensure that they
head in a direction that is politically viable at home by delivering on Obama’s
campaign commitments to create a new American trade-agreement model
that delivers jobs and fixes the country’s trade disaster. If this happens, a TPP
 3. US POLITICS AND THE TPPA 69

pact could become Obama’s first trade agreement and truly deliver change
that Americans can believe in.
While the American public is only now becoming aware that the new
administration is pursuing TPPA talks, the direction the negotiations take
will define a prospective TPP pact’s viability in the United States. Given US
participation seems to be the priority of other TPPA participants, this may
thus also determine the fate of the entire TPPA endeavour.
4. The TPPA and Indigenous
Peoples: Lessons From
Latin America
José Aylwin

On 14 November 2009 in Tokyo, President Obama confirmed US support for

a Trans-Pacific Partnership Agreement with the goal of shaping a regional
agreement with ‘high standards worthy of a 21st century trade agreement’.1
That same day in Singapore, US Trade Representative Ron Kirk explained
the objective behind this initiative:

A high-standard regional trade agreement under the TPP could help bring
home to the American people the jobs and economic prosperity that are
the promise of trade.2

In the context of President Obama’s announcement, US trade staff met

with their counterparts from the Pacific Rim states that were invited to this
initiative. Those countries are not only Australia, Brunei, New Zealand,
Singapore and Vietnam in the Asia-Pacific area, but also include Chile and
Peru in Latin America.
Little or no information on this initiative is available in Latin America.
Indigenous peoples of the region, who have strongly opposed free trade
agreements with the US and other leading economies that were signed by
several states in the region in the last few years, are even less informed of
its existence.
Their opposition is rooted in experience. The governments of these states
have subscribed to those free trade agreements (FTAs) without consultation
with the representative organisations of indigenous peoples, and even less
with their free, prior and informed consent, in open violation of domestic
and international law. Moreover, FTAs have triggered investment in natural
resource extraction in their lands and territories, with devastating implications
for many of their communities. Protest against such investments has been
repressed and criminalised. The events that occurred in Bagua in the Peruvian
 4. THE TPPA AND INDIGENOUS PEOPLES 71

Amazon in 2009, when thirty-four people died, exemplifies this repression.

In the clashes, indigenous communities mobilised against legislation that
was enacted to make possible the implementation of the US–Peru Trade
Promotion Agreement.
This chapter analyses the efforts of the US government in the last two
decades to expand its free trade model throughout the Americas, and the
strategies used by the US for this purpose. It examines the implications of that
model and its implementation for indigenous peoples, and their responses
to these strategies. It focuses in particular on the FTAs entered into by the
US with Mexico, Chile and Peru.
The final section refers to the debate that will most likely take place in
the region, in particular in Peru and Chile, if the US continues its efforts to
achieve a TPPA. It focuses on the arguments made by indigenous peoples
and by human rights analysts when rejecting the imposition of previous FTAs
in violation of obligations arising from international human rights treaties.

The US and Free Trade in the Americas

For the last two decades, the US has promoted free trade throughout the
Americas. In 1990 it announced plans to negotiate a free trade agreement
with Mexico, an initiative that later evolved into the North American Free
Trade Agreement (NAFTA), which included both Mexico and Canada3 as
commercial partners. NAFTA was signed in 1992 and came into force on 1
January 1994.
NAFTA’s provisions required that all trade barriers should be eliminated
within a period of fifteen years. In the first five years, two-thirds of US industrial
exports would enter into Mexico without duties. Mexico’s tariffs on all other
industrial and most agricultural goods were to be eliminated within ten
years. NAFTA also incorporated agreements on labour and environment,
and foreshadowed cooperation to expand free trade areas in the Americas.
On the same day that NAFTA came into operation, the Zapatista Army of
National Liberation, a rebel organisation bringing together indigenous and
peasant communities in the south of Mexico, rose up in arms in the state of
Chiapas against globalisation and the threat of corporate incursion into their
territories. They demanded that the government of Mexico recognise their
rights as peoples, including the right to autonomy and self-determination. The
Zapatista movement, since then, has become a symbol of indigenous resistance
to the expansion of the global economy in Latin America and worldwide.
Later that year (1994), President George H. W. Bush announced the US
Enterprise for the Americas Initiative (EAI), which had trade, finance and debt
as its main pillars. Its stated aim was to encourage democracy and market-
oriented reforms throughout the continent. This idea was pursued by the US
at the 1994 Summit of the Americas held in Miami when hemispheric leaders
agreed to negotiate within a decade the creation of a Free Trade Area of the
72 JOSÉ AYLWIN

Americas (FTAA). That initiative was formally launched at the Santiago Summit
of the Americas in 1998 and was reaffirmed later in the Quebec Summit of
2001. The US economic downturn in the early 2000s, the 9/11 events, policy
reforms and, above all, resistance by newly emergent political actors in Latin
America in the last decade (Hugo Chavez in Venezuela, Lula da Silva in Brazil,
Evo Morales in Bolivia, among others), subsequently watered down US efforts
to involve the whole region in the creation of a single free trade zone.
The US government then decided to move forward with its free trade agenda
through a different strategy, by negotiating bilateral or sub-regional FTAs
with different states. Since then, agreements with Chile (2004), Dominican
Republic–Central America (Costa Rica, El Salvador, Guatemala, Honduras
and Nicaragua) (CAFTA, 2004), Peru (2006), and Panama and Colombia
(both still awaiting Congressional approval) have been reached by the US.4
Most of these agreements have common features. The next section focuses
on Chile and Peru, the two states in the region that have so far been invited
to join the TPPA negotiations.

US–Chile FTA
As a consequence of the transformations introduced in the 1980s under
the Pinochet dictatorship, Chile opened its economy to international
markets, encouraging foreign investment and exports, both of which depend
mainly on natural resource exploitation. Paradoxically, this policy was
strengthened and legitimised after 1990 with the return to democracy. It
was under the governments of the Concertación, the centre–left coalition
that ruled the country from the end of the dictatorship until March 2010,
that Chile entered into FTAs with the world’s largest economies, as well as
throughout the region.
Indeed, in the last two decades, Chile has signed FTAs with fifteen states,
including Canada, Mexico, the US, Korea, China and Australia. It also signed
Economic Association Agreements with the European Union, and the Trans-
Pacific Strategic Economic Partnership Agreement (or P-4) with New Zealand,
Singapore and Brunei. These FTAs have deepened the liberalisation of the
country’s economy and attracted foreign capital to Chile largely because
of its political stability, favourable legislation, and low environmental and
labour standards.5
In the US–Chile FTA, which came into operation in January 2004, both states
reaffirmed their previous obligations under World Trade Organization (WTO)
agreements. In Chapter 3 of the agreement, each party made commitments
to treat products of the other in a non-discriminatory manner, providing for
the phase-out of non-tariff trade barriers that restrict or distort trade flows.
The agreement also eliminated all tariffs on originating goods traded among
the parties immediately or phased in over twelve years.
 4. THE TPPA AND INDIGENOUS PEOPLES 73

Chapter 10 of the agreement strongly protected investors – namely US

investors in Chile – by ensuring they enjoy six basic principles that are common
to most FTAs imposed by the US in the region:

• non-discriminatory treatment relative to domestic investors or investors

of non-parties;
• freedom from ‘performance requirements’;
• free transfer of funds related to an investment;
• protection from expropriation;
• ‘minimum standard of treatment’ in accordance with customary
international law; and
• the ability to hire key managerial and technical personnel without
regard to nationality.

This chapter also provided a mechanism for an investor of a party to pursue a

claim against the other party on grounds that it has breached an investment
right protected by the FTA.
Chapter 17 of the agreement was aimed at the protection of intellectual
property, as well as at the enforcement of intellectual property rights. This
chapter obliged Chile to ratify or accede to several agreements on this matter.
Further provisions were aimed at the protection of trade marks and geographical
indications, copyrights and related rights, patents and trade secrets.
The agreement also contained labour provisions in Chapter 18 that were
theoretically aimed at reaffirming ILO standards on labour rights. However, it
recognised the right of each party to establish its own labour laws. Chapter 19
dealt with environment, including a commitment by both parties to provide
for high levels of environmental protection. Last but not least, Chapter 22
set out procedures for dispute resolution between parties over compliance
with the FTA, establishing a Free Trade Commission for this purpose. The
use of arbitration and alternative dispute mechanisms to settle international
commercial disputes among parties was encouraged.6
In contrast with first-generation FTAs that dealt mainly with tariff
reductions, and with second-generation agreements such as NAFTA that
include investment and other commitments, the US–Chile FTA is considered
to be a third-generation agreement, which is more ambitious and regulates
matters that go beyond trade, such as environment, labour and intellectual
property.
The agreement was strongly criticised when it came into operation because
of the protection of US commercial interests that it entailed, and Chile’s
self-imposed restrictions in its relations with the US superpower that have
the effect of considerably limiting the autonomy of Chile’s public policy. As
Rodrigo Pizarro, a Chilean environmental economist, affirmed after this
agreement was signed:
74 JOSÉ AYLWIN

The Free Trade Agreement with the USA involves profound commitments in
public policy, which further reduces the ability of the Chilean authorities to
modify the current economic development strategy. Therefore, the decision
by the current government to accept new restrictions upon its freedom of
action in economic policy and international integration, constitute a bet
in favor of the status quo, and a commitment with the neoliberal economic
model.7

The FTA was also criticised by progressive sectors of Chilean society and
social movements, including indigenous peoples, because of the lack of a
consultation process or public debate on the real need for such an agreement.

US–Peru TPA
In December 2005 Peru became the first of the three Andean states invited
by the US to negotiate a free trade agreement to sign what was called a
Trade Promotion Agreement (TPA). This TPA was negotiated and approved
during the second administration of the populist President Alan Garcia,
notwithstanding opposition by large sectors of society, including unions, small
farmers and indigenous peoples. The TPA deals basically with the promotion
of investment and trade. It required two-thirds of US farm exports to Peru to
become duty-free immediately, and tariffs on most US farm products to be
phased out within fifteen years and all tariffs eliminated in seventeen years.
Chapter 10 of the agreement provides for several different measures aimed at
promoting and facilitating investment. The TPA establishes strong protections
for US investors in Peru by granting them, in almost all circumstances, the
right to establish, acquire and operate investments in Peru on equal footing
with local investors. It prohibits expropriation and measures ‘tantamount to
expropriation’, with the exception of a ‘public purpose’ (which carries a right to
full compensation), and provides investors with due process protection and the
right to receive a fair market value for property in the event of expropriation.
The same chapter establishes that disputes should be brought before the
International Centre for Settlement of Investment Disputes (ICSID).8
Intellectual property is also protected under Chapter 16. The TPA grants
extensive protection to patent-holders, requiring the creation of procedures
and remedies to prevent the marketing of pharmaceutical products that
infringe on patents.
The agreement includes additional provisions on labour and environment
that are similar to those considered in the US–Chile FTA. It is interesting
to note that the investment chapter (Chapter 10) states that the agreement
shall not be construed to prevent a party from adopting measures (including
environmental measures) to secure compliance with laws and regulations
that are not inconsistent with the agreement, or that are necessary to protect
human, animal or plant life, or related to the conservation of endangered
 4. THE TPPA AND INDIGENOUS PEOPLES 75

or depleted natural resources. Moreover, it affirms that in the event of an

inconsistency between Chapter 10 and other chapters, others (including the
chapter on environment) shall prevail.9
Pressure by different actors in the US, including Democrats in the Congress,
led to a renegotiation of this agreement in 2007 (Protocol of Amendment), and
to the inclusion of improved protection on access to medicine, environment
and labour rights, thus theoretically allowing Peru to maintain its international
human rights obligations on these matters. The TPA finally entered into
force on 1 February 2009.

The Implications of US FTAs for Indigenous Peoples in Latin America

Mexico
Mexico has not yet been invited to be a partner in the TPPA. NAFTA, however,
has been in effect for a decade and a half, with significant political and
economic consequences. So it is important to consider the effects that NAFTA
has had in Mexico, with particular reference to indigenous lands and resources.
NAFTA triggered the reform of the Mexican land tenure system that had
been structured throughout the twentieth century after the revolution. Laws
were passed shortly after the signing of NAFTA that enabled the privatisation
of the ejido.10 Due to these reforms, indigenous peoples and campesinos who
communally owned the ejidos have been slowly disenfranchised from their
land and water rights at the hands of outsiders, who have acquired these
resources for agro-industrial activities. Consequently, small farmers have
increasingly been forced to abandon production and to migrate to nearby
cities or to emigrate out of the country. Water law reforms have made water
a commodity valued as an economic good, which has enormous social
implications for impoverished urban residents and small farmers.11
Aside from the privatisation of the ejido and of water rights, NAFTA
increased Mexico’s imports of agricultural products that were traditionally
grown by indigenous peoples and rural communities, severely harming
rural economies. By 2003 Mexico was importing basic crops that had been
traditionally grown by indigenous peoples. More than a fifth of the corn, a
third of the wheat, nine-tenths of the rice and soybeans, and a third of the
sorghum that was consumed in the country was imported, causing the ruin
of millions of farmers.12
To take the example of corn, Mexico has gone from being a major corn
producer to a corn importer, with imports nearly tripling since NAFTA. Due
to this agreement, Mexico has had to open its market to subsidised corn from
the US and Canada, and by 2008 Mexico had eliminated quotas on corn
imports. This has had a devastating effect on indigenous crop farmers. In
addition, whereas indigenous peoples traditionally grew their own seeds, now
they have to buy seeds from transnational corporations such as Monsanto
that have patented the seeds, generating dependency and increasing costs.13
76 JOSÉ AYLWIN

Chile
The implications of the US–Chile FTA should be analysed in the broader
context of the liberalisation of Chile’s economy in the last two decades,
facilitated by FTAs and bilateral investment treaties (BITs) signed with the
world’s largest economies. Such agreements have resulted in the installation
of large development projects that are both extractive and productive. These
projects involve national and foreign capital and are situated on indigenous
peoples’ legal or ancestral lands, where natural resources that Chile exports
are predominantly located.14
The US–Chile FTA has strongly increased US investment in Chile. Such
investment, which totalled US$12.1 billion in 2008, is mainly related to the
finance, manufacturing, mining and banking sectors. Although most of this
investment has not directly impacted on indigenous lands and resources,
Chile’s exports to the US have also grown, amounting to US$8.2 billion in
that same year. Of these exports, a large percentage was copper (US$2.8
billion), fish and seafood (US$938 million), wood products (US$658 million)
and precious stones (specifically gold) (US$542 million).15
Such exports were mainly extracted and/or processed on indigenous lands
by Chilean companies or by foreign investors attracted by incentives under
the FTA and BITs. Probably the best example is mining, an activity that has
grown at high speed in the last decade, not only due to the rising prices of
minerals, but also because of Chile’s competitiveness through its low labour
costs and environmental and taxation standards. According to the Fraser
Institute Annual Survey of Mining Companies 2008/2009, Chile is a world
leader that has ranked for more than a decade among the top ten states where
metal mining is considered to be safe for investors, taking into account factors
such as taxation and other mining-related regulations.16
The largest mining investors in Chile are CODELCO, a Chilean state-
owned corporation, followed by Canadian and Anglo-Australian companies.
CODELCO is responsible for one-third of Chile’s copper exports, largely to
the US, and the company’s exports from 2006 to 2009 generated US$26.7
billion in income for the Chilean state. Most of its mining operations are
in the territory of the Lickanantai people in the north of the country. The
remaining two-thirds of copper exports are from private companies, largely
controlled by foreign investors.17
Canadian as well as Australian mining investments are also promoted by
FTAs that Chile has signed with each of these countries. Both operations
have strongly impacted on the Aymara and the Diaguita people. One of the
Canadian companies involved in mining activities in this area is Barrick
Gold, which is responsible for two mining projects (Pascua Lama and El
Morro) that were resisted by Diaguita communities because they were located
on their traditional lands, involving the appropriation of ancestral waters
and posing threats to the environment. Anglo-Australian company Cerro
 4. THE TPPA AND INDIGENOUS PEOPLES 77

Colorado, a subsidiary of BHP Billiton, has been involved in the extraction

of underground waters in the Pampa Lagunilla, drying up meadows and
wetlands of the community of Cancosa.
In the south of Chile, the traditional territory of the Mapuche has been
severely affected by the expansion of forestry, the building of hydro dams, and
the proliferation of fishing and salmon farms. Almost two million hectares
acquired mainly by Chilean companies have been planted with fast-growth
exotic species (radiata pine and eucalyptus) for the production of timber and
cellulose, which is largely exported to the US and China.18 Hydro dams that
supply the power needed for paper mills and forest operation have been built
on Mapuche lands. Salmon farms, which have made Chile the second-largest
exporter of farmed salmon worldwide, have been installed along Mapuche
river and ocean shores.19
Indigenous, and particularly Mapuche, social protest that was triggered
by the proliferation of these investment projects without proper consultation
and without participation in benefits has been criminalised by the Chilean
state. Such criminalisation is evidenced by acts of police brutality against
individuals, resulting in many cases of torture, and cruel, inhuman and
degrading treatment affecting community members. Three Mapuche activists
involved in social protests against the expansion of forest activities in their
communities have been killed by police agents in the last decade.20 Those
responsible for these acts remain free with impunity. By contrast, hundreds of
Mapuche activists have been prosecuted by the state after they were accused
of committing ordinary or terrorist crimes listed in the Anti-terrorist Law (No.
18,314). Fifty are currently in prison charged with terrorist crimes.
Chilean anti-terrorism laws have caused concern among a number of
UN human rights entities, including the Human Rights Council, the UN
Committee Against Torture and the UN Committee on the Elimination
of Racial Discrimination. In 2009 this last entity, as well as UN Special
Rapporteur on the rights of indigenous peoples, James Anaya, recommended
that the Chilean state ensure that investments are not implemented in
violation of indigenous rights to land and natural resources.21 Moreover, the
Committee on the Elimination of Racial Discrimination recommended that
such activities should not be implemented without indigenous people’s free,
prior and informed consent.22

Peru
Peru probably offers the best example of the adverse effects on indigenous
peoples of FTAs signed with the US. In order to enable the implementation
of the US–Peru TPA, the Peruvian Congress in 2007 granted the executive
branch the use of legislative powers in matters that included trade facilitation,
state modernisation, administration of improved justice in trade matters
and administrative disputes, promotion of private investment, institutional
78 JOSÉ AYLWIN

strengthening of environmental management, and improvement of

competitiveness of farming production. Within less than six months, Alan
Garcia’s government issued ninety-nine legislative decrees, thirty-eight of
which affected indigenous and peasant communities.23
The legislative decrees (LD) that threatened indigenous peoples’ lands
and resources with the purpose of implementing the US–Peru FTA included
the following:

• LD 1089 Extraordinary Temporal Regime of Rural Formalisation and Deed

of Title eases the path to expropriation and exploitation of rural property
at national level. The decree promotes individual property on the basis
of collective impairment, undermining the right to consultation, to
land and territory, and the use of natural resources and development.
• LD 1079 Natural Protected Areas opens up natural protected areas to
forest concessions, mines and oil under the US–Peru TPA by enabling the
exploitation of renewable and non-renewable resources in those lands.
• LD 1090 Forest and Wildlife Law redefined forest patrimony to exclude from
public administration around 45 million hectares of land with foresting
capacities – equivalent to 64 per cent of Peruvian forests – and make it
available for grants of private property to transnational corporations.
This decree was modified by Law 29317, which was aimed at privatising
forests and promoting changes of land use in order to promote bio-
combustible production. Law 29317 was repealed on 5 June 2009.
• LD 1015 and 1073 Native and Peasant Communities Law promotes private
investment on indigenous peoples’ lands and in rural communities by
allowing indigenous peoples to decide on the sale of their property by a
vote of 50 per cent plus one, instead of demanding the agreement of the
community’s general assembly, which requires two-thirds approval.24

The intention behind these legislative decrees was to encourage the new
expansion of large private estates – neolatifundización – of Amazonian forests
lands; by breaking up indigenous communities, their territories could be
handed to large investors interested in biofuel production.25
As in the case of the negotiation of the US–Peru TPA, indigenous peoples
were never consulted about these decrees. That situation led the ILO Committee
of Experts on the Application of Convention 169 to issue an observation to
the Peruvian state expressing its concern over the serious failure to consult
with indigenous peoples on legislation that may affect them, and on decisions
regarding the use of natural resources on their traditional territories.26
There was an immediate indigenous reaction against the implementation of
the TPA by means of the legislative decrees. In 2008 the Amazonian indigenous
peoples in the Interethnic Association of the Peruvian Amazon (AIDESEP)
mobilised behind demands that the decrees affecting them and approved
without consultation be rescinded. Such protests were successful in getting
 4. THE TPPA AND INDIGENOUS PEOPLES 79

LD 1015 and 1073 (which facilitated sales procedures and individualisation of

land ownership) overturned. President Garcia made a commitment to initiate
an evaluation of other decrees questioned by AIDESEP, and formed a Special
Multiparty Commission. The Commission’s report, issued in December 2008,
recommended their repeal. Among the fundaments of its recommendations
were that rules regarding rights and freedoms recognised by the Constitution
should be interpreted in accordance with the UN Human Rights Declaration
and with international treaties ratified by Peru in this matter; it argued that the
decrees did not comply with this obligation. New protests began in April 2009
after the Congress failed to implement the Commission’s recommendation
to repeal seven additional decrees that affected indigenous peoples’ rights.
AIDESEP again mobilised its grass-roots organisations throughout the
country. Among these organisations were those of the Awajún and Wampis
people in the area of Bagua where the government threatened to reduce the
Ichigkat Muja National Park on the border with Ecuador to the benefit of
mining in the Condor Mountains, in accordance with the decrees. After several
days of road blockade, the government ordered the police to clear the roads,
generating clashes that ended with thirty-four identified deaths, including
twenty-four police officers and ten people from the indigenous communities;
a hundred civilians were injured by firearms.27
The events of Bagua led to several investigations, including that conducted
by UN Special Rapporteur James Anaya. In his report issued in August 2009,
the Special Rapporteur not only asked the government of Peru to investigate
and clarify these events, but also stressed the importance of harmonising the
development policies implemented by Peru with the respect for the state’s
human rights obligations regarding indigenous peoples, in particular ILO
Convention No. 169 to which Peru is a party, and the UN Declaration on the
Rights of Indigenous Peoples which was approved in 2007 with Peru’s support.28
The US–Peru TPA has only been in effect for a year. Its implications for
investments on indigenous peoples’ lands and resources are still to be assessed.

Conclusions
Indigenous peoples in Latin America have strongly advocated against the
FTAs signed in the region to date. This is not surprising, considering that these
peoples have not been informed or consulted by states on the negotiations of
the agreements, nor considered when defining their contents. This chapter has
shown the serious implications of FTAs for land and resource appropriation,
environmental destruction and criminalisation of social protests, specifically
as they relate to indigenous communities.
The proposed TPPA is not yet a matter of debate in the region, and even
less among the indigenous peoples. Notwithstanding the international law
obligations of Chile and Peru under Article 6.1.a Convention 169 of the
ILO,29 which mandates states to consult with these peoples’ representative
80 JOSÉ AYLWIN

organisations whenever considering the adoption of legislative or administrative

measures that may affect them directly, indigenous peoples have not yet been
informed that conversations on the TPPA have been taking place.
After the traumatic experience of Peru, the governments of both Peru and
Chile will probably end up having to implement consultation processes with
these peoples if they want to move forward on the TPPA initiative. However,
as long as these initiatives continue to propose the inclusion of Latin America
into the global economy as a supplier of natural resources located on indigenous
lands – as has occurred with the forests of the Amazon basin in Peru or with
subsurface resources of the Andes in Chile – the perspectives of indigenous
peoples with regard to these agreements is not likely to change.
A recent continental summit of indigenous peoples held in 2009 in Puno,
Peru, reaffirmed their opposition to FTAs, which are clearly seen as a form
of domination and colonisation:

We reject the Free Trade Agreements with United States, Europe, Canada,
China and other countries which have destroyed our economies, as new
instruments of subjugation of our Peoples and plunder of Mother Earth.
We reject the tactics of the European Union along with the dictators of
Peru and Colombia that would destroy the Andean Community in order
to impose their Free Trade Agreement.30

Opposition to FTAs and other initiatives aimed at strengthening resource-

based investments is grounded not only in political rationales, but increasingly
in indigenous worldviews. New paradigms among indigenous movements
in Latin America based on the need to respect nature (Mother Earth or
Pachamama) proclaim that their aspiration is not that of Western societies,
which is ‘living better’, but instead is ‘living well’. That perspective has
strongly influenced new trends in Latin American constitutionalism, as can
be evidenced in the case of the recently approved Constitutions of Ecuador
(2008) and Bolivia (2009).31
Although opposition to free trade agreements is common to most indigenous
peoples worldwide, it is relevant to highlight here that in the context of the
Pacific Rim, which is the scenario proposed for the TPPA, there are some
exceptions to this rule. Such is the case of the Māori people in Aotearoa,
where after a period of resistance to neoliberalism and FTAs in the 1980s
and 1990s, some Māori organisations have expressed their support for FTAs
in which the New Zealand government has become involved.
Two factors may help to explain their perspective on this matter. The
first is the fact that the treaty settlements process in which they have been
involved for the last two decades, as a consequence of the Crown’s decision to
assume its obligation to resolve historical grievances in accordance with the
principles of the Treaty of Waitangi, has resulted in the inclusion of Māori
organisations, both traditional (iwi and hapū) and modern, into activities
 4. THE TPPA AND INDIGENOUS PEOPLES 81

such as fisheries, forestry, and geothermal exploration and exploitation. It is

through these activities that Māori, unlike their counterparts in Latin America,
have increasingly become involved in international trade and relationships
with the corporate world.32
The second factor that may help to explain their perspective is that the
New Zealand government, even if it is for pro-corporate reasons, has been
successful in including Māori representatives in trade delegations that attend
forums where these kinds of initiatives are being negotiated. This strategy
substantially differs from the way indigenous peoples in Latin America have
been excluded from such negotiation.33
Finally, it should be mentioned that challenges to the inclusion of Latin
American states in the TPPA may arise not only from indigenous voices, but
also from a human rights and social movement that has opposed FTAs due
to their habitual infringement of rights protected in human rights treaties.
Organisations such as the International Federation of Human Rights, a
league to which many human rights organisations in Latin America belong,
have made strong statements to states and to the UN forums where these
matters are being debated, concerning the risks that investment and trade
agreements can pose to the ability of states to comply with their human rights
obligations. The International Federation has argued that such agreements
should be assessed with regard to the pre-existing human rights obligations of
all parties involved in them and, consequently, that FTAs should be amended
or rejected if they are not in conformity with these obligations.34
At the regional level, a similar statement was issued by a group of human
rights NGOs that attended the regional consultation of the Representative of
the Secretary General of the UN for Human Rights, Transnational Corporations
and other Business Enterprises, John Gerard Ruggie, in Argentina in May
2009. Among other issues, these NGOs stated the need to elaborate proposals
for the revision of the validity of trade agreements that do not comply with
international human rights norms, and the need to ensure that arbitration
tribunals on matters of trade and investment that operate under ICSID or
the UNCITRAL (United Nations Commission on International Trade Law)
rules are subject to international human rights norms.35
The prospects for the TPPA in Latin America are still uncertain. After the
recent experience of the implementation of the US–Peru Trade Promotion
Agreement, it is unlikely that the TPPA will be implemented without strong
challenges, in particular those to be put forward by indigenous peoples and
human rights movements.
5. Security Implications
of the TPPA
Paul G. Buchanan

This book debates the merits of expanding the Trans-Pacific Strategic Economic
Partnership Agreement (P-4) to one that includes the US, Australia, Peru and
Vietnam. Attention will be accorded to the impact the proposed TPPA (referred
to as ‘the enlarged TPP’)* might have on a variety of economic sectors. Entry
and after-entry issues of this ‘new generation’ trade deal will be weighed, and
the purported benefits of the proposed compact analysed, in terms of the
economic, labour, indigenous and larger societal costs embedded in it. As
Lori Wallach and Todd Tucker have noted in Chapter 3, there are also serious
issues of democracy and human rights involved in expanding the P-4 to a
TPPA, particularly the attitude of the democratic partners (Australia, Chile,
New Zealand, Peru and the US) regarding the unimpressive civil liberties
records of Brunei, Singapore and Vietnam.
This chapter focuses on the security implications of closer economic
integration between these variegated partners, who not only have very different
resource and knowledge bases but also quite distinct cultural and political
traits that influence their perceptions of threat and security. In particular,
the growing presence of China as an emerging Pacific (if not world) power
has received little critical attention in analysis of the TPPA. Specifically, the
impact on multilateral trade of the growing strategic competition between
the US and China in the Western Pacific may have a significant influence
on the way in which TPP expansion is approached by the actors involved.
There are also security issues, such as counter-terrorism and crime
mitigation, that are raised by the TPP expansion that are not addressed in
either the academic or policy literature. To this can be added the unintended
but inevitable security-related consequences of TPP expansion, such as
the potential for a TPPA to facilitate increased weapons sales and arms

* The phrase ‘expanded TPP’ or ‘enlarged TPP’ is used here to refer to the development of the P-4 into a
TPPA with the P-4 members plus others that will nominally accede to the P-4.
 5. SECURITY IMPLICATIONS 83

races around the Pacific Rim. The chapter will examine the major security
implications embedded within an enlarged TPP, but it is necessary first to
reflect on the broader conceptual issues involved in linking security and trade.

The Relationship between Security and Trade

The relationship between security and trade is said to boil down to a simple
truism: trade partners are believed to make better security partners and vice
versa. The assumption upon which this premise (known as ‘issue linkage’)
rests is that the partners to trade and security agreements develop mutual
dependencies and levels of trust unknown by those who are not trade or
security partners. Relationship on one level gives them a vested interest in
protecting and deepening the partnership so as to better hedge against future
uncertainty (protecting the investment or investing in protection, as it were).
The more deeply bedded the relationship, the more institutional isomorphism
obtains (that is, the more the institutional approaches of trade or security
partners tend to mirror each other in content and organisation).
The Cold War appeared to prove the truth of the proposition, as evidence
showed that Western (liberal democratic) trading partners tended to enter
into security alliances preferentially with each other, and organised their trade
and security branches in ways that promoted institutional symmetry, if not
isomorphism in diplomatic approaches. For its part, with some modifications
due to the preponderance of the USSR within it, the Soviet bloc exhibited
issue linkage as well.1
Issue linkage was seen in the special relationship Australia and New
Zealand maintained as post-colonial security allies and exporters of agricultural
commodities to the United Kingdom until the latter’s entrance into the
European Economic Community in 1973, at which point the Antipodean
neighbours were forced to expand their export client base beyond their
traditional security partners. Given that the forced export re-orientation
overlapped with New Zealand concerns about French nuclear testing in
the South Pacific (a concern not shared by its traditional security partners),
this eased the transition to a more independent foreign policy stance that
culminated in the 1985 announcement of New Zealand’s anti-nuclear policy
and the subsequent dissolution of the Australia–New Zealand–United States
(ANZUS) security alliance. In effect, issue linkage for New Zealand was
seen as two sides of the same coin: ending of privileged economic ties led to
loosening of traditional security ties in the years that followed. Downgrading of
economic and security relations with traditional partners in turn precipitated
New Zealand’s re-orientation towards Asia, a process that is deepened by the
current TPPA negotiations and which is an area in which Australia shares
a common interest.2
The causal direction of those ‘dual’ partnerships still remains unclear. Did
security more often come before trade or did the reverse occur (and was this
84 PAUL G. BUCHANAN

the same for the Soviet-led camp)? Was the presence of an opposing ideological
bloc the primary motivation for actors to pursue dual partnerships within their
own blocs, or were these partnerships formed independently and according
to individual actor objectives uninfluenced by the Cold War struggle? Were
there variations in the pursuit of agreements within each camp, with some
countries preferring to pursue security before trade relationships while others
did the opposite? Did one partner use a trade or security agreement to push
for the other, or did it offer the prospect of a future agreement to secure an
immediate one? It may be true that trade and security went together in the
Cold War, but the reasons and modalities for the linkage are not reducible
to a syllogism.
After the Cold War, the assumption that trade and security alliances
preferentially go together, or are at least facilitated by each other, came
into question. On the ‘trade’ side, globalisation of production, capital,
communication, consumption and exchange has seen the proliferation of
trade agreements, trading blocs and trade regimes that are often unconnected
to existing or new security alliances (although states such as Australia, New
Zealand and the US continue to couch their approach to trade in issue linkage
terms). Conversely, the international security regime has shifted since the Cold
War, first of all away from notions of collective security based upon credible
counter-forces straddling the communist–capitalist ideological divide, to
notions of cooperative security based upon confidence and security-building
measures. The emphasis in the 1990s was on multinational peace-keeping,
and after the attacks of 9/11 shifted to global asymmetric warfare pitting
Islamic extremists and the ‘West’ against each other.
These shifts have not necessarily been related to the expansion of trade
agreements and security regimes. In fact, they may be counterpoised (for
example, when linkages between trade and security impinge on the Arab
world). Even if they overlap post-9/11, and even if economic globalisation
and trade have facilitated the reach of non-state asymmetric warfare actors
and those who seek to counter them, the linkage between security and trade
in the post-Cold War era appears to be more spurious than causal. In other
words, it appears that the post-Cold War globalisation of capitalist production,
consumption and exchange in a geostrategic context devoid of superpower
rivalries has removed the ideological and practical need for tight issue linkage
between security and trade. The question then is whether issue linkage is
consciously at play in TPPA negotiations, as the attitude of some actors
(Australia and Singapore in particular) would suggest.
There is an additional issue of regime types and their approaches to trade
and security. The literature on trade mostly refers to ‘states’ – that is, politically
undifferentiated sovereign political entities with rational policy objectives
that frame their approach to trade and other foreign policy issues.3 But
states are governed by specific national political regimes, each with its own
 5. SECURITY IMPLICATIONS 85

leadership characteristics, political goals and rules of behaviour. This was

evident during the Cold War, even if attention focused mainly on the trade
patterns of liberal democracies rather than on their Stalinist counterparts.
In fact, there is little written on how different national political regimes
approach the subject of issue linkage of trade and security, much less how
different types of authoritarian regime approach the subject (say, despotic or
military-bureaucratic versus national-populist or one-party mobilisational).4
For example, how do Brunei or Vietnam engage in trade and security
negotiations, be it bi- or multilaterally, with other authoritarian as compared to
democratic regimes – say, within the framework of the Association of Southeast
Asian Nations (ASEAN) or the TPPA? Do authoritarians and democrats shift
bi- or multilateral negotiating strategies based on who they are negotiating
with (as opposed to adopting uniform approaches on all issues of trade and
security)? What strategic logics underpin the move to engage negotiations in
either field? Do authoritarians pay more attention to the security implications
of trade than do their democratic counterparts, and if so, is that more a matter
of strategic location than regime characteristics?
Conversely, do democracies necessarily continue to trade preferentially with
other democracies in the post-Cold War era, or has the range of preferential
partners expanded to include authoritarian-ruled states after the demise of
the Soviet bloc? If so, do democracies sacrifice political principles (such as
support for human rights and free and open governance) when engaging
authoritarians on the subject of trade, or do they condition trade talks on
authoritarian adherence to a minimum of human rights standards? Is it true,
as the comparative political economy literature maintains, that institutional
isomorphism occurs once agreements are reached regardless of the regimes
involved or the sequencing of the issue linkage?5
Given the varied nature of the regimes that govern the expanded partnership,
as well as the possibilities of issue linkage at play, this brings us to the subject
at hand: the security implications of the TPPA. The language of free trade
agreements seldom takes into account the military and law-enforcement
ramifications of increased volumes of goods and services freely flowing across
international boundaries (which should be seen as costs of the exchange). Yet
trade liberalisation crosses pre-existing security alliance commitments (for
example, between the ASEAN Security Community [ASC] or the Rio Treaty
and the multilateral annual naval exercise programme known as UNITAS
involving the US and a variety of Central and South American partners),
and provides structural incentives for the formation of new ones. It also
offers criminal enterprise a means of expanding markets, be it in money
laundering; drug, arms or human smuggling; or via the use of legitimate
business as fronts for crime.
As other contributors to this volume point out, a number of ‘after-entry’
issues are the anticipated flow-on effects of the opening of international trade
86 PAUL G. BUCHANAN

borders. Environmental impact, human resource, indigenous and gender

aspects, labour market conditions and the broader social policy implications
of cross-border economic integration are now viewed as significant ‘after-
entry’ concerns. Taken together they are seen as fundamental human rights
matters.6 The security dimension of trade liberalisation in the broad sense
in which it is used in relation to the TPPA should consequently be seen as an
important ‘after-entry’ concern for three reasons. Most importantly, because
freedom from physical insecurity and freedom from fear regardless of cause are
held to be universal human rights. More immediately, because FTA security
concerns impact on the role and operations of customs, immigration and the
police as frontline agencies in the effort to prevent untoward use of legitimate
trade opportunities as a conduit for illegal activity (something that requires
institutional and policy changes appropriate to the necessities involved). And
finally, because the TPPA is influenced by and has an impact on military-
strategic perspectives, force composition and approach to military alliances.
Issues of intelligence gathering, analysis and focus overlap the latter two, and
all three issues impinge on the human security dimension inherent in the
1948 Universal Declaration of Human Rights and its addenda.7
The practical policy questions that emerge from this introduction focus on
current practice of issue linkage as it applies to the TPPA. State actors may or
may not continue to see security and trade as linked, and therefore develop
strategic approaches to trade that are influenced by security considerations.
After-entry security questions may or may not play a part in trade negotiations
regardless of the regime type involved. Issue linkage may or may not be the
underpinning rationale at play behind expanded TPP negotiations, at least
in the minds of some state actors. These points provide the focus for the
discussion below.

Strategic Context
National security and trade do, in fact, overlap. One encompasses the physical
security of the nation state, the other helps provide for the material conditions
of its existence. Trade is a human security issue because it impinges on
economic growth and stability, which is the basis for social and political order.
Physical security matters because it conditions the context of trade. Security
is a strategic concern as well as a double-edged sword. Unlike the situation
governing issue linkage during the Cold War, where security relations preceded
or were more important to policy makers than trade, the current security
context in which the TPPA is being negotiated is more fluid and therefore
conducive to exploitation by state and non-state actors.
Given the overriding emphasis on trade operative under the market-driven
macroeconomic logics that currently dominate inter-state discourse, security
issues (before- or after-entry) are relegated to a secondary concern on the part
of many of the policy élites involved. Not only that, security relations between
 5. SECURITY IMPLICATIONS 87

the states negotiating the TPPA (as well as elsewhere) are in a process of flux,
with US military hegemony challenged by unconventional non-state actors
and rogue states (the two often working in concert) and emerging or resurgent
powers such as China, India and Russia, all of whom have a strategic interest
in tying their security to trade, as well as having a strategic interest in the
Western Pacific.
Under such conditions, the more open a nation’s trade borders, the more
there is a potential for traditional as well as non-traditional security threats
to use commercial links as vehicles for the attainment of military-strategic
objectives (and conflict itself ). Economic and regulatory integration also
facilitates cross-border crime in the absence of countervailing prophylaxis.
The strategic context in which the proposed TPPA is being negotiated
is one where the People’s Republic of China is gradually challenging US
military and economic primacy in the Western Pacific amid a general military
build-up throughout the region. Japan, Indonesia, Malaysia, Singapore,
Vietnam and (further afield) Australia, India, Russia, Peru and Chile have
all increased their expenditures on defence and security during the early
2000s.8 Along with this military re-balancing, there has been a pronounced
growth in Chinese economic and diplomatic influence throughout Africa
and the Southwestern Pacific as well as Latin America, to the point that it is
a major investor and foreign aid donor in a majority of the fourteen island
states grouped together with Australia and New Zealand in the Pacific Islands
Forum (PIF), especially in Melanesia. China has become the second largest
foreign investor in Latin America (after the US), and is the centrepiece of the
ASEAN+3 and East Asian Summit, regional trading blocs that, unlike the
Asia-Pacific Economic Cooperation (APEC) forum, do not include the US (or
Taiwan). Through these entities, China has pushed for more intra-regional
economic integration, as opposed to the inter-regional focus of APEC. This
allows it to achieve strategic objectives (diminishing US influence in Asia)
without confronting the US openly or in a military fashion. As Charles Barfield
and Philip Levy have noted:

Asia is awash with alliances and acronyms. There is APEC, the Association
of Southeast Asian Nations (ASEAN), ASEAN+3 (APT), and the East Asian
Summit (EAS). Each configuration differs from the other in an important way,
usually by which country is excluded. Thus, the struggle over which forum
is to be empowered – sometimes referred to as ‘East Asian architecture’ – is
really a struggle over political influence in the region. Since there is little
eagerness for joint security action among the major players in Asia, the
shaping of commercial ties emerges as the key battleground.9

This proxy battlefield has been extended by Chinese investment throughout

Southeast Asia, Latin America and the Antipodes, moving beyond its
traditional interest in natural resource extraction (for example, Australia
88 PAUL G. BUCHANAN

is the biggest source of coal for Chinese industry) into financial services,
tourism, construction, real estate and property development. China’s reach
extends to a bilateral free trade agreement with New Zealand, which in the
event of TPP expansion puts New Zealand in the awkward strategic position
of being the point of trade overlap between the competing great powers. New
Zealand’s ‘tug of war’ dilemma could be exacerbated by the growth of Chinese-
dominated Asian trade networks that exclude the US and which offer more
liberal terms of trade than the Americans (including more permissive after-
entry conditions). New Zealand’s entrance into such networks runs the risk
of politically alienating the US at a time when the latter perceives growing
Chinese economic influence as a long-term security threat. That will have
the effect of decreasing New Zealand’s range of diplomatic manoeuvre and
increasing its structural dependence on China-centric trade.
In addition, by manipulating its currency exchange rate so as to leave it
comparatively undervalued, China has generated enormous trade surpluses
that have provided it with an estimated US$450 billion in reserves, a significant
portion of which has been used to fund its military build-up.10 Until very
recently, the US has not responded in kind to this soft power leveraging,
leaving a diplomatic vacuum that it has attempted to fill by shifting military
priority to the Pacific.
The strategic consequences for the US posed by China’s expanding trade
relations have been captured in a report by the open intelligence aggregation
and analysis service Strategic Forecasting (Stratfor):

Throughout the first decade of the 21st century, as Washington focused

primarily on South and Southwest Asia, China undertook a re-examination
of its own position and foreign policy. Shifts in China’s economic patterns,
which make the country much more dependent upon trade flows to and from
far-flung areas, prompted Beijing to begin expanding its own political and
economic influence, starting in Southeast and Central Asia. In addition,
to protect its longer maritime supply lines, Beijing began shifts in its naval
acquisitions and doctrine, working to reshape its navy from one of coastal
defense to one capable of overseas deployment and long distance missions.
This expansion of China’s sphere of interest, influence and activity has
pushed up against two of the guiding U.S. strategic imperatives – ensuring
that no single great power can arise in the Eurasian landmass, and ensuring
domination of the seas to allow rapid access to distant locations while
minimizing any foreign power’s ability to challenge the U.S. mainland.
China is expanding its reach throughout Eurasia via land and beyond via
the sea, and the Strait of Malacca, between Indonesia and Singapore, is
a critical element for Beijing’s access to the Indian Ocean basin. China
is far from becoming the dominant power in Eurasia, and has yet to
fundamentally challenge U.S. control of the seas (though there have been
 5. SECURITY IMPLICATIONS 89

occasional collisions between the two countries’ maritime assets). But

Beijing is certainly showing an inclination in that direction, and Beijing’s
ultimate capabilities aside, Washington has taken notice.11

Thus, for the US, the TPPA has strategic implications beyond trade per se.
The TPPA would provide the US with a trade-based counterbalance to Chinese
ambitions as well as a means by which to redress the current soft power
imbalance that favours the Chinese in the South Western Pacific. Beyond any
material benefits that accrued, the establishment of a US-led eight-country
trading bloc across the Pacific Rim, with potential to expand to other APEC
members, would help offset Chinese ‘chequebook diplomacy’ as a form of
influence and leverage in that part of the world. In order to understand the
larger context in which this countervailing strategy is being played out, we
must turn to the military side of the ledger.

Military Balance
The military context in which the TPPA is being negotiated is dominated
by two main features: firstly, dramatic increases in military expenditures
worldwide, but specifically in the Western Pacific where the US is a major
arms exporter; and secondly, China’s rise as a military power. Fuelled by
annual growth rates that exceed an average of 6 per cent for the last fifteen
years, China has engaged in a sustained military upgrade that is designed to
change what has traditionally been a land-based, quantity over quality, army-
dominated defensive force, into a technologically sophisticated air–sea–land
force capable of power projection overseas.
Beyond issues of national pride and brute power projection, China’s military
expansion is a natural outgrowth of its expanding trade relations because
it is heavily dependent on (primarily sea-borne) international sources of
raw materials and productive inputs. In order to ensure continued resource
supply, China seeks to establish a ‘blue water’ naval presence as well as air
support and interdiction capabilities that will ensure the safety of its supply
lines. With a submarine fleet of eighty boats (six nuclear-propelled) and with
an aircraft carrier currently being constructed, they are well on their way
towards doing so.12
In part due to the growing Chinese military presence, India, Malaysia,
Indonesia, Singapore and Vietnam have all increased their defence spending,
sometimes in phenomenal fashion. According to the Stockholm International
Peace Research Institute (SIPRI), amid a 22 per cent global increase in arms
sales between 2005 and 2009 as compared to 2000 to 2004, Malaysia increased
its spending on arms imports by 722 per cent, Singapore by 146 per cent and
Indonesia by 84 per cent. Although spending comparatively less, Vietnam
has also placed orders for submarines and long-range combat aircraft as
part of its weapons modernisation programme. As the world’s largest arms
90 PAUL G. BUCHANAN

exporter with a 30 per cent share of the world arms’ market, the US supplies
nearly 40 per cent of the weapons sold to Southeast Asian countries.13 The
combined effect of US arms sales and militarily competitive regional and
global geopolitics therefore makes issue linkage a distinct possibility in the
eyes of TPPA policy makers.
For its part, Australia has embarked on a long-term military upgrading that
takes pride of place amongst US allies14 and has seen its defence expenditures
rise above the 2.5 per cent threshold that is considered a high water mark for
most liberal democracies.15 Both the Australian and New Zealand approaches
have been couched in issue linkage terms. Under both Labour and National
governments, New Zealand has consistently floated the concept of bilateral
issue linkage when authorising its military to train, exercise and deploy with
US forces. This is as true in the positive as in the negative. The fifth Labour
government’s reluctance to join the invasion of Iraq was partially attributed to
the lack of progress in getting the US to reciprocate New Zealand’s interest in
negotiating a bilateral FTA, while both Labour’s and National’s deployment
of Special Air Services troops to Afghanistan is seen as an inducement for
US consideration of a bilateral agreement. For the Australians, issue linkage
is a given, which is why the bilateral FTA with the US that entered into force
in 2005 is explicitly seen as a reward for Australian military support of the
US invasion of Iraq and its ongoing operations in Afghanistan. Conversely,
slow progress on a US–New Zealand bilateral FTA before 2008 was attributed,
again in part, to US displeasure with New Zealand’s reluctance to join the
‘coalition of the willing’ in Iraq.
More recently the US has sent mixed signals on the subject. Early in its
tenure, the George W. Bush administration was explicit in phrasing trade in
issue linkage terms, whereas the Obama administration has been coy about
linking a TPPA trade deal to its security concerns in the Pacific Rim. But it
is clear that the linkage exists, again in both the positive and the negative.
The Bush administration initially made clear to New Zealand that the latter’s
anti-nuclear stance was an impediment to a bilateral trade agreement. Further
afield, it threatened to cancel bilateral free trade negotiations with Chile if it
did not vote in favour of a 2003 UN Security Council resolution authorising
the US invasion of Iraq.16 Chile refused to cave in to the US demands and,
although trade discussions were temporarily suspended, a bilateral free trade
agreement was eventually signed in 2005. Along with the bilateral US–Peru
FTA signed in 2008, this was more due to US concerns about countering the
rise of the Left-leaning ‘Bolivarian trade bloc’ involving Bolivia, Ecuador
and Venezuela (and now Cuba and Nicaragua) than it was about the specific
benefits of each agreement.
During the last years of the Bush administration the US signalled that
New Zealand’s anti-nuclear stance was no more than a ‘bump in the road’
in the relationship between the two countries, a change in tack that has been
 5. SECURITY IMPLICATIONS 91

reinforced by the Obama administration. Yet, when it comes to the other

TPPA negotiating partners, the US has made no specific linkages between
its approach to trade and security relations with them. Thus, although the
US always holds an issue linkage card when approaching its trade relations
with other states, the use of that card is conditioned by a number of fluid
contextual factors placed in a larger strategic context.
As a primary ally, Australia receives latest-generation equipment from
the US and has increasingly adopted a force projection/expeditionary, as
opposed to homeland defence, strategic orientation. That approach, not
coincidentally, dovetails neatly with US strategic projection in the Western
Pacific and beyond. Given the bilateral FTA between them, Australia and the
US offer an exemplary study in post-Cold War issue linkage. And, given that
the US also has close bilateral military ties to Singapore, issue linkage under
the umbrella of the TPPA may obtain in that instance as well.
Several military cooperation agreements already exist that bi- and
multilaterally bind the TPPA partners together. The US has bilateral security
agreements with Australia, Brunei and Singapore; and multilateral agreements
with Chile and Peru (via UNITAS and the Rio Treaty). Australia has bilateral
security ties with Singapore and New Zealand. Brunei, Singapore and Vietnam
are united in the ASEAN Security Community; and Singapore has a bilateral
security cooperation agreement with Brunei that extends back to 1978.
Australia, Malaysia, New Zealand, Singapore and the United Kingdom belong
to the Five Power Defence Agreement (FPDA). Should other Southeast Asian
countries (such as Malaysia) be added to the TPPA, the ASEAN overlap will
be expanded. In other words, there already exist enough security agreements
between the proposed TPPA partners to ensure a deepening of issue linkage
between them.
Given the above, it is clear why the US has both a military and economic
interest in seeing the Western Pacific arms race continue as part of its strategic
competition with China, because arms sales are one component of trade
and a major source of influence. In the broad view, for the US as well as its
(potential) partners, trade is just one part of a larger strategic equation, with
security agreements being the foundation stone upon which a larger web
of strategic interdependence can be constructed. Arms sales tied to closer
military cooperation are part of that equation.
Such a view has ramifications that extend beyond the strategic interests
of the TPPA partners. Arms sales involve both state and private companies
and are not limited to the major powers. Singapore, New Zealand and Chile,
in particular, have thriving small-arms and weapons-system manufacturers
that supply everything from anti-personnel mines (Chile), to armoured
personnel carriers and Unmanned Aerial Vehicles (UAVs) (Singapore), to
missile guidance and telemetric components as well as UAVs (New Zealand).
Without specific provisions to the contrary, already loose export-licensing
92 PAUL G. BUCHANAN

regulations for these military products are likely to be relaxed further by the
TPPA while at the same time opening new markets for them.
There is no generic exclusion of arms from trade agreements. It is a matter
for governments to decide, relying on the ‘essential security’ exception as
a justification for shutting doors on arms imports, or more likely to justify
breaching rules against local preferences for production, research and
development, and procurement. The US has always treated this exception
as self-judging. Since 9/11 it has expanded the scope of the provision in
its FTAs to remove the need to rely on UN resolutions to act. The current
wording in the US–Peru TPA simply says that nothing shall preclude a party
from applying measures that it considers necessary for the fulfillment of its
obligations with respect to the maintenance or restoration of international
peace or security, or the protection of its own essential security interests.17
The permissive attitude towards security-justified exceptionalism transcends
the US. Some of these regimes, such as that led by the authoritarian People’s
Action Party in Singapore, have shown little restraint in selling weapons to
‘pariah’ states such as Myanmar on the grounds that military ties fostered by
weapons sales help bring such states into the community of nations. Likewise,
democratic regimes such as those that rule Chile and New Zealand have
cast a blind eye to, if not facilitated, private weapons manufacturers selling
their wares to Israel for what are clearly occupation-related duties. In both
instances, profit motives and diplomatic ties outweigh ethical concerns about
the ultimate purpose and use of exported weaponry.
Arms sales facilitation in a free trade regime also need not be by conscious
design; it could equally reflect ignorance of longer-term possibilities for criminal
exploitation. The TPPA will cover investment, capital flows and service firms,
including cross-border services and research and development firms. But it
does not address the downside of this opening. For example, loose rules of
incorporation saw a New Zealand ‘consulting and services’ firm serve as a front
for an arms-smuggling operation between North Korea and Iran discovered
by chance in Thailand in late 2009.18 The point to note is that opening of
trade along these lines increases the potential for criminal exploitation.
Thailand itself has a free trade agreement with New Zealand that, among
other things, allows corporate registration and easier capital and information
flows between them. Given the presence of criminal elements in a number of
Asian corporate circles, that could spell trouble when it comes to the use of
New Zealand-based shell companies as conduits for illegal activities. Recent
figures show that wholly owned, foreign-directed corporate registrations in
New Zealand jumped dramatically in early 2010, sparking calls for a review
of corporate registration regulations.19 That notwithstanding, the problem
of façade organisations being unwittingly facilitated by TPP expansion has
yet to be addressed.
As a result, there is a distinct possibility that the illegal as well as legal
 5. SECURITY IMPLICATIONS 93

arms trade side of the TPPA will grow exponentially while serving as a bridge
to third-party sales to countries that are considered unstable, militaristic,
or sponsors of and havens for terrorists. That raises the spectre of TPPA-
encouraged arms proliferation throughout the Pacific Rim and beyond. In
sum, the military balance in which TPP expansion is being negotiated makes
likely the acceleration of weapons proliferation within the trading bloc. Pre-
existing defence ties between its members and the looming military presence
of a resurgent China all but guarantee that will be the case. Economic and
military imperatives, in other words, promote issue linkage in ways that could
promote both legal and illegal arms sales given the different strategic objectives
of the actors involved and the broader opportunity structures created for
criminal enterprise by such a broad-based approach to trade liberalisation.

Crime and Terrorism

The issue of criminal exploitation of a broad-ranging TPPA is also worth
considering. The use of legitimate businesses as fronts for criminal activity
provides a window of opportunity for criminal organisations to expand their
reach and develop new markets. They are, after all, entrepreneurs; and their
spheres of interest include money laundering, and drugs, arms or people
smuggling, all of which are facilitated by the relaxation of border controls,
market entry conditions and capital flows.
Governments realise this, but lack either the political will or the material
capacity to ensure that the predictable criminal exploitation of trade opening
does not bear fruit. In order to do so, there must be an increase in customs,
immigration, intelligence and police capabilities focused on interdiction and
prevention of cross-border crime. That takes additional human, financial
and technical resources. Yet, in the current climates of fiscal austerity and
government downsizing, it is only authoritarian regimes that devote increased
attention to border security. For their democratic counterparts (save the
US), other pressing policy issues that are more immediately connected
to maintaining electoral favour are what matter most, something that
mitigates against increases in the security apparatus dedicated to stopping
the exploitation of expanded trade relations by organised crime.
As an example, consider the criminal implications of increased capital flows
incoming to New Zealand as a result of TPP enlargement. In practice, this
will mean eventual increases in the amount of goods, people and investment
headed to New Zealand. These will come via air, sea and wire transfers. In
order to ensure that air cargo and shipping containers are free of contraband,
the numbers of customs and coastguard inspectors, Ministry of Agriculture
and Forestry dog handlers, intelligence and police financial forensic analysts
will have to be increased in line with the increased inflow of goods. That
means more expenditure of taxpayer dollars on these necessities.
Yet, other than token increases in areas such as in the budgets of the Police
94 PAUL G. BUCHANAN

and the New Zealand Security Intelligence Service (NZSIS), the New Zealand
government that is negotiating the TPPA has done virtually nothing to ensure
that the after-entry problems posed by criminal exploitation of increased trade
are countered. Few analysts have been added, no additional inspectors or
dog handlers have been hired other than to replace departing colleagues, and
regulations governing company incorporation and registration and financial
exchanges have not been tightened. The issue transcends the TPPA per se and
stems from New Zealand’s adoption of an open border economic model that
is export-import-driven and which has never given full consideration to its
security implications. That is compounded in the present juncture by the cost-
cutting rationale that dominates government budgetary policy, which has led
to the downplaying of the increased security requirements mentioned above.
To illustrate the point, consider that most of the precursor chemicals
required to manufacture methamphetamine (as well as the finished product
that arrives in Australia and New Zealand) originate in China and Southeast
Asia. The same is true for heroin, whose origins extend into Central Asia.
Likewise, cocaine is sourced in the Andean region of which Chile and Peru
are part. Either directly or indirectly via third parties such as small Pacific
island states, drug cartels have the opportunity to use the TPPA as a conduit
by which to increase market demand and supply. For every container of drugs
seized, several more are likely to pass border controls unhindered. Given the
paucity of resources dedicated to stopping that from happening, that poses
serious risks to the population at large. The flow-on effects are alarming.
The nexus of criminal activity and terrorism as it relates to the TPPA also
needs consideration. The post-9/11 campaign against Islamicist extremists
has forced their decentralisation and use of criminal channels for financing,
movement of cadres and re-supply. It has also required them to relocate to
safe havens in unstable countries or in those that have sympathy or tactical
reasons to support their cause. Instances of both are located in the Western
Pacific Rim. This means that, along with crime, expanded trade relations
resultant from TPP enlargement can bring exposure to ideological extremists
seeking cover, either physical or financial, for their armed activities. Since
the US and Australia are primary targets of Islamic extremists, and since
the TPPA aims to facilitate increased capital mobility and services between
the signatories, it is not inconceivable that unconventional warfare actors
will attempt to use the expanded commercial access as a means of reaching
targets within them. In the absence of increased border controls and after-
entry security measures, this could occur via the use of agents and staging
platforms located within the TPPA network.

Intelligence Issues
Intelligence collection depends on access to information, which is garnered
in several ways on both a strategic and tactical level. Besides so-called
 5. SECURITY IMPLICATIONS 95

‘open source’ intelligence collection (that is, information that is available in

the public domain), classified intelligence is gathered by technical, signal
and human means, depending on the specific collecting agent. Technical
intelligence involves remote acoustics, seismic and imagery collection
(for example, via submarine and satellite platforms); signal intelligence
involves telecommunications sensors and intercepts; and human intelligence
involves people spying on the ground. Proximity to the target facilitates all
levels of intelligence gathering. The more open and varied the channels by
which intelligence can be gathered, the more likely they are to be exploited.
Intelligence gathering targets economic as well as political and military
capabilities. Industrial techniques and equipment, government economic
strategy, specialised technical data, firm-specific proprietary information
– all of these are targets of intelligence gathering. Market opportunities
for intelligence gathering abound in free trade environments, especially
when national governments are ill-disposed or ill-prepared to accept that
increased espionage is an inevitable consequence of inter-state competition
in an increasingly globalised world. For the espionage business, opening
of trade borders amounts to a lowering of the guard by the states involved
since relaxation of customs controls not only eases the flow of goods and
services within which all three types of intelligence gathering can occur, but
also provides ‘back door’ entry to target states via third-party TPPA partners.
Two recent examples in Australia and New Zealand illustrate the problem.
In 2005 a defector from the Chinese intelligence services assigned to the
Australian embassy in Canberra revealed that China had in place a network
of 1000 spies whose duties included monitoring Falun Gong dissidents as
well as garnering information on Australian and New Zealand commercial
and security strategy.20 Not always based in Chinese embassies, this network
uses the Chinese expatriate community and legitimate business activities as
covers for its intelligence-gathering operations in both countries. It also uses
front organisations in third countries like Hong Kong that have preferential
trading relationships with targeted nations such as New Zealand. Yet, in spite
of the defector’s allegations and official recognition in both countries that
foreign espionage efforts are ongoing in both of them, no Chinese agents in
New Zealand or Australia have been caught.
‘Friendly’ countries may also find reason to use commercial ties for
surreptitious purposes. In 2004 two Australian-based Israeli contract agents,
working in concert with two handlers in Auckland, attempted to procure
legitimate New Zealand passports using the names of New Zealand citizens.
The cover for the two operatives (known as sayanim or ‘helpers’) was a
travel agency in Australia. The two handlers posed as a sailing student and
paramedic lecturer in Auckland.21 Expansion of non-security vetted foreign
student visa schemes and the need for skilled labour allowed the New Zealand-
based Israeli handlers (who escaped capture) greater ease of access into New
96 PAUL G. BUCHANAN

Zealand, while open border agreements and commercial reciprocity clauses

allowed the two Australian passport-holding sayanim privileged access to
New Zealand. In effect, preferential immigration and commercial exchange
schemes between Australia and New Zealand allowed the Israeli operatives
better access and opportunity to undertake missions in New Zealand on behalf
of an erstwhile friendly state. Although the two sayanim were arrested, tried,
jailed and deported, their discovery was more by chance than as a result of
counter-intelligence capabilities. They were discovered by an alert low-level
immigration officer who suspected passport fraud when the accent of a
proclaimed native-born Kiwi asking for a replacement passport in a telephone
conversation did not sound like any local dialect. The Police were notified,
ran a sting to capture the fraudsters, and it was only after their arrests that the
NZSIS was alerted. Since the NZSIS has primary responsibility for conducting
counter-intelligence operations in New Zealand, the affair revealed that it
was clueless about the Israeli operation until after the fact.
Increased ‘trade’, including services, investment and capital flows, means
increased opportunities for intelligence agencies to use commercial vehicles
as fronts for their operations. Should increased immigration quotas be added
to trade agreements (as occurred in New Zealand’s free trade agreements with
China and ASEAN and may also arise in the TPPA), another channel for both
criminal penetration and intelligence gathering is opened. Easier placement
of human and technical intelligence resources facilitates understanding of the
motives and capabilities of trade partners. It can also reveal larger strategic
intent. Often the placement of intelligence gathering assets occurs via front
organisations or third parties, sometimes located in partner states that have
access to the target country via privileged commercial, diplomatic or military
agreements. The TPPA is potentially one of those. It is therefore not implausible
to suggest that foreign intelligence gathering activities in Australia and New
Zealand will be facilitated by the expansion of the trade bloc.22

Conclusion
There are more security implications that could result from a proposed TPPA
(say, with regard to human trafficking and intelligence gathering via student
and business visa schemes), but the preceding account provides enough food
for thought to suggest that caution and prudence should be applied when
pursuing the agreement. It specifically invokes the darker implications of
increased economic integration between these eight countries, as well as
the ‘after-entry’ security measures required to forestall criminal and military
exploitation of new opportunities within the partnership. It poses all of this
against the military–strategic backdrop of the moment and the near future.
Should the TPPA negotiators consider all of these issues and embed in
the agreement binding security clauses that address the implications of open
trade on weapons proliferation, intelligence gathering, criminal activity and
 5. SECURITY IMPLICATIONS 97

terrorism, then the issue linkage will be positive and of universal benefit. If
they achieve regime consensus on institutional approaches to the security
part of the equation, and go on to achieve some measure of institutional
symmetry in their approaches given that consensus, then issue linkage of
trade and security within a TPPA would also prove to be of universal benefit
for all involved. Should they not do so, as seems likely, then the security
consequences of an expanded TPPA will be unhappy indeed.
6. Lessons from the Australia–US
Free Trade Agreement
John Quiggin

With the Doha round of trade negotiations (in process since 2001) in limbo
since they broke down in mid-2008, increasing attention has been paid to the
possibility of negotiating trade agreements among a more limited number
of states. The United States, in particular, vigorously pursued bilateral trade
agreements under the Bush administration. The Obama administration
is now promoting a regional, Asia-Pacific trade agreement, known as the
Trans-Pacific Partnership Agreement, which would be an expansion of an
existing agreement between Brunei, Chile, New Zealand and Singapore to
encompass Australia, Peru and Vietnam, and perhaps other countries in
the region.
In assessing the prospects of the proposed TPPA, it is useful to consider
the lessons that may be learned from existing trade agreements undertaken
between the United States and its trading partners. This chapter focuses
on the Australia–US Free Trade Agreement (AUSFTA), negotiated in 2004.
The chapter deals first with the political background to the agreement,
focusing on the asymmetry between the parties and the resulting imbalances
in the bargaining process. The second section describes the content of the
agreement as it affected goods, services, investment and intellectual property.
The next two sections deal with the predicted and actual outcomes respectively.
Two main conclusions are drawn: (a) while the free trade agreement has
produced few, if any, of the expected benefits for Australia, the negative effects
have been less severe than predicted by some critics; and (b) the political
context in which a trade agreement is negotiated and implemented is at least
as important as the formal content of the agreement.

Background
The negotiation of the AUSFTA took place against the background of a close
political and personal alliance between the Australian Prime Minister, John
Howard, and the US President George W. Bush. The Australian government
 6. LESSONS FROM THE AUSFTA 99

had been among the strongest supporters of the Iraq war and, while both sides
denied the existence of any quid pro quo, there was a widespread feeling on
the Australian side that Australia’s status as a close ally should be reflected
in the negotiation of an agreement.
The resulting political dynamic was one in which the Australian government
had a large stake in the successful conclusion of an agreement. On the US
side, by contrast, the issue was one for trade policy specialists, including
the large and powerful agricultural lobby groups that sought to limit market
access for competing products.
A second asymmetry arose from the different starting points of the two
countries. Following several decades of unilateral reductions in tariffs and
quotas, Australia retained only minimal intervention affecting international
trade in goods. The main elements were a general 5 per cent revenue tariff on
imported goods, and slightly higher tariffs on motor vehicles, textiles, clothing
and footwear. The latter items were in the process of being phased out.
Australia’s approach to international trade negotiations had been to lead
by example, in the hope of promoting multilateral liberalisation. As founder
of the ‘Cairns Group’ of agricultural exporting countries, Australia sought to
promote reform of the interventionist policies adopted by most food-importing
countries, particularly the United States and the European Union.
By contrast, the US maintained a long-standing tradition of intervention
in domestic and international agricultural markets, formalised in ‘Farm
Bills’ passed at regular intervals of about six years since the mid-1960s. The
elements of most interest to Australia are restrictions on imports of sugar,
beef and dairy products, and subsidised exports of corn and wheat.
In addition to its interventionist agricultural policy, the US has made
liberal use of anti-dumping and emergency assistance provisions to protect
domestic manufacturers. A notable instance was special protection for the
steel industry introduced by the Bush administration, but abandoned after
retaliation by the European Union.
In international negotiations, the US has adopted the ‘bargaining chip’
approach, seeking to obtain the largest possible concessions from other
countries while offering the smallest possible concessions itself.
Under the Bush administration, the US abandoned multilateral agreements
of all kinds, including trade agreements, in favour of bilateral agreements. As
well as maximising the disparity in bargaining power between the parties, the
bilateral strategy encouraged even more hardline use of the bargaining chip
approach. Any concession made to one bargaining partner would embolden
others in future, so the need to minimise concessions was even greater.
As a result of these asymmetries, the actual terms of the agreement were
considerably less favourable than those anticipated by the Australian side.
In particular, there was no increase in access to the US market for Australian
sugar, and only modest improvements for beef. These were the most salient
100 JOHN QUIGGIN

elements of a generally lopsided deal, in which the US maintained substantial

barriers to Australian imports while gaining not only the removal of nearly all
traditional trade barriers, but also influence over a wide range of Australian
domestic policy institutions.
When the agreement was finally announced, it included extensive clauses
relating to the operations of the Pharmaceutical Benefits Scheme (PBS)
and to enhanced protection for the owners of drug patents. However, the
Australian government presented this outcome as a victory, arguing that
the US had demanded a right of appeal against adverse decisions from the
Pharmaceutical Benefits Advisory Committee (PBAC), but had received
only a non-binding review.
The implementing legislation for the agreement was passed by the Australian
Parliament in August 2004. The legislation incorporated an amendment,
proposed by the Labor Party, that was designed to prevent a possible abuse
of patent law through ‘evergreening’, a device by which patent-holders may
extend the effective life of patents through trivial modifications to existing
drugs. It was feared that evergreening, in combination with the increased
protection for US patent-holders provided under the agreement, might reduce
the availability of cheaper generic drugs and thereby increase the operation
costs of the PBS (see Chapter 10).
The evergreening amendment was criticised vigorously by the US and its
supporters, but was accepted when it attracted strong public support. The
Howard government’s initial resistance to amendments concerned with the
PBS reflected the importance placed by US negotiators on this issue, as did
the reaction of US officials to the amended legislation.
Although previously enthusiastic about the agreement, representatives of
the US government were strongly critical of the amended legislation. As a
result, the US delayed certification of the Australian legislation, a step required
for the agreement to come into force. This resistance is indicative of the
importance to the US administration of the protection of intellectual property
in pharmaceuticals and the perceived threat to intellectual property posed by
interventions such as the PBS. US and other pharmaceutical companies have
long been critical of the PBS, claiming that it does not provide an adequate
return for the investment in research and development required to develop
new drugs. Conversely, the debate over the agreement in Australia highlighted
the importance placed by political actors and the public on the preservation
of the PBS in its current form.
The AUSFTA was signed on 18 May 2004. The US Congress ratified the
agreement with large majorities in both houses.
In Australia, however, provisions relating to the Pharmaceutical Benefits
Scheme and intellectual property (IP) created substantial controversy. The
agreement’s implementing legislation was passed, with amendments, by the
Senate on 13 August 2004. After some delay, the US administration accepted
 6. LESSONS FROM THE AUSFTA 101

the amended Australian legislation as being consistent with implementation

of the agreement. The FTA came into force on 1 January 2005.

Content of the Agreement

Goods
The AUSFTA removed most tariffs and barriers to Australian imports of
US goods, but made no change in US restrictions on imports of sugar from
Australia and only modest and gradual changes with respect to imports of
beef and dairy products. More importantly, no changes were made to the US
Farm Bill, under which US agricultural producers benefit from a complex
set of subsidies, with the resulting enhanced supply being dumped on world
markets. Not only is the general system of subsidies unaffected (it would
perhaps have been utopian to hope for broad-based reform), but there does
not even appear to be any commitment to avoid the use of export subsidies
that directly harm Australian exporters in particular markets. Indeed, it
appears that the issue of the Farm Bill was not even raised in the negotiations.
The most important distortions of agricultural trade practised by the US
were unaffected by the AUSFTA and were, in effect, endorsed by Australia’s
signature to the agreement.
As the New York Times editorial of 14 February 2004 observed:

The deal with Australia is a huge setback in the process of liberalizing global
agricultural trade. Poor nations whose only viable exports are agricultural
goods are hampered by excessive protectionism. And by making a deal with
Australia that leaves out sugar, Washington has jeopardized chances for
meaningful progress on a hemispheric Free Trade Area of the Americas,
and the latest round of negotiations at the World Trade Organization. As
part of this effort to lower trade barriers, developing countries are rightly
insisting that rich nations stop subsidizing their farmers and open up their
markets to competition.
The agreement sends a chilling message to the rest of the world. Even
when dealing with an allied nation with similar living standards, the
administration, under pressure from the Congress, has opted to continue
coddling the sugar lobby, rather than dropping the most indefensible form
of protectionism. This will only embolden the case of those around the
world who argue that globalization is a rigged game.1

As Patricia Ranald notes in Chapter 2, the success of the US in retaining

agricultural import restrictions means that these policies can be reused as
bargaining chips in negotiations for a TPPA.

Services and Investment

The impact of the proposed free trade agreement on services was limited.
Although there were some provisions in both Australia and the US that
102 JOHN QUIGGIN

discriminate against non-citizens, these were relatively modest. Moreover,

some of the most important policies of this kind, such as restrictions on
airline services, were excluded from the scope of the agreement. However,
energy, water and public transport services, which had been excluded from
the Singapore FTA, were included.
On the other hand, the protections extended to investors were substantial.
In effect, the agreement precluded the application of any conditions on US
investors in Australia that would not be applicable to domestic investments
(or vice versa). There was an exception for investments worth more than
A$800 million (indexed from the time of the agreement), for which foreign
investment review procedures remained permissible.
Given the dominant role of the US as a source of investment capital in
Australia, the effect was to implement, on a bilateral basis, measures that
incorporated much of the Multilateral Agreement on Investment proposed
by OECD members in the 1990s. This agreement was abandoned as a result
of community opposition in many countries.

Intellectual Property
The agreement included numerous provisions aimed at expanding the scope
of intellectual property rights and strengthening the protection accorded to
holders of those rights. The ‘strong IP’ agenda behind these provisions has
been consistently advocated by the US government, and equally strongly
criticised by economists and advocates of Internet-based innovation.
Prior to the agreement, Australia had a relatively short copyright term
by international standards (copyrights expired fifty years after the death of
the author), while the US had one of the longest (ninety-nine years after the
author’s death). The AUSFTA required Australia to extend its copyright term
to seventy years after the death of the author, but did not require any change
from the US, or preclude further extensions of US copyright protection. The
AUSFTA also extended patent protection, and required legal enforcement of
digital rights management systems, implemented in the United States by the
Digital Millennium Copyright Act.

Predicted Effects
Discussion of the proposed AUSFTA showed a sharp divergence between
official estimates of the likely effects, those put forward by mainstream
economists, and those of non-economists concerned with specific aspects of
the agreement. The official estimates were highly optimistic, in some respects
more so than those of the organisation set up to promote the agreement.2
Conversely, critics predicted a range of potentially disastrous outcomes. The
predominant view among mainstream economists was that the costs of the
agreement outweighed the benefits, but that the likely net impact was small.
 6. LESSONS FROM THE AUSFTA 103

Official Projections
In the lead-up to the AUSFTA, the Department of Foreign Affairs and Trade
commissioned the Centre for International Economics (CIE) to analyse the
economic impacts of a likely agreement.3 The CIE reported benefits of around
A$4 billion, largely because of the benefits assumed to flow from improved
access to the US sugar market.
When the agreement was announced, with no improvement in access for
sugar, the CIE prepared a new analysis which, surprisingly enough, showed
even larger benefits.4 The loss of sugar access was more than offset by the
inclusion of highly speculative assumptions about a reduction in the cost of
capital. The results of the modelling are shown in Figure 6.1.

Figure 6.1 Changes in real GDP: percentage deviation from baseline

Source: G–Cubed model simulation.

The big gains in the picture come from two main sources. The first are
the so-called ‘dynamic gains’ from liberalisation, which are little more than
a pious belief held by advocates of free market reform. These gains have no
basis in neoclassical economic theory and no real supporting evidence.
The second supposed gain is derived from the idea that capital market
liberalisation will reduce the equity risk premium and therefore increase
economic welfare. Again, these projections lacked any credibility. The policy
changes proposed under the free trade agreement were tiny by comparison with
the floating of the dollar and the associated removal of exchange controls over
the 1970s and 1980s, not to mention the concomitant domestic liberalisation.
Yet there was no convincing evidence that these changes had any net effect
on the risk premium for equity. Australian regulators who have to use a risk
premium in estimating the cost of capital have looked at this issue repeatedly,
104 JOHN QUIGGIN

and none has yet been willing to base decisions on the assumption that
the risk premium for equity has declined recently, relative to the twentieth
century as a whole.
Examining the CIE assessment in retrospect, it is clear that this was
an example of a consultancy exercise undertaken with a predetermined
result, namely, that the AUSFTA should be shown to be beneficial. Once
the assessment had served its purpose, it was quietly forgotten. However,
there remained an expectation that, even if the benefits were smaller than
expected, Australian exporters would gain significantly improved access to
the US market.
By contrast with the optimistic predictions prepared by the Australian
government, a study undertaken by the International Monetary Fund found
that a free trade agreement with the US would shrink the Australian economy
by 0.03 per cent per year and increase the bilateral trade deficit.5

Unofficial Estimates by Economists

Independent analysis, such as that of Philippa Dee,6 generated much smaller
estimates to the order of A$100 million each year for the goods trade component
of the agreement. Taking account of the uncertainties involved in all such
projections, it would be difficult to reject the hypothesis that, assessed in
terms of standard neoclassical trade theory, the costs and benefits of the
agreement to Australia will be approximately equal, and that the net benefits
will be approximately equal to zero.
The second issue considered by independent analysts concerned the relative
desirability of bilateral and multilateral agreements. Proponents of multilateral
processes, such as Ross Garnaut and Bill Carmichael,7 were strongly critical
of the agreement, and argued that it would undermine both the World Trade
Organization and prospects for improved trade relationships with Asia.
Supporters of the agreement such as Alan Oxley,8 on the other hand,
argued that the failure of the Doha round of WTO negotiations showed that
multilateral processes could not be relied upon to produce progress towards
freer trade, or alternatively that bilateral and multilateral agreements were
complements rather than substitutes. In addition, they pointed to the alleged
dynamic benefits of closer integration with the US economy.9
Summing up the independent economic studies of the AUSFTA, a research
note for the Australian Parliamentary Library found that four out of five
studies predicted negative effects.10

Other Estimates
The economic issues were familiar from past debates. However, the agreement
also attracted critical attention from a wide range of actors, including writers,
health policy professionals and actors in the literal rather than metaphorical
sense of the term, whose concerns and interests had not previously been
 6. LESSONS FROM THE AUSFTA 105

impinged upon by trade policy. Most of these concerns were related, in one
form or another, to the issue of intellectual property.
The most extreme critique, by Linda Weiss and others was called How
to Kill a Country: Australia’s Devastating Trade Deal with the United States.11
The polemical title of this work reflected the heated atmosphere of the
debate and also, perhaps, the marketing requirements of a popular book on a
complex issue that remained topical for only a few months.

Outcomes
At least viewed from the Australian side, the AUSFTA has produced few of
the expected benefits. On the other hand, while there have been some notable
negative effects, they have been relatively modest. The hyperbolic claims of
Weiss et al12 have not been borne out, and the AUSFTA has played only a
relatively marginal role in Australian public policy.

Benefits
A survey undertaken by the Australian Industry Group revealed general
disillusionment with the agreement. According to the Group:

The survey found that five years after implementing the much heralded
Australia–US FTA, the US market remained difficult for Australian exporters.
Almost 80 per cent of respondents said the FTA was not very effective in
improving export opportunities, and 85 per cent said it had failed to help
in setting up an operation in the US.
As for improving access to US government contracts, 87 per cent rated
the FTA’s effectiveness as low or having no effect.13

These subjective impressions are confirmed by statistical measures of the

outcomes. As Rodney Tiffen observes:

Australia’s exports to the US in the five years to last year grew by only 2.5
per cent, compared with double-digit growth for exports to all the major
Asian trading partners. Since the signing, America has slipped from third
to fifth among Australian export destinations, overtaken by Korea and
most recently India.14

Moreover, between 2004 and 2009, the bilateral trade gap in America’s
favour grew even larger. Australia’s imports from America have grown much
more quickly than its exports to America. According to US data, the gap in
America’s favour grew from US$6.4 billion (A$7.1 billion) to US$11.6 billion.
Michael Priestley also notes the deterioration in the trade balance, observing,
however, that ‘it is unclear whether the widening trade deficit with the US
and the decline in manufactured exports to the US can be attributed to the
AUSFTA or to the lagged effect of the strong Australian dollar beginning in
early 2004, or to a combination of both of these factors’.15
106 JOHN QUIGGIN

These outcomes are hardly surprising. The Howard government’s

desperation to produce a result allowed the Bush administration to impose
an agreement heavily weighted in favour of the United States.
The available evidence suggests that, as regards international trade in goods
and services, the outcomes for Australia have been negative, as predicted
by most independent economists. Certainly, there is no sign of the benefits
predicted in the studies commissioned by the Australian government.

Costs
Some adverse effects feared by critics of the AUSFTA have not come to pass.
For example, the appeal provisions of the agreement regarding decisions by
the Pharmaceutical Benefits Advisory Committee to list drugs for subsidy
under the Pharmaceutical Benefits Scheme were first used in 2006, by Eli
Lilly in relation to Forteo, an osteoporosis drug, which had been rejected
(except for a limited set of cases) four times. The appeal was unsuccessful,
and the decision of the PBS was upheld.16 Following further studies, Forteo
was listed in May 2009.17
Thus, while the appeal mechanism may be of some marginal benefit to
pharmaceutical companies, it has not fundamentally changed the operation
of the PBAC. More generally, the PBS remains a central feature of Australian
health policy. Policy changes aimed at cost containment have allayed concerns
about the sustainability of the scheme, and criticism from pharmaceutical
companies regarding the prices paid and criteria for listing have been
ineffectual.
On the other hand, as noted by Ranald in Chapter 2 and Tom Faunce and
Ruth Townsend in Chapter 10, the agreement set up a joint Medicines Working
Group that has pushed for changes to medicines policy. The creation of a
new ‘F1’ class of medicines exempt from reference pricing was one outcome
of this process.
In relation to intellectual property, the additional restrictions imposed
by the AUSFTA and other international agreements have been relatively
ineffectual in the face of a general shift in sentiment against strong intellectual
property rights and the effective breakdown of most prohibitions on copying
material. Recent moves by the Australian government to raise the thresholds
to patenting and to exempt experimental activities from patent restrictions
are indicative of the trend.
On the other hand, the investment provisions appear to have some real
bite, notably in restricting protections that governments might seek to impose
in the process of privatisation, such as limits on foreign ownership and
requirements to provide employment in regional areas.
On at least one occasion, the extra bite of the AUSFTA proved counter-
productive to the goal of limiting public intervention in the economy. Snowy
Hydro, an electricity generation company jointly owned by the Commonwealth,
 6. LESSONS FROM THE AUSFTA 107

New South Wales and Victorian governments, was a candidate for privatisation.
In view of the political unpopularity of privatisation, it has been common for
governments to attach a range of conditions on employment and ownership.
Under the terms of the AUSFTA, however, the capacity to impose such
conditions is strictly limited. Ranald notes that a proposed limit, restricting
foreign ownership to 35 per cent of shares, was judged to be in contravention
of the agreement. The inability to impose such conditions, and thereby allay
some sources of public concern, was one reason for the abandonment of the
proposed privatisation.
A notable feature of this case is that a bilateral agreement between Australia
and the United States sharply constrained policy options, even though there
was no reason to suppose that the restrictions were directed at US investors in
particular. It seems unlikely that the US government would take the provisions
of the agreement with Australia, or the provisions of a TPPA, into account
when formulating policies directed primarily at incoming investment from,
say, China.

Concluding Comments
The AUSFTA has delivered few, if any, of the benefits promised by its advocates.
On the other hand, its consequences have been more limited than many critics
predicted. The PBS remains intact, although the agreement has strengthened
the push to raise returns to pharmaceutical companies. Attempts to advance a
strong intellectual property agenda on the basis of the agreement have generally
been unsuccessful, and there has been some liberalisation of intellectual
property rules in relation to fair use and other exemptions.
Perhaps the most important general lesson to be learned is that the effects
of an international trade agreement depend, to a large extent, on the political
context in which the agreement is applied. In the political context of the
1980s and 1990s, a market liberal policy agenda, focused on privatisation and
deregulation, was dominant in most developed countries, but nevertheless
faced significant resistance. International agreements such as those associated
with the World Trade Organization and the World Intellectual Property
Organization provided a powerful tool for governments seeking to overcome
such resistance. Even where community mobilisation was sufficient to
defeat proposed agreements, as with the failed Multilateral Agreement on
Investment, many of the provisions were implemented piecemeal, in ways
that avoided public scrutiny.
On the other hand, by the time the AUSFTA came into effect in 2005,
enthusiasm for market liberalism had waned. In the place of a consistent
programme of market-oriented reform, a pragmatic approach has emerged.
The scope of government intervention has been expanded in some areas and
reduced in others, depending on assessments of the political, economic and
social costs and benefits.
108 JOHN QUIGGIN

Rather than using the provisions of the AUSFTA to advance an agenda

of privatisation and deregulation, as was widely expected, the Howard
government adhered to the letter of the agreement, but was not, in practice,
much constrained by its provisions. The Rudd government took a similarly
pragmatic approach, which its successors seem likely to continue.
Similarly, discussion of the proposed TPPA should not be seen primarily as
the venue for stand-alone campaigns against (or for) a particular text. Rather,
the discussion needs to be placed in the context of long-term debates about
the interaction between trade policy and such issues as employment rights,
environmental protection and intellectual property.
7. The TPPA, Agribusiness and
Rural Livelihoods
Warwick Murray and Edward Challies

Agriculture operates in an increasingly globalised system where change in

one locality and/or sector yields restructuring implications for others. Free
trade agreements such as the potential Trans-Pacific Partnership Agreement
impact on the livelihoods of millions of people and the social, economic and
environmental sustainability of the many implicated localities and regions.
New Zealand’s national interest is tied up with the question of market access
for the dairy giant Fonterra, and the government’s approach to negotiations
will inevitably focus on this. Because Fonterra is a New Zealand cooperative,
it is tempting to view the company as a benevolent player on the world dairy
stage. Whilst Fonterra could be a force for developmental good, its record
is not spotless to date. For example, in March 2010 the global conference
of dairy workers’ trade unions undertook to monitor Fonterra’s actions on
human rights as the owner of Soprole in Chile and the joint partner with
Nestlé in Dairy Partners America, given Fonterra’s conflict with unions in its
operations in Sri Lanka and Malaysia. This is not the first time the company’s
international operations have been questioned (as this chapter shows with
reference to Chile and Latin America).
Fonterra’s actions, and the actions of similar entities, have an important
impact on many lives. So would the agriculture provisions of a TPPA, whatever
its shape. Ensuring that the outcome is, on balance, positive requires both
governments and companies to look beyond the imperatives of pure profit
maximisation. In this chapter, the authors urge the TPPA negotiators to take
a broad view and consider in a holistic sense the impacts of the potential
agreement. Essentially, that would involve the promotion of an agreement
in agriculture that incorporates strict social and environmental regulations.
Pursuing such a strategy is likely to make a trade agreement more politically
marketable and sustainable not only in New Zealand but also in the US and
beyond.
110 WARWICK MURRAY AND EDWARD CHALLIES

Agriculture and Rural Livelihoods

Agricultural production and trade of food, fibre, fuels and an increasing array
of commodities and industrial inputs is today integral to the livelihoods of
over 2.6 billion people worldwide, the vast majority of whom live in developing
countries on incomes of less than US$2 per day.1 In the wake of the 2006–2008
food price crisis and the 2008–2009 global financial crisis, over a billion people
are currently undernourished,2 many of them rural dwellers. The state of
world agricultural production and trade is thus of central concern to a large
proportion of the world’s population. While many millions of farmers and rural
households in the developing world rely directly and indirectly on agriculture
for food and income, the rules governing agricultural production and trade
are formulated by bureaucrats and politicians generally in the interests of
core economies and transnational capital. While neoliberal free trade has
successfully promoted specialisation, modernisation, economic growth and
competitiveness in the national agricultures of many economies, this has too
often come at significant social and environmental cost.3
Food production and consumption are increasingly organised globally
to the specifications and for the benefit of transnational retailers and agri-
businesses,4 and with the acquiescence of non-interventionist or ‘market-
enabling’ states. In 2007 global agri-food exports were valued at US$1.1 trillion,
and the world’s top ten transnational food and beverage corporations alone
boasted foreign sales of US$298 billion and controlled foreign assets valued
at US$282 billion.5 Agriculture, then, is clearly ‘big business’ for many large
corporations, and concentration is evident at all stages of global agri-food
chains, from the provision of agro-industrial inputs to marketing and retail.6
As a result, smallholder farmers tend to take part as relatively insignificant
players in global networks of cross-border agri-food chains, or are expelled from
commercial production altogether as domestic agricultural sectors respond
to international competition. Trade liberalisation thus tends to undermine
food security and drive the destruction of diversified and sustainable rural
livelihoods in the developing world. At the same time, and aggravating these
problems, northern protectionism in an unevenly liberalised world trading
system leads to dumping and impeded market access for developing country
agricultural exports.
In addition to its social costs, modern industrial agriculture has major
environmental implications. The primary production sector within agriculture
contributes up to 30 per cent of global greenhouse gas emissions, accounts
for the greatest share of water use, and plays a significant role in soil
degradation, groundwater depletion and agri-chemical pollution.7 Therefore,
while agriculture relies on natural resources and a range of environmental
services, governments have failed to regulate the exploitation of natural
systems adequately. That failure has seen a rapidly globalising mode of
industrial agriculture substantially deplete and degrade the environment,
 7. THE TPPA, AGRIBUSINESS AND RURAL LIVELIHOODS 111

in the process undermining its own production base. This has become
particularly pronounced with the mechanisation, industrialisation and
integration of agricultural production systems, which are increasingly energy-
and technology-intensive. Inherently, people’s livelihoods are implicated
at all stages of agricultural value chains in all parts of the global agri-food
industry. At the primary production end, for example, farmers’ livelihoods
are directly and indirectly affected by the operation of agribusiness, which in
turn is partly conditioned by the regulations that govern their own activities
and the relationships between trading nations. In this sense, the labour and
environmental provisions embodied in any trade agreement are especially
important with respect to agriculture.
The narrow way that agriculture is viewed by agribusiness and trade
negotiators (both intent on expanding their country’s export markets) is
emblematic of the disconnection between local realities and global politico-
economic ideologies. The social and environmental externalities of capitalist
industrial agriculture are often exported to the periphery, and the costs are
thus borne disproportionately by rural communities in developing countries.
It is therefore the responsibility of advocates and negotiators to insist on fair
trade agreements that prioritise social and environmental sustainability;
as this chapter argues, these are preconditions for, and not incidental to,
economic sustainability both domestically and globally. The Trans-Pacific
Partnership Agreement represents an opportunity to design a ‘21st century
trade agreement’ that is progressive and sustainable. The political moment
may be such that this outcome is attainable.
In order to illustrate the scope of the opportunity that exists, this chapter
examines current levels of trade and interaction between the eight countries
party to the TPPA negotiations, with the aim of identifying primary motivations
and potential sticking points in those negotiations. Drawing on research
in Chile, it also discusses the potential structural impacts of a TPPA with
respect to agriculture and local rural livelihoods, focusing particularly on the
case of globalisation in the dairy sector. While the focus is particularly on
New Zealand and the United States, with reference to the dairy industry, the
implications of a TPPA for other negotiating parties and selected agricultural
sectors are also considered.

Agricultural Trade and National Strategies

The TPPA initiative is a complex one. The parties to the Trans-Pacific Strategic
Economic Partnership (or P-4) agreement – New Zealand, Singapore, Chile
and Brunei Darussalam – propose to expand the trans-Pacific partnership
framework to incorporate a range of politically, economically and culturally
diverse Pacific Rim economies. Those countries currently include the United
States, Australia, Vietnam and Peru. The issues and compromises that might
ordinarily be expected to pose challenges to trade negotiations among such
112 WARWICK MURRAY AND EDWARD CHALLIES

a diverse group are compounded by the fact that (as Jane Kelsey notes in her
introductory chapter) there is already a web of twelve existing trade agreements
between the negotiating parties, the status of which remains uncertain in
the face of the TPPA. In addition, the various negotiating countries are tied
into about fifty further free trade agreements separate from, but potentially
affected by, the TPPA, which may confer consequential rights on those other
treaty partners.
An examination of existing patterns of trade and interaction between the
TPPA economies offers some insights into the motivations and likely strategies
of various parties, and indicates the relative significance of the agreement
to different countries. Table 7.1 shows the composition of intra-TPPA trade
in 2009 according to International Monetary Fund (IMF) data. In each cell,
the value of exports from country A to country B is reported in millions of
US dollars, followed by the proportional contribution to total exports from
country A as a percentage (in parentheses). Existing trade agreements between
various parties are represented by the shaded cells, with the P-4 distinguished
by the darker shading. While the data are not specific to agricultural trade,
some obvious patterns can be observed. Overall, it is apparent that the vast
majority of trade among the TPPA participants is already governed by a range
of trade agreements.8 However, there are areas where particular parties may
look to make instant gains or grow exports, and other relationships in which
parties may hope to secure improved terms if the TPPA ends up superseding
existing agreements.
For New Zealand the obvious motivation, and a long-held goal, is to secure
a deal with the United States, its most important export market after Australia.
The US absorbs almost 10 per cent of all New Zealand exports, and is the
most important market for New Zealand’s agricultural exports. In the year to
June 2009, agricultural exports from New Zealand to the US were valued at
NZ$3.15 billion. Of this, dairy and meat products accounted for NZ$1.25 and
NZ$1.18 billion respectively.9 Wine and apples are also important agri-export
sectors. Conversely, an already unilaterally liberalised New Zealand holds
relatively little economic appeal as a trading partner for the US, absorbing less
than a quarter of a percent of US exports, yet posing potentially significant
challenges for TPPA negotiations in the realm of US domestic agricultural
protectionism (discussed further below). Indeed, given the fact that the US
already has trade agreements with all of the other participating countries
except Brunei (almost insignificant in US trade), and a weak agreement with
Vietnam, the deal is clearly (as Lori Wallach and Todd Tucker point out in
Chapter 3) of far greater politico-strategic and symbolic importance to the
Obama administration than it is of direct economic importance. The same
is possibly true for other countries that do not look likely to make significant
trade gains through the agreement – such as Australia, Brunei and Chile.
Both Singapore and Vietnam would appear to have an interest in liberalising
 7. THE TPPA, AGRIBUSINESS AND RURAL LIVELIHOODS 113

bilateral trade, and both Vietnam and Peru would substantially broaden
their portfolio of FTA partners if the agreement goes ahead. However, as has
been suggested by several commentators and political leaders, the primary
motivation for the TPPA appears to build on the P-4 as a platform for trade
and investment liberalisation in APEC and beyond. US exporters in particular
would like to gain better access to Asian markets. The US has a Trade and
Investment Framework Agreement with the Association of Southeast Asian
Nations and an FTA with Singapore, but while the proposed TPPA incorporates
Brunei and Vietnam, it does not include at this stage the more important
Southeast Asian markets of Indonesia, Malaysia, the Philippines or Thailand
(although Malaysia has signalled an interest in the TPPA).

Table 7.1. Bilateral trade matrix for TPPA negotiating parties: merchandise exports
(US$, millions) and share of total exports (%), 2009

Importer (B)
Australia Brunei Chile New Peru Singapore United Vietnam
Darussalam Zealand States
Australia 27 167 6,294 83 4,227 7,600 1,099
(0.0) (0.1) (4.1) (0.1) (2.7) (4.9) (0.7)
Brunei 575 <1 279 <1 83 39 <1
Darussalam (7.2) (<0.1) (3.5) (<0.1) (1.0) (0.5) (<0.1)
Chile 506 <1 25 1,179 177 6,019 47
Exporter (A)

(0.9) (<0.1) (<0.1) (2.2) (0.3) (11.0) (0.1)

New Zealand 5,834 3 32 27 616 2,413 192
(23.7) (<0.1) (0.1) (0.1) (2.5) (9.8) (0.8)
Peru 112 <1 1,228 14 18 4,011 <1
(0.5) (<0.1) (5.3) (0.1) (0.1) (17.3) (<0.1)
Singapore 10,582 865 36 1,363 20 17,747 6,990
(3.9) (0.3) (<0.1) (0.5) (<0.1) (6.5) (2.6)
United States 19,604 100 9,365 2,161 4,925 22,279 3,108
(1.9) (<0.1) (0.9) (0.2) (0.5) (2.1) (0.3)
Vietnam 2,448 <1 11 83 <1 2,062 11,853
(4.4) (<0.1) (<0.1) (0.1) (<0.1) (3.7) (21.4)

Exports from country A to country B by value and as a proportion of total exports from country A (in parentheses).

Trade governed by P-4

Trade governed by other bilateral and plurilateral trade agreements between TPPA countries

Source: Compiled with IMF data from the International Financial Statistics database, available at http://www.imfstatistics.
org/IMF/imfbrowser.aspx?branch=ROOT.

Table 7.2 shows the key agricultural products produced and traded by
the TPPA negotiating parties, as reported by the United Nations’ Food and
Agriculture Organization (FAO), while Table 7.3 ranks the eight countries by
value of their agricultural exports, showing both the value and the proportional
importance of agriculture in their external trade. The final column records
114 WARWICK MURRAY AND EDWARD CHALLIES

the agricultural balance of trade for each country in 2007 (in millions of US
dollars).10 Viewed in conjunction, Tables 7.2 and 7.3 reveal a significant degree
of diversity in the agricultural trade profiles of the negotiating parties. The US,
by its sheer size, is the dominant agricultural trader within the group, exporting
50 per cent more by value than the rest of the group combined. Despite their
absolute value, however, agri-exports represent only 8 per cent of total US
exports, which are dominated primarily by services and manufactures. The
US also represents an enormous market, importing almost US$75 billion in
agricultural products.
A second tier of agri-exporters consists of Australia, New Zealand and
Chile, all of whom run significant positive agricultural trade balances. While
Table 7.2 shows only limited overlap in the leading agri-export commodities
from these countries, they compete across many agricultural sectors for world
market share – particularly for counter-seasonal access to North American,
European and, increasingly, Asian markets.11 Wine, dairy, fruit and meat
are cases in point. However, the huge significance of mineral exports for
both Australia (coal, iron ore) and Chile (copper) mean that agricultural
products account for less than 17 per cent of total exports by value in both
cases. New Zealand stands apart from all of the other TPPA participants as
being highly reliant on agricultural exports. Given this (over-)reliance and
the significance of the US market for New Zealand exporters, it is perhaps to
be expected that the limited discussion of and consultation on the TPPA in
New Zealand to date12 has been fixated on the New Zealand–US dimension
of the proposed agreement.
Peru and Vietnam both potentially face challenges in the TPPA negotiations,
given their comparatively low levels of human development as measured by
the UN Development Programme’s (UNDP) Human Development Index.13
For example, according to data produced by the UNDP, New Zealand’s per
capita GDP (purchasing power parity) is US$23,336, while the corresponding
figures for Peru and Vietnam are US$7,836 and US$2,600 respectively. Neither
economy is primarily reliant on agricultural exports, although the nature of
a TPP agreement would have important consequences for rural livelihoods.
While Vietnam is a globally significant exporter of rice, coffee beans and
pepper, its key exports are oil, textiles/garments and footwear. Similarly, Peru
is a major exporter of coffee beans and asparagus, but is primarily reliant
on gold and copper exports. Both countries are dependent on imports of
agricultural commodities, particularly wheat and soy derivatives.
Singapore and Brunei probably have least at stake in the realm of agricultural
trade under the TPPA. While Singapore exports a significant quantity of
beverages and food preparations, these are mostly re-exports and represent
less than 2 per cent of total exports. Similarly, Brunei is not a major agricultural
exporter. Both countries are net agricultural importers.
 7. THE TPPA, AGRIBUSINESS AND RURAL LIVELIHOODS 115

Table 7.2. TPPA negotiating parties: major agricultural commodities in national

production, export and import, 2007

Key agricultural Key agricultural Key agricultural

commodities produced
Australia Milk, wheat, wool, sugar
cane
Brunei Darussalam Hen eggs, fruit NES,
vegetables NES, legumes
Chile Grapes, milk, apples,
tomatoes
New Zealand Milk, wool, kiwifruit, apples
Peru Rice, chillies, asparagus,
potatoes
Singapore Hen eggs, vegetables NES,
other birds’ eggs, spinach
United States Milk, maize, soybeans, wheat
Vietnam Rice, vegetables NES,
cashew nuts, coffee beans
commodities exported
Wheat, beef, wine, wool
Rubber, beef, sugar, hides
Wine, grapes, apples, pork
Whole milk powder, sheep
meat, beef, skimmed milk
powder
Coffee beans, cotton,
asparagus, chillies
Distilled alcoholic
beverages, cigarettes, food
preparations NES, wine
Maize, soybeans, wheat,
cotton
Coffee beans, rice, cashew
nuts, maize, pepper
commodities imported
Food preparations NES*,
distilled alcoholic beverages,
wine, beer
Cigarettes, rice,
non-alcoholic beverages,
food preparations NES
Fat preparations NES,
soybean cake, maize, beef
Food preparations NES,
wine, pastry, distilled
alcoholic beverages
Wheat, maize, soybean oil,
soybean cake
Distilled alcoholic beverages,
wine, food preparations NES,
cigarettes
Distilled alcoholic beverages,
wine, beer, coffee
Soybean cake, palm oil,
wheat, distilled alcoholic
beverages

* NES: Not elsewhere specified

Source: FAO data.

Table 7.3. TPPA negotiating parties: agricultural trade data, 2007

Agricultural exports Agricultural imports Agricultural trade balance

US$m % US$m % US$m
United States 92,679 8.0 74,651 3.7 18,028
Australia 23,643 16.7 7,758 4.7 15,885
New Zealand 13,482 50.1 2,598 8.4 10,884
Chile 11,235 16.6 4,184 8.9 7,051
Vietnam 5,637 11.6 4,554 7.3 1,083
Singapore 4,945 1.7 6,889 2.6 -1,944
Peru 1,996 7.2 2,258 11.0 -262
Brunei 3 0.0 272 12.9 -269
Darussalam

Source: FAO data.

Other aspects of a TPPA – including market access and investment rules,

trade in services, intellectual property, government procurement, competition
policy, dispute settlement, and labour and environmental provisions – have
116 WARWICK MURRAY AND EDWARD CHALLIES

the potential to widen its implications for agriculture. For example, Vietnam,
Peru and Chile are already major recipients of foreign direct investment (FDI)
in agriculture. Over the period 2005-2007, average inward flows of agricultural
FDI amounted to US$51.4m in Vietnam, US$51.0m in Peru and US$49.5m
in Chile.14 This investment is seeking markets for agricultural products and
resources to use as inputs for agribusiness. In particular, the search for cheap
labour and land, combined with relatively liberal environmental regulations,
plays an important role in determining investment flows out of core economies.

A View from Chile

The authors’ research in Chile and other territories illustrates that growth in
FDI-intensive agri-exports, if poorly managed, can lead to the devastation of
rural communities, and the entrenchment of rural poverty and inequality.15
Over the past two decades, for example, Chile has witnessed a significant
boom in agri-exports, especially in fresh fruit for the northern hemisphere.
This has been driven by an influx of multinational capital, facilitated by a
neoliberalisation of the economy. The fruit boom has yielded some benefits
at the macro-level, including a partial diversification away from reliance on
copper, steady rates of economic growth and trade surpluses, and an impressive
reduction in absolute poverty. However, at the local level, the impacts have been
far more controversial as poorer farmers have been squeezed out of business,
reversing the land reform of the 1960s and 1970s and leading to a significant
concentration in ownership of farms. Former small-scale land owners have
either remained in the countryside as a new proletariat working under arduous
conditions, or have migrated to urban centres, adding to the vast pressures
there. This shift in the economic base of the new export-oriented hotspots
has often led to the expansion of monocultures, with associated economic
and environmental risks and costs.
Fonterra’s investments in Chile, and in Latin America more broadly, have
not been without problems. Attracted by favourable investment incentives
and a growing dairy sector, the New Zealand Dairy Board (NZDB) began to
invest in Chile from the later 1980s. As part of a broad internationalisation
strategy whereby strategic foreign investment in local brands bypassed national
borders and trade barriers,16 the NZDB acquired a controlling stake in leading
Chilean dairy company Soprole in 1987. In this way the NZDB benefited, and
Fonterra17 continues to benefit, from Chile’s unilateral liberalisation and
now extensive and growing network of FTAs, which allow Soprole improved
access to a range of markets that are unavailable to New Zealand exporters
on similar terms. For example, Chilean dairy products are able to enter the
United States duty- and quota-free by 201518 under the US–Chile FTA.
Through its stake in Soprole, and in an effort to maintain dominance in
the region, New Zealand capital has played a significant role in the ongoing
corporate concentration of the Chilean dairy processing sector. 19 This
 7. THE TPPA, AGRIBUSINESS AND RURAL LIVELIHOODS 117

concentration, along with steadily declining prices over the 1990s, was a
contributing factor to allegations of non-transparent and anti-competitive
practices (including price-fixing) among the main processing companies.
Falling prices, which were partly attributable to increased imports (including
from New Zealand via Soprole) and increased production, have also driven
concentration at the primary production stage, with many smallholder
farmers being forced out of the sector over the last two decades.20 Due to the
prominence and activities of Soprole, its New Zealand investors and New
Zealand dairy in general became the focus of much discontent on the part
of Chilean farmers. More recently, an attempt by Fonterra and Nestlé to roll
Soprole into their Latin America-wide joint venture – Dairy Partners America
– was resisted by Chilean farmers, companies and the Chilean authorities as
the move was deemed to pose a threat to healthy competition in the industry.
The trends outlined above will not necessarily be reproduced through
the TPPA, and it is certainly not the argument here that FDI is negative per
se. There is nothing wrong with the expansion of Fonterra if it is regulated
in the interests of the wider society and the environment. The presence of
Fonterra in Chile’s dairy sector is clearly having a positive effect in terms of
productive innovation; the use of improved pastures, for example, has raised
productivity rapidly. However, it is unclear how far this has benefited small-
scale indigenous farmers in the south of the country, as many are not able to
compete. It is unfortunate that the recognition of the importance of small and
medium enterprises in the TPPA negotiations does not appear to include a
more formal investigation of the potential impacts of the agreement on small
farmers or moves to optimise favourable outcomes for them. Brushing aside
such concerns augments, rather than ameliorates, suspicion that there are
likely to be significant negative outcomes for the south of Chile that offset
the gains. To date, there has been little or no mention of such matters, to the
discredit of those involved in the negotiations.
Consideration of similar social and economic outcomes will be particularly
relevant to Vietnam and Peru (and should therefore be of concern to the other
TPPA parties), where significant numbers of rural dwellers are dependent
on agriculture for their livelihoods. Some 37 million people within the TPPA
zone are economically active in the agricultural sector. The vast majority of
these people – almost 29 million – are in Vietnam, where 64 per cent of the
economically active population is engaged in agriculture. Agriculture is also
of major importance to the livelihoods of almost 4 million people in Peru,
accounting for 25 per cent of the total economically active population.21 Of
course, there is nothing inherently negative about agri-export growth and, if
duly regulated via progressive trade agreements that protect labour and the
environment through appropriate and effective mechanisms, it may be able
to contribute to sustainable development outcomes.
118 WARWICK MURRAY AND EDWARD CHALLIES

The US Farm Lobby and New Zealand Dairy

As noted, the dairy sector represents a major area of concern for New Zealand
and the US, and is already posing challenges to TPPA negotiations, in which
agriculture is central. Indeed, agriculture has the potential to be a deal breaker.
This section examines the case of dairy trade to illustrate some of the tensions
and trade-offs that are likely to characterise this key aspect of the negotiations.
The TPPA is widely perceived in the US as the forum in which the Obama
administration will first define its approach to trade.22 The US perspective,
outlined in the President’s 2010 Trade Policy Agenda,23 is that the TPPA
should eventually expand to include additional countries across the Asia-
Pacific region: ‘The Administration believes that the TPP is the strongest
vehicle for achieving economic integration across the Asia-Pacific region
and advancing US economic interests with the fastest-growing economies
in the world.’ Whether the ‘advancement of US economic interests’ is to be
sought via a progressive, reformist approach or a conservative continuation
of NAFTA-style politics, however, remains to be seen.
As suggested above, negotiations on a TPPA need to consider the
implications of any agreement for existing bilateral and multilateral FTAs.
As the Introductory Chapter explains, the likely fate of existing regional trade
pacts is unclear, but there is certain to be a preference among particular US
interest groups for the retention of concessions or protections negotiated
under earlier agreements. The US Trade Representative Ron Kirk signalled
that the United States is entering TPPA negotiations with the intention of
preserving, as far as possible, the benefits that it currently enjoys under existing
free trade agreements with TPPA participants. In May 2010 Kirk stated that
US negotiators would ‘start out trying not to give away what we gained in
existing free trade agreements .… We want to make sure the agreement is
as high standard as possible, while at the same time retaining the flexibility
to accommodate sensitivities.’24 This language reveals little as to the US
negotiators’ approach, however, leaving the door open to the appeasement
of both domestic lobby groups and negotiating partners.
The Office of the USTR has received strong submissions from various
subsectors on the agricultural dimensions of the negotiations. On one hand,
powerful primary-producer lobby groups have argued for the maintenance of
existing tariff schedules with TPPA countries; on the other hand, secondary
producers and processors have called for the administration to shun
protectionism and further liberalise agriculture. Although public opinion
on the agricultural component of the agreement is not necessarily neatly
divided between primary and secondary producers in this way, it is clear that
preliminary responses to the prospect of a TPPA in the US have been mixed.
In a letter from the American Farm Bureau Federation and other producers’
organisations dated 11 May 2010,25 US agricultural commodity producers urged
the USTR Chief Agricultural Negotiator not to revisit existing bilateral trade
 7. THE TPPA, AGRIBUSINESS AND RURAL LIVELIHOODS 119

agreements with TPPA negotiating parties. If the TPPA were to supersede

existing agreements, cleaning up the ‘spaghetti bowl’ of bilateral arrangements,
US producers could see the erosion of remaining protective measures as
these are traded off against higher priority issues for the US – for example,
in intellectual property and copyright protection and financial services
liberalisation.26
Rather than re-opening existing bilateral FTAs, the producers argue, the
US should focus on ‘sanitary and phytosanitary (SPS) issues and non-tariff
measures that hamper US agricultural exports to TPPA countries’.27 However,
as one US commentator has observed:

[T]he position of some of the signatories [to the aforementioned producers’

letter] could change, or at least become more nuanced, if other countries
with which the US already has FTAs, such as Canada or South Korea, joined
the TPP talks .… For instance, the National Milk Producers Federation
may want to revisit the North American Free Trade Agreement (NAFTA)
if Canada were to join the TPP talks, as NAFTA provided few gains for US
dairy producers into the Canadian market .… Similarly, US rice producers
may want to revisit the Korea FTA if South Korea were to join the TPP
talks, as the US made no inroads into the Korean rice market under that
FTA as negotiated .… 28

The issue of dairy trade, and the insistence by US dairy farmers that
US–New Zealand dairy trade be excluded from the agreement, has been of
particular importance in these debates so far. Building on the existing FTAs
would mean that dairy was, at least, on the table. Unlike sugar, dairy was
included in the AUSFTA. The main means that the US uses to control dairy
imports is a system of tariff-rate quotas (TRQ), which allow a quota from a
country at a lower tariff than applies generally. These quotas apply to non-
fat dry milk (skim milk powder), dry whole milk (whole milk powder), butter
and anhydrous milk fat, which are of interest to Fonterra. High tariffs apply
for imports outside those quotas. The AUSFTA introduced a new quota
arrangement with relatively large increases in the first year, followed by an
average increase of 5 per cent a year on the previous year’s quotas. But that
was off a very low base, as Australia had a small share of the TRQs. Tariffs
were removed immediately within the quotas, but tariffs over the quotas did
not change.
However, the National Milk Producers Federation (NMPF) in its evidence
to the US International Trade Commission in February 2010 insisted that
each country’s situation needed to be calibrated differently, and that the
existing arrangements with Australia on dairy could not be transposed to
New Zealand, given Fonterra’s alleged near-monopoly.29
The US dairy lobby expressed its strong opposition to the inclusion of dairy
trade in TPPA negotiations with New Zealand in a joint press release from
120 WARWICK MURRAY AND EDWARD CHALLIES

the National Milk Producers Federation and the United States Dairy Export
Council (USDEC).30 NMPF president Jerry Kozak stated:

The heightened prospect of greater exploitation by New Zealand … would

make an already uneven playing field in the global markets worse .… This
heavy influence on our markets will drive down dairy farmer income in
America, force farms out of business, and create a ripple effect on dairy
plants and other rural businesses – all at a time when our economy is slowing
and unemployment is rising .… There’s only one way to deal with such a
unique and monopolistic situation [as New Zealand dairy and Fonterra],
and that is through an equally unique response: full exclusion of all US–New
Zealand dairy trade.

Such objections from the powerful dairy lobby prompted thirty US senators
to petition the USTR expressing concerns about Fonterra’s ‘virtual monopoly’
in the New Zealand dairy sector. Their letter questions whether, in light of
the concentration of market power, genuine competition is possible between
US and New Zealand dairy industries, and warns of the likelihood of both
increased pressure from imports, and limited expansion of exports:

Because of the anti-competitive practices in New Zealand’s dairy industry

and the extensive degree of control it wields over world dairy markets to
the detriment of the US dairy industry, we are deeply concerned that an
expansion of US–New Zealand dairy trade would further open the US to
these imports while providing little additional market for American farmers
in New Zealand and the other Pacific countries.31

The National Milk Producers’ Federation has also targeted Fonterra’s exports
of milk protein concentrates (MPCs) and casein to the US, which are not
currently subject to TRQs and have very low tariffs. The dairy industry lobby
argues that MPC imports are displacing US-produced skim milk products.
Legislation is currently before Congress to bring MPCs within the quota
regime, even though that would reportedly breach US agriculture obligations
in the WTO.32

New Zealand’s Agriculture Objectives in the TPPA

In the first, very short, round of public consultation in New Zealand, between
12 October and 8 December 2008, the Ministry of Foreign Affairs and Trade
(MFAT) received sixty-five submissions from individuals, the private sector and
civil society groups.33 While many of these were preoccupied with intellectual
property and copyright concerns (see the chapters by Tom Faunce and Ruth
Townsend, Susy Frankel, and Jock Given in this volume), strongly supportive
submissions were received from stakeholders across the agri-export sector.
Predictably, primary sector players – like the New Zealand Horticulture
Export Authority, Meat and Wool New Zealand, Fonterra, DairyNZ and the
 7. THE TPPA, AGRIBUSINESS AND RURAL LIVELIHOODS 121

Dairy Companies Association of New Zealand – have been overwhelmingly

in favour of an agreement with the US, and insistent that any agreement
should be comprehensive and inclusive of all agricultural sectors. Submissions
have focused on market access issues, strategic trade policy implications and
(particularly in Fonterra’s case) investment rules.
With respect to dairy trade, the US is New Zealand’s largest market,
accounting for around NZ$1.25 billion in exports, or 10 per cent of total dairy
exports, in 2009. The US market is the only market in the TPPA group where
New Zealand dairy products face substantial entry barriers; New Zealand has
existing FTAs with all other participants except Peru, which is currently not
a major importer of dairy products. New Zealand exporters are, therefore,
keen to see the elimination of existing US trade barriers (in the form of
tariffs, quotas and import licensing requirements) for New Zealand butter,
cheese and milk powders. With regard to investment and financial services
provisions, agricultural exporters have urged the government to build on
provisions in the US–Chile FTA to protect New Zealand investments in the
US and secure ‘robust’ processes for investor–state dispute resolution. The
US–Chile FTA is identified as more favourable to agribusiness investment
than current agreements New Zealand has with Singapore and Chile.34 As
argued by Bill Rosenberg (Chapter 14), however, these provisions are likely
to benefit US-based transnationals disproportionately and to undermine the
capacity of governments to regulate capital movements.
DairyNZ, whose website describes it as ‘the industry good organisation,
representing New Zealand’s dairy farmers’, has countered US resistance to
the inclusion of New Zealand dairy in TPPA negotiations. DairyNZ argues
there is plenty of room for increasing New Zealand dairy exports to the US,
given that only 5 per cent of an annual US consumption of over 80 million
tonnes of milk is imported. Further, far from being a vulnerable traditional
sector, the US dairy industry is emerging as a significant exporter, with exports
now comprising around 12 per cent of production. Finally, it is argued that
New Zealand dairy investment in the US to date (notably via DairiConcepts,
Fonterra’s joint venture with Dairy Farmers of America) has brought major
benefits to the US dairy industry.35 Federated Farmers of New Zealand
responded in similar vein to the thirty US senators who expressed concerns
about Fonterra’s ‘virtual monopoly’ in the New Zealand dairy sector; the New
Zealand farmers’ organisation argued that the TPPA ‘is about taking the best
of the United States and blending that with the best from New Zealand. It’s
about optimal outcomes for both countries.’36
TPPA proponents in New Zealand have taken pains to point out that, despite
Fonterra’s weight in global dairy trade and its importance to the New Zealand
economy, the size of the company is not exceptional when compared to many
US agribusiness transnational corporations,37 and therefore not really a threat.
While this point may or may not help the case for the liberalisation of dairy in
122 WARWICK MURRAY AND EDWARD CHALLIES

the New Zealand–US negotiations, it does underscore the considerable clout

that lies with US agribusiness, and should serve as a caution to New Zealand
negotiators not to conflate the national interest with the interests of Fonterra.
Rather than approaching the negotiations primarily as a campaign to secure
access for New Zealand dairy to the US market, New Zealand negotiators
would do well to take greater stock of the potentially far-reaching impacts of
concessions that are likely to be demanded in other areas for questionable
returns. The implications for New Zealand’s ability to regulate within its own
borders on a whole suite of issues is at stake.

Conclusion
Agriculture, agribusiness and rural livelihoods are integral to the unfolding of
the TPPA negotiations. Agriculture is of major concern in terms of employment
in the poorer countries that are party to the negotiations, especially Peru and
Vietnam. In a number of countries, including New Zealand and Chile, it is of
crucial importance as an export earner. Indeed, the search for higher value-
added products that involve the processing of primary agricultural commodities
is central to the economic strategy of both of those countries. Agriculture
is also likely to be the major stumbling block in terms of the negotiations,
and the case of the contentious relationship between the US farm lobby and
New Zealand dairy illustrates the intensity of this engagement. The TPPA
negotiations must take account of all these considerations.
If this is to be a genuinely twenty-first century agreement, the social and
environmental costs of trade liberalisation within and beyond New Zealand’s
borders should be given equal weight along with economic analysis in the
TPPA negotiations. This chapter has suggested that the impacts of the
proposed TPPA in the agricultural sectors and rural communities of developing
countries (such as Vietnam and Peru) have the potential to be particularly
devastating. There are equally important reasons closer to home for New
Zealand to consider social and environmental regulations. In negotiating
for improved access for New Zealand dairy products to the US market,
New Zealand negotiators should not lose sight of the importance of robust
environmental and labour safeguards, the need to maintain biosecurity and
control of sanitary and phytosanitary rules, and the stance on GE seeds and
crops, as David Adamson points out in Chapter 8. There is also a great need
to adopt a robust emissions trading scheme that brings in agriculture (see
Geoff Bertram in Chapter 9).
It follows that detailed and sustained research into the social and
environmental impacts of trade and investment liberalisation – not just in
New Zealand, but also among its trading partners and beyond – is needed
before such deals are negotiated, rather than the current ideologically driven
approach of ‘sign first and ask questions later’. The TPPA process to date
has been non-transparent in this regard. The authors recommend the delay
 7. THE TPPA, AGRIBUSINESS AND RURAL LIVELIHOODS 123

of TPPA negotiations while that research is conducted, combined with a

concerted public outreach. Such an approach would help legitimise any
agreement that results.
Ultimately, the TPPA is promoted to the wider public in New Zealand in
terms of the goal of gaining access for dairy to the US market – agriculture is
the major concern. However, the ramifications of the agreement will go far
beyond agriculture. The troubling aspect is that New Zealand does not have
much to offer any of the negotiating partners in return for market access as
it already has FTAs with all parties except the US and Peru.
To a great extent, then, the shape and progress of the TPPA, at least as
far as New Zealand is concerned, will hinge on US politics and the Obama
administration’s success in juggling domestic pressure for a new, post-NAFTA
trade agreement model, and opposition to agricultural trade liberalisation from
the US farm lobby. Ultimately, the two tasks need not prove to be mutually
antagonistic: if Obama can argue that improved labour and environmental
mechanisms can help to level the playing field by eliminating the incentive
for capital flight to low-cost labour and resources, he may be able also to
safeguard US jobs and farms and appease domestic critics. In this sense,
the political moment of the TPPA negotiations creates a rare and valuable
opportunity to forge an accord that is progressive, sustainable and equitable.
8. Quarantine and Food Safety
Issues in a TPPA
David Adamson

Globalisation has expanded our horizons through international media,

widespread migration, travel and economic growth. These rapidly increasing
inter-connections between people and countries have, however, some
unintended social and economic consequences.
Primary producers aim to increase their exports into expanding and more
diverse international markets where they have a comparative advantage in
production. Growing demand, for example, for alternative foods, ornamental
plants and exotic pets1 has created new markets that importers seek to fill.
However, the ability to supply and source products in international
markets is constrained by the quarantine policy and food standards within
each country. These standards exist to protect against by-products of trade,
including the spread of invasive species, exotic diseases and pathogens, and
the contamination of food. Although there may be relatively little risk of
these events occurring, they can have catastrophic and irreversible impacts
on individuals, production systems and the environment if they do happen.
Quarantine and food standards are inconsistent internationally because
countries have different positions with regard to potential threats to their
agricultural production, the environment and society. These differences will
determine, for example, what chemicals and residue levels are considered
acceptable, and how we label our food. Those decisions can in turn be used
to provide significant economic benefits in market access. They will also have
an impact on the quality of our ecosystems and the health of society at large.
The geographical isolation of Australia and New Zealand allowed unique
species to develop and prevented many weeds, animals and diseases from
establishing. Despite the deliberate introduction of numerous species in
the last two centuries, the relatively remote location of these two countries,
combined with strict quarantine protocols, has prevented many other threats
from arriving. This freedom has allowed society, production systems and the
ecology to develop along different paths from many other countries, and the
 8. QUARANTINE AND FOOD SAFETY ISSUES 125

continuing absence of many unintended consequences of trade prevents both

the loss of human life and ecological homogenisation, while continuing to
support economic growth.
To date, the relative autonomy of states to determine the acceptable level
of protection is one of the few national policy instruments that Australia and
New Zealand have not diluted during bilateral trade negotiations, even though
the two countries have sometimes disagreed regarding the interpretation of
those standards between themselves. This chapter outlines why both Australia
and New Zealand, under the proposed Trans-Pacific Partnership Agreement
and other trade agreements, should never negotiate away their sovereign
right to determine their own acceptable levels of risks to production systems,
the environment, and food standards that meets their society’s expectations
and choices. It does this by illustrating issues that might arise in the course
of the negotiations, especially in light of US pressure for other countries to
harmonise to US techniques and standards.

Quarantine and SPS Measures

Quarantine works to ensure that exports meet international requirements
and it attempts to limit the possibility of products arriving that do not meet
Australian and New Zealand assessment of acceptable levels of risk. Specific
quarantine measures are designed to minimise the possibility of exotic pests,
pathogens and diseases entering a country, and to ensure that imported
foods adhere to the set standards. Numerous exotic invaders have already
been introduced to Australia and New Zealand (rabbits, foxes, gorse, prickly
acacia); others have arrived accidently (didymo, horse flu) or may arrive by
natural means (avian influenza can be spread by migrating birds); some are
associated with international travel (swine influenza). Those exotics 2 cost
the economies of Australia and New Zealand billions of dollars, not only in
control and eradication campaigns, but also through the damage they cause
to agricultural production systems, to society (through ill-health) and to the
environment.
Both Australia and New Zealand enforce strict quarantine barriers to
prevent new exotics from arriving through international travel, air freight,
shipping containers and ballast water in ships. Both countries also test food
products leaving and arriving at the borders to ensure that they meet the
required food standards of the importing country and the domestic market.
Due to their quarantine measures, both Australia and New Zealand are still
free from many serious biosecurity threats faced by many other countries.
Being identified as ‘free from’ has two principal benefits. First, it significantly
improves access to international markets. Secondly (and crucially in terms
of a TPPA), that status has also allowed Australia and New Zealand to
have strict guidelines on what can be used in their agricultural production
systems. These regulations have direct and indirect human health benefits,
126 DAVID ADAMSON

and they help to preserve international market access. It is highly important

that both countries retain their right to decide their own standards, subject
to the existing WTO rules.
The World Trade Organization’s Agreement on the Application of Sanitary
and Phytosanitary Measures, known as the SPS Agreement, insists that a
country must use the best available scientific evidence (see Article 5 of the SPS
Agreement) to determine the impact on the economy, food safety, and animal
and plant health of changes in the importation of goods. The SPS Agreement
allows each WTO member country to determine its own appropriate level of
protection (ALOP) – that is, the level of risk a country is willing to accept from
its importation policy by country and by product. A number of international
instruments and agencies help to determine the ALOP. The Codex Alimentarius
Commission (Codex) develops international standards for food safety. The
International Plant Protection Convention (IPPC) provides guidance on plant
health and protection. The World Organisation for Animal Health (Office
International des Epizooties or OIE) provides guidelines on animal diseases
and diseases that can be transmitted to humans. Sanitary and phytosanitary
(SPS) measures based on international standards are deemed to comply with
the SPS Agreement. A measure is considered to pose a prohibited technical
barrier to trade if the scientific justification is untenable and is considered
trade-distorting.
The SPS Agreement essentially allows each country to determine the level
of risk (that is, ALOP) it is willing to accept from the unintended consequences
of trade when setting its quarantine regulations. However, all decisions must
be based on the best available science.
In Australia, the ALOP is determined by using the Import Risk Analysis.
The controversial example of quarantine restrictions on imports of New
Zealand apples provides a useful example. In 1921 New Zealand lost access
to the Australian market after fire blight became endemic in New Zealand’s
apple orchards; in 1995 Australia received an application from New Zealand
to re-gain market access for fresh apples.3 Under international law, Australia
can only retain the restrictions if it can prove, via its Import Risk Analysis
process, that the potential risk from allowing New Zealand apples into its
fresh-fruit market would cause unacceptable costs (economic, social and
environmental) from fire blight and other unintended consequences of trade.
Realistically, there are four possible outcomes under the SPS Agreement.
First, Australia could accept the imported apples with no conditions. Second, it
could place a number of conditions on New Zealand apple exporters to reduce
the level of risk of unintended consequences of trade. Such restrictions might
include being able to export only to certain States in Australia or insisting
that apples are treated with a prescribed chemical or procedure to reduce the
risk. Third, Australia could maintain the market exclusion until it receives
scientific confirmation that the New Zealand management strategy aimed
 8. QUARANTINE AND FOOD SAFETY ISSUES 127

at reducing risks will be effective. Lastly, it could reject the application under
the grounds that the risk is too great.
Depending upon the outcome, New Zealand could provide counter
arguments to the decision, and if New Zealand believed the country was
being unfairly treated or that the Australian quarantine restriction was not
based on good science, then New Zealand could take Australia to the WTO’s
dispute resolution panel. That is what New Zealand did. The WTO panel has
ruled in New Zealand’s favour 4 and now Australia is appealing the decision.
There are two critical aspects to determining the risk that arises from
allowing greater market access for any country: the science underpinning
exotic impacts, and how the country wanting to gain access produces the
good in question. The application of science to such considerations means,
for example, that potential exotics from the exporting country are compared
to known exotics in the importing country. Unless a prior incursion has
occurred, determination of how threats might impact on agriculture, the
environment and society is generally based on overseas evidence. Sometimes
no information exists, especially with regard to the impacts that diseases
might have on native species. Collecting this information raises moral issues;
for example, should society determine if a kiwi can be a vector for avian flu
by subjecting specimens to vector analysis, or assume on the basis of the
available science that it can and have counter measures ready? 5 In situations
of genuine scientific uncertainty, however, the SPS Agreement allows a
precautionary approach to be applied, especially where risks of irreversible
damage to human health are concerned.6
Secondly, by examining the production system, it is possible to determine
and evaluate steps to reduce the risk of exotic entry. These risk-reduction
strategies must be in line with existing food standards. Importantly, the
science underpinning the level of risk for both impacts of exotics and food
standards continues to evolve and improve over time, and this may alter
future market access.

Production Systems and Food Safety

Assessments of the safety of food not only address the substance of the food
itself, but also its production, packaging and storage. Food safety guidelines
differ widely throughout the world, and they will affect an item of fresh food
all the way along its journey from one country to another. For example, that
apple you pick up at a shop could be classified by variety and labelled to show
if it is organic or genetically modified (GM) and where in the world it was
grown. A variety of fertilisers, herbicides, insecticides, fungicides, miticides,
antibiotics and growth regulators (hereafter chemicals) may have been used
to grow it. Once picked, other chemicals, waxes and the like were probably
used in both the packaging and storage process to enhance colour and shine
and to extend post-harvest life. The chemicals that are allowed to be used
128 DAVID ADAMSON

in production change over time; many have been withdrawn due to health
reasons. For example, daminozide (Algar) was first used in 1963 in the US to
ripen apple crops uniformly until a link to cancer was established and it was
deregistered for use in food crops in 1989.7

Chemical Residues
The Codex provides international guidelines on food safety, including the
acceptable level of chemical residues that can be found in marketed food.
Australia and New Zealand have a single body, Food Standards Australia and
New Zealand (FSANZ), which operates within the Codex guidelines and is
responsible for setting the standards on food for human consumption. Each
country operates its own independent departments to monitor the safety
of both domestic and imported foodstuffs. The process for ensuring food
safety in terms of regulations and requirements for food sold in Australia
and New Zealand is better than in many parts of the world. In addition,
other government bodies exist to regulate what chemicals can be used,
how they are used and where they can be used; there are stiff fines for non-
compliance. However, agricultural producers in Australia can still use different
chemicals with different rates of application from those in New Zealand, as
production systems and agricultural pests are fundamentally different in the
two countries. Which chemical can be used on food or ornamental crops,
the application rate, and even whether the chemical remains registered
may change as new scientific evidence is found or society’s attitude to the
levels of risk alters.
The CODEX allows for standards to vary internationally and over time.
When standards do change, a re-alignment of international market access
can occur. For example, the North American Export Grain Association stated
in 2007 that:

We are very concerned that the establishment of a 0.5 PPM MRL [parts
per million maximum residue limits]8 wheat will unnecessarily result in a
major impediment to the food security interest of Taiwan by restricting,
perhaps to the point of preventing, the importation of wheat from the United
States. It is clear that such a level is not economically and commercially
practical. We recognize the immediate need to provide for an MRL for
malathion in wheat. However we believe 0.5 PPM level is inappropriate as
well as impractical.9

This statement ignores the fact that other countries that export wheat – for
example, Australia – could meet these conditions and take the US market share.
In Australia, the bulk-grain handlers replaced malathion with phosphine to
provide ‘residue free grain’.10 The ability for Australia and New Zealand to
produce and export food considered as ‘clean and green’ by world standards
 8. QUARANTINE AND FOOD SAFETY ISSUES 129

will help them to maintain their international market access under increasingly
tighter regulations and testing standards.

Food Production
Australian and New Zealand agricultural production systems have evolved
very differently from other countries involved in the TPPA negotiations
because of their geographical isolation and evolving policies. As a result, their
chemical and food standards also vary substantially from those countries.
For example, the Australian beef industry is a low-intensive, primarily
pasture-based system, while the US beef industry, especially in the export
market, tends to be intensively grain-fed. Some US producers house animals
over winter, where they can be fed a combination of grain mixed with high
protein meal and other supplements, including antimicrobials either to
maintain weight gain or finish the animals for market.11 It was not until
1997 that the US Food and Drug Administration (FDA) outlawed the use of
ruminant waste as feed for other ruminants (meaning cattle).12 This policy
was introduced in light of the British outbreak of mad cow disease, Bovine
Spongiform Encephalopathy (BSE). However, blood meal, platelet waste and
poultry litter can still be included in US cattlefeed.13
The GM food debate is another where science, trade and perceptions
clash. Since 2001 both Australia and New Zealand have mandatory labelling
of GM content, while the US uses voluntary labelling only.14 This again has
implications for international exports as key current markets for Australian
and New Zealand exporters, including China, Japan and the European Union,
have mandatory labelling of GM content. Even if there are no problems
associated with the ingestion of GM foods, the moral obligation to provide
consumer choice is considered important in many markets. Once again,
the regulation of other growth additives, including growth hormones and
antibiotics discussed below, is very different between the TPPA negotiating
countries. All these factors influence the availability of export markets.

Use of Antibiotics
One increasing area of concern in international markets extends beyond
chemical residues in food to other production agents, including growth
hormones and the use of antimicrobial agents (including antibiotics).
Restrictions on antimicrobial agents started in 1986 when Sweden limited their
use in agriculture. Mounting concern about antimicrobial use and food safety
quickly translated into quarantine regulations, and in 1991 Japan rejected an
Australian beef shipment when streptomycin residue was found.15 These and
other factors led to the formation of the Australian Pesticides and Veterinary
Medicines Authority in 1993. By 1999 an Australian government committee
on antibiotic resistance delivered its report outlining that not only was the
130 DAVID ADAMSON

frequency of antibiotic-resistant bacteria increasing in humans and livestock,

but also that the bacteria could be transferred from animals to humans.16 This
report recommended that, in order to preserve the effectiveness of antibiotics
in humans, only antibiotics that are considered of low importance for humans
should be assigned for agriculture use.17
The argument here is that the rate of antimicrobial resistance increases if
both humans and agriculture use the same antibiotics (for example, spraying
streptomycin to control fireblight).18 Antimicrobial resistance in either
humans or agriculture leads to higher costs due to treatment complications
and negates their effectiveness on non-target diseases.
These arguments can be tested firstly by comparing the Australian and
US approaches to antibiotics, which apply different standards on use for
agriculture. In the pig industry, for example, 19.2 per cent of E. coli tested in
Australia were resistant to more than one antimicrobial drug,19 while in the
US it was over 62.6 per cent.20
Secondly, zoonotic diseases (diseases that can to be transferred between
animals and humans) do not pose the same problem. Clostridium difficile PCR
ribotype 027 is a highly contagious gastrointestinal disease endemic in North
America and Europe, where it is highly resistant to antibiotics.21 In pigs, it
can lead to mortality and permanently reduces live-weight gain.22 In England
and Wales, human mortality rose from 1211 to 2083 cases between 2001 and
2005,23 while in Quebec 1270 died out of 7004 people infected between 2003
and 2004.24 In Australia, C. difficile is present, but the 027 strain has only
been found four times in humans with no fatalities.25 It is believed that the
way antibiotics are used in agriculture and the human population, combined
with the location of piggeries, will help to reduce the occurrence and effect
of C. difficile outbreaks in Australian hospitals.26
Resistance to antibiotics costs the Australian health budget an estimated
A$250 million per annum.27 This sum reflects direct budgetary costs only, and
does not account for lost days of work, the opportunity cost of having hospital
beds unavailable for other patients, and the lost incomes and productivity of
family members who provide temporary care. While it is crucial for Australia
and New Zealand to gain international market access for each country’s
commodities, it is equally vital for the health and welfare of our populations
that our governments never give up the right to determine how to use antibiotics
within national borders.

Quarantine Failure
BSE (commonly referred as ‘mad cow’ disease) causes a degeneration of the
brain and spinal cord in cattle and humans. Transmission to humans occurs
when infected spinal tissue and brains from cattle are ingested. In humans,
this condition is called new variant Creutzfeldt–Jakob disease (vCJD or
 8. QUARANTINE AND FOOD SAFETY ISSUES 131

nvCJD). Once detected, BSE must be reported to the Office International

des Epizooties, which distributes the information internationally.
On 23 December 2003 a single dairy cow in Washington was identified
with BSE. The OIE was informed, and effectively within twenty-four hours
the US lost over one hundred international markets. International market
closure cost US beef exporters between US$3.2 and US$4.7 billion in 2004.28
Some markets have proven exceptionally difficult for the US to re-enter, even
though US scientists have proven that beef meat without the spinal cord is
safe for human consumption and the US had undertaken not to sell brains.
Ongoing market access problems for US beef exporters have been due to
other countries’ hesitancy in accepting the US scientific findings, the public’s
perception in export destinations for US beef, and occasional incidents where
US beef exporters failed to meet the new US standards and international
export requirements.29 Although the US beef industry was severely damaged
by the loss of international markets, it was able to survive by having a large
domestic market to absorb traditional exports. This strategy is unavailable
to both Australia and New Zealand.
The BSE outbreak in the US provided significant economic benefit to
Australian, and to a lesser extent New Zealand, beef exporters both in terms of
exported quantity and the price increase that occurred. Figure 8.1 illustrates the
impact of the US BSE outbreak on US and Australian market share in Japan.
Being identified as ‘BSE free’ has allowed Australia to become the dominant
player in the Japanese market, and many Japanese retailers advertise that
they use only ‘Aussie Beef ’.

Figure 8.1 Japanese beef imports by country of origin (kt)

Australia United States
500

400
Beef imported (kt)

300

200

100

0
2001 2002 2003 2004 2005 2006 2007 2008
Year

Source: Adapted from ABARE, Australian Commodity Statistics 2009, ABARE, Canberra, 2009, http://www.abare.gov.au/
publications_html/acs/acs_09/acs_09.pdf.
132 DAVID ADAMSON

BSE spurred international capital investment in detection equipment,

and these testing facilities will probably be used to monitor not only BSE
but also other diseases, viruses, chemical residues, antibiotics, growth
hormones and other compounds. Many countries raised their standards in
response to this heightened biosecurity awareness. Australia, for example,
introduced quality assurance systems that monitor produce from ‘paddock
to plate’, 30 so that any contamination can be tracked throughout a vertically
integrated system.
Governments have a difficult balancing act between ensuring the food
and health standards for their population, understanding the needs and
desires of domestic producers and consumers, acknowledging the growing
international awareness of what additives are used in foods, and wanting to
increase society’s opportunities and choices through economic integration
and better international trade relations. The tradeoffs between these factors
need to be discussed in public so that governments can both acknowledge
and understand the opinions of the people they represent. Fundamental
questions need to be asked: what do we want society to look like; what level
of risk (for example, in food safety or biosecurity outbreaks) are we willing
to accept to get there; how are we going to get there; and what are we willing
to forgo in trade deals to achieve that?
For example, strict quarantine measures and high food standards aim to
protect human health, the environment and production systems, but they can
lead to higher domestic prices and reduce consumer choice. Stricter measures
and higher standards might also provide greater international market access
for Australia and New Zealand, which are both reliant on international markets
for their agricultural exports, but agriculture is a shrinking part of the economy.
Ultimately, the negative long-term consequences of poor decision-making
for future production choices, health standards and the environment can be
irreversible and are likely to significantly outweigh short term trade gains.

Bilateral Trade Deals

An examination of how the SPS Agreement and SPS standards are treated
in existing trade deals can help determine what is in the best interests of
Australia and New Zealand in the TPPA negotiations.
The SPS Agreement is recognised in all the existing bilateral and multilateral
trade agreements that the TPPA negotiating countries have with each other.
Some are minimalist and are limited to acknowledging the WTO agreement.
Others include chapters on SPS measures that reaffirm the rights of countries
to maintain different standards.
The most limited approach is in the US–Singapore Free Trade Agreement
where there is simply a confirmation in the Preamble of the parties’ mutual
commitment to the WTO agreement and no SPS provision in the text itself.31
 8. QUARANTINE AND FOOD SAFETY ISSUES 133

The trade relations agreement between the US and Vietnam deals with the
SPS matters briefly under the article on non-discrimination in the chapter
on trade in goods. It requires both parties to ensure that:

… any sanitary or phytosanitary measure which is not inconsistent with

the provisions of the GATT 1994, is applied only to the extent necessary to
protect human, animal or plant life or health, is based on scientific principles
and is not maintained without sufficient evidence (i.e., a risk assessment),
taking into account the availability of relevant scientific information and
regional conditions, such as pest free zones. 32

The same agreement also contains the following obligation (article 2:6B),
which further limits the individual rights of a country:

For this purpose, technical regulations shall not be more trade-restrictive

than necessary to fulfil a legitimate objective, taking into account the risks
non-fulfillment would create.

The US agreements with Australia, Chile and Peru provide a chapter on

SPS measures that affirms rights and obligations under the WTO agreement.
These agreements establish a joint committee that meets at least annually to
consult on SPS matters to foster understanding between the parties as well
as identifying national contact points.
Interestingly, while the Singapore agreement with the US has no substantive
provision on SPS issues, the agreements Singapore has with Peru, Australia
and the other P-4 countries (Chile, New Zealand and Brunei Darussalam)
progress far beyond the scope of a committee and identified contact points.
The P-4 provides the strongest platform for promoting a balanced approach to
SPS measures as a starting point for a TPPA negotiation. The most innovative
element of Chapter 7 of the P-4 Agreement dealing with SPS measures facilitates
recognition of equivalent SPS measures in different parties and regionalisation
practices, while allowing for differences between the participating countries to
be acknowledged and accepted. These differences include the determination
and recognition of pest-free areas and acceptance of the importing country’s
domestic market requirements. The P-4 has a built-in acknowledgement that
regulations and standards will change in the future in each market. It also
further protects each party by ensuring that quarantine checks on imports
can occur, and incorporating the right to check the exporter’s processes to
verify procedures. These enhancements significantly improve each country’s
right to ensure that their standards are recognised now and in the future.
However, an equivalent level of recognition of sovereign rights is likely to
be a stumbling block for the US in any TPPA. The USTR has recently released
two reports on what it considers are unjust technical barriers to trade 33 and
SPS measures 34 that US exports face in each country in the world. The line
134 DAVID ADAMSON

between SPS and technical barriers to trade is noticeably blurred in these

documents, especially with regard to genetically modified organisms.
The SPS report specifically lists the four US challenges brought against
trading partners before the WTO dispute mechanism. In each instance, the
US claim that their trading partner’s case lacked credible science was upheld.
These challenges involve the European Union’s ban on US beef produced with
growth hormones; the European ban on GM (biotech) products, such as corn
and soybean; Japan’s varietal testing requirements; and Japan’s assessment
of the risk of fireblight from imported apples. A further fifth case involving
the European Union’s concerns over pathogen reduction products used in
poultry is currently before the WTO.
The report lists six issues where other governments’ SPS measures are
seen to limit US global trade: swine influenza, biotechnology, BSE, avian
influenza, Ractopamine (a stock feed additive) and maximum residue limit
levels. The document outlines the way that the US uses its technical advice,
expertise and scientific skill to communicate to, or work with, the importing
country to prevent these standards or quarantine barriers from constituting
trade restrictive barriers for US companies. Principally, the US considers
any mandatory labelling of GM or biotechnology as a technical barrier to
trade and not a justified SPS measure. As both Australia and New Zealand
have compulsory GM labelling, this is likely to become an issue in the TPPA
negotiations. It provides a clear example where conceding to US demands
would erode individual’s choice and local democracy.
In these documents the US also has very clear advice for countries that may
not have systems or resources equal to its own in relation to testing chemicals:

To ensure against trade disruptions while a pesticide is under evaluation,

U.S. authorities often ask countries to adopt Codex MRLs on an interim
basis until their permanent MRLs are established. If countries are unwilling
to adopt the Codex MRLs, or to defer to the U.S. MRL in the interim, U.S.
growers could be subject to onerous penalties and serious trade barriers
for using pesticides that EPA has approved. For example, in 2009, U.S.
celery and strawberry growers were unable to ship their products to Japan
because the regulatory authorities had set an unwarranted default MRL
of 0.01 ppm until a permanent MRL was established.35

The US push for standardised chemical registrations is further illustrated by

the NAFTA agreement where a trilateral regulatory authority on chemicals was
established. Australia and New Zealand do not benefit from this harmonisation
of food standards, chemical registration and MRL levels with the US. As both
countries have fundamentally different production systems from the US,
the question becomes why Australia and New Zealand would trade away a
strategy that has protected their international market access (BSE), provided
cheaper input costs (antimicrobial resistance), and allows their consumers
 8. QUARANTINE AND FOOD SAFETY ISSUES 135

to decide what they ingest (GM)? There would have to be something very
special offered in the TPPA to forgo these benefits.
Ideally, TPPA negotiations should aim to expand the P-4 notions of
individual country rights in setting their own standards, requirements, and
ability to test and double-check the exporter’s risk-reduction systems. That
includes ensuring they have the sovereign right to require mandatory labelling
of identified growth promotants, to update and change the list as required,
and to enforce the mandatory labelling of GM foods. They should also be able
to specify which antimicrobials cannot be used in agriculture, and to uphold
the right to alter and adapt the list through time. These provisions should
recognise and strengthen the right of each country to set its own standards,
which may differ from those of other members, and allow for the continual
updating of scientific discovery to help guide future decisions.

Conclusion
The international standards for SPS measures need to change not only as
better scientific information comes to light, but also as conditions change in
the importing or exporting country. When disease outbreaks occur, either due
to third-party breaches or a new exotic pressure (for example, as a result of
climate change), temporary market closure does and will occur. The ability
of a country to determine its own quarantine standards, how the ALOP is
set, what compounds and chemicals its producers and manufacturers are
permitted to use, and how the population is informed – these are fundamental
rights that have already been constrained by the WTO’s SPS Agreement. They
should not be further eroded by a TPPA. Their impacts go beyond what the
countries can export and import; they affect the health of populations and
the natural environment.
The US government uses its own science and standards to define the
level of risk it is willing to pass on to its agricultural productions systems, its
environment and its inhabitants. Other countries do not have to accept this
level of risk as the default setting; the costs of doing so could be catastrophic
and irreversible.
9. Border Carbon Adjustments
and Climate Change Policy
Geoff Bertram

At Copenhagen in December 2009, the world’s governments failed to reach a

binding international arrangement to limit greenhouse gas (GHG) emissions.
Unless some new collective global agreement emerges in the next couple
of years (which seems unlikely), the outlook for the next decade is that
individual countries or blocs of countries will ‘go it alone’ in policy responses
to global warming. In some cases, this will mean fairly stringent restrictions
on emissions, which will increase costs for those firms that use emission-
intensive production processes. Offsetting those cost increases for polluters
will be greater profit opportunities for low-emission producers of the goods
and services required to operate a low-carbon economy.
As economies restructure away from high carbon dependency, there will
be winners but also losers, and because losers tend to be more vocal than
winners, politicians in many countries already feel under pressure to appease
the complaints of their large pollution-intensive firms and sectors.
Prominent amongst those complaints is the claim that trade-exposed home
producers, such as agriculture in New Zealand or oil refining in the US, are
placed at a competitive disadvantage vis-à-vis producers located in ‘pollution
haven’ countries which have chosen not to implement emission-reducing
policies. Closely linked is the spectre of ‘carbon leakage’,1 that emissions-
intensive industries will relocate their activities to countries offering them
pollution havens. As governments look for ways to address these problems of
leakage and ‘unfair’ competition, two options come immediately into view.
One is to exempt their trade-exposed producers from the policy, whether
outright or by free allocations of emission permits. The other is to impose
border charges on imports (and possibly rebates on exports) to ‘level the
playing field’ between home and overseas producers.2
Such measures at the border can take the form of direct ‘border tax
adjustments’ (BTAs), or of more indirect measures such as requiring importers
to buy and surrender carbon units of some sort. Border measures of this sort
 9. BORDER CARBON ADJUSTMENTS AND CLIMATE CHANGE POLICY 137

are allowed under the rules of the General Agreement on Tariffs and Trade
(GATT) and the World Trade Organization (WTO), provided that they satisfy
either GATT Article iii(2) (allowing taxes and charges to be imposed on imports
to match those on home production), or Article xx that allows ‘necessary’
exceptions to protect human, animal or plant life or health and to conserve
exhaustible natural resources (of which the atmosphere is arguably one).3
Yan Dong and John Whalley argue that trade policy and environmental
policy must now evolve closely in tandem and that this could even ‘render
the WTO obsolete’:

In light of the growing interface between trade and environmental policies,

international agreements are critical for countries to avoid destructive
policy retaliation …. Today, given concerns over global warming, the future
evolution of the trading system may well be that environmentally motivated
arrangements prevail over trade and financial arrangements in the WTO and
IMF. The world of global policy coordination may thus move beyond WTO
trade negotiations to linked trade and environmental policy bargaining.4

Any such realignment seems remote at this stage. However, it is clear

that, in designing its own climate change policy in the new geopolitical
environment, each country will be well advised to take account of the possible
trade restrictions that its trading partners may put in place, if those trading
partners’ emission-reducing policies are more stringent and their domestic
producers seek protection against ‘unfair competition’. As a small trading
nation, New Zealand is particularly exposed, and has made itself more so
because the Emissions Trading Scheme (ETS) legislated in 2008 and watered
down in 2009 is conspicuously less stringent in key respects than policies
already in place, or under consideration, in major trading partners including
the European Union and the United States. The New Zealand ETS provides
massive subsidies to trade-exposed sectors, with New Zealand Units (carbon
credits) handed out for free to large industry and agriculture on the basis of
their ‘emissions intensity’5 – a recipe for being identified as a pollution haven
and targeted for trade sanctions.6
Consequently, an important element in any free trade negotiation between
New Zealand and the US is likely to be the latter’s assertion of its right at any
time unilaterally to impose trade barriers targeted at New Zealand exporters,
on the grounds that those products embody greenhouse gas emissions that
have not been subjected to emission charges comparable in stringency to
those in the US, or even on the more general basis that New Zealand has not
adopted climate change policies matching those of the US.
Confirming in November 2009 that the US will enter negotiations for the
Trans-Pacific Partnership Agreement, President Obama referred to ‘the goal
of shaping a regional agreement that will have broad-based membership and
the high standards worthy of a 21st century trade agreement’.7 The President
138 GEOFF BERTRAM

did not spell out what a ‘21st century trade agreement’ required or what
benchmarks ‘high standards’ should be measured against.
Climate change is not mentioned in the ‘fact sheet’ put out by the Ministry
of Foreign Affairs and Trade (MFAT) on the TPPA. However, the fact sheet
does note that:

In other free trade negotiations the United States has generally pursued a
negotiating agenda that extends beyond goods and services into areas such
as intellectual property, foreign investment screening and pharmaceuticals
services. Similar issues are likely to arise in the Trans-Pacific negotiation.8

In both climate change and WTO negotiations over the past decade, the US
government has played a central role in the breakdown of international trust
and cooperation. In both cases, the failure of attempts to find global cooperative
solutions has left the way open for individual countries to pursue their own
national interests via bilateral negotiating agendas. The US is unlikely now
to offer major trade concessions to the TPPA participating countries without
insisting on its right to impose border adjustments of one form or another
to protect the integrity of whatever domestic climate change policy package
eventually emerges from the US Congress under the Obama administration.

US Congressional Approaches to Climate Change

For several years now, the US Congress has been considering how to legislate
a Federal policy to reduce greenhouse gas emissions in the US economy. The
unsuccessful Lieberman-Warner Climate Security Act of 2007 (S.2191) was
followed by the Waxman-Markey American Clean Energy and Security Act
of 2009 (H.R. 2454), which passed the House of Representatives in 2009 but
had not proceeded further as of March 2010. In the Senate, John Kerry in
2009 and 2010 sponsored a series of attempts at putting together a similar
measure. All of these bills aimed to establish a ‘cap-and-trade’ system under
which emissions-intensive sectors of the US economy would have to underwrite
their emissions by holding a matching number of permits. Those permits
would have to be acquired from a fixed stock limited to whatever target the
US government chose to set for total emissions. In theory, the resulting
competition for permits should establish a ‘carbon price’ for those sectors,
and thereby operate to reduce emissions by a least-cost process of squeezing
out activities that get less value from their emissions than the social cost
represented by the permit price.
In designing their bills, US lawmakers were careful to ensure that their home
industries would be protected against competition from countries that lacked
comparable emission-reduction policies. The 2008 Lieberman-Warner Bill
was drafted to ‘set up a system whereby importers of GHG-intensive primary
products such as cement, steel, glass and paper from countries which had
not made a “comparable action” toward climate change by 2018 would need
 9. BORDER CARBON ADJUSTMENTS AND CLIMATE CHANGE POLICY 139

to present allowances at the border’.9 Similarly, included in the Waxman-

Markey Bill were provisions which

… would require the President, from 2018 and in the absence of an ‘equitable’
international agreement, to introduce a system of international reserve
allowances for imported goods. These provisions would effectively extend
the proposed cap-and-trade scheme to designated imports. Under such a
scheme, importers would have to acquire allowances before products covered
by the scheme could be sold in the US. The price for these international
reserve allowances would be set daily so that it was ‘equivalent’ to the auction
clearing price for domestic emission allowances. In this sense, it is similar
to an import permit program.10

The nature of the border adjustment that would have applied in the US,
had the Waxman-Markey Bill become law, would have been equivalent to a
border tax, even though it was not framed as a tax (the requirement for the
importer of any good to incur the cost of acquiring and surrendering US-valid
carbon credits amounts to a tax). The Bill in its 2009 form did not specify
exactly how the number of units required on any imported good was to be
determined; this was left to be set by regulation.11
The cap-and-trade model has a sound pedigree in economic theory but
a poor track record in its application to real-world climate change policy,
because of the ability of vested interest lobbyists to pressure politicians into
handing out scarce permits to them for free, instead of requiring all polluters
to pay in full for their permits.12 In the US by early 2009, economist Greg
Mankiw’s slogan ‘cap and trade = carbon tax + corporate welfare’ was widely
accepted.13 By early 2010 the New York Times was pronouncing the death of
the Waxman-Markey Bill because of this weakness:

… in trying to assemble a majority to pass [their bill], Mr. Waxman and

Mr. Markey dished out a cornucopia of concessions and exemptions to
coal companies, utilities, refiners, heavy industry and agribusinesses. The
original simplicity was lost, replaced by a bazaar in which those with the
most muscle got the best deals.
Opponents labeled it a tax-and-redistribution scheme.14

The criticisms were well founded, but they did not address the carbon-leakage
argument used by lobbyists worldwide to muscle their national politicians
into handing out emission rights for free. Handing out permits for free often
seems the easiest way to address such concerns. Unfortunately, this amounts
to reversing the policy itself, by eliminating the emission costs, and hence the
incentive to abate, for those producers who gain the concession.
The Waxman-Markey concept failed because its free permit allocations
discredited the policy. One implication is that any successor legislation will
140 GEOFF BERTRAM

have less free allocation of permits, which means greater prominence for
border measures to protect the competitive positions of emission-intensive
sectors of the US economy. The leading contender to replace the Waxman-
Markey framework as of March 201015 was the Cantrill-Collins Carbon Limits
and Energy for America’s Renewal (CLEAR) Act introduced in the Senate
in December 2009.16 This proposed a cap-and-trade scheme with all permits
auctioned, effectively equivalent to a universal carbon tax. Section 4 would
have authorised the president to set a maximum volume of emissions for the
years 2013 and 2014 and to auction off ‘carbon shares’ equal to that total, with
the revenues distributed as a dividend to all individual US residents. From
2015 the cap was to reduce by 0.25 per cent per year, but the president was
to be authorised (subject to congressional approval) to change the number
of shares auctioned in response to, for example, new scientific information.

The Cantrill-Collins Bill and the GATT Rules

Two GATT/WTO rulings open the way for border carbon adjustments. The
first in 1970 established that under Article iii, indirect taxes such as the
EU’s VAT or New Zealand’s GST can be imposed on imports and rebated
on exports, in order to avoid competitiveness effects.17 This almost certainly
applies to carbon taxes (and to policies that are tax equivalents), though there
has not yet been a WTO test case. The main limitation of BTAs imposed
under Article iii is that the tax or tax-equivalent burden imposed on imports
must be no greater than the tax on the domestic products with which those
imports compete. This is commonly interpreted to mean that the border tax
must be calibrated to have the same proportional impact on final price of
imports as the corresponding domestic carbon tax has on the price of home
products, even though the actual emissions embodied in the imported good
may be much higher.18 Hence, border tax adjustments under Article iii may
go only a limited way towards offsetting any advantage gained by firms that
locate in pollution havens.19
In common with its predecessors, the Cantrill-Collins Bill would have
required emission permits to be presented for all imports to the US on the
same basis as that applying to domestic producers. Importers of commodities
would have had to compete with home producers to acquire carbon shares
from the fixed stock available at each auction, the penalty for non-compliance
being five times the auction price. All of this appears consistent with GATT
Article iii.
The second ruling, the 1998 and 2001 decisions of the WTO Appellate Body
in the US Shrimp/Turtle case,20 established as a legal precedent that under
Article xx a country whose environmental or conservation policy prohibits
certain ‘process and production methods’ (PPMs), and which wishes to
apply border measures to block imports from countries that do not match
that policy’s standards, can do so. The application to climate change policy
 9. BORDER CARBON ADJUSTMENTS AND CLIMATE CHANGE POLICY 141

seems clear, although again it has not yet been directly tested at law. A joint
WTO–UN Environment Programme (UNEP) study in 2009 gave a clear
signal that those organisations expect climate change policies to qualify for
Article xx exemption.21 In this case, the border measures do not have to be
calibrated to match the ad-valorem impact of domestic carbon taxes, but can
be set at prohibitive levels. Consequently, it is this part of the GATT that will
be central to national policies in the post-Kyoto era of climate change policy.
In the spirit of GATT Article xx, under the Cantrill-Collins Bill section 4(6),
fees would be imposed on imports of specified commodities to ‘adjust’ for
their production process carbon, subject to any fee being ‘compatible with the
obligations of the United States with respect to any applicable international
trade agreement or treaty’, and further subject to the test that ‘the country in
which the commodity was produced does not impose comparable limits or
fees on the use of fossil carbon’. The explicit intent of the fee arrangement is
to offset ‘the average additional cost per unit output for the [US] industry or
economic sector due to disparate carbon limits among countries’ (section 4(7)
(B)(i) (emphasis added).
The Cantrill-Collins proposal appeared to enjoy early support from the
Obama administration, and was politically appealing because of its dividend
provision for recycling auction revenue. New Zealand policy makers, in
contemplating any free trade agreement with the United States, will be wise
to bear in mind the contingent possibility that this measure, or something
like it, is quite likely to become law in the next few years, presenting New
Zealand exporters with the prospect of being subject to potentially prohibitive
carbon charges at the US border.
New Zealand’s trade negotiators would be placed at an immediate
disadvantage by the conspicuous shortcomings of the New Zealand ETS
when compared with the Cantrill-Collins proposal: the absence of any cap
on New Zealand domestic emissions; the large unconditional subsidies to
trade-exposed sectors with eighty years of phase-out enshrined in statute; and
the allocation of free units to polluters on the basis of their carbon intensity
(which allows total emissions and free allocations to rise over time, directly
inviting US scrutiny of the competitiveness effects for US producers).

New Zealand Exposure to US Border Carbon Adjustments

In recent years, it does not seem that New Zealand ministers or their officials
have given much thought to the threat of border carbon measures when
designing climate change policy. In 2002 to 2005 when a carbon tax was
contemplated, officials reportedly noted that such a tax could be presented as
an indirect tax and hence subject to the GATT rules for border equalisation;
but in 2009 when official documents advising on the ETS were released, there
were none that addressed trade issues.22 Only in 2009 did MFAT commission
some general ‘scoping research’ on border adjustments from the New Zealand
142 GEOFF BERTRAM

Institute of Economic Research (NZIER),23 while the Ministry of Agriculture

and Forestry (MAF) commissioned work on emissions embodied in New
Zealand’s trade, preliminary results from which were reported to MFAT only
in 2010 (but not publicly released at the time of writing).24
During 2009 New Zealand’s climate change negotiators, when asked about
the prospect of border measures in the US market, generally took comfort
from the proposition that New Zealand was too small to be caught by the
border-adjustment provisions of the Waxman-Markey Bill, which at that time
seemed the likely legal framework.
The Waxman-Markey proposal allowed exemption from border adjustments
for goods from countries that met any one of three conditions: (1) the country
must have a greenhouse gas emission reduction commitment fully equivalent
to the US in ‘stringency’, or be party to an international agreement that includes
the US; or (2) it must be one of the UN’s least developed countries; or (3) it
must ‘be responsible for less than 0.5 per cent of total global greenhouse gas
emissions and less than 5 per cent of United States imports of covered goods
with respect to the eligible industrial sector’.25
New Zealand had no prospect of meeting either of the first two requirements
for exemption; its domestic ETS is dramatically less stringent than the
Waxman-Markey Bill (let alone the Cantrill-Collins proposal), and New
Zealand is a developed economy. Under the third, however, New Zealand
would have qualified, and New Zealand policy makers accordingly proceeded
during 2009 on the presumption that this country would not be targeted for
US trade sanctions based on climate concerns.
New Zealand accounts for just over 0.2 per cent of global emissions,26 and
less than 0.2 per cent of total US imports by value,27 which at first sight placed
it below the Waxman-Markey threshold. In certain categories of imports,
however, New Zealand has a much larger share of US imports, which raised
the issue of whether the sectors in which New Zealand has more than a 5 per
cent share of US import trade were liable to coincide with those likely to be
declared ‘eligible’ under the Waxman-Markey proposal.
US trade data at a five-digit end-use code level show four sectors in which
New Zealand breaks the 5 per cent barrier (see Table 9.1). All are primary
commodities, and hence at first sight unlikely to have been ‘eligible industries’
under the proposed US cap-and-trade scheme – though any move in the US
towards bringing agriculture under its cap-and-trade scheme would have
immediately exposed New Zealand meat, dairy products and wool to carbon-
based trade sanctions. Five other categories in which New Zealand accounts
for over 1 per cent of US imports are also shown in Table 9.1; they are headed
by timber and wine, neither likely to be declared eligible, and include two
manufactured goods sectors (textiles and pleasure boats) that have not to
date figured in US policy debates.
 9. BORDER CARBON ADJUSTMENTS AND CLIMATE CHANGE POLICY 143

Table 9.1. New Zealand share of some US import categories (%)

2005 2006 2007 2008 2009

(00100) Meat products, poultry and edible animals 11.1 9.7 8.5 10.5 10.2
(00110) Dairy products and eggs 20.1 19.7 17.6 19.1 19.8
(12000) Cotton, wool and other natural fibres 18.0 14.7 13.1 13.0 10.8
(12070) Other (tobacco, waxes, non-food oils) 5.3 5.1 6.2 5.5 4.8
(13000) Lumber and wood in the rough 1.8 2.1 2.2 2.6 3.4
(00190) Wine and related products 1.4 1.4 1.8 1.8 2.1
(12110) Wool, silk, and other vegetable cloth and fabric, thread 2.0 1.7 1.6 1.7 1.4
(41110) Pleasure boats and motors 0.9 0.7 1.1 1.1 1.4
(00180) Other (soft beverages, processed coffee, etc.) 1.8 1.9 1.4 0.6 0.9
TOTAL 0.19 0.17 0.16 0.15 0.16

Source: http://www.census.gov/foreign-trade/statistics/country/.

Had the Waxman-Markey Bill become law, therefore, New Zealand’s main
concern would have been that New Zealand primary commodity suppliers
might face trade barriers if the US government decided to extend its scheme
to agriculture. The situation would have changed if US policy makers were
to treat New Zealand jointly with Australia (or with the TPPA partners as a
whole) in applying border adjustment measures; and it would change radically
if the US were to move from the Waxman-Markey approach of merely using
border adjustments to level the competitive playing field for individual goods
and services, to more severe trade sanctions aimed to punish countries that
fail to sign on to the US’s view of appropriate climate change policy response,
along the lines proposed by economist Joseph Stiglitz in 2006.28
This risk increased sharply with the advent of the Cantrill-Collins Bill, for
two reasons. First, the Bill contained no threshold size limits below which
countries’ exports to the US were to be exempt from surrendering US carbon
shares equivalent to those required from US producers; the 5 per cent shelter
provision of the Waxman-Markey proposal was gone. Second, the Bill’s fee
mechanism to adjust for production-process carbon explicitly brought the
WTO’s 2001 ruling on process and production methods (PPMs) into the
picture, and opened the way for targeted and prohibitive border measures to
be applied against any or all New Zealand export commodities. The Cantrill-
Collins Bill did, however, provide that the fee mechanism would not apply if
it were incompatible with ‘the obligations of the United States with respect to
any applicable international trade agreement or treaty to which the United
States is a party’ (Section 4(6)(C)(i)). Whether New Zealand would be able to
negotiate a provision into a TPPA with the United States granting exemption
from PPM-related fees, and from any similar measures retaliating for New
Zealand failure to match US domestic climate change policy, seems highly
144 GEOFF BERTRAM

doubtful. US negotiators will undoubtedly wish to leave the way open for
whatever border measures the US Congress eventually settles on.
As the issue of New Zealand’s potential exposure comes under more official
scrutiny than hitherto, the issue of how emission-intensive the country’s
economy actually is, relative to trading partners, will become increasingly
important. Research into the detailed emissions content of New Zealand’s
export products has begun to emerge in the past four years. Caroline M.
Saunders and her colleagues have produced studies of ‘food miles’, limited
to CO2 and energy use only and focusing on sectors that were selected in the
light of ongoing debates in the United Kingdom.29
A major project using input-output techniques to establish the emissions
content of New Zealand products and trade is underway at the government’s
environmental research institute, Landcare. A 2008 paper from key members
of the research team (Robbie Andrew, Glen Peters and James Lennox )30
found that New Zealand’s exports are substantially more emissions-intensive
than its imports, and that this holds especially true for trade with the US.
The 2008 paper notes:

With most of its main trading regions, NZ is a significant net exporter of

embodied emissions. With its near neighbour Australia, NZ is a significant
net importer of embodied emissions, while emissions embodied in trade
with China are approximately balanced. New Zealand’s net embodied
emissions in trade are 34% of total NZ industry emissions and 30% of total
NZ territorial emissions.31

Table 9.2 and Figure 9.1 below are reproduced from the 2008 research
paper. Table 9.2 shows that New Zealand exports, in net terms, contain
roughly one-third of the national economy’s total greenhouse gas emissions
as measured for Kyoto purposes. Figure 9.1 shows that the ‘emissions export
surplus’ applies most dramatically to bilateral trade with the US.
Tracey Epps and Niven Winchester have also used 2001 data from the
Global Trade Analysis Project (GTAP) international database to compare
the emissions-intensity of goods and services produced in New Zealand with
that in other countries, and in the world, yielding the figures reproduced in
Table 9.3.32
The bilateral comparisons between New Zealand and the US in this data are
plotted in Figure 9.2. In pastoral and horticultural production, New Zealand
is clearly less emissions-intensive than the US, but in ‘resources’, metals and
manufacturing, the opposite holds true.
New Zealand’s emissions-export surplus is unusual amongst OECD and
Annex I countries and inevitably must attract attention as international
trade negotiators make increasing use of carbon-footprinting and emissions-
intensity estimates. Most developed economies import more emissions than
they export, and this pattern has become stronger since the Kyoto Protocol
 9. BORDER CARBON ADJUSTMENTS AND CLIMATE CHANGE POLICY 145

Table 9.2. Components of New Zealand’s overall greenhouse gas balance in 2001

kt CO2-e
Imports Exports Net
Emissions attributable to:
New Zealand households 6,939
New Zealand industry 60,485
Total territorial emissions 67,424 67,424
Emissions embodied in bilateral trade (EEBT) with:
Australia 5,612 -2,321 3,291
China 2,263 -2,126 137
Japan 584 -3,372 -2,788
Rest of Asia 2,217 -7,836 -5,620
North America 2,018 -7,982 -5,963
Central and South America 323 -2,582 -2,259
Europe 1,777 -9,523 -7,746
Russia and rest of former USSR 309 -157 152
Middle East 1,522 -1,153 370
Africa 397 -767 -370
EEBT Total 17,022 -37,819 -20,797*
Emissions net of EEBT 46,627

* Evident typographical error in original corrected.

Source: Tracey Epps and Niven Winchester, ‘Trade Policy and Climate Change: Using Trade Measures to Address
Competitiveness Concerns’, mimeo, University of Otago, April 2008, Table 3, p. 17.

Figure 9.1. New Zealand’s greenhouse gas international trade balance by Kyoto Protocol
participation category
Imports Exports

Non-Annex 1

USA

Annex 1 (exc. USA)

0 2000 4000 6000 8000 10000 12000 14000 16000 18000

kt CO2-e
Note: Annex I countries are the ‘rich’ countries which, under the 1992 UN Framework Convention on Climate Change
(UNFCCC), initially committed to the aim of returning their collective greenhouse gas emissions to the 1990 level
by the year 2000. They continue to be treated as a distinct group in climate change negotiations. By default, the
other countries are referred to as Non-Annex I countries.
Source: Tracey Epps and Niven Winchester, ‘Trade Policy and Climate Change: Using Trade Measures to Address
Competitiveness Concerns’, mimeo, University of Otago, April 2008, Figure 2, p. 24.
 146
GEOFF BERTRAM
Table 9.3. CO2 production emissions by commodity (metric tons per 2001 US$100,000)

Commodity New Zealand Australia China Japan United States Europe Other Annex I Southeast Asia Rest of World
Fruit and vegetables 4.5 19.4 17.1 8.0 28.3 25.4 21.7 9.0 8.3
Animal products 8.4 15.6 23.9 1.5 12.8 13.5 20.7 5.8 6.2
Raw milk 5.2 8.8 16.1 1.7 11.2 11.2 18.4 4.4 4.2
Wool 7.4 12.3 48.0 2.0 21.1 5.7 7.4 16.9 3.1
Forestry 12.2 29.4 42.1 16.1 8.1 19.1 42.8 29.6 7.7
Other agriculture 16.8 18.8 36.5 30.5 29.5 27.2 45.4 23.2 13.2
Resources 41.7 34.8 126.3 10.8 28.4 27.0 34.0 68.1 53.4
Meat products 1.5 8.3 7.9 0.7 6.1 2.4 6.1 6.0 4.5
Dairy products 5.9 15.4 17.0 2.4 5.8 3.2 9.0 4.7 7.5
Other food 1.9 9.5 27.2 1.7 9.0 4.9 10.5 10.6 7.2
Textiles, clothing, footwear 6.0 7.6 10.9 5.9 5.6 2.6 7.9 12.5 7.9
Wood and paper 3.8 12.6 31.3 5.0 12.0 3.8 13.9 15.5 20.4
Chemical products 31.5 84.9 76.1 3.7 30.2 9.7 41.7 52.8 104.4
Metal products 66.0 57.2 84.3 9.0 17.2 9.8 55.0 29.7 55.5
Transport equipment 3.3 0.4 14.6 0.1 3.2 1.0 2.8 1.9 3.6
Electronic and machinery 4.0 1.9 8.1 0.6 2.1 0.9 3.6 1.9 9.3
Other manufacturing 22.3 0 1.8 2.4 1.5 0.7 6.2 12.3 24.3
Services 25.9 61.8 174.6 7.4 30.0 15.5 89.6 44.2 70.8

Source: Tracey Epps and Niven Winchester, ‘Trade Policy and Climate Change: Using Trade Measures to Address Competitiveness Concerns’, mimeo, University of Otago, April, 2008, Table 1, p. 48.
 9. BORDER CARBON ADJUSTMENTS AND CLIMATE CHANGE POLICY 147

Figure 9.2. Emissions-intensity of economic sectors: NZ and US compared

New Zealand United States
70

60
Tonnes CO2 per US$100,000

50

40

30

20

10

0
Fruit and vegetables

Animal products

Raw milk

Wool

Forestry

Other agriculture

Resources

Meat products

Dairy products

Other food

Textiles, clothing, footwear

Wood and paper

Chemical products

Metal products

Transport equipment

Electronic and machinery

Other manufacturing

Services
Source: Tracey Epps and Niven Winchester, ‘Trade Policy and Climate Change: Using Trade Measures to Address
Competitiveness Concerns’, mimeo, University of Otago, April 2008, Table 1, p. 48.

was signed in 1997, partly at least because of the carbon leakage that border
adjustments aim to halt.33
Further down the track will come the emissions content of international
travel, on which New Zealand relies heavily for its tourism earnings. In
rough terms, tourism accounts for 20 per cent of total exports and 10 per
cent of GDP. While tourist emissions have escaped inclusion in the Kyoto
accounting procedures, they are likely to become included in measures of the
emission-intensity of trade as data collection improves. In 2005 international
visitors to New Zealand accounted for 7.9 million tonnes of emissions from air
transport, and New Zealanders travelling abroad added another 3.9 million
tonnes. Adding these to New Zealand’s 2005 total Kyoto-measured emissions
raises the annual total by about 10 per cent.34

Conclusion
This chapter has provided only a brief snapshot of the enormous and rapidly
growing literature on carbon-related border adjustments and the measurement
of emissions embodied in international trade. It nevertheless strongly suggests
that in future trade negotiations, New Zealand is likely to face demands from
major trading partners such as the US for provisions that allow prohibitive
border measures to be applied unilaterally by trading partners as part of their
national or regional efforts to address the problem of reducing greenhouse
gas emissions. GATT/WTO rules will provide no shelter from such measures.
148 GEOFF BERTRAM

If New Zealand is unable to negotiate exemption from the border provisions

of those national policies in a TPPA, it will have to align its climate change
policy with the demands of at least some trading partners in order to retain
market access. Because of the prominence of emission-intensive agricultural
commodities in New Zealand’s export mix, and its unusual (for a rich nation)
emissions trade surplus, failure to secure exemptions or to deliver policy
alignment could have serious consequences for trade. If alignment is the
path taken, in a world where trading partners are grouped into mutually
incompatible climate policy regimes, it will not be easy to decide with which
bloc New Zealand ought to align its domestic policy. The negotiation of a
TPPA that includes the United States promises to be merely the first of a
series of difficult exercises in grappling with the new trade realities of the
twenty-first century.
10. Public Health and Medicine
Policies
Thomas Faunce and Ruth Townsend

This chapter examines the extent to which the proposed Trans-Pacific

Partnership Agreement may impact on public health and medicines policies
in the countries party to the agreement. Its predictions are based chiefly
on a critical analysis of two sets of submissions from influential US health
and medicines-related corporations and industry bodies to the US Trade
Representative (USTR) in 2009. The first set of submissions was on the TPPA
itself and the second arose in relation to the Section 301 Trade Watch List. The
submissions sought TPPA provisions that fell into four broad categories: (1)
impeding the market entry of generic medicines and increasing the monopoly
privileges of patented medicines; (2) restricting the capacity of governments
to operate evidence-based systems that assess the cost-effectiveness of health
technologies; (3) creating committee mechanisms for ongoing lobbying of
governments on these issues; and (4) including investor–state dispute settlement
procedures that would allow foreign corporations to sue governments if their
investments are impeded, for example, by public health legislation.
When the first formal round of TPPA negotiations was held in Melbourne
from 15–19 March 2010, health and medicines issues were not phrased in the
above terms. Instead, the brief official memorandum released afterwards
to the public stated that future negotiations were officially set to include
investor–state dispute settlement, ways to promote ‘regulatory coherence’
and how to ensure small-to-medium corporate enterprises (SMEs) are able
to benefit from the agreement.1
Naturally, the communiqué did not present these issues as reflecting a
US industry agenda for health and medicine policy that would in effect be
pushed onto the other parties. Yet, this is exactly what is likely to happen, if
only because no TPPA nation except the US has a powerful health industry
sector with the capacity to influence the negotiation agenda so strongly. This
is partly a function of the size of the respective economies, but it also reflects
a protracted and fundamental lack of vision and organisation among the
150 THOMAS FAUNCE AND RUTH TOWNSEND

non-US governments and trade negotiators. Indeed, watching bilateral and

regional trade negotiations involving the US often becomes a disheartening
exercise in observing nations pay timid obeisance to US free market ideology
regardless of the deleterious impacts on their own industry development, as
well as the national and global public good.
This chapter evaluates the proposals the USTR is likely to raise in the TPPA
so as to influence other nations’ health and medicines policies, particularly
focusing on investor–state dispute settlement. It concludes by suggesting an
alternative approach that aims to reconcile legitimate public health objectives
with industry incentives in a twenty-first century trade agreement that reflects
a balance of private and public interests.

TPPA Health and Medicines Provisions

Free trade agreements were initially designed to reduce tariffs or taxes placed
at the border on goods coming from one country to another. In time, however,
various US industry groups have successfully transformed US-led trade
agreements into opportunities to facilitate their monopoly advantage by
influencing the legislation and policies that other countries can implement,
under threat of trade sanctions. This happened particularly in areas of
intellectual property rights (IPRs, now also referred to as intellectual monopoly
privileges or IMPs) such as copyright, trade marks and patents (especially
pharmaceutical patents).
Multilateral trade agreements that have impacted on domestic public health
and medicines policies include the World Trade Organization Agreement
on Trade-Related Aspects of Intellectual Property Rights (TRIPS) (which
required, for instance, increased pharmaceutical patent terms) and the
General Agreement on Trade in Services (GATS) (which created a mechanism,
for example, whereby signatories could agree to prevent barriers to foreign
ownership of hospitals). The investor–state dispute provisions that appeared
in the 1994 North American Free Trade Agreement (NAFTA) between the US,
Canada and Mexico have also been used to challenge health and medicines
policies in the signatory states, as illustrated below.2
At the bilateral level, US trade agreements have included a variety of
provisions restricting market entry for generic medicines. Notably, the
Australia–US Free Trade Agreement (AUSFTA) also contains potentially
precedent-setting provisions that required changes to Australia’s constitutionally
supported system where scientific assessment of the cost-effectiveness of a
new prescription medicine is a necessary precursor to the Federal government
subsidising most of its cost to patients.3
The extent to which US corporate interests have been paramount in framing
such issues and how TPPA provisions resulting from them may impact on
health and medicines policies is made clearer in the following section.
 10. PUBLIC HEALTH AND MEDICINE POLICIES 151

Submissions on the TPPA

The USTR sought submissions on the proposed TPPA in 2009. Members
of PhRMA, the influential US patented pharmaceutical research and
manufacturing lobby group, duly lodged a detailed ‘wish-list’ of proposals.
It should be noted that members of PhRMA often interchange employment
with, and are highly influential upon, the USTR, so this TPPA submission
offers useful insights into the USTR’s probable TPPA negotiating agenda in
the health and medicines-related sector.
The PhRMA submission suggests that the TPPA negotiations could serve
to address ‘market access barriers, [and] remedy inadequate consultative
mechanisms and transparency concerns in countries like New Zealand, for
which no US FTA currently exists .… [Doing so] would ensure that patients
throughout the TPP region receive safe, effective and innovative medicines’4
(emphasis added to highlight the replacement of ‘cost-effective’ with ‘effective
and innovative’). By way of preliminary explanation, drug regulatory authorities
in Australia and New Zealand (like those in many European nations, South
Korea and China) in assessing ‘innovation’ consider not only the safety
(toxicity), efficacy (whether they work) and quality (standard of manufacturing)
of medicines,5 but also their comparative cost-effectiveness (compared to
existing products). The latter is an important addition designed to facilitate
value for public expenditure and affordable access to ‘best value’ medicines
by patients in those countries.6
The PhRMA submission also advocates provisions expanding the IMPs
(or IPRs) that increase the monopolistic advantage of its members:

A lack of commitment to protect US IP around the world could impair future

R&D investment and could discourage the capital investments. … A strong
IPR framework should not be undermined by other government pricing
and regulatory mechanisms that significantly devalue IP protection, or in
some cases render it of little economic value.7

PhRMA’s subsidiary recommendations for TPPA provisions include pro-

monopolistic ‘linkage evergreening’ provisions that would require regulators
of prescription drug quality, safety and efficacy (in TPPA nations that are
not already so obligated) to notify a patent-holder of an impending generic
entrant to the market. These obligations have already been imposed on
Australia under the AUSFTA and have the aim of reducing competition and
maintaining high prices for patented pharmaceuticals. PhRMA is further
seeking ‘data exclusivity’ TPPA protections that prevent generic companies
from using drug safety research data on patented medicines even after a
patent has expired, thus again restricting generic entry to the market and
therefore limiting consumer access to cheaper medicines. Such provisions
may also have the effect of hindering the ability of governments to license
152 THOMAS FAUNCE AND RUTH TOWNSEND

compulsorily a medicine for generic manufacture (at a low but reasonable

compensation to the patent-holder) in a public health emergency.
The submission to the USTR by the US patented pharmaceutical company
Novartis reiterates PhRMA’s sentiments in hoping that the TPPA could promote
‘cooperation among TPP signatories to ensure the quality, safety and efficacy
of medicines’, and that the TPPA could lead to ‘enhanced cooperation among
the TPP participants’ respective drug authorities’ as a way of preventing the
entry of substandard medicines onto the market. There is again no mention
of promoting enhanced cooperation or achieving ‘regulatory coherence’ on
cost-effectiveness amongst TPPA participants, despite increased interest in
promoting health technology cost-effectiveness assessment at the Federal
level in the US.
Novartis also seeks TPPA provisions that require a drug manufacturer to
provide regulatory certification of compliance with Good Manufacturing
Practices (GMP). It wants a Medical Devices and Pharmaceuticals Working
Group established to facilitate ongoing lobbying of other TPPA governments
on issues affecting drug quality, safety and efficacy, including post-marketing
pharmaco-vigilence, as well as a private sector advisory body.8

PhRMA and the USTR Special 301 Watch List

PhRMA’s submissions here also provide valuable insights on the USTR’s
likely TPPA demands in the health and medicines sector. Section 301 of
the US Trade Act of 1974, as amended,9 is ‘the principal statutory authority
under which the United States may impose trade sanctions against foreign
countries that maintain acts, policies and practices that violate, or deny U.S.
rights or benefits under, trade agreements, or are unjustifiable, unreasonable
or discriminatory and burden or restrict U.S. commerce’.10 PhRMA continues
to recommend that, because of concerns about allegedly inadequate patent
protection and pharmaceutical cost-effectiveness regulation, the governments
of Australia, Chile, New Zealand, Peru and Vietnam be placed on the USTR’s
Special 301 Watch List.11
These recommendations (set out below) signal PhRMA’s dissatisfaction
with the already extensive concessions to pharmaceutical IMPs that the USTR
has secured on its behalf in the raft of existing US FTAs. Their implications
for the TPPA negotiations therefore need to be analysed against the backdrop
of those agreements and the public health controversies that they created.
Unless the non-US TPPA nations take a more positive pro-domestic industry
or pro-public-good stance, their position on its health and pharmaceutical-
related provisions is likely to be both defensive and disadvantageous.

Australia
PhRMA’s 301 Watch List submission clearly outlines its TPPA intentions
 10. PUBLIC HEALTH AND MEDICINE POLICIES 153

with respect to Australia’s medicines cost-effectiveness and subsidy system

known as the Pharmaceutical Benefits Scheme (PBS). It states:

PhRMA and its member companies are concerned that: (1) Actions during
the ongoing implementation of the AUSFTA have weakened intellectual
property provisions; and (2) Existing and emerging issues affecting patient
access to new medicines have not yet been adequately addressed.

PhRMA stated that the reforms undertaken under the AUSFTA were
welcomed, but that there was ‘a range of remaining issues with the Australian
Government’:

PhRMA notes that there is some disagreement between PhRMA member

companies and the Australian Government regarding the likely impact of
statutory price reductions on the listing of new, innovative medicines on the
PBS, identified in a recent report to the Minister for Health and Ageing from
the separate joint Government-Industry Access to Medicines Working Group
which was created as part of the PBS reform process. PhRMA encourages
the Australian Government to pursue policy solutions which will ensure
that innovative medicines are not adversely affected by the PBS reforms.

The manner is which Australia’s cost-effectiveness assessment system for

medicines was significantly altered as a result of USTR demands under the
AUSFTA provides valuable lessons for other TPPA nations. Australia is unlikely
to reopen those negotiations, as to do so will create regulatory confusion
with AUSFTA provisions and significant public backlash. An analysis of how
Australia’s PBS works will also provide valuable insights into one argument
that US TPPA negotiators may make about ‘regulatory coherence’, linking
the notion to prior attempts (such as the AUSFTA) to undermine regulatory
systems that promote scientific assessment of health technology innovation.
The first point to note in confirmation of this argument is that the AUSFTA
attempted to change the Australian PBS system fundamentally, despite the
fact that the latter has unquestionable democratic legitimacy. The PBS (in
its pre-AUSFTA form) was one of the few pieces of public policy in Australia
that had been approved in a constitutional referendum by a majority of
citizens in a majority of states. It had survived challenges to its implementing
legislation in the High Court of Australia and been improved by a series of
Federal governments over more than fifty years of intense health policy debate.
The core regulatory component of the PBS system remains Section 101: 3A
and 3B of the Commonwealth National Health Act 1953. This, in broad terms,
requires that pharmaco-economic experts on the Pharmaceutical Benefits
Advisory Committee (PBAC) recommend PBS listing of a pharmaceutical
submitted by its manufacturer after a positive determination of its comparative
cost-effectiveness (or ‘health innovation’) in relation to alternative therapies
(whether or not those involve drugs).
154 THOMAS FAUNCE AND RUTH TOWNSEND

Australia’s PBS (even post the AUSFTA) remains highly respected nationally
and internationally as a successful articulation of a scientific approach
to ensuring maximum public benefit from government expenditure on
medicines.12 Now solidly based on principles of the National Medicines Policy,
it has been operating for over half a century to provide evidence-based, cost-
effective and equitable access to health care for Australians.
Before a newly patented drug is listed under the PBS, it must obtain safety,
quality and efficacy marketing approval from the Australian Therapeutic
Goods Administration (TGA). Once this is done, the supplier may apply
to have it listed on the PBS. That listing is determined by an independent
statutory committee – the Pharmaceutical Benefits Advisory Committee
established under the authority of the National Health Act 1953. The
PBAC is required to consider applications against certain criteria set out
in the legislation. Under Section 101 3B(a) of the National Health Act 1953,
the PBAC cannot recommend a new drug for listing if it is ‘substantially
more costly than an alternative therapy’ unless it ‘provides a significant
improvement in efficacy or reduction of toxicity over the alternative therapy
or therapies’.
Yet, as a result of the AUSFTA, in August 2007 (after minimal parliamentary
debate lasting no more than two weeks for both houses combined), the National
Health Amendment (Pharmaceutical Benefits Scheme) Act 2007 was passed,
amending key provisions of the National Health Act 1953. The legislation
effectively created two PBS pricing formularies: F1 comprises single brand,
mostly patented and ‘innovative’ drugs, and F2 comprises multiple brand,
mostly generic medicines. Reference pricing no longer occurs between the two
formularies. Although these F1–F2 legislative changes to the PBS ostensibly
facilitate lower-cost generic medicines into Australia, they appear substantially
to reflect the position on the PBS articulated by US negotiators during the
AUSFTA negotiations (and in the AUSFTA Medicines Working Group) on
the ‘elimination’ of PBS reference pricing mechanisms.
The inclusion of USTR demands in the AUSFTA resulted in many
other statutory changes and policy influences that impact on Australian
pharmaceutical regulation. These may become templates for what the USTR
seeks to obtain in other nations through the TPPA. One problematic area for
the US, however, was the potential influence on pharmaceutical policy of the
definitions of pharmaceutical ‘innovation’ inserted in AUSFTA Annex 2C.1.
The Australian Minister for Trade at the time (Mark Vaile) stated in relation
to Annex 2C of the AUSFTA that ‘the core principle that we both agree on
in this area … is recognising the value of innovation’.13 This begged the
question as to what the term meant. Annex 2C.1 contained two competing
definitions of pharmaceutical innovation. The first definition required valuing
pharmaceutical innovation through competitive markets (the US approach).
The second definition permitted the valuing of pharmaceutical innovation
 10. PUBLIC HEALTH AND MEDICINE POLICIES 155

through the operation of objectively demonstrated therapeutic significance

(the Australian approach). It is to be hoped (should the issue arise) that
Australian TPPA negotiators recommend a joint adoption of the Australian
science-based definition of pharmaceutical innovation.
Fortunately the changes to the PBS arising from the AUSFTA did not alter
the four key pillars of the National Medicines Policy. These are:

• timely access to the medicines that Australians need, at a cost that

individuals and the community can afford;
• medicines meeting appropriate standards of quality, safety and efficacy;
• quality use of medicines; and
• maintaining a responsible and viable medicines industry.

PhRMA also complained about Australia’s anti-evergreening legislation that

was passed as a condition of AUSFTA implementation legislation coming into
force. PhRMA additionally protested against the possibility that the Australian
Patents Act 1990 might be amended to allow the manufacture of generic
medicines for export to international markets where relevant patents have
expired. Such a reform would provide support for the weakening Australian
domestic generic manufacturing market and would not contravene TRIPS.
PhRMA likewise claims that Australia’s data exclusivity protections are weak,
although they are precisely what is required by the AUSFTA and by TRIPS.

Chile
It may be a telling foretaste of the USTR’s TPPA arguments that, according to
PhRMA’s 301 Watch List submission, Chile has failed to establish an adequate
system to protect proprietary pharmaceutical data as required by Article 17.10.2
of the US–Chile Free Trade Agreement. In particular, PhRMA considers that
Chile has not moved far enough to protect ‘patent linkage’ and ‘data exclusivity’
requirements (explained in Chapter 11).14 PhRMA, for example, claims that
a new sanitary decree issued by Chile’s Health Ministry for public comment
in April 2008 would, if enacted, definitively foreclose ‘linkage evergreening’
because it stated explicitly that the Public Health Institute lacks authority to
consider intellectual property – or any other criterion apart from safety and
efficacy – in granting sanitary registrations. In comments to El Mercurio on
25 April 2008, Economy Minister Hugo Lavados noted that the government
was ‘not happy about being on this list’, but added that ‘we’ve seen recently
that views within the United States on this subject aren’t as strong as they
were a while ago’.

New Zealand
New Zealand has a lot to lose in relation to health and medicines policies
under the TPPA, having not yet been exposed to any US bilateral trade deal
that contains anti-generic medicines or anti-cost-effectiveness provisions.
156 THOMAS FAUNCE AND RUTH TOWNSEND

In its submission to the 301 Watch List Report regarding New Zealand,
PhRMA states:

New Zealand’s Pharmaceutical Management Agency (Pharmac) continues

to impose stringent cost containment strategies, and operate in a non-
transparent, unpredictable manner, creating an unfavourable environment
for innovative medicines …. 15

This is lobbying rhetoric, of course, as the Pharmac system is only about

ensuring value for public expenditure of money on medicines by transparently
rewarding medicines that are scientifically proven to possess ‘health innovation’
over comparable marketed products. The Pharmac system is a cost-effectiveness
and government subsidy system for pharmaceuticals similar to Australia’s
PBS. Scientific advice on comparative cost-effectiveness of new medicines
is provided by the Pharmacology and Therapeutics Advisory Committee
(PTAC). The Pharmac system has additional public health advantages through
its closed-bid competitive tender process (a set amount, for example, being
offered to the lowest bidder to provide medicines for a specified programme).
The New Zealand arm of the patented pharmaceutical industry has already
begun lobbying the public in that nation to believe that the TPPA will offer New
Zealanders ‘quicker access to new and expensive medicines’. A Researched
Medicines Industry Association of New Zealand (RMI) newsletter has stated
that the association expected that any trade deal between New Zealand and
the US would entail reforms at Pharmac, ‘to align practices in New Zealand
with other trade agreements’. This would be an unfortunate interpretation
of ‘regulatory coherence’ under the TPPA as it would mean imposing on
New Zealand the kinds of restrictions on rapid access to generic medicines
and interference with the cost-effectiveness assessment of new patented
prescription drugs that were strongly opposed in earlier US bilateral trade
agreements (like the AUSFTA) as contrary to public health.16
The RMI has Pharmac’s process of closed-bid competitive tendering
particularly in its sights, because of its capacity to facilitate genuine competition
and a realistic understanding of the marginal cost of production of newly
patented pharmaceuticals.17 Will New Zealand be able to stand up to such pro-
monopolistic pressure from the USTR in the TPPA negotiations? New Zealand
Prime Minister John Key has already indicated that something significant
will have to be traded for alterations to Pharmac as that is ‘not something
we are looking at getting rid of ’.18 If such a trade is made, however, will the
New Zealand public be told exactly what was gained for each component of
the Pharmac system that is altered?

Peru
PhRMA’s Section 301 Watch List submission demands that Peru have a five-
year data exclusivity provision and the evergreening trade deal provisions
 10. PUBLIC HEALTH AND MEDICINE POLICIES 157

that link drug safety to patents status evaluation.19 The United States and
Peru signed a US–Peru Trade Promotion Agreement in 2006, which PhRMA
does not consider a model for future trade agreements. This is partly because
it does not contain patent linkage provisions. The Andean Court of Justice
(ACJ) has already issued several legal opinions20 forcing Andean Community
members to refuse recognition of peripheral patents that in fact constitute
‘evergreening’ ploys to prolong royalties from a medicine by strategic claims
of additional patent life (for example, over scientifically dubious second uses
or new packaging or stabilising ingredients) when the main patent over its
active pharmaceutical ingredient is about to expire.21

Vietnam
In its Section 301 submission for Vietnam, PhRMA argues that:

Even with the significant reforms Vietnam has undertaken in recent years,
there are still several areas which are of great concern to PhRMA, namely
weak intellectual property protection, the absence of data exclusivity, patent
linkage legislation, overly-stringent product registration and clinical trial
requirements, a lack of legal status, and government reference pricing.22

Vietnam’s failure to implement data exclusivity protections is said by

PhRMA to be contrary to paragraphs 5 and 6 of Article 9 of Chapter 11 of
the US–Vietnam Bilateral Trade Agreement. On the evergreening tactic of
patent linkage, Vietnam has stated that ‘it is not appropriate to inject patent
enforcement procedures into regulatory procedures’, and that ‘it is impossible
to issue administrative rules or procedures to administrative agencies to
enforce patents’.23
PhRMA’s Watch List submission also attacks Vietnam’s mandatory system
based on the Certificate of Pharmaceutical Product (CPP) or a Free Sales
Certificate (FSC) and certification for Good Manufacturing Practices, as
well as its requirements for quality tests for all new batches of vaccines and
biological products before they are imported into the country. It further objects
to the requirement that multinational companies conduct local clinical trials
prior to registration of medicines.

Investor–State Provisions and Health Policy

The TPPA may have serious implications for public health in one particular
area in addition to pharmaceutical regulation. This involves investor–state
dispute resolution procedures. For example, Philip Morris, the tobacco
company, lodged a submission with the USTR about the TPPA that outlined its
concerns over Australia’s move toward plain packaging of cigarette packets.24
Philip Morris stated in this submission that the adoption of plain packaging
of cigarettes would amount to expropriation of intellectual property rights
in its trade mark, as well as ‘limit the freedom of commercial free speech,
158 THOMAS FAUNCE AND RUTH TOWNSEND

significantly restrict competition and breach Australia’s obligations under

the WTO TRIPs Agreement’.25 The tobacco company’s submission sought, as
a response, an investor–state dispute settlement provision that would allow
the company to sue governments for introducing tobacco regulation that it
believed reduced the commercial value of its investment.26
Investor–state provisions have now become a controversial part of bilateral
investment treaties and investment chapters of FTAs; as of 2008, over 300
investor–state dispute settlement cases have been decided.27 Such provisions
grant investors covered by them a right to initiate dispute-settlement
proceedings for damages against foreign governments in a variety of different
fora, including international arbitration proceedings and domestic courts.28
These proceedings can be commenced without having to exhaust local
remedies.29 The lawyers appointed to such arbitral proceedings are appointed
and paid at the behest of the parties, fostering a pro-plaintiff jurisprudence.30
Foreign investors can use this mechanism to undermine government legislation
promoting, for example, sustainable development, environmental protection,
and human health and medicines policy.31 For this reason it was vigorously
resisted by Australia and excluded from the AUSFTA.32
In its submission to the USTR on the TPPA, Philip Morris’s case for a
multilateral investor–state provision maintained:

Notwithstanding PM’s general support for the TPP initiative, we are very
concerned about the excessive legislative proposals pending in Australia
and Singapore that threaten to violate existing bilateral and multilateral
agreements with the US .… PM considers that availability of an investor
state dispute settlement mechanism including the right of investors to
submit disputes to independent international tribunals, is a vital aspect
of protecting its foreign investments.33

As the following examples show, moves to introduce a multilateral investor–

state provision into the TPPA would have a potentially deleterious impact
on the capacity of signatory nations to pass legislation implementing the
precautionary principle in relation to public health risks.

Investor–State Disputes on Health and Medicines Policy

Investor challenges against government regulation have occurred under
investor–state dispute settlement processes across a spectrum of public health
and environmental legislation, including tobacco controls and packaging,34
toxic chemical bans,35 toxic gasoline additives,36 water protection,37 garbage
disposal,38 food security 39 and hazardous waste disposal.40
Of particular concern in the health policy context for many TPPA nations
is the NAFTA investor–state dispute brought by the US firm Centurion Health
Corporation for US$160 million alleging that ‘Canada is an unfair competitor
in ways detrimental to US private sector companies in [its] monopolized health
 10. PUBLIC HEALTH AND MEDICINE POLICIES 159

care system’.41 Centurion claims the Canadian government is in breach of

NAFTA Articles 1502 and 1503, which limit ‘state enterprises’ and ‘government
monopolies’, and for which they are asking to be compensated. If this claim
is successful, it will set an adverse precedent for those states that maintain a
universal health-care system and uphold a public-health system ideology. A
notice of arbitration was lodged in early 2009.42
Not all NAFTA health and medicines-related investor–state claims have been
made by US corporations. Apotex Inc., a Canadian generic pharmaceuticals
firm, has brought a claim against the US under Chapter 11 of NAFTA alleging
that a US court decision in favour of the Pfizer drug company violated NAFTA
Article 1102 (national treatment) and Article 1105 (minimum standard of
treatment under international law). The company also alleged under NAFTA
Article 1110 that the decision expropriated Apotex’s investments in generic
versions of the antidepressant Zoloft and was manifestly unjust.43 Apotex
relied on the doctrine that a manifestly unjust domestic legal decision breaches
international law and can be viewed as a substantive denial of justice. 44 It
further argued that the US had ‘no public purpose’ for interfering with its
property rights and sought a total of US$8 million in compensation. Apotex
has brought a similar claim involving US regulatory provisions concerning
an abbreviated new drug development application for Pravachol and patents
allegedly held by Bristol Myers Squibb.45 The US Department of State said
that it will defend the case ‘vigorously’.46

Investor–State Claims and the Precautionary Principle

The precautionary principle emerged in German regulatory policy during
the 1970s and rapidly spread through the international policy arena as a
philosophical challenge against policies that demanded an often unrealistic
level of scientific certainty about risks before recommending or implementing
public health and environment protection measures. One well known
international enunciation of the precautionary principle is found in Principle
15 of the Rio Declaration on Environment and Development (1992): ‘Where
there are threats of serious or irreversible damage, lack of full scientific
certainty shall not be used as a reason for postponing cost-effective measures
to prevent environmental degradation.’ The Australian Intergovernmental
Agreement on the Environment (IGAE) includes an almost identical definition
of the precautionary principle in Section 3.5.1. The manner in which the
precautionary principle applies often depends on the correlation between
evidence of the nature and seriousness of the risk, as well as the kinds of
remedies to be made available.
Approximately 40 per cent of legal challenges made under NAFTA’s Chapter
11 investor–state provisions have been against Canadian governmental
legislation which can be viewed as applying the precautionary principle in
relation to risks to public health and the environment.47 Examples include
160 THOMAS FAUNCE AND RUTH TOWNSEND

Canada’s payment of US$13 million to the Ethyl Corporation because Canada

banned the importation and inter-provincial trade on the suspected neurotoxin,
MMT.48 Similarly, on 25 August 2008, Dow AgroSciences LLC, a US corporation,
initiated Chapter 11 NAFTA proceedings for losses allegedly caused by a
Quebec ban on the sale and certain uses of lawn pesticides containing the
active ingredient 2,4-D.49 In March 2009 a notice of investor–state arbitration
was lodged, with Dow alleging that there was no scientific evidence to support
the ban on their product and challenging the Quebec government’s use of a
‘precautionary approach’ to managing environmental health issues as merely
a political reaction rather than one based on empirical evidence. Dow is
claiming damages of not less than US$2 million, plus costs. 50
Investor–state claims are usually framed in terms of insufficient scientific
evidence being available to justify public health or environmental legislation
that has allegedly interfered with corporate investments. Yet such a situation
of scientific uncertainty in the face of a threat to public health is exactly what
the precautionary principle was created to deal with. If the standard of proof
required to activate the precautionary principle was expressly recognised in
the TPPA as lower than that required to activate the investor–state clause,
then that may offer some mechanism for at least alleviating the ‘chilling
effect’ that the threat of an investor–state dispute can have on public health
and environmental protection legislation.

US and Australian Politics on Investor–State Provisions

Whilst the industry’s submissions to the USTR have sought a multilateral
investor–state provision in the TPPA negotiations, senior figures in both the
US and Australian governments seem not to support this. As Lori Wallach
and Todd Tucker report in Chapter 3, President Obama is on record as
saying that he intends to restrict investor–state claims through US-related
trade deals. Obama also promised that he ‘will ensure that foreign investor
rights are strictly limited and will fully exempt any law or regulation written
to protect public safety or promote the public interest’. 51
As Wallach and Tucker explain, US Democrats have also drafted an
alternative trade agreement model (Bill H.R 3012), otherwise known as the
Trade Reform, Accountability, Development and Employment Act of 2009
(the Bill). This has not yet been debated by the Congress. However, analysis of
the Bill suggests that many of the concerns about public health and medicines
policy that Australia and other nations in TPPA negotiations are likely to raise
with the US (including the negotiation of investor–state provisions) would
be addressed if this legislation were adopted. Amongst other things, the Bill
reaffirms the WTO Doha Declaration on TRIPS and Public Health (adopted
by the US in 2001). To date, however, the trade and investment policies of the
Obama administration remain unclear.
The Australian Labor government has raised similar doubts. In answer to
 10. PUBLIC HEALTH AND MEDICINE POLICIES 161

an opinion editorial piece about the TPPA by the authors of this chapter in
March 2010, the Australian Trade Minister at the time, Simon Crean, wrote:

There is an urgent need to correct the record after the publication of the
article, ‘Big pitfalls and fewer freedoms in the new trade agreement with the
US’ (Canberra Times March 15, pg9) by Thomas Faunce and Ruth Townsend
… [T]he Trans-Pacific Partnership talks … are being held in Melbourne this
week …. The goal of the negotiations is to find a pathway to a Free Trade
Area of the Asia-Pacific. It is not a reopening of the FTA with the US that
came into force in 2005 …. It is wrong to suggest that we are about to re-open
obligations in relation to the Pharmaceutical Benefits Scheme that were
settled in 2005. If there are to be any changes to the scheme in the future, it
would be part of a domestic policy debate in Australia. It does not concern
me what the US drug companies are pushing for because decisions about
the scheme are made in the national interest by the Australian Government.
The article also argues there is a threat to Australia from the introduction
of an investor–state dispute settlement provision through the TPP. We will
give our negotiating partners a chance to pitch their case on the issue, but
let me say we have serious reservations about the inclusion of investor–state
dispute settlement provision in this agreement. We do not want new layers
of red tape under the guise of trade liberalization. Australian negotiators
will make this clear at the Melbourne meeting which concludes today.
Simon Crean, Minister for Trade, Parliament House 52

Conclusion
The PhRMA submissions on the TPPA and the Section 301 Trade Watch
List analysed above show that the US pharmaceutical industry, through
the USTR, will be seeking a variety of provisions related to public health
and medicines policy that are monopolistic and protectionist in nature. No
other TPPA nation appears to have an industry group likely to be pushing for
countervailing proposals in the health and medicines sector. The US industry
also aims to inhibit market entry for generic medicines by tying up the drug
safety regulatory agencies of other nations in red tape, as well as undermining
the evidence base of cost-effectiveness pricing schemes.53
In the TPPA negotiations, the USTR is likely to meet strong resistance from
the public in Australia and New Zealand to any inclusion of their democratically
supported systems for assessing the cost-effectiveness of medicines.
In the interests of regulatory coherence and promotion of the legitimate
business interests of their small and medium enterprises (such as biotech
start-ups and generic medicine firms), the non-US nations negotiating
the TPPA should instead demand reciprocal changes in the US system
for regulating medicines. One such example would be to require the US
medicines regulatory system to recognise (as the USTR did in Annex 2C
162 THOMAS FAUNCE AND RUTH TOWNSEND

of the AUSFTA) that pharmaceutical innovation can and should be based

on scientific assessment of comparative cost-effectiveness as well as on the
operation of competitive markets (the latter requiring strong anti-monopoly
laws). Non-US TPPA negotiators should likewise demand, in the interests
of regulatory coherence, the inclusion of a provision that requires the US to
support the establishment of a Federal agency to advise on the cost-effectiveness
of medicines and remove any legislative provisions that inhibit the creation
of a Federal PBS-type system for assessing the cost-effectiveness of health
technology in the US. This would create a level playing field for the entry
of generic manufactured pharmaceuticals produced by non-US small and
medium enterprises into the US market.
Non-US TPPA negotiators should also argue for a provision that, even if a
drug is in patent in their countries, it can be manufactured for sale in other
TPPA countries where it is out of patent. This, too, would greatly assist non-
US small and medium enterprises in the generic medicines sector. The TPPA
should expand the compulsory licensing exceptions that allow drug patents to
be broken (with reasonable compensation) in a public health emergency. Non-
US TPPA negotiators should demand that the TPPA permit and require the
US Federal government pass laws to reintroduce the research use exemption
that allows publicly-funded university researchers to experiment with the
chemistry of drugs that are in patent without having to pay royalties.
Some general recommendations can also be made about the process to
be followed in the negotiations. First, all the stakeholder groups involved in
and representing public health and medicines interests, including consumer
advocates, should be informed and invited to participate in the process
beyond just the opportunity to supply a written submission. Second, it is
critical that detailed minutes be kept and published, recording TPPA health
and medicines-related negotiations, including what was traded off for what.
These could be particularly important in later dispute resolution proceedings.
Finally, the right of investors to use investor–state dispute mechanisms to
directly challenge the right of democratically elected governments to protect
their own public health, environment and medicines policy undermines the
sovereignty of the state and threatens its security. There must be no multilateral
investor–state dispute resolution system included in the TPPA; to do so would
trigger an immediate, highly controversial public debate in Australia, similar
to that surrounding the AUSFTA. If an investor–state provision is included,
the standard of proof required to activate it should be clearly distinguished
from that applying to public health legislation based on the precautionary
principle; no damages should be awardable without domestic remedies being
exhausted; and arbitral decision-makers must be required to take into account
domestic constitutional and legislative public health protections. If necessary,
non-US TPPA nations should make unilateral interpretative declarations to
this effect before signing a TPPA.
11. Intellectual Property in
New Zealand and the TPPA
Susy Frankel

Intellectual property law is an important factor in a knowledge economy. It is

the legal method through which knowledge can be commodified and traded.
There are many ways in which the Trans-Pacific Partnership Agreement
negotiations will require New Zealand to increase its intellectual property
protections. This may seem a good idea if a short-term view is taken, but if New
Zealand is ever to develop into a knowledge economy then trade negotiators
need to plan for that possibility.
Too much intellectual property protection can also increase the price of
goods, including books, films, electronics and pharmaceuticals. The longer
copyright protects a book, for example, the longer its price stays higher.
Books that are out of copyright tend to be cheaper because more than one
publisher can print the book. If New Zealanders want access to a wide range of
goods and services, then there must be a careful balance, within the detail of
intellectual property law, to make sure such goods do not become unaffordable
for New Zealanders.

Intellectual Property
Intellectual property is the collective term given to the legal rights that are
separately called copyright, trade marks and patents. As well as these three
main areas of intellectual property law, there are related areas of legal protection
that include geographical indications and the protection of integrated circuits
used in computers and electronic devices.
Intellectual property is a legal construct and is often described as intangible
property. Although this sounds like legal jargon, it is in fact a helpful way to
understand how intellectual property is different from goods. A book or CD is
tangible; you can hold it in your hands. The intellectual property associated
with those products is intangible. A person can use the book to read, or even
as a doorstop. If you buy a book, you can resell the book. When you buy a
book, you do not, however, buy the right to copy the work. That right remains
164 SUSY FRANKEL

with the copyright owner and is intangible; you cannot hold it in your hands.
In the electronic world, it is not correct to talk about music or film being
products that you can physically hold as you can a book. Music and film
can be downloaded, but this does not allow the downloader to copy those
downloads except for their own use. In a similar way, when you purchase a
pharmaceutical or a car, you do not purchase any right to manufacture those
same goods. The rights to do that are the patent rights. Intellectual property
rights are communicated to the world through the products in which they are
manifested (there are also registers of some rights), but the legal notion of an
intellectual property right is not the actual product. Rather, it is embodied in
the product. The product is a book, for example, and the intellectual property
right is copyright. Intellectual property rights have an independent existence
from the books, films, music and pharmaceuticals to which they relate, and
can be regarded as an entity that has a legal as well as a transactional reality.
As a commodity in its own right, intellectual property can be bought and
sold, and it can be the major asset of some businesses that do not produce
goods or services. Their business might be to generate and sell the intellectual
property to others who produce goods and services.
In each country, domestic intellectual property law frames the protection
of intellectual property. This is often referred to as the territoriality principle
of intellectual property. What it means is that the laws of the United States
apply to the protection of intellectual property in the US, the laws of Australia
apply to the protection of intellectual property in Australia, the laws of New
Zealand apply to the protection of intellectual property in New Zealand, and
so on. This territoriality rule even applies where intellectual property works
are on the Internet. The relevant law may apply where the alleged infringing
material is available on the Internet (and that could be many places) or where
the material is uploaded to the Internet, or both.
There are many commonalities between most countries’ intellectual
property laws because so many countries are members of the World Trade
Organization. One of the WTO’s agreements is the Agreement on Trade-
Related Aspects of Intellectual Property Rights (TRIPS), which requires that
WTO members all have minimum standards of intellectual property in their
domestic laws. The TRIPS Agreement also allows its members to provide a
higher level of protection than the TRIPS Agreement requires; that is often
called TRIPS-plus protection. In some cases, TRIPS-plus protection is not
much more extensive than the TRIPS Agreement; in others it is much greater.
The US in many of its free trade agreements has required of its trading
partners considerable increases in intellectual property protection. The FTA
between the US and Chile, for example, has many TRIPS-plus provisions.
The agreement between the US and Australia (AUSFTA) has a very high
standard of TRIPS-plus protection, requiring extensive protection of patents
and copyright in particular. The AUSFTA also requires protection of certain
 11. INTELLECTUAL PROPERTY IN NEW ZEALAND 165

things that the TRIPS Agreement does not cover – for example, the protection
of domain names used on the Internet.
The FTA between New Zealand, Singapore, Chile and Brunei, known as the
Trans-Pacific Strategic Economic Partnership Agreement (P-4), has a fairly
limited intellectual property chapter. The existing agreement is, however, in
many ways a TRIPS-plus agreement. One way in which it is TRIPS-plus is that
it deals with areas on which the TRIPS Agreement is silent. These include,
for example, a provision specifying that parties may establish measures to
protect traditional knowledge.
The expansion of the P-4 through a TPPA is likely to result in a much greater
level of TRIPS-plus intellectual property protection. From New Zealand’s
perspective, some of the increases in intellectual property protection are likely
to be more problematic than others. Of greatest concern is what New Zealand
will concede, or be forced to concede, in the intellectual property field in
order to make gains in other fields. Concessions are likely in this area because
New Zealand does not have what trade negotiators call an offensive interest
in intellectual property. The economy is not dependent on the production,
creation and distribution of intellectual property-related products in the way
that it is dependent on agriculture. New Zealand does have many businesses
that generate and are dependent on intellectual property, but the amount is
not a significant portion of GDP in the way that it is for the US economy.
Consequently, in the short term, New Zealand concessions in the intellectual
property field can look palatable, but the social and economic impact of over-
reaching intellectual property laws is too often underestimated.
It is in New Zealand’s interests to have an intellectual property law that is
beneficial to New Zealand. Recent legislation relating to copyright and patents
states such a goal in its explanatory notes. Intellectual property policy makers
and trade negotiators would not disagree with that statement when framed at
a broad level. Any disagreement might be in the detail of what does or does
not benefit New Zealand. The goal for New Zealand’s intellectual property
law should be to ensure that patent law fosters research and development
in New Zealand, that copyright encourages New Zealand-based creativity,
and that trade marks help New Zealanders do business. If a trade agreement
hinders any of those things, then the outcome should not be regarded as a
good achievement for New Zealand.
The preamble of the P-4 provides that the parties resolve to:

FOSTER creativity and innovation, and promote the protection [of ]1

intellectual property rights to encourage trade in goods and services among
the Parties.

Although the intellectual property chapter expands on this preamble, with a

series of ‘intellectual property principles’, the preamble reveals an undeveloped
and under-analysed view about the role and function of intellectual property in
166 SUSY FRANKEL

trade. Primarily, it appears not to contemplate that trade in intellectual property

occurs independently from goods and services as well as in connection with
them. While intellectual property rights can foster creativity and innovation,
the P-4 (like many international intellectual property agreements) has no
internal mechanism to measure the appropriate level of protection to achieve
the goals of the agreement. Rather, intellectual property protection without
qualification, other than the general principles, is presumptively the starting
point. If the only limits on protections are contained in general principles, this
tends to result in the principles taking a back seat in any legal interpretation.2
The remaining sections of this chapter describe some of the main areas of
intellectual property protection that are likely to raise issues in the expanded
P-4 negotiations.

Copyright
Copyright law is relevant to culture and information. Copyright law protects
works described as literary, artistic, musical and dramatic. In New Zealand,
artistic works include design drawings and prototype models for industrial
products, meaning that copyright is used to protect a myriad of things,
including cars.3 Copyright also protects films, sound recordings, broadcasts,
cable programmes and communications on the Internet.4 Copyright protects
all of these things whether they are made in New Zealand or made somewhere
else and imported into New Zealand. It is not possible in this chapter to
outline all of the ways in which trade agreements may affect copyright law
and copyright products, but some key areas are discussed.
Although copyright applies to products of culture, the culture debate
discussed in Chapter 12 has largely proceeded independently of the intellectual
property debate. That debate has focused on the cultural industries and the
tangible products they produce; and whether those industries can receive
domestic support in the name of supporting local culture, or whether that
support is a kind of protectionism that trade rules might prohibit. Trade
negotiations and agreements have treated copyright separately even though
it impacts on the same goods and services. The reasons for this can seem
justified from a legal perspective, but arguably do not make much sense
because the same products are at issue in both legal settings.
The push for the free movement of cultural goods stands in stark contrast
to the ways in which intellectual property law territorialises rights and is used
to confine some intellectual property products to a particular territory. For
example, if the free movement of goods is a priority, then Hollywood movies
should be able to be exhibited and sold on DVD or digital download all over
the world. This does not mean, however, that once a movie is released in one
part of the world anyone can export it to another part of the world. Intellectual
property protects the copyright in such movies in each territory independently
of any other territory. So that if the movie is released in the US and is not
 11. INTELLECTUAL PROPERTY IN NEW ZEALAND 167

simultaneously distributed in New Zealand, it will be an infringement of New

Zealand copyright law for that same movie to be distributed here without the
copyright owner’s permission. The copyright owner can be a foreign entity.
A DVD of a movie that was made for distribution elsewhere can be imported
into New Zealand, provided nine months has elapsed since the movie was
first distributed. This is called parallel importation, which is not permissible
in a number of countries including the United States.
Intellectual property also means that the owner of copyright can prevent
copies of the movie being made anywhere else in the world. In sum, intellectual
property is a barrier to reproducing goods and in some countries also to
importing them. This trade barrier is treated as acceptable because it is designed
to prevent piracy, and the opportunities for piracy theoretically increase in
the global market. This is because there are more goods to imitate as more
goods that embody intellectual property are made available around the world.
Full coverage of the debate over the extent of protection needed to achieve
this ‘anti-piracy’ goal is beyond the scope of this chapter, but broadly it can
be stated that TRIPS-plus intellectual property rights may well be in excess
of what is needed to prevent piracy and more about enhancing a comparative
advantage in cultural, scientific and technological industries. To be sure, the
prevention of piracy or counterfeiting is part of protecting that comparative
advantage, but TRIPS-plus protection goes beyond the anti-piracy and anti-
counterfeiting function.

Parallel Importation of Copyright Products

The P-4 provides that the parties may ‘provide for international exhaustion
of intellectual property rights’. This allows its members to parallel import
products protected by intellectual property. A parallel import is a legitimate
good that is not pirated, but is made for a different market. New Zealand
allows for the parallel importation of copyright goods and trade-marked
goods. This permits the importation not only of cultural products but also of
many consumer goods from nail polish to cheap Japanese cars and electronic
goods. Singapore allows these sorts of parallel imports and also parallel
imports of patented goods. US domestic and trade policy aims to prevent all
parallel imports. Under the AUSFTA, patented products cannot be parallel
imported. The Australian Federal government recently reviewed whether it
should allow parallel imports of books, and concluded that it should not. One
of the reasons given was support for the local publishing industry. It is not
at all clear that preventing parallel importation achieves that goal. Rather,
preventing parallel importing allows major players in the cultural industries
and others, such as pharmaceutical industries and car manufacturers, to
divide world markets and to keep retail prices high in so-called developed
countries such as New Zealand.
The TRIPS Agreement does not prevent countries from parallel importing
168 SUSY FRANKEL

goods. The decision to allow parallel imports, or not, is a matter of domestic

policy. The benefits to consumers are reasons to retain New Zealand’s copyright
and related trade-marks parallel-importation regime.

Term of Protection for Copyright Works

The US, Chile, Singapore and Australia have a longer term of copyright
protection than New Zealand. The US–Chile FTA and the AUSFTA specify a
term based on the life of the author plus seventy years, or seventy years from
the creation of the copyright work. Similar terms apply also in the European
Union. The expanded P-4 negotiations will almost certainly require that New
Zealand extend its copyright term to the equivalent of those countries. The
current term in New Zealand, which is the TRIPS Agreement minimum term,
is the life of the author plus fifty years, or fifty years from the creation of the
work where life is not the basis of the calculation.5 Arguably New Zealand
potentially gains little from not extending the term; the shorter term of
protection does not enable New Zealand to import goods any cheaper from
overseas where they are still protected by copyright. A potential gain from
having a shorter term is that New Zealand-based creators and businesses
could use and reproduce copyright works in New Zealand because they are
out of copyright, even though they would still be in copyright elsewhere. This
has the potential for local businesses to reproduce works more cheaply for
local consumption than the cost of importing the copyright works. Is there
evidence of such uses and businesses developing in New Zealand? Maybe it
is impractical for such businesses to be established?
Much of the current debate about copyright is about remix culture. Remix
culture is where music and video, for example, are digitally rearranged to
make new music or video or a combination of both. Such activities often
infringe copyright, and some argue that such activity should be permissible
and not be a copyright infringement. That remix can be creative in its own
right should not be denied. Equally, the value of copyright for authors should
not be underestimated. Copyright is not just used by major industries: it is
also what provides many authors of all kinds of copyright works with their
livelihood. The balance between copyright protection and remixes of copyright
is too large a topic for this chapter. However, as the term of copyright is long,
in any event, the calls for greater uses of copyright works to be permissible in
the online world is equally strong where the fifty-year term applies; one could
therefore say that extension to seventy years, while in principle not desirable,
makes little difference to the real issue.
The extension of copyright term has been widely criticised and even
challenged as unconstitutional in the US on the basis that it conflicts with
the constitutional clause to encourage the arts, from which US copyright law
stems.6 That challenge failed and worldwide pressures to extend the term
even further continue. A recent example was a proposal by the European
 11. INTELLECTUAL PROPERTY IN NEW ZEALAND 169

Commission to extend the term of copyright in sound recordings to ninety-

five years.7 This proposal is not proceeding because the European Parliament
did not agree to it. If New Zealand kept the shorter term, it would be taking
a stance against longer term arrangements, but such a stance may be more
a matter of principle than one with actual advantages.

Digital Copyright Issues

All of copyright law allows some uses of works to occur that might otherwise be
infringements. In the US, this is called ‘fair use’. In New Zealand, following the
British tradition, the terminology is ‘permitted acts’. Permitted acts include,
for example, certain uses for research and private study, for criticism and
review, and for education.8 In the digital world, copyright works are often
protected by technology that prevents copying. Such technological protections9
can make it hard even to use those works for some permitted acts. In New
Zealand, copyright law allows libraries designated under the Copyright Act
to circumvent such devices in order to exercise some permitted acts.
The P-4 affirms that its parties may establish provisions to facilitate the
exercise of permitted acts where technological measures have been applied. It
is possible that the TPPA negotiations will require more stringent protections
of digital copyright works and more confined exceptions to those protections
than the New Zealand law provides. New Zealand law was amended in 2008
to provide greater protection of copyright works in the digital and online
world, but that law was modelled for New Zealand and is not the same as
either US or Australian law.10
The US has more extensive protections of technological protection
mechanisms, digital rights management and other digital protections.
Broadly, however, it has more extensive fair use provisions. The AUSFTA
makes all reproductions of copyright works, even those transient in nature,
a copyright infringement. New Zealand law does not make the creation of
transient copies that allow the Internet to function a copyright infringement.
This is important because it means that people cannot be sued for simply
using the Internet and looking at things online.
New Zealand’s digital copyright laws are unique. Although their enactment
has in part been controversial, the digital copyright laws were largely designed
for New Zealand rather than being a wholesale adoption of foreign law. Will a
trade agreement claw back the position to be more similar to the US approach
to digital copyright protection? At the very least, New Zealand negotiators
should aim to ensure that the TPPA obligations are no greater than US
domestic law digital copyright protections, and that New Zealanders have
the same chance to exercise permitted acts as fair use permits in the United
States. The very different nature of fair use and permitted acts arguably tends
to make the exercise of permitted acts in New Zealand narrower.
170 SUSY FRANKEL

Patents
Internationally, there is a considerable debate over the scope of patent
protection. The TRIPS Agreement requires that patents are available for
inventions ‘in all fields of technology’, but that does not mean that everything
must be patented.11 For an invention to be patentable, it must be novel, involve
an inventive step, and be useful. These are terms of art and there is much
case law about their scope. No definition of the terms is found in the TRIPS
Agreement, so each member of the WTO has discretion to define the scope
in their national laws. This results in many differences between the patent
laws of WTO members, despite there being some minimum standards that
the WTO members’ laws must incorporate under the TRIPS Agreement.
One example of such a difference is found in the laws of developing countries
like India and Brazil compared to the laws of the United States. India does
not protect certain sorts of inventions because, under its law, the inventions
lack an inventive step; thus patents are not granted where inventive activity is
deemed to be so incremental that the inventive step is missing. The rationale
behind India’s law is that patents for incremental advances can hinder
economic development. The US, by contrast, already has substantive patent-
based industries, and therefore an economic interest in allowing incremental
advances (often called ‘incremental innovation’ in the developed world) to
be patented. A new use of a known pharmaceutical, where the new use is
not based on a new compound but uses the same compound, is a type of
incremental innovation. An example is aspirin, which had a first-known use
as a painkiller and a subsequent use as a blood thinner. Aspirin sold as pain
relief can also be used for the new use. In countries such as India, incremental
new uses of this kind will often not be patentable, whereas the same new uses
will probably be patentable in the US (and also Australia and New Zealand)
on the basis that such new uses involve an inventive step.12
This area of the law is complex and cannot be fully described here. Whether
patents should be granted over new dosages of known pharmaceuticals raises
significant issues. When a pharmaceutical compound has been patented
at least once, and possibly more than once for the treatment of different
conditions, these sorts of patents increase the costs of pharmaceuticals
and consequently increase the costs of health care. Those seeking such
patents argue they are necessary to stimulate research and development, and
corresponding investment in pharmaceutical innovation. As the compound
has already been patented, many doubt whether the further patenting is
necessary. Even if such patents are necessary to stimulate research for new
uses, very little or any of that research takes place in New Zealand. So one
might ask why New Zealand needs such patents. The answer is likely to be
that it does not, and there is no international agreement that requires New
Zealand to provide such patents.
The opportunity for making informed policy decisions on patents for new
 11. INTELLECTUAL PROPERTY IN NEW ZEALAND 171

uses of known products, particularly pharmaceuticals, is important because

not all economies are the same and, therefore, patents that are appropriate
for one economy may not be economically appropriate in another economy.
This is why Indian law is different from US law. Whether such new use patents
are in the interests of New Zealand should be determined through policy
analysis, not through trade negotiations.
There are differences in the patentability criteria (novelty, inventive step
and usefulness) and how they are applied between Australia, New Zealand
and the US. However, these differences are not as stark as those between
the US and developing countries such as Brazil and India. Perhaps because
of these international differences, the US approach to FTAs is to require
that patents be available for certain types of incremental innovation. The
AUSFTA and the US–Chile FTA, for example, provide that ‘patents shall
be available for any new uses or methods of using a known product’. This
includes a patent for a new use of a known pharmaceutical, even if the new
use does not involve a new compound but uses the same compound. If the
TPPA required this, there would be a significant change to New Zealand’s
patent law. Even though many new uses of known products are patentable
in New Zealand,13 it is not clear that all new uses of known products must
or should be patentable.
Whether a country like New Zealand chooses to patent new uses of known
products is a balancing issue. The factors in the balance include what is
economically and socially beneficial for New Zealand, such as keeping the
cost of health care affordable, and what is required under international
obligations, such as the TRIPS Agreement. In the area of pharmaceuticals,
the issue is whether protecting new uses of known pharmaceuticals is
beneficial. New Zealand needs to weigh up whether providing that protection
for pharmaceuticals is worthwhile because it may increase the cost of
pharmaceuticals. If the new use can be treated with the same compound and
the same compound can be purchased in a form marketed for the first known
use, such as aspirin discussed above, then protecting the new use may only
serve to increase the price of the pharmaceutical. On the other hand, unless
the new use is protected, pharmaceutical companies may make new medicine
unavailable in New Zealand. The adoption in the TPPA of a blanket provision
to protect new uses of know products would foreclose any evidenced-based
discussion of the above issues and policy decisions about whether certain
new uses of known substances should be patentable in New Zealand.

Patent Term for Pharmaceuticals

Under the TRIPS Agreement, a patent must be granted for a period of not
less than twenty years. A US-driven text for the TPPA will increase the term
of pharmaceutical patents in many ways. If pharmaceuticals receive second
and subsequent-use patents, as discussed above, based on the requirement
172 SUSY FRANKEL

that new uses of known products are patentable, this would mean that a
pharmaceutical product would be protected for more than twenty years.
The granting of patents for new uses of known products has been termed
the evergreening of patents.
Other extensions of patent term that the US and Australia might wish to
see introduced into New Zealand’s law relate to extension of patents because
of the time taken to obtain approval for the sale of pharmaceuticals.14
Pharmaceuticals cannot be sold in New Zealand, or in many places, until
they pass regulatory approval processes, primarily relating to safety.15 In both
the US and Australia, when a patented pharmaceutical product is subject to
this regulatory approval process, the patentee can apply to extend the period
of term of the patent. This extension period is designed to compensate for the
period of time that the patented product could not be marketed because it was
subject to regulatory review. This extension of term for pharmaceutical patents
also occurs in the European Union.16 In New Zealand, there is no extension
of term for patents. Historically, some term extensions were granted in New
Zealand, but this was when patent law provided for a shorter patent term of
fourteen years, rather than the twenty-year term that the TRIPS Agreement
currently mandates.
A Ministry of Economic Development discussion paper considered whether
to allow extension of patent term under a twenty-year patent term regime,
but that paper appears to have been rejected by the Labour cabinet at the
time because an increased patent term results in a higher cost of medicines.17
In many jurisdictions, including the US and New Zealand, there is an
exception to patent infringement that is related to the regulatory approval
process. The exception is that a patent is not infringed if, during the term of the
patented product, a third party makes the patented product in order to obtain
regulatory approval of a potential generic pharmaceutical. This exception is
to allow a competitor to enter the market when the patent expires, rather than
the patentee having a longer patent term because the competitor’s products
are still tied up in the regulatory review process. In the US and Australia, the
‘pay-off ’ to the patentee for this exception is the extension of term discussed
above. New Zealand’s position is different from that of the US and Australia
because, while the law allows for third-party regulatory review of patented
products, it does not provide the ‘pay-off ’ of patent-term extension. This is
arguably appropriate for New Zealand’s economic circumstances because it
imports most of its medicines. There is likely to be pressure in the expanded
TPPA negotiations to allow patent–term extension for pharmaceuticals.
At the time of writing, there is a Patents Bill before Parliament18 that has
some key differences from the US and Australian laws. Whatever the outcome
of that process, the TPPA negotiations may mean that there will be further
patent reform.
 11. INTELLECTUAL PROPERTY IN NEW ZEALAND 173

Data Exclusivity
Under the TRIPS Agreement, if WTO members require marketing approval for
pharmaceutical or agricultural chemical products, and that approval process
required the submission of data to the regulatory authority, then that data
shall be protected against ‘unfair commercial use’.19 This obligation affects,
for example, when generic pharmaceuticals that compete with patented
pharmaceuticals may enter the market. These generic pharmaceuticals also
require regulatory approval before they can be sold. The data exclusivity
provisions prevent generic manufacturers, during the exclusivity period,
from relying on the data field in relation to a patented pharmaceutical in
order to obtain regulatory approval. Generic pharmaceuticals must, in many
places including New Zealand, be approved on their own merits. However,
data exclusivity prevents the regulating authority from relying on that data
to assess the safety or efficacy of any generic pharmaceuticals during the
exclusivity period. Data exclusivity can act as a patent-term extension even
if the intention is to protect the data.
Some of the US free trade agreements include provisions that require data
exclusivity that relates to patented products, particularly pharmaceutical and
agro-chemical products. Under the US–Singapore FTA and the AUSFTA, data
exclusivity is for five years for pharmaceuticals and ten years for agro-chemical
products.20 The US–Chile FTA has a five-year exclusivity provision for both.
Data exclusivity under US domestic law is for five years for new chemical
entities and three years for other pharmaceutical products.21
Currently, under New Zealand law, there is a requirement for data exclusivity
for five years for both innovative agro-chemical compounds and for innovative
medicine applications.22 An innovative medicine application is one that
involves a medicine where an active ingredient has not previously been
approved as an active ingredient of a medicine. The data exclusivity provisions
do not apply in certain circumstances, including where disclosure is necessary
to protect the health and safety of the public.
The TPPA negotiations may very well require New Zealand to broaden
its application beyond so-called innovative agro-chemical or medicine
applications.

Exceptions to Patentability
The Patent Bill before Parliament at the time of writing includes some
exceptions to patentability because these things should not be the exclusive
property of anyone. These include patents for:23

• human beings, and biological processes for their generation;

• an invention for a method of treatment of human beings by surgery or
therapy;
174 SUSY FRANKEL

• an invention of a method of diagnosis practised on human beings; and

• a computer program.

Listing express exceptions is broadly based on the European approach.

The TPPA may require some winding back of these exceptions, should they
become law; equally, they may be left alone. Possibly, some exceptions may
attract more attention than others. For example, the exclusion of computer
programmes from patent protection is the exact opposite of US law, and US
businesses with subsidiaries in New Zealand may wish to see that removed.
The New Zealand courts have upheld the exceptions relating to treatments
by surgery or therapy and diagnosis, and the Bill codifies that exception.24
Neither the US nor Australian laws have this exception. The arguments some
make for the removal of the exception can be seen in the case law and in the
submissions to Parliament over the Patent Bill. One firm of patent attorneys
suggested:

United States patent law contains a provision preventing a medical

practitioner from being sued for infringing a patent in the course of
performing a medical or surgical procedure. The introduction of a similar
provision into the Bill would achieve the same goal as the exclusion from
patentability, but without the difficulties in claiming protection for a new
medical use of a known composition.25

The codification of the exception shows the Parliamentary intent to retain

that exception, but the trade negotiations may bring pressure to remove it from
New Zealand law. Such pressures should be resisted because the removal of
the exception will only serve to increase the costs of health care.

Other Intellectual Property Rights

Expansion of the Reach of Trade Mark
The expanded TPPA seems unlikely to make a significant difference to New
Zealand trade-mark law. Although the AUSFTA has TRIPS-plus provisions,
such as requiring the parties to provide protection of sound and smell trade
marks, New Zealand law provides this protection already. Also, the AUSFTA
requires certain protection of domain names and related dispute-resolution
processes. New Zealand law already has these standards.

Geographical Indications
Geographical indication law protects a name that is associated with the
geographical origin of goods. Famous examples are champagne and Roquefort.
New Zealand examples might be Marlborough or Hawkes Bay wines. The law
of geographical indications (GIs) prevents others from using these names, even
in the form of sayings like ‘roquefort-style cheese’ or ‘methode champagnoise’
that apparently acknowledge the original origins of these products.
 11. INTELLECTUAL PROPERTY IN NEW ZEALAND 175

In intellectual property law, geographical indications are different from

trade marks that protect marks that distinguish one trader’s goods or services
from those of another. Geographical indications protect any number of traders
who can claim legitimately to use the geographical indication because they
make products in the particular region and usually by a particular method
of production.
The European Union is seeking to extend GI protection, particularly in
the area of wines and spirits. It has publicly stated that GIs are a necessary
protection in exchange for reducing agricultural subsidies in Europe. In other
words, without the subsidies, the local populations need a new way to make
money. In the TRIPS Council, developing countries also support GI protection
as a way to improve their economic situation. India, for example, would use
GIs to protect worldwide the use of ‘basmati’ in conjunction with rice.
In the international arena, the US has not been a fan of GIs. Perhaps
ironically, the United States’ main argument against GIs is that they are
protectionist, rather than meeting the trade-mark reputation-based standard.
The US has had several disputes, including a WTO dispute, with the EU over
GI protection. It therefore seems unlikely that the US would seek to extend
GI protection in the TPPA, although that may be an issue in some of New
Zealand’s other FTA negotiations – for example, with India.
The existing P-4 allows for parties to list their claimed GIs. New Zealand
has not listed its GIs, whereas Chile has a list incorporated into the agreement.
Will the US resist New Zealand listing GIs in the future? This is potentially
a problem, particularly for Māori names, cultural artefacts and concepts.

Treaty of Waitangi Clause and Traditional Knowledge Protection

The extent to which New Zealand protects traditional knowledge is yet to be
decided.26 The existing TPPA provides that members may establish appropriate
measures to protect traditional knowledge. This flexibility should be retained
in the new TPPA.

Conclusion
New Zealand has historically adopted British intellectual property laws. More
recently, New Zealand has started to create intellectual property laws that
consider its domestic and particular interests in the policy debate leading
up to the legislation. The interests of New Zealand are about more than
agreeing to high standards of intellectual property protection in exchange
for other trade gains, and include making sure that intellectual property
does not interfere with New Zealand’s ability to develop more proficiently
as a knowledge-based economy. It is also crucial for the welfare and health
of the nation that intellectual property products, including pharmaceuticals,
are available and affordable in New Zealand.
12. Culture and Information
Jock Given

Images, sounds and words now move around the world more easily and quickly
than ever before. Movies, photographs, music, stories and messages seem to
cross borders online silently and invisibly without needing to ask permission
from the officials who could once check every book, recorded disc, film print
or letter, and stop, tax or impose conditions on their entry. This technological
shift matches the regulatory transformation pursued by generations of trade
liberalisers. A Trans-Pacific Partnership Agreement could re-energise such a
deregulatory agenda and so support the growing technical scope for trade in
cultural goods and services. But the consequences for cultural diversity and
the cultural economy might not be unambiguously liberal.
This chapter explores the potential treatment in the TPPA of goods and
services that are seen as particularly important for culture, especially audio-
visual and information products. These are generally sensitive topics in
trade negotiations. The chapter considers different ways of defining them
and the methods used to reconcile the twin desires for open exchange across
national borders and government assistance measures that may restrict or
shape that exchange.
In the TPPA negotiations, as in wider multilateral forums like the World
Trade Organization (WTO), the US is likely to be a strong supporter of liberal
trade in cultural goods and services. Frustrated by the lack of progress at the
WTO, but encouraged by the concessions it has extracted in bilateral free
trade agreements, it will aim to multilateralise its gains in the TPPA. Smaller
countries seeking to preserve their ability to support local production and
distribution will face particular challenges in digital media sectors (‘electronic
commerce’). The United States is determined to keep these sectors free of
the kinds of assistance measures that are so common in television and radio
broadcasting, film production, distribution and exhibition. An unpredictable
element will be the relationship between free trade and free speech, given
the different political systems of the TPPA negotiating partners, and the
aspiration that this agreement becomes the foundation for a free trade area
of the Asia-Pacific involving China.
 12. CULTURE AND INFORMATION 177

Crossing and Blocking Borders

Borders in cyberspace are less perfectly porous than they can seem when
downloading a song from iTunes, watching a video on YouTube or buying
an e-book from Amazon. Google’s April 2010 decision to relocate its Chinese
search operations from the mainland to Hong Kong was a protest against ‘a
highly sophisticated and targeted attack’ on the networks of Google and at
least twenty other large companies in the Internet, finance, technology, media
and chemical sectors. A primary goal of the attackers, according to Google,
was accessing the Gmail accounts of Chinese human rights activists.1 Trade
and cultural exchange over the Internet was a long way from free.
For some, Google’s stance was a ‘momentous statement’, highlighting the
division between its ‘new form of principled capitalism and the novel form
of authoritarian capitalism that China represents’.2 Timothy Garton-Ash
agreed it was ‘a defining story of our time’, but thought it highlighted the
reality of the way information is currently supplied – through a combination
of decisions made by the states we live in and the big companies we rely on,
like Google, Yahoo, Baidu, Microsoft, Apple and China Mobile. Unconvinced
that the right answer lies simply in choosing big companies over states as the
arbiters of our information, Garton-Ash thinks ‘everyone should be free to see
everything, except for a limited set of things that clear, explicit global rules
specify should not be available. The job of states, companies and netizens is
then to enforce those international norms.’ 3
One place where such norms might get thrashed out is in trade agreements.
Because of the importance of the US in the global cultural and information
economy, the treatment of these sectors will be a critical part of any trade
agreement in which it participates. Since its movie makers came to dominate
the global audio-visual market during and just after the First World War, it
has been the main force supporting freer trade in cultural goods and services,
though not the only one. The economic goal of free trade has been consistently
equated with the political goal of a free flow of ideas.
Trade agreements have set two ideas against each other: one, the idea that
people should be free to make and trade their wares; the other, that people
should be free to create, distribute, receive and engage with the things, practices
and people that offer meaning to their lives.4 These agreements conceptualise
government support measures for their people to create, distribute, receive and
engage as impediments to other people’s freedom to trade. The widespread
reluctance of nation states to surrender their capacity to impose these kinds
of measures represents both an economic defence against liberalisation of
industry sectors where they fear they will be net losers from freer trade, and
a refusal to accept this conceptualisation.

What is Culture?
Thrashing out global norms about culture and information requires some
178 JOCK GIVEN

agreement about what these concepts mean, whether they require state support
and, if so, what forms it should take. Established in 1946, UNESCO (the United
Nations agency that deals with culture) defended cultures in decolonising states
in the 1950s and 1960s, broadening the concept of culture beyond producing
‘art’ to encompass the notion of cultural identity. In the 1970s and 1980s, it
promoted the relationship between culture and development, and in the 1980s
and 1990s, the role of cultural aspirations in constructing democracies. More
recently, it has tried to encourage ‘dialogue among cultures and civilizations
in their rich diversity’, adopting a still wider concept of culture. Its 2001
Universal Declaration on Cultural Diversity regards culture not just as art and
literature, but as ‘lifestyles, ways of living together, value systems, traditions
and beliefs’, the whole ‘set of distinctive spiritual, material, intellectual and
emotional features of society or a social group’.5
Without state support, many nation states feel their people would end
up mainly receiving and engaging with cultural wares from someplace else,
thus compromising their own distinctive lifestyles, value systems and beliefs.
When negotiating trade agreements, they have wanted to safeguard their
ability to impose such measures. Those resisting their demands typically
make several points. First, they fear that almost any economic activity could
be encompassed within ‘lifestyles, ways of living together, value systems,
traditions and beliefs’. Such a wide definition of culture would allow states
almost open slather to impose measures protecting particular domestic
industries and enterprises in ways that may restrict trade, undermining the
purpose of trade agreements. The French could protect their wine-makers,
New Zealanders their milk-producers, Australians their four-door-family-car
manufacturers.
Second, if culture is the ‘totality of lived experience and forms of human
expression’,6 they argue that nation states need to accept that the goods and
services thought to embody distinctive cultural characteristics most densely,
especially movies, TV programmes and literature, are just one part of a much
larger story. Directing so much energy to measures assisting a small subset
of commodity producers – say, a nation’s film and TV programme-makers
and novelists – reveals that the underlying policy purpose is more economic
and protectionist than cultural and cosmopolitan.
Third, they object that national policy intended to support diverse cultural
expressions is too easily and often conscripted to the stifling agendas of a
‘nationally-based cultural status quo’,7 the ‘asphyxiating parochialism created
and policed by cultural bureaucrats’,8 privileging ‘cultures traditionally
conceived and mobilized along the lines of nationality’ over individual self-
expression.9 Outward-looking cultures exist and evolve through communication
with each other. Openness, not protection, is what is supposed to feed them.
From the outset, UNESCO has had a ‘dual mandate’ to promote the
‘fruitful diversity of cultures’ and the ‘free flow of ideas by word and image’.10
 12. CULTURE AND INFORMATION 179

The Convention on the Protection and Promotion of the Diversity of Cultural

Expressions, negotiated in 2005 as an alternative to the approach taken in
trade agreements, includes as its first two objectives:

a. to protect and promote the diversity of cultural expressions;

b. to create the conditions for cultures to flourish and to freely interact
in a mutually beneficial manner .…11

Supporting materials explain that the term ‘protection’, when used in

the Convention, does not carry ‘the connotations that it may evoke in the
commercial sphere’. It is inseparable from ‘promotion’. Together they imply
‘the need to keep alive cultural expressions imperilled by the quickening
pace of globalisation’. ‘Promotion’ calls for perpetual regeneration of cultural
expressions to ensure that they are not confined to museums, ‘folklorised’
or ‘reified’.12 The mix of government measures and openness is supposed to
foster genuine cultural exchange between truly free peoples, not just market
exchanges of goods and services.

Reconciling Culture and Information with Trade: The Models

The ‘dual mandate’, openness as well as protection-and-promotion, is difficult
to articulate in a single agreement acceptable to all the world’s nation states.
The UNESCO Convention on the Protection and Promotion of the Diversity of
Cultural Expressions had been ratified by 109 countries by mid-March 2010
– but not by the US. (Australia ratified in September 2009, becoming the
hundredth country to do so.) The Convention expressly does not affect the
rights and obligations of the parties under any other international treaties,
such as the WTO agreements.13 The WTO agreements do not mention
culture. The ‘agreement to disagree’ about culture at the eleventh hour of the
Uruguay round negotiations was not a compromise or pragmatic solution but
‘a failure and a stalemate’, according to Tania Voon.14 In particular, the new
services agreement, the General Agreement on Trade in Services (GATS),
entrenched long-standing confusion under the General Agreement on Tariffs
and Trade (GATT) about whether cultural products are goods or services. The
distinction matters because the two agreements impose different obligations,
although it matters little to the consumers of essentially identical audio-visual
products delivered in physical objects like DVDs or online as files. Subsequent
negotiations have made no progress on this issue.15
Unlike the WTO agreements, some bilateral and regional trade agreements
exclude culture altogether. Canada insisted on exempting cultural industries
from the provisions of its bilateral agreement with the US in 1989, though
the US insisted on a retaliatory provision allowing measures ‘of equivalent
commercial effect’ to be imposed in response to any cultural policy measures.
When the agreement was expanded to include Mexico, cultural industries
remained excluded between Canada and the US, but Mexico allowed them
180 JOCK GIVEN

to be covered by the general provisions, subject to a few specific exceptions.16

The bilateral and regional free trade agreements entered into by Australia and
New Zealand treat culture in very different ways. The Singapore–Australia Free
Trade Agreement (SAFTA) has a sweeping cultural ‘carve-out’, under which
Australia reserves the right to adopt or maintain any measure with respect to:

– the creative arts, cultural heritage and other cultural industries, including
audiovisual services, entertainment services and libraries, archives, museums
and other cultural services;
– broadcasting and audiovisual services, including measures with respect
to planning, licensing and spectrum management.17

The more recent ASEAN–Australia–New Zealand Free Trade Agreement,

entering into force on 1 January 2010 for most of the parties, also includes a
general exception, but its sectoral coverage is narrower and there are limits
on the kinds of measures that can be adopted. Parties can impose measures
otherwise inconsistent with the services and investment provisions where
they are ‘necessary to protect national treasures or specific sites of historical
or archaeological value, or measures necessary to support creative arts of
national value’ (emphasis added). ‘Creative arts’ includes most of the areas
covered by the SAFTA exemption – ‘film and video, language arts, creative
on-line content, indigenous traditional practice and contemporary cultural
expression, and digital interactive media and hybrid art work’. Digital and
hybrid work includes material that uses new technologies to transcend discrete
art form divisions. Notably, this list does not include television and radio.
Measures cannot be applied ‘in a manner which would constitute a means of
arbitrary or unjustifiable discrimination between Parties where like conditions
prevail, or a disguised restriction on trade in services or investment’.18 This
general exception replicates the one in the P-4 agreement (Article 19.1(5)).
Australia’s FTA with the US (AUSFTA), commencing in 2005, has no
general cultural exception. Instead (as discussed further below), Australia
made detailed reservations preserving its ability to retain, modify and, to some
extent, introduce, measures requiring local content especially for television
services. The US has a reservation allowing it to retain its restrictions on foreign
ownership of ‘radio licenses’, including TV and radio broadcasting licences
(Annex I–10). The Closer Economic Relations Agreement (CER) between
New Zealand and Australia also contains no general cultural exception,
nor does it have the same extensive provisions preserving policy-making
flexibility as are contained in the AUSFTA. Singapore entered reservations
for broadcasting services and printed media in its FTA with the US, while
Chile listed reservations about broadcasting ownership, personnel and
programme content.
 12. CULTURE AND INFORMATION 181

Reconciling Culture and Information with Trade: The Impact

These different reconciliations have forced countries to remove or modify
several cultural assistance measures. When negotiating the Trade in Services
Protocol to the CER Agreement with New Zealand in 1988, Australia did
not list its TV quotas as measures excluded from the obligation to offer
New Zealand services and service providers ‘national treatment’ – that is, to
treat them no less favourably than Australian equivalents. After Australian
broadcasting legislation was amended a few years later and a new Australian
content standard was determined, a group of New Zealand TV programme
producers successfully challenged the standard. The Australian Federal
Court ordered that it be amended to make it consistent with the obligation
Australia had taken on under CER.19
Since then, New Zealand programmes have counted towards the Australian
programme quotas, although the practical impact, so far, has been small.20
In 2007 and 2008, the three commercial networks averaged a little over six
hours of first-release New Zealand drama each per year (out of an average of
144 hours each), and only the Seven Network has screened any New Zealand
documentaries, averaging ten hours of first-release programmes each year in
2007 and 2008 (out of an annual average of 64 hours).21 Unlike Australia, New
Zealand chose to make commitments under the WTO services agreement
(GATS), tightly limiting its future capacity to introduce measures affecting the
production, distribution, exhibition and broadcasting of audio-visual works,
including TV programme quotas.22 The Clark Labour government, elected
in 1999, explored the possibility of introducing TV quotas like Australia’s.
But faced with the requirement to offer compensatory adjustments to other
WTO members affected by any change to the GATS commitments made by
the Bolger National government, it settled for voluntary targets.23
Despite its broad cultural reservation in the bilateral trade agreement with
the US, Canada found itself forced to repeal laws supporting local magazines,
following one of the first successful WTO dispute-settlement challenges. The US
objected to Canada’s long-standing policy designed ‘to provide Canadians with
a distinctive vehicle for the expression of their own ideas and interests’ in local
magazines. The aim was to reserve the lion’s share of local advertising revenue
for Canadian magazines and reduce the cost of distributing them through
subsidised postal rates. Certain special editions could not be imported at all,
and a heavy tax was imposed on split-run editions of international magazines
that carried advertising bought especially to reach Canadian audiences. The
WTO’s Appellate Body found that all three measures violated GATT rules.
Canada removed them, although an agreement was later negotiated with the
US limiting the sale of advertising space in split-run magazines to 18 per cent
and permitting subsidies for original editorial content.24 The same year, 1997,
the US settled a dispute with Turkey over a tax on box office receipts from
182 JOCK GIVEN

foreign films that was not also imposed on domestic films. Turkey agreed to
‘equalise’ any tax as soon as possible and the complaint was withdrawn.25
The atmosphere surrounding trade negotiations can also prompt the
modification of regulations. In the face of persistent pressure from the US
in the early 1990s, Australia relaxed its long-standing requirement that most
advertisements shown on commercial television be produced in Australia or
New Zealand. The changed standard allowed 20 per cent of advertising time
to be taken by overseas commercials and adopted a less strict local production
test.26 In 2006 South Korea halved the screen quotas that required local cinemas
to exhibit Korean films on 40 per cent of the days of the year. Although the
quotas were permitted under a specific cinema quotas exception in the GATT
(Article iv), the US was reluctant to begin negotiations for a bilateral FTA
with Korea while they remained unchanged.27
Though trade rules and the atmosphere surrounding their negotiation have
forced some changes to cultural and information policies, they have also left
considerable room for them. The cinema quotas exception included in the
original GATT, negotiated soon after the end of the Second World War, expressly
allowed what was then the most common form of support to the dominant
audio-visual sector, before television surpassed cinema in many countries in
the 1950s. Television was beyond the coverage of a goods agreement like the
GATT – though the disputes about this have never ended – leaving member
states largely free to retain or adopt policy measures about it. Many chose
to hand the new medium over to state monopoly broadcasters or to impose
requirements or restrictions about domestic and foreign programmes. In
cinema, post-war governments placed more emphasis on subsidy schemes for
local productions and producers than on regulatory schemes affecting local
exhibitors and distributors. While the GATT did not welcome subsidies, it
did not force their removal.28

The Shift to Bilateralism

Despite the US success in the Canadian periodicals dispute, the WTO has
been disappointing for those seeking the removal of government measures in
the audio-visual sector. The overwhelming majority of WTO members have
not set any limits on the assistance measures they can adopt for audio-visual
services. Only about a sixth have made specific commitments under the
GATS, a further handful have made offers of new commitments in the current
round of GATS negotiations, and many took out MFN (most-favoured nation)
exceptions, mainly to allow them to retain and make new international co-
production agreements.29 In a paper for the WTO’s Trade in Services Council
in 2000, the US highlighted the potential for cultural policy measures to be
justified under the general ‘public morals’ exceptions to the GATS and GATT
(Articles xiv(a) and xx(a) respectively) and for member states to subsidise
 12. CULTURE AND INFORMATION 183

audio-visual services without infringing the provisions about subsidies in

the GATS. Stressing that liberalisation was not an ‘all-or-nothing game’ and
that commitments could be partial, it sought ‘negotiated commitments …
that establish clear, dependable and predictable trade rules with due account
taken of the sector’s specific sensitivities’.30
In the decade since, this agenda has made little progress, except in accession
negotiations where countries have been prepared to make commitments on
audio-visual services as part of the price of admission to the WTO. But, in
general, the United States encouragement to use subsidies seems disingenuous,
since the overriding goal of trade agreements is to reduce them. The GATS,
for example, may not require subsidies to be removed, but this does not mean
it encourages them. On the contrary, it requires member states to enter into
negotiations with a view to developing the necessary multilateral disciplines
to avoid their trade-distortive effects (Article xv). Under the United States free
trade agreement with Australia, government subsidies, grants and investments
are subject to performance requirements that limit the kinds of local content
obligations that can attach to them.31
The ‘public morals’ exception also gives little comfort, being ‘too vague
and its future interpretation too uncertain’, according to Tania Voon.32 It was
successfully deployed not by a small state defending its ability to maintain
cultural policy measures, but by the US itself to defend statutory restrictions
about online gambling from attack by tiny Antigua and Barbuda, one of the
homes of offshore online gaming services.33 As in the Canadian periodicals case,
the US ultimately won on most counts in the WTO’s dispute settlement process.
The Appellate Body largely found in favour of the United States, overturning
the Panel’s more restrictive interpretation of whether measures used by the
US were ‘necessary’ to protect public morals. (The Appellate Body turned the
United States’ win on most points in the periodicals case into a comprehensive
win on all points.)34 On the one measure where Antigua succeeded (which
involved the discriminatory nature of the Inter-state Horseracing Act), the
dispute then dragged on over the speed and appropriateness of the United
States’ response to the Appellate Body’s report.35 Far from showing the value
of the general ‘public morals’ exception, the case demonstrated how unreliable
a tool it is, particularly for small states.
Frustrated about audio-visual services in the multilateral arena, the US
has had more success in bilateral and regional negotiations. Finalising
agreements with several countries that had made no audio-visual services
commitments in the WTO, the United States secured bilateral concessions from
all, including aspiring TPPA partners Australia, Chile, Peru and Singapore.
These concessions, however, have been limited, especially in television and
radio, where restrictions like content quotas remain ‘the norm rather than
the exception’. In film production, distribution and projection, and in sound
184 JOCK GIVEN

recording, concessions have been less restricted – that is, the partners of the
US have been more prepared to constrain their capacity to retain, modify and
introduce policy measures in the future than for broadcasting.36
The real success of these bilateral negotiations for the US has been the
very different treatment of ‘old’ and ‘new’ media sectors. Chapters covering
‘electronic commerce’ have been included in all the FTAs, requiring very
liberal treatment of trade in ‘digital products’. The US goal has been to fence
off established media sectors like television, radio and film where governments
have so many assistance schemes in place and beneficiaries that resist their
removal. As audio-visual commerce shifts to new formats and forms of
distribution and exhibition encompassed by ‘digital products’, the share of
trade affected by traditional cultural policy measures should shrink.

Reconciling Trade with Culture and Information: The TPPA

The goal for the US in the TPPA negotiations will be to multilateralise and
improve upon the gains made in these bilateral agreements. Comments
submitted to the United States Trade Representative (USTR) make this agenda
clear. The Motion Picture Association of America (MPAA), representing the
major Hollywood studios, supports agreements that ‘protect intellectual
property, lower market access barriers to US audiovisual products and services,
and promote legitimate electronic commerce’. Noting that its industry is ‘one
of the few … that consistently generates, even in these difficult economic times,
a positive balance of trade’ for the US, the MPAA wants the new agreement to

… avoid ‘cultural exceptions’, and rely on the flexibilities built into FTAs to
promote economies’ cultural interests. Such exceptions are an unhelpful
precedent and suggest that cultural promotion and open markets are
incompatible, fostering protectionist inclinations that rear their heads in
the other international fora.37

The motion picture industry wants the TPPA to replicate the US free
trade agreement with Australia by prohibiting tariffs on both tangible and
electronically delivered digital products, and to improve on it by avoiding
the kind of broader reservations for audio-visual products that Australia took
out under the services, investment and electronic commerce chapters. While
the MPAA concedes that the reservations are ‘not wholly problematic given
Australia’s obligations under the services chapter’, it opposes them because it
believes they are ‘incompatible with the reality that open markets fuel cultural
diversity and consumers’ access to diverse content and ideas’. The MPAA
also wants incorporated into the TPPA some machinery provisions that were
included in most of its FTAs, but not the one with Australia – an obligation
to publish new final regulations before they take effect, and investor–state
provisions allowing US corporations to argue their cases directly against
governments before international arbitration panels. Further provisions are
 12. CULTURE AND INFORMATION 185

also sought targeting ‘cam-cording’, a practice used to produce bootleg copies

of movies and the pirating of encrypted cable TV signals.38
Australia’s reservations to the services, investment and electronic commerce
chapters of the AUSFTA already affect its ability to maintain and adopt local
programme requirements in established and new media. With established
media services, Australia can retain the existing ‘transmission quota’ of 55 per
cent for all programmes broadcast on commercial TV stations between 6 am
and 12 midnight and the programme-specific quotas for adult and children’s
drama and documentaries. Similar quotas can be imposed on at least one, and
a maximum of two, further free-to-air digital multichannel services provided
by each of the three commercial broadcasters. Local music quotas are also
permitted for commercial radio, and the 10 per cent local drama expenditure
requirement for pay TV drama and general entertainment channels can be
increased to 20 per cent.
With new media services, Australia’s right to introduce local content
requirements (though not all other policy measures) is tightly circumscribed.
Measures can be imposed on ‘interactive audio and/or video services’, but only
so as to ensure Australian content or genres are ‘not unreasonably denied’
to Australian consumers, and only on companies that carry on business in
Australia.39 This was a small but significant victory, given the determination
of the US to keep ‘digital products’ free from the kinds of assistance measures
it has fought against for so long in film and television. So far, Australia has
not used the powers reserved for established or new media services.
These reservations are not the sole source of Australian policy-making
capacity under the AUSFTA. The services, investment and electronic commerce
chapters provide considerable capacity to retain, modify and introduce measures
to support domestic cultural and information production and distribution.
Tax concessions and international co-production agreements can provide
more favourable treatment to projects co-produced with partner countries;
and indigenous programmes, spectrum allocation processes and universal
service policies can continue. Australian government representatives also
argued strongly at the time the AUSFTA was finalised that it did not constrain
public cultural agencies like the Australian Broadcasting Corporation (ABC)
and the Special Broadcasting Service, or grants, subsidies and investments
in cultural activities and enterprises.
Inevitably, these and other reservations in bilateral FTAs with the US will be
targeted in the TPPA negotiations. The US will try to minimise any reservations
taken out by other countries. Those other countries that already have bilateral
FTAs with the US will probably try to maintain similar reservations in the
TPPA. Since each free trade agreement reservation is unique to one country,
the aim of the US will be to isolate them, contrasting the singular protectionism
of the parties maintaining them with the preparedness of the other parties
to concede in equivalent agreements.
186 JOCK GIVEN

An obvious example is Australia’s granting of national treatment to New

Zealand television programmes for the purposes of local content quotas under
CER, compared with its detailed reservations about TV content quotas under
its FTA with the United States. This means that at present, New Zealand
programmes qualify as Australian under the quotas, but not those from any
of the other six aspiring TPPA partners, including the United States. Because
most of the foreign programming on Australian commercial television comes
from the US, allowing it to count as Australian would almost completely
undermine the effectiveness of the quotas. Here, the stance taken by countries
without FTAs with the US, especially New Zealand, will be critical. Having
already compromised its policy-making capacity through WTO commitments,
New Zealand might see nothing to gain from opposing the United States’
inevitable pressure on Australia’s AUSFTA reservations. But paradoxically,
New Zealand’s preferential access to Australia’s TV quotas under CER gives
it a good reason to support Australia’s continued capacity to maintain and
perhaps even broaden them as permitted under AUSFTA.
The USTR’s 2010 report on foreign trade barriers identifies several other
measures maintained by the aspirant TPPA partners that are likely to attract
attention in the negotiations. In the media sector, the report notes: Australia’s
programme quotas; Peru’s foreign ownership limits for domestic broadcasters;
Singapore’s licensing requirements for foreign newspaper distribution and for
satellite dishes to receive direct-to-home television broadcasts; and Vietnam’s
opaque film and Internet censorship processes, its plan for a single, government-
controlled purchaser of programming for pay TV, and its requirements for
local participation in cinema construction.40

Trading Culture and Information: Emerging Issues

Because trade agreements are difficult to renegotiate, they tend to last. Deals
done are generally much more durable than measures expressed in domestic
legislation. The audio-visual economy in 2010 is unrecognisable from the
one when the GATT was concluded in 1947, yet its rules still apply to trade in
audio-visual goods. This is the reason cultural policy advocates are so wary
of compromising nation states’ ability to implement measures in the future.
When considering the TPPA, trade negotiators will need to think well beyond
the inevitable squabbles about TV quotas, contemplating broader, longer-term
trends in cultural and information trade. They will need a more sophisticated
understanding of their uncertainties than the rhetoric that so often dominates
future visions of these sectors as places where perfectly informed consumers
in every part of the world get whatever they want, wherever and whenever
they want it. At least four issues seem especially relevant, in addition to the
intellectual property issues discussed in Chapter 11.
First, emerging global digital distribution systems are proving remarkably
concentrated. Google’s dominance of search, Facebook’s in social networking,
 12. CULTURE AND INFORMATION 187

Apple’s power in the markets for music downloads and smartphone applications,
and Amazon’s online bookselling strength all challenge the expectation that
global digital media would end scarcity and distribution bottlenecks. None of
these dominant positions is necessarily timeless, and new fronts are opening
up, as the current battle about the future of reading and bookselling among
Google, Apple and Amazon demonstrates. But network effects are real and
the prospect of a very small number of globally dominant sources of supply
for audio-visual content is not far-fetched. It need not be only undemocratic
nation states that worry about the influence over culture and information
wielded by such global behemoths, and that seek flexible powers to implement
measures ensuring their citizens are makers, as well as takers, of their outputs.
A good current example is the Google Books settlement, where decisions of
US courts will have immense significance for authors and publishers around
the world.
Second, the global financial crisis has inspired or helped to endorse
significant new state interventions in Western countries. Of particular note
for cultural and information trade are the broadband networks being built
with substantial government subsidy in several TPPA negotiating countries,
including Singapore, New Zealand and Australia, and the national broadband
plan submitted to the US Congress by the communications regulator. 41 These
represent major reversals of the trends towards liberalisation and privatisation
that have dominated telecommunications policy and been reflected in trade
agreements over the last twenty years. They involve complex new partnerships
between private and public enterprises; new structural relationships across
network, wholesale and retail activities; and novel access and other regulatory
arrangements. These might be difficult to reconcile with trade commitments,
especially if the networks being built are targets for full privatisation in the
future.42
Third, global debates about Internet censorship are acquiring at least as
much heat as those about culture and local content did during the Uruguay
round in the late 1980s and early 1990s. United States Secretary of State,
Hillary Clinton, firmly linked this to economic policy in a speech about
Internet Freedom at Washington’s Newseum in early 2010: ‘We feel strongly
that principles like information freedom aren’t just good policy, not just
somehow connected to our national values, but they are universal and they’re
also good for business.’43 Where some thought global digital media and the
fall of the Berlin Wall would undermine the ability and the desire of nation
states to censor information products, both the technical capacity and the
will have survived. Indeed, the intimacy of online and mobile media for
both corporations and individuals has given them special significance. The
corporations that citizens trust for their goods and services have not always
been as robust in their defence of free speech during commercial negotiations
as they have asked their representatives to be in trade talks. Yet those seeking
188 JOCK GIVEN

to defend the capacity of nation states to implement policy measures about

culture and information are going to find themselves grouped with net censors
and corporate cyber-warriors.
Fourth, the TPPA is part of a wider strategy for all aspirants now dealing
with a multipolar world. The global financial crisis produced the G-20.
As World Bank President and former United States Trade Representative
Robert Zoellick said, ‘the old world of fireside chats among G-7 leaders is
gone. Today’s discussion requires a big table ….’ Asia is a huge part of that
political and economic transformation. It tripled its share of the global
economy between 1980 and 2008, to 21 per cent.44 For American industry,
the TPPA is an opportunity to connect more deeply to that prosperity and to
resist any decline in its importance as a trading partner for Asian countries
as China continues to rise. Even if the new export opportunities in seven
small economies are ‘relatively modest’, it is ‘an important geostrategic group’
and the TPPA a potential foundation for a free trade area of the Asia-Pacific
that has so far been beyond APEC’s reach.45 At a time when Washington
Consensus capitalist countries have found themselves uneasily dependent
on the economies of nation states choosing different ideological routes to
economic growth, the TPPA provides an opportunity to lay some political
bedrock beneath the trading practices of the Asia-Pacific region – a ‘Western’
Far Eastern bloc.
Announcing the TPPA negotiations, the USTR said it was engaging with
‘an initial group of seven like-minded countries … to craft a platform for a
high-standard, comprehensive agreement – one that reflects US priorities and
values’.46 For the other seven countries, it will be no small test to secure their
own cultural interests and values, while accommodating both the American
giant at the table and the Asian one waiting outside.
13. Government Procurement
and Labour Issues
Ted Murphy

In 2009 the Australian trade union movement had a very public argument
with the Rudd Labor government on the issue of government procurement.1
It was the most publicised of several arguments between the union movement
and the Australian Labor Party (ALP) on the table at the opening of the ALP
National Conference in July that year. All the issues were ultimately resolved
behind the scenes by government representatives and factional leaders. The
media, understandably enough, reported that the conference was managed
with the aim of displaying a consensus between the Rudd government, the
party and the union movement.
Government procurement is one of the key issues for Australia in the
negotiations for a Trans-Pacific Partnership Agreement. The cornerstone of
the procurement policy of the Australian Council of Trade Unions (ACTU)
is that government procurement ‘should have as its objectives the retention
of and creation of jobs and the development and support of local industry in
Australia’, and that contractors supplying goods and services to government
should adhere to ethical employment practices.2 The union movement will
be campaigning for a government procurement chapter in the proposed
agreement that reflects this policy.
How the governments of various negotiating countries treat the procurement
issue will be especially interesting given their reliance on public stimulus
packages to counteract the collapse of demand and employment in the wake
of the global financial crisis. Public hostilities are likely to recur in Australia if
the TPPA negotiations affect the 2009 ALP conference settlement or greatly
circumscribe procurement options.
More broadly, there is scepticism within the union movement about the
claimed benefits of free trade, and the impact of free trade agreements (FTAs)
on labour conditions. The place of labour rights in trade agreements has long
been a matter of contention within the ALP. Again, a policy change at the
2009 ALP conference supported the incorporation of core labour standards in
190 TED MURPHY

trade agreements, largely resolving this disagreement between political and

industrial labour. The TPPA negotiations will be the first test of the Labor
government’s commitment to the new policy. The ACTU will be campaigning
to secure a labour chapter with better provisions than those negotiated for the
Australia–US Free Trade Agreement (AUSFTA) by the Bush administration
and the Howard government. An alliance of the peak union bodies from
most of the countries affected by the proposed TPPA has already set down
the base lines around which they and their membership will be campaigning
internationally and at the local level.

Current Procurement Commitments

The FTAs to which Australia is a party have widely varying clauses in relation
to government procurement. The agreement with Thailand simply commits
the parties to establish a working group to discuss relevant issues, and to
report on the scope for commencing negotiations to include procurement.
In preparation for such negotiations, both governments promise to promote
and apply the principles of transparency, value for money, open and effective
competition, fair dealing, accountability, due process and non-discrimination.
Significantly, the dispute settlement chapter of this FTA does not apply to
the procurement section unless that is authorised as a result of the proposed
negotiations.
The Australia–Singapore agreement provides for the parties to use ‘open
tendering’, which involves a public call for tenders, or ‘limited tendering’
whereby one or more potential suppliers are directly invited to tender. The
FTA with Singapore is also notable for an article that states that nothing in
the procurement chapter shall prevent the parties from using government
procurement to promote industry development, including measures to assist
small and medium enterprises to gain access to the procurement market.
Australia’s obligations under the agreement with Singapore are limited
to Commonwealth government entities. In contrast, Australia’s FTAs with
the US and Chile include procurement obligations for a range of State and
Territory government entities. These FTAs have no equivalent to the broad
reference in the Singapore FTA to industry development. However, both do
contain an exception for small and medium enterprises (SMEs), without
defining what qualifies as an SME.3
The AUSFTA allows both selective tendering and limited tendering,
with conditions. In relation to selective tendering, invitations to tender are
confined to firms that are selected by the procuring agency; the process is
thus subject to tenders being invited from the largest number of suppliers
consistent with the efficient operation of the procurement system. Limited
tendering is subject to the proviso that it is not used to avoid competition
or to protect domestic suppliers or in a manner that discriminates against
potential suppliers of the other party. The FTA also specifies circumstances for
 13. GOVERNMENT PROCUREMENT AND LABOUR ISSUES 191

the use of limited tendering – for example, that no tenders were submitted in
response to a prior notice; that the tenders received did not conform with the
requirements of the tender documentation; and that the goods and services
could only be supplied by a particular supplier because of technical reasons,
the protection of copyright, patents or proprietary information, or because
they involved works of art.
Australia and New Zealand have a Government Procurement Agreement
as part of the Closer Economic Relations (CER) framework. New Zealand
is effectively treated by State and Commonwealth governments as part of
Australia for procurement purposes. However, procurement by any local
authority, body corporate or other legal entity is excluded unless the parties
decide to apply it to such an entity. They are charged under the agreement
to use their ‘best endeavours’ to so apply the policy, consistent with good
commercial practice. There is no provision for FTA-type dispute settlement
procedures for procurement or other CER obligations because the close
relationship between Australia and New Zealand has been seen as sufficient
to deal with any difficulties.

Exceptions and Exclusions

The agreements typically include a range of exceptions, the standard ones being
for security and defence procurement; procurement from other government
entities; measures that are ‘necessary’ to protect intellectual property, public
morals, order or safety, human, animal or plant life or health; and measures
to provide for goods and services produced by the handicapped, prison
labour, and philanthropic and not-for-profit institutions. The word ‘necessary’
in this context incorporates a requirement to use measures that are least
trade-restrictive to achieve the desired objective. Moreover, many of these
exceptions are subject to the requirement that measures are not applied
in a manner that constitutes arbitrary or unjustifiable discrimination or a
disguised restriction on trade.
Again, Australia’s FTAs show wide variations. The texts of free trade
agreements with the US and Chile record the parties’ understanding that
the exceptions designed to protect the life and health of humans, animals
and plants encompass environmental measures that are ‘necessary’ for
these purposes.
The agreement with Singapore also has an exception for the promotion
of employment and trading opportunities for Australia’s indigenous people
in regions where significant indigenous populations exist. The comparable
exceptions in the US and Chile FTAs are broader: they omit the requirement
that the indigenous population is significant and cover measures for the
health, welfare, and economic and social advancement of indigenous people.
Specific services are excluded from some procurement chapters, but this
is uneven across the agreements. An important example involves health
192 TED MURPHY

and welfare services. The Australian schedule in the Chile agreement has a
note that the procurement chapter does not apply to those services. While
Commonwealth health and welfare services are not excluded from the AUSFTA,
either in the procurement chapter itself or Australia’s schedule, the lists of
State and Territory government entities that are covered by the procurement
obligations generally avoid commitments on health and welfare services, with
the State of Victoria being a notable exception.
Financial services are excluded from the procurement chapter of the
free trade agreement with Chile. As well, there is a specific exception for
the Australian Department of Finance and Deregulation regarding the
procurement of investment management, advisory and custodian services
by a named body in connection with Australian government superannuation
funds. This FTA also excludes the procurement of fiscal agency or depository
services, liquidation and management services, and services related to the
sale and distribution of public debt.
The FTA with Chile also carves out the procurement or rental of land,
existing buildings, or other immovable property or rights thereon where they
are not part of an arrangement for procurement of construction services.
Government procurement of construction services is normally included in
the FTAs to which Australia is a party, subject to the value of the contract
being above a nominated dollar threshold that is regularly indexed.

The 2009 Local Procurement Campaign

The initial impetus for a campaign over government procurement arrangements
came from the Australian Workers Union (AWU). The AWU is one of the
major unions aligned with the right faction of the ALP and the right caucus
of the ACTU. The campaign occurred against the background of the global
financial crisis and plans announced by the Rudd government for significant
economic stimulus spending, particularly on infrastructure.
The AWU argued that the steel industry was at risk due to the extent of the
use of imported steel for construction projects. Early in 2009, Paul Howes, the
national secretary of the union, argued in the union journal that countries with
subsidised steel mills were likely to respond to the global economic downturn
by dumping their surplus steel in Australia’s markets. Howes claimed that the
future of the local industry hung in the balance, and with it the employment
prospects of AWU members and the financial security of their families and
communities. Howes promoted the AWU’s New Steel Plan and called for a
strong preference for Australian steel in the Rudd government’s infrastructure
stimulus package.4
Measures proposed by the AWU included: using the WTO’s anti-dumping
and safeguards provisions; updating Australia’s anti-dumping laws and their
administration; issuing government-backed steel industry infrastructure
bonds to finance production and investments; paying production bounties
 13. GOVERNMENT PROCUREMENT AND LABOUR ISSUES 193

to reward on-time and on-budget completion; and using a world benchmark

comparator price reflecting the ‘true cost of production’ to compare local
and overseas bids.
Several of these proposed measures were consistent with an intention to work
around rather than confront Australia’s FTA commitments on government
procurement. However, the AWU paper also raised the idea of domestic steel
producers having a first right of refusal to meet steel requirements associated
with government infrastructure spending. In the event that the steel could
not be sourced locally at a competitive price, the tender would be open to
international bids.5
This approach, had it been adopted by the Australian government, could
well have led to a dispute under some free trade agreements to which Australia
is a party. While the AUSFTA allows selective and limited tendering, both
options are circumscribed. Moreover, the value of a major construction project
was likely to be at or above A$9,514,000, the nominated monetary threshold
(as at January 2010) at which the procurement obligations in the AUSFTA
applied to construction.
The AWU campaign crossed factional boundaries in the industrial and
political wings of the Australian labour movement. In 2009 the Australian
Manufacturing Alliance was formed, bringing together the AWU and the
Australian Manufacturing Workers’ Union (AMWU), a major leftwing union
affiliated with the ALP with a history of campaigning over industry policy
and trade agreement negotiations. The issues pursued by the Alliance were
taken up by the 2009 ACTU Congress, which adopted a policy on government
procurement. The policy included the provision of ‘a price preference advantage
for Australian suppliers of 20 per cent with an additional five per cent for
those companies based and operating in regional Australia’.6
This aspect of the ACTU policy was based on the preference available
to Australian and New Zealand suppliers under the New South Wales
government’s procurement policy. The emphasis of the campaign by the
Australian Manufacturing Alliance in the lead-up to the ALP conference was
more on preference for national suppliers for government-funded infrastructure
projects than on the broader ACTU preference policy, but this distinction was
largely obscured in the political debate at the time.
As part of its campaign, the Alliance commissioned and released a poll that
showed that 85 per cent of respondents believed that the Federal government
should buy Australian-made goods even if they cost more. This indication of
broad support for local preference policies elicited warnings from the then
Prime Minister, Kevin Rudd, about the need to avoid both counter-productive
Depression-era policies and any form of protection that would invite retaliation
from other countries.
Around the time of the 2009 ALP conference, Howes argued in media
interviews that Australian producers were effectively locked out of supplying
194 TED MURPHY

steel for government-funded projects because many of the suppliers were

integrated into global steel supply chains. Judging by the conference outcome,
this appears to have been a more acceptable argument in government circles.
The settlement reached during the ALP conference involved a A$19.1 million
funding increase over four years for procurement-related programmes. The
funding was earmarked to appoint Supplier Advocates to champion Australian
industry in the government marketplace, to improve competitiveness, and
to assist with requirements on suppliers to submit an Australian Industry
Participation Plan for major national government contracts, government-
funded infrastructure plans and the Industry Capability Network. The
Network uses procurement experts to link Australian companies and project
opportunities. A subsequent user guide for procuring agencies defined major
Commonwealth government procurement as that valued at over A$20 million;
the guide also excluded any tender that did not have an Approved Australian
Industry Participation Plan.7 As of June 2010, Supplier Advocates had been
appointed for steel, railways and information technology.
The ACTU’s programme of work on government procurement for 2010
encompassed the potential procurement implications of the TPPA negotiations.
On 15 March 2010 the presidents of the ACTU, the American Federation
of Labor and Congress of Industrial Organizations (ALF–CIO), the New
Zealand Council of Trade Unions and the National Trade Union Congress
of Singapore issued a statement on the TPPA negotiations. The statement
included a call on the governments involved in the negotiations to ensure that
the procurement chapter does not constrain the ability of national, regional,
and local governments and authorities to use government procurement policy
to promote job creation, local economic development, and environmental
and social goals.8
It will be difficult, however, for the ACTU to ensure that procurement
issues will receive adequate media attention during the course of the TPPA
negotiations, despite the controversies over the Snowy Mountains Hydro-
electric Scheme, blood products and the Pharmaceutical Benefits Scheme
(described by Patricia Ranald in Chapter 2). In the Australian context,
critics of the AUSFTA and journalists with an interest in trade policy will be
expecting a renewed, and possibly more aggressive, set of demands from the
US in other highly sensitive areas, such as local content for television, foreign
investment, the labelling of product with genetically engineered ingredients,
and Australia’s processes for limiting the costs of pharmaceutical products.
Unions in other TPPA negotiating countries will face a similar dilemma.
However, there are ways in which the profile of procurement issues can
be raised in the media and the community. First, the trade union movement
can point to the risk of the TPPA negotiations undermining the revised
arrangements for Australian Industry Participation Plans. Second, the ACTU
 13. GOVERNMENT PROCUREMENT AND LABOUR ISSUES 195

could point out that the TPPA negotiations provide an opportunity for the
US to re-open the exclusions that Australia secured in the AUSFTA, such as
plasma fractionation (blood) services (see Chapter 2). Third, the unions could
broaden the debate by highlighting the issue of government procurement of
services.

Labour Chapters
The widely varying provisions in the labour chapters of the free trade agreements
involving the TPPA negotiating countries, or the omission of such a chapter
altogether, largely reflect the politics of the governments in office at the time
and the specific negotiating dynamics between the parties and among their
domestic constituencies. The only FTA to which Australia is a party that has
a labour chapter is the AUSFTA. The chapter was reluctantly negotiated by
the Howard government because of the long-standing history of interest in
labour provisions in trade agreements on the part of the US Congress.
In 2003 ACTU and the AFL–CIO issued a joint statement on the
negotiations that led to the AUSFTA; this called for the core International
Labour Organization (ILO) labour standards to be included as an enforceable
provision in any resulting FTA, and objected to the notion that FTA disputes
over labour standards could be limited to the situation where a party failed to
enforce its domestic labour standards in order to achieve a trade advantage.9
The outcome fell well short of this position.
The labour chapter of the AUSFTA included a Statement of Shared
Commitment that reaffirmed the parties’ respective commitments under
the ILO Declaration on Fundamental Principles and Rights at Work and its
Follow Up 1998 Declaration. The statement said that each party would strive
to ensure that its labour laws were consistent with: the right of association;
the right to organise and bargain collectively; acceptable conditions of work; a
prohibition on forced or compulsory labour; and labour protections for children;
and the prohibition and elimination of the worse forms of child labour. The
statement also restricted access to the dispute settlement proceedings of
the FTA to the issue of whether a party had failed to enforce its labour laws
effectively, through a sustained or recurring course of action or inaction, in
a manner affecting trade between the parties.10 The chapter, including the
dispute provision, was based on labour chapters negotiated in the earlier
US–Singapore and US–Chile agreements.
The 15 March 2010 Labour Declaration from the peak union councils of
Australia, New Zealand, Singapore and the US about the TPPA negotiations
set out minimum requirements for this new FTA: each country should be
required to adopt, maintain, and enforce laws and regulations consistent
with ILO core labour rights as well as domestic laws on wages, working hours
and safety; and the TPPA should provide for both effective dispute-resolution
196 TED MURPHY

procedures and strong remedies, including trade sanctions, on these matters.

The declaration also called for a tripartite process in each participating country
to bring domestic labour laws into compliance with the ILO standards.11
Securing commitments of this kind from governments will not be easy. For
a start, New Zealand, Singapore, Brunei and Chile have already concluded
a Trans-Pacific Strategic Economic Partnership (or P-4) without a labour
chapter. Instead, the P-4 has a separate Memorandum of Understanding
on Labour Cooperation, which is buttressed by an exchange of letters to
the effect that a party that withdraws from the memorandum also ceases to
be a party to the P-4 Agreement.12 The memorandum reaffirms the parties’
commitment to the 1998 ILO Declaration and states that it is inappropriate
for parties to encourage trade or investment by weakening or reducing labour
laws. However, while there is a requirement for consultations, there is no
effective dispute resolution procedure on these or other matters referred to
in the memorandum.
A second factor is the diversity of the countries negotiating the TPPA.
The nature of the government and of labour regulations will have a bearing
on their approach to negotiations about a labour chapter. The International
Trade Union Confederation (ITUC) in its 2009 Annual Survey of Trade Union
Rights states that there is no legal basis for collective bargaining or strikes in
Brunei Darussalam and no freedom of association for migrant workers, who
constitute the majority of the private sector workforce. Brunei has not ratified
the ILO Conventions on freedom of association and collective bargaining.13
According to the ITUC, in Vietnam, while there are legal avenues to take
industrial action in the private sector, that option is limited in practice by
high thresholds set for strikes to be approved by workers, opportunities for
employers to make legal challenges to industrial action, and the perception
that legal unions are too close to the government; illegal wildcat strikes are
often the only option available to workers.14 The ITUC survey also notes that
conservative governments were elected in New Zealand in 2008 and Chile in
2009, with a renewed assault on labour standards and union rights expected
in both countries.
On the other side of the ledger, there are hopes that more progressive
views on labour and trade from a Democrat-controlled US Congress and the
Obama administration will have a positive bearing on the TPPA negotiations.
The influential AFL–CIO is likely to promote the labour chapter in the 2006
US–Peru agreement as the bare minimum. Under that chapter the parties are
obliged to adopt and maintain the obligations in the 1998 ILO Declaration
on Fundamental Principles and Rights of Work in their statutes, regulations
and practices. These obligations relate to freedom of association; effective
recognition of collective bargaining; compulsory, forced and child labour;
and discrimination in employment. There are related obligations against
 13. GOVERNMENT PROCUREMENT AND LABOUR ISSUES 197

waiving or derogating from those standards, or offering to do so, in a manner

that affects trade between the parties. The Peru–US FTA also provides that a
party shall not fail to enforce its labour laws effectively through a sustained
or recurring course of action in a manner that affects trade or investment
between the parties. Unlike the AUSFTA, there is full access to the normal
dispute resolution procedure on the matters in the labour chapter.
Judged by the standards of the free trade agreements to which Australia
is a party, the US–Peru labour chapter would be a major advance, although
even that text still does not refer to the detail of any of the eight core ILO
conventions to which the obligations relate. The Australia–Chile FTA has no
labour chapter and merely lists labour issues as one of many areas for potential
future economic cooperation. Ironically, while its terms were mainly negotiated
by the Australian side under the Howard government, it was finalised when
social democratic governments were in office in both countries.
Conversely, other governments involved in the TPPA negotiations might
see the AUSFTA’s labour chapter as a compromise point, or as a benchmark
for a new compromise. It could be particularly attractive to governments
that prefer the approach of the P-4’s Memorandum of Understanding but
recognise the political necessity, given US involvement, of a labour chapter
in the proposed TPPA. Parties may also want to limit the outcome on labour
issues so that other member economies of APEC were not deterred from
acceding to the agreement – however long term and remote that prospect
might seem.
The ways in which the various peak unions place pressure on their negotiators
to achieve a high quality outcome will depend on their relationship with the
government and the prevailing local conditions. The Australian government
will be negotiating for the TPPA against the background of a change in the
trade platform of the ALP adopted at the 2009 ALP conference. Specifically:

Labor supports the incorporation of core labour standards in international

trade agreements. Labor will outlaw the importation into Australia of goods
and services produced with forced or prison labour. Labor will work actively
through the WTO and other international trade organisations to combat
and overcome the scourges of forced, prison or child labour.15

This is a significant advance over the resolutions of previous ALP conferences

about Labor supporting a dialogue between the WTO and the ILO over labour
issues. Labor governments have in the past breached the technically binding
provisions of the ALP platform, even without the excuse of having to negotiate
with other parties. The long-term implications of the ALP’s policy shift at
the 2009 conference – and whether this has any practical consequence in the
government’s TPPA negotiations – thus remain to be seen.
198 TED MURPHY

Conclusion
This chapter has focused on the immediate questions confronting the labour
movement in the TPPA negotiating countries: what are the base lines and best
practice standards the movement will demand for public procurement and
labour chapters in a TPPA. In closing, however, it is important to acknowledge
there are broader questions for unions to consider about seeking to achieve
advances for the labour movement through free trade agreements, in particular
through labour chapters.
The implicit rationale for this approach is a strategy to overcome the lack
of power on the part of the ILO to ensure the compliance of its member states
with their ILO commitments. By comparison, the multilateral trade regime
has teeth, especially since the creation of the WTO with its powerful dispute
settlement mechanism. However, it appears to have no interest in using those
powers on labour matters. Indeed, a majority of WTO members has deflected
a series of initiatives on the part of the international trade union movement to
make labour issues a legitimate matter for WTO meetings. Organised labour
has also proposed modest goals, such as tripartite processes to promote the
implementation of ILO obligations, or the establishment of labour advisory
bodies within institutions, such as APEC. Such proposals have frequently
been rejected.
Over the last decade peak union councils representing workers in various
regions of the world and at the national level have increasingly pursued more
ambitious objectives by campaigning for labour chapters in FTAs. While there
have been gains made in the standard of some labour chapters in particular
agreements, the preceding discussion shows that the record of achievement
has been chequered at best. On the one hand, the workers’ group at the ILO
is a central and legitimate institution, but the ability to enforce the outcomes
in ILO conventions is weak. On the other hand, free trade agreements may
be more enforceable but unions are not even present at the negotiating table.
Moreover, as the FTAs are essentially about trade and domestic economic
liberalisation, this terrain is hardly hospitable to the union movement’s
agenda of guaranteed labour standards or public procurement that aims to
generate employment.
If the assumption is that this approach will lead to breakthroughs on the
enforceability of labour standards at the ILO or through another international
institution, or better job security and working conditions through a proliferation
of bilateral and regional FTAs, the union movement faces a very long march
and with it considerable risk in terms of the value of the precedents created.
While this is easier said than done, a different strategy is needed for the labour
movement to make significant progress in achieving these goals.
14. International Capital
and Investment
Bill Rosenberg

After decades of unfettered foreign investment in New Zealand, the tide has
begun to turn. The prospect that overseas interests could become absentee
landlords of large areas of New Zealand farmland has prompted a backlash
against the hands-off approach to foreign investment that has prevailed since
the mid-1980s. Wary of the political fallout, the National-led government has
repeatedly delayed the release of a review that is widely expected to weaken
the already-feeble rules even further.
The timing is highly significant in terms of the Trans-Pacific Partnership
negotiations. New Zealand and Australia removed most of their traditional
barriers to trade, such as tariffs for goods and agriculture, a long time ago.
They want the US to do the same for its highly protected agricultural sectors
of dairy and sugar. Both countries will face enormous pressure to guarantee
new and far-reaching rights to American businesses in other commercially
lucrative areas, especially services and investment, with no guarantees that
the US will open its sensitive agricultural markets in return. Conceding to
those demands in the present climate could have major political ramifications.
The annual reports from the US Trade Representative (USTR) on the
purported barriers to its investors in New Zealand foreshadow US objectives
in the TPPA negotiations.1 New Zealand has already conceded some of these
in various free trade agreements, but large and litigious US corporations
present a much greater risk that the provisions will be used to New Zealand’s
considerable disadvantage.
One target will be the minimalist Overseas Investment Act (OIA). At the
least, the US will demand the same liberal treatment for its investors in New
Zealand as Australian investors enjoy, which means exempting most foreign
investment from the vetting regime. New Zealand will be expected at least
to match the threshold of A$800 million for vetting US investments that
Australia agreed to in the Australia–US Free Trade Agreement (AUSFTA).
The few special restrictions that apply to foreign holdings, specifically in
200 BILL ROSENBERG

Telecom New Zealand and Air New Zealand and to fisheries and land, will
also come under attack.
US investors will also want the right to take the New Zealand government
directly to an international tribunal to challenge new laws, administrative
actions and court decisions that reflect New Zealand’s national interest,
but that US corporations say undermine the commercial value of their
investments. Even threats to initiate such legal actions can have a chilling
effect on government regulation. Their leverage over government decisions
may be further boosted by so-called ‘transparency’ provisions that require
governments to consult with affected overseas investors before making
changes to administrative procedures, regulations or laws.
The US will also demand greater liberalisation of the financial services sector
and associated free movement of capital into and out of New Zealand. This
could prevent the introduction of measures like a financial transaction tax
to stem speculative capital flows. The implications of a TPPA for regulation
of the financial sector are examined in depth in Chapter 16. But financial
services and investment are also closely intertwined. Deeper liberalisation in
financial services would guarantee investment rights to US financial giants
with dubious histories, such as AIG or Citigroup, which could enforce those
rights through investor–state dispute mechanisms. Such an agreement would
further limit the tools available to governments to address systemic financial
instability and manage international financial movements, at a time when
the lessons of the global financial crisis show stronger rather than weaker
regulation is required.
This chapter examines the implications for New Zealand of a TPPA with
particular reference to the overseas investment regime and constraints on
the government’s right to regulate investment, finance and capital flows.

Overseas Investment in New Zealand

Overseas investment is a very significant part of New Zealand’s economy. In
recent years, New Zealand has accumulated one of the largest net international
liabilities of the OECD countries in propotional terms. The debt is mostly
private, not public. The income foreign investors receive from New Zealand
is more than the contribution to New Zealand’s GDP made by agriculture,
forestry and fishing combined. It is obviously in the national interest to ensure
that New Zealand is obtaining the greatest possible benefit from overseas
investment, given the huge outflow of resources that investment generates.
Cross-border investment takes two principal forms: foreign direct investment
and financial movements. FDI has been the subject of explicit though
weakening controls in New Zealand, Australia and elsewhere for many years.
International financial movements, whether in the form of longer-term debt
or short-term (often speculative) flows, bring challenges to both financial
and macroeconomic stability. These have been highlighted by the global
 14. INTERNATIONAL CAPITAL AND INVESTMENT 201

financial crisis. Short-term flows are particularly relevant in the case of New
Zealand: the Bank for International Settlements (BIS) reported that, in 2007,
New Zealand’s dollar was the eleventh most-traded currency in the world,
accounting for 1.9 per cent of average daily turnover in the global financial
markets,2 despite the country ranking around fifty to sixty by size of economy
and producing about 0.2 per cent of world output.
The two forms of cross-border investment are not always distinct: private
equity investment, for example, which was probably the predominant form
of FDI during the 2000s and is a major investor in privatisations and public–
private partnerships, is financially driven with high debt loadings and can
involve rapid movement of capital.

Foreign Direct Investment

Foreign direct investment in New Zealand is regulated by the Overseas
Investment Act 2005, which distinguishes three main forms of foreign
investment for the purposes of regulation: land, fishing quota, and other
foreign direct investment.
There are relatively detailed requirements for ownership of certain types of
land. The Act calls land that is subject to these requirements ‘sensitive land’. It
encompasses non-urban land, land on islands other than the North or South
Islands, the foreshore or seabed, the bed of a lake, conservation and park
land, and land registered under the Historic Places Act. Overseas investors
also require consent to acquire a 25 per cent or more interest in fishing quota
and other entitlements to catch fish, or in a company that has such interests.
The largest part of FDI by value is, however, business investment – such as
ownership of banks, telecommunications, media, supermarkets, elderly care
facilities and transport firms. Despite its significance in the economy, business
FDI is subject to minimal control under the OIA, and there is no regulation
at all if the value of an investment falls under a threshold. The threshold has
been raised on several occasions over the years and now stands at NZ$100
million. Under a new Closer Economic Relations (CER) Investment Protocol
still under negotiation, the threshold for Australian companies will rise to
NZ$477 million. The result of this hands-off regime is that most business FDI
is exempt from oversight. A current review of the overseas investment rules
may raise the threshold further.
The only criteria for approving business FDI under the Act are that the
investors have business experience and acumen relevant to that investment
and have demonstrated financial commitment to the investment, and that all
the individuals with control over the investment are of good character. The
weakness of these provisions is obvious, and they appear to have rarely, if ever,
been used to prevent an investment. The fact that an investor is making an
investment can be used as evidence of both their relevant business experience
and acumen and their financial commitment; the good character requirement
202 BILL ROSENBERG

is routinely satisfied by the individuals providing statutory declarations that

they are of good character.
For land and fishing quota, there are more rigorous conditions. For sales
of the fishing quota to foreign interests, the Fisheries Act 1996 (which the
OIA refers to) specifies that the sale must be ‘in the national interest’. For
foreign investment in land, the OIA requires that the sale ‘will, or is likely
to, benefit New Zealand’ and for non-urban land exceeding 5 hectares, the
‘benefit will be, or is likely to be, substantial and identifiable’. Factors for
assessing the benefit to New Zealand include: job creation or retention of
job opportunities; introduction of new technology or business skills into
New Zealand; increased export receipts for New Zealand exporters; added
competition, efficiency or productivity; enhanced services; and increased
processing within the country of New Zealand’s primary products in the case
of farm land, or fish or aquatic products in the case of fishing quota. Other
provisions in the Act push investors into making commitments such as: pest
control, erosion control or covenants over the land; protecting trout, salmon
and game; improving walking access to the public; or offering foreshore, sea-,
river- or lake-bed to the Crown. Farm land must be first offered on the open
market to buyers who are not overseas investors before sale to an overseas
investor can be approved. It is significant that, for foreign investment in both
land and fishing quota, the OIA and Fisheries Act allow the relevant ministers
to specify additional factors through regulations, and in the case of fishing
quota, to take into account any other factors they think fit.3
Concerns about the regulation of overseas ownership of land are particularly
topical with widespread concern in New Zealand following the offer by a
company with Chinese shareholding for sixteen (mainly dairy) farms owned
by the Crafar family after it went into receivership. The substantive concerns
were the strategic nature of land ownership for New Zealand, especially in
dairying. Fonterra chairman Henry van der Heyden, for example, expressed
concern that ‘New Zealand’s economic future could, in fact, be in jeopardy
if we allow our dairy industry to slip from our control’, and Prime Minister
John Key warned that New Zealanders could ‘become tenants in our own
country’.4 The controversy has highlighted the inadequacy of the OIA to
take a strategic view of such sales. Instead, it considers sales in a fragmented
manner on their individual merits.
There were 1629 decisions made by the Overseas Investment Commission
and its successor the Overseas Investment Office from 2001 to 2009. Because
of the high value threshold at which business investment requires approval
and the weakness of the criteria for judging such investment, the vast majority
of decisions since the OIA was reviewed and the current statute came into
force in 2005 have involved land (1561) and just one has involved fishing quota.
There were only 44 refusals, all with regard to land acquisitions.5
The most important recent refusal was that of the 2008 application by
 14. INTERNATIONAL CAPITAL AND INVESTMENT 203

the Canada Pension Plan Investment Board to acquire up to 40 per cent of

the shares of Auckland International Airport Limited. This included 1548
hectares of land. Ministers refused the application, finding that on balance
there was not substantial and identifiable benefit.6 It was crucial that there was
sensitive land involved in this proposed investment, otherwise the ministers
would have had no power to consider the balance of benefits. This case is
discussed further below.
In summary, the Overseas Investment Act is completely ineffectual with
regard to most decisions on foreign investments that are economically
important to New Zealand, unless there happens to be sensitive land involved
and, as noted, there is growing public concern over its weaknesses regarding
sensitive land.
There is also considerable evidence that the OIA does not ensure that New
Zealand is getting value for money for its high levels of inward foreign direct
investment. A significant part of the foreign direct investment coming into
New Zealand is of low quality.7 A large proportion of FDI in the 1990s was
privatisation, some of which has had to be reversed because of its problems
to the wider economy, and some of which is still problematic. While there
is little data to enable a clear picture to be drawn, a significant part of the
more recent FDI has been takeovers in the form of leveraged buyouts for
short-term capital gain through private equity financiers. They are typically
investing for at most three to five years and have no interest or expertise in any
particular industry or sector, as long as they can see opportunities for profit.
Kerry McIntosh, the New Zealand representative of private equity investor
Ironbridge, rejected concerns that the company had no media experience
when it took over MediaWorks (the owner of free-to-air television channels
TV3 and C4 and one of New Zealand’s two largest commercial radio networks,
RadioWorks), on the grounds that: ‘Ironbridge did not know much about waste
either before buying EnviroWaste’, a major waste management company.8 It is
questionable whether New Zealand is seeing direct benefits, let alone indirect
positive ‘spillovers’ of new technology, skills, jobs and increased competition
from such investment. Greenfield investment, considered by some experts
to be more desirable than takeovers, is relatively rare: the United Nations
Conference on Trade and Development (UNCTAD) estimates there were
only twenty to thirty a year in New Zealand between 2004 and 2008.9 There
is therefore a very arguable case for much more selective policies to control
FDI coming into New Zealand.
However, New Zealand’s foreign investment regime is locked in by existing
trade and investment agreements. In 1994, New Zealand made commitments
under the General Agreement on Trade in Services (GATS) in the WTO. These
commitments permit the continuation of the Overseas Investment Act regime
as it was in 1994; the only changes allowed must preserve or increase that level
of access to New Zealand by foreign investors in the services sectors that are
204 BILL ROSENBERG

covered by New Zealand’s schedule of commitments. There are exceptions

for enterprises that were in state ownership in 1994 and for more favourable
treatment for Māori business.
Also under the WTO, New Zealand is party to the Agreement on Trade-
Related Investment Measures (TRIMS), which prohibits requirements on
foreign investors to use locally produced goods, for example, or to limit the
amount of imported content.
Options for regulation of FDI have been further constrained by the CER
agreement with Australia and subsequent free trade and investment agreements.
The 2001 Singapore–New Zealand Closer Economic Partnership Agreement,
for example, expanded the services sectors to which GATS-like restrictions
applied. It also gave Singapore investors in economic activities other than
services the right to the best treatment New Zealand gives investors of any
other nation, most importantly Australia under CER.

Investor–State Disputes
In the TPPA negotiations, the US is expected to demand an investor–state
disputes procedure.
This power for investors to challenge legislation and actions of the state is
not available to New Zealand investors, let alone ordinary citizens, although it
is similar in many respects to proposals in the highly controversial Regulatory
Responsibility Bill currently before the New Zealand Parliament.10 However,
empowering corporations through ‘trade treaties’ has even greater constitutional
implications than the proposed domestic law, as it subjects New Zealand’s
regulation of FDI to decisions of international panels of trade lawyers,
negotiators and academics. Those panels routinely take an overwhelmingly
trade-related view that relegates or ignores wider social, economic and
environmental considerations. Conflicts of interest have also been a concern.11
While many decisions are never made public, there is an increasing stream of
adjudications, some of which have awarded hundreds of millions of dollars
to investors. Tom Faunce and Ruth Townsend (Chapter 10) show how such
cases have overruled laws and court decisions in relation to public health.
These investor–state disputes provide another example of the undermining
of democracy that Bryan Gould describes in Chapter 1.
The US is meeting increasing opposition at home to such investor powers.
The inclusion of investor-initiated enforcement was successfully resisted by
Australia in the Australia–US Free Trade Agreement. Regrettably, New Zealand
governments have already accepted such enforcement in the Association of
Southeast Asian Nations (ASEAN) agreement, in free trade agreements with
Singapore and China, and in an investment agreement with Hong Kong.
Legal claims made by foreign investors using these powers commonly
concern two provisions on investment: ‘indirect expropriation’ and ‘fair and
equitable treatment’. The US is likely to want to strengthen these in a TPPA,
 14. INTERNATIONAL CAPITAL AND INVESTMENT 205

though with some finessing to reduce the risk of damage to its own domestic
regulatory powers.

‘Indirect Expropriation’
One ground used for claims is ‘indirect expropriation’ – that is, actions
‘equivalent’ to expropriation or nationalisation. This has been invoked,
for example, in a toxic waste case involving the US Metalclad corporation,
decided in 2000. The decision of a Mexican municipality to demand a
construction permit before the company could begin building a toxic waste
facility was successfully challenged as illegal under the North American Free
Trade Agreement (NAFTA). The Mexican government was ordered to pay
US$15.6 million in damages because the corporation had lost the value of its
investment. This was regarded as equivalent to expropriation even though no
expropriation had taken place. The tribunal that heard the case stated that it
‘need not decide or consider the motivation, nor intent of the adoption of the
Ecological Decree’.12 Further examples are provided in Chapter 10.
Recent corporate complaints in New Zealand against an emissions trading
scheme (explained in Chapter 9) illustrate the possibilities of similar legal
action. In May 2008, for example, the corporate-led Flexible Land Use
Alliance accused the government of ‘destroying’ NZ$3 billion to NZ$4 billion
worth of land value when the government announced its intention to impose
retrospective liabilities on those who harvest pre-1990 forests and convert the
land to other uses. The alliance spokesperson said that if the government
did not back down on the matter, the group wanted full compensation.13 The
emissions trading scheme was set up to recognise the real costs of activities
that increased the rate of global warming. If all such costs were compensated,
the point of the scheme would be lost. Yet under expropriations provisions
of an investment chapter, a corporation from another TPPA party might
well have been able to mount a case against the New Zealand government,
undermining the scheme and privileging overseas investors at the same time.
Similarly, business groups such as the New Zealand Business Roundtable
have repeatedly asserted that government actions to force Telecom New Zealand
to open its network to competitors (referred to as ‘unbundling’) amount to
expropriation and require compensation (see Chapter 15).14
In response to US concerns that indirect expropriation provisions were
undermining desirable social and environmental protections, the US drafted
an interpretative statement that it included in its revised model bilateral
investment treaty (BIT) in 2004.15 A similar statement appears also in
annexes to the New Zealand–China and ASEAN–Australia–New Zealand
free trade agreements. The New Zealand–China statement, for example,
requires the indirect expropriation to be severe or for an indefinite period and
disproportionate to the public purpose behind the government’s action. There
is more likely to be an indirect expropriation when the measure discriminates
206 BILL ROSENBERG

against the investor or is in conflict with the state’s prior binding written
commitment to the investor. The interpretative Annex then states that:

Except in rare circumstances [to which the criterion of discriminatory

measures that conflict with binding commitments applies], such measures
taken in the exercise of a state’s regulatory powers as may be reasonably
justified in the protection of the public welfare, including public health,
safety and the environment, shall not constitute an indirect expropriation.16

The US model BIT from 2004, with its similar interpretative note, is currently
under review. Several members of the review committee still objected to the
investor–state disputes procedure and to the indirect expropriation provision
on a number of grounds. They recommended clarification that

… an indirect expropriation occurs only when the government acts indirectly

to seize or transfer ownership of an investment, and not when the government
merely acts in a manner that decreases the value or profitability of an
investment.17

These supposedly clarifying statements are yet to be tested in a dispute, so their

effect is as yet unknown. They allow the dispute panel to make a judgement,
potentially overruling that of the government, as to whether the government
has exercised its powers in a ‘reasonably justified’ way.
The statements are also relatively recent inclusions in trade and investment
treaties. The US will certainly be claiming wide-ranging ‘most-favoured nation’
status in the TPPA, which would mean that US and other aspiring investors
from TPPA countries could ‘jurisdiction shop’ to find older agreements to
rely on that do not contain such modifications. New Zealand’s 2005 FTA
with Thailand18 and its 1995 bilateral investment treaty with Hong Kong19
are examples, although the latter is currently being renegotiated.

‘Fair and equitable treatment’

The second common area of action by investors has been to allege a breach
of ‘fair and equitable treatment’. This is frequently a demand for treatment
different from that received by domestic investors or citizens, and is an
attempt to escape government decisions made in the public interest. In a
current case affecting public health (described in more detail in Chapter 10),
US-based tobacco company Philip Morris has filed an action complaining
about Uruguay’s tobacco control policies, claiming both expropriation and
breach of fair and equitable treatment; the tobacco company is demanding
compensation and suspension of Uruguay’s new policies.20 In another case,
European investors in South African mining are challenging legislation aimed
at increasing the participation of historically disadvantaged South Africans
as being in breach of ‘fair and equitable treatment’.21
As noted earlier, the New Zealand government became concerned in 2008
 14. INTERNATIONAL CAPITAL AND INVESTMENT 207

at the proposal by the Canada Pension Plan Investment Board to acquire

up to 40 per cent of the shares of the company owning New Zealand’s most
significant airport, Auckland International Airport. The government created
a new regulation allowing consideration of ‘whether the overseas investment
will, or is likely to, assist New Zealand to maintain New Zealand control of
strategically important infrastructure on sensitive land’. This regulation and the
government’s refusal of the Canadian proposal (a decision that did not rely on
the new regulation) were described by a variety of business commentators and
lobbyists as unfair and undermining the value of the airport company. Indeed,
the Wellington Regional Chamber of Commerce and the New Zealand Business
Roundtable complained about the regulation to Parliament’s Regulation
Review Committee,22 saying that ‘major business organisations were deeply
concerned about the pattern of “ill-justified confiscation of property rights
in New Zealand”’.23 The Regulation Review Committee considered that the
change should have been made through law rather than regulation but did not
consider it unlawful. Treasury had advised the government that a change in
law risked being in breach of New Zealand’s international trade obligations.
The government’s action had widespread support, including that of the
majority of the board of the airport company. Arguably the government
had little choice but to intervene in the national interest. Yet, if any of the
existing foreign shareholders of the partly-privatised company had been able
to access investor-rights provisions of the kind that US corporations want in
the TPPA, they could have claimed a breach of fair and equitable treatment
and expropriation, and sought financial damages and pressed for reversal of
the regulation. Put another way, the TPPA would have allowed a corporation
from one of the non-New Zealand parties to the agreement to attempt to
overturn a democratically mandated government action along with a valid
regulation and law, and to extract potentially many millions of dollars from
the government for its actions.
While US corporations are obvious potential beneficiaries of investor rights
provisions, the largest proportion of foreign direct investment in New Zealand
comes from Australian businesses. Under the Closer Economic Relationship
agreement with Australia, these businesses gain certain privileges (particularly
the higher NZ$477 million exemption from oversight once the new protocol is
finalised), but the CER agreement does not provide a mechanism to enforce
CER rules. This power would be a significant gain for Australian investors
from Australian membership of the TPPA.
As an example, Australian companies have acquired numerous retirement
villages, rest homes and hospitals for the elderly in New Zealand. There is
increasing concern at the quality of care in privately owned facilities, including
the Australian-owned chains, with a succession of cases of unacceptable
treatment of their frail residents.24 State intervention could well be necessary,
with requirements for increased staffing levels, better qualifications of staff
208 BILL ROSENBERG

and tenure guarantees for residents; these would, however, be seen as reducing
the value of those assets. That could be grounds for action under a TPPA as
indirect expropriation, with investors potentially challenging whether such
requirements are ‘proportionate to the public purpose’ and ‘reasonably justified’.
In effect, overseas investors could be privileged over the needs of the elderly.

Financial Investment
The current global financial crisis is one in a series of recent international
financial crises, distinguished mainly by its size. It is unlikely to be the last.
As a result, respected economists such as Joseph Stiglitz are once again
advocating management of international financial movements to reduce the
risks inherent in open international capital markets.25

Managing Capital Flows

In analysing the systemic risks posed by liberalised and deregulated financial
markets, Joseph Stiglitz, José Antonio Ocampo and Shari Spiegel note that
capital flows, particularly short-term speculative flows,

… have been at the heart of many of the crises in the developing world since
the 1980s. Even when capital flows were not the direct cause of the crises,
they played a central role in their propagation. They have also made it
difficult for policymakers to respond to the crises with traditional economic
tools aimed at smoothing business cycles.26

In the light of the financial crisis, even formerly staunch opponents of

capital controls such as the International Monetary Fund (IMF) are now
conceding that such controls have value. For example, a staff paper published
in February 2010 states:

A key conclusion is that, if the economy is operating near potential, if

the level of reserves is adequate, if the exchange rate is not undervalued,
and if the flows are likely to be transitory, then use of capital controls – in
addition to both prudential and macroeconomic policy – is justified as part
of the policy toolkit to manage inflows. Such controls, moreover, can retain
potency even if investors devise strategies to bypass them, provided such
strategies are more costly than the expected return from the transaction:
the cost of circumvention strategies acts as ‘sand in the wheels’.27

This argument is especially pertinent to New Zealand. Despite a common

perception that New Zealand has been relatively untouched by the post-2007
international crisis, the country is extremely vulnerable to destabilising capital
flows in various ways. Investors routinely threaten capital flight when elected
governments pursue policies that investors consider to be against their interests.
Open capital markets have created an almost unlimited availability of funds
that have fuelled rising house prices and inflation. Speculation by foreign
 14. INTERNATIONAL CAPITAL AND INVESTMENT 209

currency traders is a major contributor to the volatility of the New Zealand

dollar. None of these problems is likely to be resolved without managing
capital movements.28
In light of the economic and financial challenges that face New Zealand, the
government should be defending its ability to adopt a range of international
capital management policies, such as minimum stay periods for capital
movements in and out of the country, particularly at times of crisis, and
limits on the volume of overseas borrowing in both foreign currency and
New Zealand dollars. A small financial transactions tax (‘Tobin tax’) could
discourage speculative financial market transactions; Brazil has had such a tax
over several decades and reintroduced it in 2008, increasing the level to 2.0 per
cent in October 2009 to prevent speculative trading in the Brazilian currency.
Alternatively, governments could regulate the end-use of overseas borrowing,
such as to limit the use of foreign currency bank loans for domestic purposes.
In June 2010, South Korea required bank loans in foreign currency to be used
only for overseas purchases.29 Other options are to set minimum maturities
(terms) of overseas borrowing, and other steps to match maturities between
borrowing and lending. Stricter rules could apply to foreign direct investment
where it is largely a financial transaction, as distinct from investment that
includes substantial introduction or creation of physical assets or knowledge.
Measures that give greater stability to the value of the New Zealand dollar
than the current free float, but short of a fixed exchange rate, would involve
consideration of corresponding currency regulations. Regulation of the financial
sector might overlap, be a precondition for, or strengthen these measures.
Some of these measures could be put into effect immediately; others would
require careful phasing in, accompanied by additional policies to allow the
economy to adjust. They would not be applied across the board; they can
be used selectively by type of investment and by economic and financial
circumstance. The very consideration of some of these policies may lead to
threats of capital flight and deliberate destabilisation; that risk should be
anticipated and tools for both regulatory and political counteraction need
to be available to protect the country from such reactions.

Capital Controls and FTAs

International free trade agreements have progressively and deliberately
proscribed most such measures to manage capital movements.
All capital controls are already potentially affected by the GATS. It contains
a wide-ranging provision (footnote 8 to Article xvi) which requires that
foreign investors in services, including foreign financial institutions, must
be allowed to transfer capital into New Zealand without restriction for any
service sector that the government has committed under the agreement.
Further, the government must allow both inflows and outflows of capital when
such services are provided from offshore. These obligations would prevent
210 BILL ROSENBERG

management of capital in a variety of ways, most obviously when used to

stabilise the monetary system or the exchange rate. New Zealand is party to
the GATS Understanding on Commitments in Financial Services, under which
it commits to allowing both foreign investments in banking and New Zealand
residents to purchase across borders all banking and other financial services,
except for some forms of insurance. Banks in New Zealand could therefore
insist that they have the right to borrow without constraint overseas, as that
is simply purchasing a financial service across borders. GATS Article xi also
guarantees unrestricted ‘current’ payments and transfers such as company
profits, which could be used as a cover for significant movements of funds.
The same article (xi:2) prevents restrictions on capital movements that are
‘inconsistent with [the country’s] specific commitments’ to GATS rules in
various sectors, especially financial services. That could preclude controls
over bank operations, such as borrowing and lending and the capital transfers
required to set up or expand an overseas investment. The GATS allows an
exception in times of balance-of-payments or external financial difficulties;
such actions are subject to oversight by the WTO and the IMF.
The investment provisions of the free trade agreements New Zealand has
with China and ASEAN go further. They guarantee free capital transfers
in either direction, although they make provision for regulation of matters
including issuing, trading or dealing in securities, futures or derivatives,
provided that regulation does not discriminate between domestic and foreign
investors.
There are exceptions to some of these provisions in the GATS and FTAs
for prudential measures, but their interpretation is contested (as described
in Chapter 16 on financial services) and they by no means cover all capital
controls that may be desirable. If the exceptions were comprehensive, there
would be no point in the US and other countries seeking to liberalise capital
movements further in their trade negotiations. Indeed, the US forced Chile
to withdraw some of its short-term capital controls in their bilateral trade
and investment agreement signed in 2003 and it seems likely to seek even
greater restrictions on the abilities of Chile and other aspiring TPPA parties
to control international capital flows than apply now.
One likely target is a standard exception in investment agreements and
in the GATS that allows temporary control of capital movements in the case
of a balance-of-payments or external financial crisis. The US has refused to
accept this exception in recent bilateral trade agreements and can be expected
to do the same in the TPPA negotiations. A senior counsel in the Legal
Department of the IMF described this step as ‘draconian’.30 The strength of
this condemnation is indicated by the fact that it was made in 2004 at a time
when the IMF itself was strongly opposed to capital controls.
 14. INTERNATIONAL CAPITAL AND INVESTMENT 211

Implications for the Reserve Bank

New Zealand’s current capability to regulate financial flows to and from the
country is very limited, and in many cases has been retained for purposes
other than financial capital management as such. Firstly, some foreign direct
investment such as private equity investment is largely a financial transaction
and to that degree comes under the OIA, discussed above. Secondly, the
financial flows at some point enter New Zealand’s registered banks or non-bank
deposit takers, and therefore come under the oversight of the Reserve Bank.
The Reserve Bank Act 1989 allows for regulation of financial flows in two
main ways. It provides powers for the Reserve Bank to deal in foreign exchange,
to set exchange rates, and to suspend trading by the registered banks in foreign
exchange ‘if necessary to avoid disorder in the foreign exchange market’. The
Reserve Bank also has wide powers to regulate both registered banks and
non-bank deposit-takers, such as finance companies, in ways that influence
their use of foreign funds. The Reserve Bank has an overall responsibility
for ‘promoting the maintenance of a sound and efficient financial system;
or avoiding significant damage to the financial system that could result from
the failure of a registered bank’.
Despite its foreign exchange market responsibilities, the Reserve Bank has
few powers to carry them out. While it can fix the exchange rate, the only
options it has to defend a fixed rate are to maintain unaffordably high levels
of reserves, or suspend trading of foreign exchange. It would be very difficult
under those constraints for the bank to do more than manage the exchange
rate for very short periods or, as it is currently directed to do, marginally
reduce the peaks and troughs of long-term cycles.31 It would require capital
controls to do more.
The Reserve Bank has wider powers with respect to the regulation of
registered banks and non-bank deposit takers. When considering an application
for the registration of a bank, the Reserve Bank may take into account aspects
including its ownership structure, the standing of the applicant itself and its
owner, suitability of directors and senior managers, size, and other matters
which may be prescribed in regulations. Overseas-owned applicants must
meet further criteria. That requirement is important given that their home
financial authorities may have weak prudential or bank regulation requirements,
and may place constraints on their providing support to their New Zealand
subsidiaries or branches, as is the case with Australian-owned banks that
have restrictions on the amount of capital they can transfer in time of need.
The Reserve Bank can require financial entities to maintain their capital
and capital ratios above prescribed minima, maintain prescribed liquidity
requirements, hold a credit rating above a minimum, restrict exposure to
related parties, comply with governance requirements and other matters. For
a registered bank, it can regulate the size and nature of the bank’s business,
212 BILL ROSENBERG

loan concentrations, risk exposures, separation of the banking business from

other business, risk-management systems and policies, outsourcing, as well
as other matters prescribed in regulations.
These powers could, on the face of it, be challenged under trade in financial
services rules of a TPPA. The different rules for considering overseas-owned
applicants for registered bank status could potentially breach ‘national
treatment’ provisions, while the Reserve Bank’s use of size and ownership
structures as criteria for registration, its regulation of governance and the
separation of banking from other business might breach ‘market access’
provisions. These are arguably prudential powers; however, financial services
providers could dispute the application of the prudential exception, depending
on the context in which the regulatory measures are applied.
For example, large-scale, short-term borrowing by the four dominant
Australian-owned banks created a high risk for the New Zealand economy
at the height of the global financial crisis when international money markets
froze. The Reserve Bank felt forced to take action to bolster the banks’ liquidity
by providing funding sources itself, and through the government guarantee
for depositors and banks’ wholesale funding. Since then, the Reserve Bank
has used its powers to regulate the liquidity of registered banks in order to
pressure them to reduce their very high reliance on this borrowing.32 In its
own words:

The Reserve Bank considers that the New Zealand banks have, across the
system, held insufficient stocks of liquid assets in recent years, and have
become too reliant on short-term, overseas funding. The new liquidity
requirements are designed to address these concerns.33

It is too early to tell whether this liquidity policy will in fact reduce banks’
use of overseas funding. Whether or not it succeeds, the policy is arguably
intended as a measure to control international capital flows bound up into a
prudential tool. It could be challenged as not being in fact a prudential measure
or serving a dual purpose of favouring local funding services (see Chapter 16).

Conclusion
There is a strong likelihood that a TPPA would give the most powerful
government in the world and some of the most powerful global corporations
the legal capacity not only to block the re-regulation of foreign investment
and capital movements, but also to force their further deregulation. In one
sense, the TPPA would simply add another set of chains to an already crippled
regulatory structure. However, it would be irresponsible to remove what few
protective measures remain. In light of the lessons of the global financial crisis,
governments should be looking to remove the existing leg-irons rather than
reinforcing them through dangerous free trade deals. Specifically, negotiators
 14. INTERNATIONAL CAPITAL AND INVESTMENT 213

should be examining ways for the TPPA to pull back from existing arrangements
and provide a clear regulatory space for controlling capital movements and
allowing selectivity in accepting FDI. Unfortunately, a more likely outcome
is that New Zealand will lose further capability to cope with financial crises
and to rebalance and re-energise its economy.
15. Trade in Services
Jane Kelsey

When politicians, journalists or academics talk about trade, especially in

New Zealand and Australia, they almost always mean exports and imports of
manufactured goods and agricultural products. There is little understanding
that contemporary ‘trade’ agreements have been expanding since the 1980s
to cover a wide range of international commercial relationships, including
services.
That development coincided with the shift of gravity from industrial
production to services and finance as the major source of economic growth,
wealth and employment in OECD countries. Governments fostered that
transition through the marketisation and privatisation of public services, the
liberalisation of foreign investment and capital flows, and the deregulation
of financial and labour markets, utilities, professions and other services.
A majority of the parties to the Trans-Pacific Partnership Agreement
negotiations were in the vanguard of that ‘regime change’ from a state-centric
to market-driven paradigm,1 and became strong advocates for international
trade in services agreements that bind future governments to pro-market
policies and light-handed regulation. Those governments and their services
corporations aim to raise the bar for such agreements through the TPPA, at a
time when the global financial crisis has revealed deep flaws in the neoliberal
model.
The services negotiations will be controversial, with opposition likely to
centre on the ‘democratic deficit’ of the secretive executive law-making process
for treaties; the primacy of pro-market regulation over competing national
and social objectives; the closure of policy space that binds governments to
the neoliberal model, even when it has manifestly failed; and expanding the
leverage of foreign corporations over national policy and regulation, and hence
over economic and social life in countries that sign onto a TPPA.
This chapter critically examines the historical background to, and standard
arguments for, a services component in agreements like the TPPA. The
chapter identifies the economic, corporate and strategic interests that will
drive the services negotiations and the kind of ‘disciplines’ on governments’
 15. TRADE IN SERVICES 215

decisions that might result. The final section illustrates the potential impact
of a TPPA on two quite different aspects of services that are currently in the
spotlight: the re-regulation of telecommunications; and the contracting of
private consortia to build and/or operate prisons, schools, hospitals and roads.

A Historical Context
In the later 1970s a self-proclaimed ‘services mafia’ of major US services
companies, led by the finance industry, foresaw the enormous potential
of a global services market.2 The first obstacle they had to overcome was
conceptual. The prevailing paradigm of Keynesian welfarism took a holistic
and socially oriented approach to policy and regulation of services, not
only for health, education and environmental services, but also for banks,
telephones, transport and the professions. The creation and growth of a
commercial market in which services are traded as a commodity and priced
according to supply and demand required a mind-shift among politicians,
regulators and citizen-consumers.
That ‘socio-regulatory adjustment’3 was a controversial ideological tenet
of Thatcherism, Reaganomics, Rogernomics, Pinochet’s neoliberalism
and Australia’s economic rationalism. There was no guarantee that future
governments would maintain that unilateral approach and nothing to
ensure that other countries would follow suit. A more durable and coherent
transformation could be achieved through a binding and enforceable
international treaty, legitimised by the rubric of ‘trade’. Governments would
be asked, as part of a larger package of trade-offs, to pre-commit themselves
to dismantle policies and regulations that hindered foreign services firms and
the expansion of their services markets, and promise not to reinstate such
measures or to introduce restrictive regulations on innovative new services
and technologies.
The foundations were laid in the General Agreement on Trade in Services
(GATS), which was negotiated as part of the Uruguay round of negotiations
on the General Agreement on Tariffs and Trade (GATT) from 1986 to 1994.
Its scope, architecture and obligations fell well short of the services lobby’s
original ambitions, let alone subsequent developments. Free trade agreements
quickly left the GATS behind.4 Even during the Uruguay round, the US,
Canada and Mexico had agreed to much more far-reaching obligations in
the North American Free Trade Agreement (NAFTA), as did Australia and
New Zealand in the services protocol to the Australia–New Zealand Closer
Economic Relations Trade Agreement (ANZCERTA, more commonly known
as CER).
The core rules of all these agreements require guaranteed access for foreign
firms to a party’s services markets (market access), and treatment that is at
least as good as that enjoyed by national firms (national treatment) and firms
from other countries (the most-favoured nation, or MFN, rule).
216 JANE KELSEY

These rules potentially constrain all types of measures that governments

might adopt at central, regional or local levels, from formal legislation and
regulation to administrative decisions, by-laws, regional plans, technical
standards (for building or water quality) or rules adopted by professional
bodies that have authority to regulate their own practice.
Moreover, they apply to diverse ways that foreign firms can supply services:
across the border by remote delivery, usually the Internet; by the consumer
travelling overseas; or through foreign direct investments or equity holdings.
They also commonly guarantee rights of temporary entry for managerial,
professional and specialist personnel to service those enterprises.
All agreements allow governments to reserve certain sectors and measures
from application of all or some of the core rules. The US free trade agreements
and the Trans-Pacific Strategic Economic Partnership Agreement (P-4) do this
through two annexes that take a ‘negative list’ approach whereby governments
explicitly state what is not covered. The first annex lists existing non-conforming
measures that may be maintained, known as a ‘standstill’, which prevents a
government from adopting less liberal measures in the future. The second
annex specifies sectors or activities that are excluded from the market access,
national treatment and most-favoured nation rules. Any sector or measure
not mentioned in either annex is fully committed to the rules. Governments
cannot easily add to their reservations or exceptions if they discover an error
or omission, or if social and economic circumstances or political mandates
change. Nor can they restrict any capital flows or the repatriation of all profits
and proceeds of sale, except for very specific purposes – in the US free trade
agreements even in a balance-of-payments emergency (see Chapter 16).
The trade in services negotiations in the Uruguay round initially focused on
applying these ‘trade’ rules to services that were essential to global expansion:
financial services, telecommunications, professional services, construction
and engineering. After two decades, the ambitions of foreign services firms
have broadened to incorporate explicitly social services. As the Asia-Pacific
Economic Cooperation (APEC) Services Action Plan from 2009 illustrates,
‘trade’ in all those services is viewed in purely market terms:

Services such as logistics, communications and financial services create the

basic economic infrastructure upon which businesses operate. Educational,
health and social services affect human security and the availability and
quality of labour. Professional services provide the specialised expertise
required by other firms to increase productivity and competitiveness. In
manufacturing industries, services provide critical inputs to the production
chain, making up a major portion of value added through research and
development, accounting, engineering, administration, advertising,
warehousing and distribution services.5
 15. TRADE IN SERVICES 217

Advocates of the TPPA see an opportunity for like-minded participating

countries that have advanced services industries to achieve a new level
of ambition. That agreement would provide a minimum benchmark for
themselves, and for other countries (within or outside APEC) that sought
to accede to a TPPA, and an aggressively pro-market precedent they can
promote in other FTAs and ultimately the World Trade Organization (WTO).

Government Objectives in TPPA Services Negotiations

Officially, free trade agreements are about expanding a country’s trade. The
negotiating positions of governments participating in the TPPA seek to
enhance the comparative advantage of their domestic firms, so as to boost
their countries’ export earnings from services and strengthen their national
economies.
Speaking to the US Coalition of Service Industries (CSI) in 2009, the US
Trade Representative (USTR) Ron Kirk lamented that services accounted for
more than 75 per cent of the US domestic economy and almost 23 million new
jobs had been created in the American services sector between 1993 and 2005,
yet services constituted only 30 per cent of US international trade.6 The Obama
administration aimed to treble services exports with the assistance of FTAs.
Achieving that goal would intensify the dominance of US corporations
within other countries’ services markets. The US already reports a surplus in
its cross-border trade in private commercial services with negotiating TPPA
parties, standing at US$10.5 billion in 2008.7 The imbalance it reports is less
marked for New Zealand: commercial services exports from the US to New
Zealand were US$1.8 billion in 2008, while imports by the US were US$1.7
billion. The former is largely earned from tourism – the US is New Zealand’s
third-largest source of tourists and tourism expenditure. Sales of services by
majority-owned US affiliates in TPPA countries in 2007 were much more
significant than cross-border service transactions, reaching US$79 billion,
with US$3.3 billion of that total in New Zealand.
The USTR’s annual National Trade Estimate Report on Foreign Trade
Barriers for 2010 indicates its negotiating priorities for all other TPPA countries.
The most common services-related targets across those countries are their
foreign investment regimes and telecommunications.8
The section of the report on New Zealand described the current regime
for vetting foreign investment and remarked, with implied approval, that it
was under review to ‘improve its design, [and to] make it more transparent
and predictable for investors’. The only sector mentioned as a barrier to
services firms was telecommunications, specifically the restrictions on foreign
ownership and control of Telecom New Zealand, and it noted that a government
decision on mobile phone termination rates was pending. The 2010 report
no longer lists the voluntary agreement amongst public and private media
to broadcast a minimum quota of local content. The Labour government
218 JANE KELSEY

had introduced this agreement in 2000 after it was told that its proposal for
compulsory quotas would breach New Zealand’s GATS 1994 commitments.
In a somewhat token move, the Labour government inserted a reservation
in the P-4 Agreement that allows the government to use compulsory quotas
for local content in broadcasting vis-à-vis audio-visual services exports from
Chile, Singapore and Brunei. The voluntary quota policy has been discontinued
under the National government, which would presumably also agree to remove
the reservation from the P-4 and any TPPA.
Telecommunications and media also feature in the Australian section of
the USTR’s National Trade Estimate Report for 2010. The report welcomed
the reduction of the government’s shareholding in Telstra and the transfer
of the residual shares into Australia’s Future Fund, but criticised the cap of
35 per cent on foreign equity in Telstra. US industry remained concerned
about Telstra’s ‘potential to abuse its monopoly power and its aggressive use
of litigation to delay regulatory outcomes’, including legislation that would
require Telstra to separate its retail and wholesale arms. The USTR also
targeted several policies protected in the Australia–US Free Trade Agreement
(AUSFTA): Australia’s local content quotas for existing (but not new) media,
requirements for prior approval of foreign investment in the media sector,
and the power of the Foreign Investment Review Board to deny particular
investments on ‘national interest’ grounds (even though the report concedes
these are rarely used and apply only to US investment valued over A$800
million).
The section of the USTR 2010 report on Singapore indicates that the US will
seek commitments beyond their 2004 FTA in the areas of telecommunications,
audio-visual and media services, legal services and banking, energy and
government-linked corporations. Vietnam faces challenges in advertising and
marketing, banking and securities, distribution services, foreign investment
restrictions and procedures, regulation and under-development of e-commerce,
and corruption. Brunei is criticised for local preferences in its government
procurement regime and lack of transparency. Peru’s mobile phone termination
rates are considered barriers to competition, and the country’s regulatory
agencies are seen to lack expertise and impartiality.
Other TPPA countries have their own ‘offensive’ interests. Singapore and
Chile both consider themselves services hubs for their regions. Australia is
already the fourth-largest foreign direct investor in Chile and the largest in
New Zealand. Education and tourism are major foreign exchange earners
for Australia and New Zealand. Australia earned A$17.2 billion in ‘education
export’ income in 2008–9, mainly through foreign fee-paying students, an
increase of 23 per cent on the previous year.9 New Zealand’s ‘education
exports’ were NZ$2.3 billion in 2007–8.10 Both countries currently depend
heavily on India and China for students. New Zealand also promotes niche
 15. TRADE IN SERVICES 219

services in postal consultancy, aircraft and other engineering, legal services,

digital movie production, construction and logistics.
The economic significance of services to each country provides a superficial
plausibility to the demand for strong services chapters in free trade agreements.
But that does not accurately convey what drives these negotiations, and
especially not the TPPA negotiations. The ‘trade’ rationale has numerous
flaws. Technically, statistics on trade in services are misleading. The data
that governments cite do not correlate with the definition used in these
agreements, which spans cross-border services, foreign investment and
temporary presence of personnel.11
Moreover, there is no proven causal connection between trade in services
agreements and economic trends. Whether their rules and commitments create
any new market opportunities depends on the degree to which the parties’
services are already deregulated and liberalised – which is extensive, in the case
of the TPPA. The main role of the GATS and previous free trade agreements has
been to lock in the prevailing level of liberalisation and encourage a pro-market
regulatory environment. This book provides numerous examples of measures
that have sound social justifications but which governments are constrained
from adopting by these agreements. The respective decisions of the New
Zealand and Australian governments not to proceed with the privatisations
of Auckland International Airport and the Snowy Mountains Hydro-electric
Scheme also show how the imperative of avoiding FTA obligations can
shape important decisions. Trade in services agreements that do require
new liberalisation usually reflect a severe imbalance of power between the
negotiating parties, as José Aylwin describes with the US–Peru and US–Chile
free trade agreements in Chapter 4.
It is especially difficult to cite any economic rationale for a trade in services
chapter in a TPPA. The major players – Chile, Singapore, New Zealand,
Australia and the US – have highly liberalised domestic regimes and made
extensive commitments to maintain them in the GATS and various FTAs.
Peru has far-reaching services and investment obligations under the US–Peru
Trade Promotion Agreement (TPA) that came into force in February 2009, as
does Vietnam through its WTO accession in January 2007. Brunei’s services
market is of marginal relevance.

A TPPA on Services
It is difficult to predict what the services component of a TPPA text might
look like. Formally, the US, Australia, Peru and Vietnam are acceding to the
P-4. However, the P-4 has a weaker services text than most other agreements
among the TPP parties and does not include investment. A new text is therefore
most likely to build on and seek to rationalise the diverse structures of the
other existing FTAs.
220 JANE KELSEY

The added value of a TPPA is also uncertain. On one hand, the Obama
administration’s aim to treble services exports portends a mercantile
approach to the TPPA. Attempts by the US to target the remaining ‘barriers’
to liberalisation would require governments to remove restrictions that protect
their ability to regulate their most sensitive services in the future. US agreements
have already rolled back significant reservations that governments made in
earlier FTAs. Patricia Ranald notes in Chapter 2 that Australia reserved water,
energy and transport services in its free trade agreement with Singapore but
gave them away in the AUSFTA.
New Zealand can expect similar pressure from the US to remove the
reservations in its FTAs that retain some rights to regulate services or
reintroduce regulations where there are currently few restrictions. The P-4
was the first time New Zealand used a ‘negative list’ of reservations to specify
what was not covered by the agreement, in contrast to the previous ‘positive
list’ approach that stated what was covered. The government (rightly) took
a cautious approach that reserved

… the right to adopt or maintain any measure with respect to: the provision
of public law enforcement and correctional facilities; and the following,
to the extent that they are social services established for a public purpose:
Child care; Health; Income security and insurance; Public education;
Public housing; Public training; Public transport; Public utilities; Social
security and insurance; and Social welfare …. [as well as] the right to adopt
or maintain any measure with respect to water, including the allocation,
collection and treatment and distribution of drinking water ….12

These exceptions will be targeted in TPPA negotiations, as will New

Zealand’s already weak foreign investment vetting regime (see Chapter 14).
The removal of these reservations and similar protections in other negotiating
countries’ FTA schedules would be controversial and risk triggering anti-
TPPA campaigns of the kind that have enveloped the previous US free trade
agreements. The TPPA parties are therefore likely to downplay the sectoral-
liberalisation aspect of services publicly, while the US especially says something
quite different to its services industry lobby.
While the USTR has emphasised the opening up of services markets,
Australia and New Zealand have argued that the ‘added-value’ of a TPPA should
give priority to a ‘principles-based’ approach. Put another way, a TPPA should
require governments to adopt a light-handed, least burdensome approach to
regulation that promotes economic integration among the parties. Examples
might include a preference for market mechanisms to deal with pressing issues
(such as tradeable quotas to redress over-fishing or climate change), reducing
red tape (in areas like resource consents), minimising technical requirements
(such as construction standards), opening the delivery of universal service
 15. TRADE IN SERVICES 221

obligations (especially in post or telecommunications) to competition, and

harmonising or recognising each other’s regulatory regimes (say for auditing
or prudential measures for the finance sector).
The two approaches could be seen as complementary. The US Business
Coalition for TPP has expressed particular interest in moves that will facilitate
the integration of production, procurement and supply chains that span goods,
services and travel across all the participating countries.13 It is also calling
for ‘regulatory coherence’ in the way that the TPPA countries treat supply
chains and clusters of services. That should be underpinned by ‘transparency’
obligations that guarantee rights for foreign firms to comment on proposed
regulations, and restrictions on the regulation of emerging services and
technologies.
Yet securing agreement on generic disciplines might prove even more
difficult than liberalising the remaining sensitive sectors, because they would
impose explicit and far-reaching restrictions on the regulatory autonomy of
governments, including in the US Congress and states. Domestic US regulators
have strongly resisted such incursions in the past and the USTR has opposed
proposals that Australia and New Zealand have supported for strong pro-
market disciplines on the regulation of services in the WTO.
An alternative to generic disciplines is the inclusion of special rules to
facilitate provision by foreign suppliers in their priority sectors: for example,
financial services (see Chapter 16); telecommunications; computer services;
post, courier and express delivery services; and possibly energy. (The case
of telecommunications is discussed below.) A third option is to adopt model
schedules for clusters of activities that would ensure a coherent set of rights
for various services industries across their entire supply chains.
The groundwork for the latter two approaches has already been laid in the
Doha round negotiations on services at the WTO. The major TPPA parties
joined forces to promote the common interests of their firms through a series
of plurilateral requests they made to groups of countries in 2006.14 Table
15.1 shows that six of the eight TPPA parties were involved in at least one
plurilateral request, with the US and Australia participating in eleven and
New Zealand in eight. Common approaches were taken to computer services,
construction and engineering, and most significantly for ‘logistics’, which
means the distribution supply chain that covers all forms of land, sea and air
transport, ports, and even information and communications technologies.
However, Table 15.1 also indicates that certain sectors may be especially
sensitive for some countries.
222 JANE KELSEY

Table 15.1. Plurilateral requests by TPPA negotiating parties in the

GATS 2000 negotiations

Cross-border services [mode 1 and 2]

Architecture and engineering

Labour mobility [mode 4]

Express delivery/postal*

Telecommunications
Education (private)

Maritime transport
Computer-related

Environmental
Construction

Air transport
Distribution#

Audio-visual
Financial

Logistics

Mode 3#
Energy

Legal

Australia 3 3 3 3 3 3 T 3 L 3 3 3 3 T T T T
Brunei T T T T T T
Chile L T T T 3 T 3 3 T T 3 T 3 T 3
NZ 3 3 L 3 T 3 3 3 3 T L T 3 T
Peru 3 T T T T T T T T T 3
Singapore 3 3 T 3 T T T T T T L T 3 3 T
US 3 3 3 3 3 3 3 3 3 T T 3 3 T 3 T 3/T T
Vietnam

3 denotes party to sectoral request

L denotes lead country for sectoral request
T denotes target of sectoral request
* requests on postal services and express delivery are merged
# Source document has entry in [] denoting uncertainty
Source: US Coalition of Services Industries, http://www.uscsi.org/publications/papers/collective/Table.pdf.

Corporate Objectives
The most likely reconciliation of US liberalisation goals and the economic
integration objectives would be to graft pro-market regulatory disciplines
onto existing US FTAs in specific sectors of interest to the US. This dovetails
with the demands of the mega-firms currently dominating the globalised
services markets.
The corporate strategy for the services and investment negotiations
operates through a powerful and effective lobby that is led from the US and
is coordinated through an informal Global Services Coalition. The latter
includes the Australian Services Roundtable, the Wellington Regional Chamber
of Commerce and the US services coalition.
The US Coalition of Service Industries is an especially potent and effective
corporate lobby. Its website explains that it was created in 1982 ‘to ensure that
US trade in services would become a central goal of US trade policy and trade
negotiations’, and is ‘dedicated to reducing barriers to US services exports
and mobilising support for domestic US policies which enhance the global
competitiveness of its members’.15
 15. TRADE IN SERVICES 223

The coalition’s submission to the hearing on the proposed agreement

urged the USTR to renegotiate the P-4 and existing bilateral agreements
with other TPPA parties on services (and intellectual property) to reflect the
higher standards of the most recent US FTAs.16 The new agreement should
guarantee comprehensive access for US firms to countries’ services markets,
whether they supply the services across the border or by direct investment.
Minimal exclusions should be set out using ‘negative list’ annexes. A TPPA
should include commitments to ‘broader regulatory reform as necessary
and appropriate’ through generic disciplines and sectoral obligations. The
agreement should also include anti-corruption provisions similar to the
US–Peru TPA.
US services corporations see investment as a priority, given that ‘sales by
these foreign affiliates are one of the principal means by which US companies
compete in the global marketplace’.17 They want the agreement to eliminate
all barriers to direct and portfolio investment, including equity caps and
limits on juridical form (such as requiring foreign firms to operate through a
subsidiary rather than a branch or representative office). Governments should
provide strong protections that will boost investor confidence, especially
from government actions that ‘expropriate’ the value or profitability of
investments, and guarantee unrestricted flows of capital. In the name of
‘regulatory transparency’, foreign firms should have a right to be consulted
about proposed regulations that might affect their interests. These new
protections should be extended to investments established before the TPPA
and be directly enforceable by foreign investors against the host state.
A second major corporate lobby, the US Chamber of Commerce, has called
for a ‘comprehensive, ambitious and commercially meaningful’ agreement
with no exclusions.18 Again, ‘transparent’ rule-making should ensure that
US firms have the ability to influence other countries’ regulatory processes
and can enforce their rights under the agreement through an independent
international tribunal that can award cash damages.
The submissions from the CSI and the US Chamber of Commerce on the
TPPA identified a long list of sectoral priorities: advertising, audio-visual and
media, computer and related services, construction, education, distribution,
energy, express delivery, environmental, financial services and electronic
payment systems, medical, print media and publishing, retail, basic and
value-added telecommunications and wholesaling, legal services, accounting,
media, as well as e-commerce and intellectual property.
A number of industry groups made sector-specific submissions. Perhaps
the most far-reaching corporate input came from Wal-Mart, a long-time
activist in services negotiations.19 To date, Chile is the only country (outside
the US) in which Wal-Mart operates and which is also participating in the
TPPA talks; Chile hosts Wal-Mart’s Global Procurement Office for Americas
for food sourcing. In relation to goods and produce, Wal-Mart wants lower
224 JANE KELSEY

tariffs. It also seeks uniform standards and labelling requirements on all

products across all TPPA countries – a kind of ‘regulatory coherence’ that
could effectively see the lowest common standard in one country applied to all.
Wal-Mart has echoed the call for a ‘high standards’ services and investment
agreement with protections that are backed by a robust investor-initiated
dispute procedure. There should be no restrictions on foreign ownership
and no performance requirements on investors (such as stocking locally
produced books and music, industrial goods or food products). The retail and
distribution sectors should have guarantees that governments will be unable,
for example, to limit the size of stores, their geographic location or range of
merchandise. Domestic content quotas for media and other restrictions on
advertising should be removed. Other services sectors that Wal-Mart identified
as targets for liberalisation and deregulation reflect its operational requirements:
financial services, telecommunications, legal services, accounting, computer
services, audio-visual services and express delivery services.
In its submission on the TPPA, another major player, the Motion Picture
Association of America (MPAA), told the USTR: ‘It is imperative that the
agreement opens and locks in access for U.S. suppliers of films and television
programming to the TPP markets over a range of media, including theaters,
cable, satellite and the Internet.’ The MPAA condemned ‘cultural exceptions’,
such as those inserted by the Australian and New Zealand governments in
recent free trade agreements, as ‘unhelpful precedents’ that foster ‘protectionist
inclinations’.20
By contrast, the submission made by the Music Council of Australia to the
Australian consultation on the TPPA pressed for multilateral negotiations
that were consistent with the UNESCO Convention on cultural diversity
(to which Australia was in the process of acceding), and reversion to a more
comprehensive carve-out for cultural services that had been eroded in the
AUSFTA, especially for new media.21 This conflict is discussed in depth in
Chapter 12.

Re-regulating Telecommunications
Telecommunications are the nerve system of the global economy, while financial
flows provide the blood supply. Whoever controls the process and products of
technological innovation also controls the future form, price of and access to
international commerce, and increasingly to nations’ internal services. The
US has always given top priority to securing liberalisation commitments and
regulatory disciplines that enhance the dominance of its major ‘telcos’ and
information technology firms (such as AT&T and Microsoft) over all forms of
terrestrial, digital, cable, satellite and as-yet un-invented technologies. The
rules that it has already secured on services and investment in the GATS and
FTAs are complemented by guarantees of rigorous intellectual property rights,
largely unregulated e-commerce and unrestricted data flows.
 15. TRADE IN SERVICES 225

The US services coalition has a specific wish list for telecommunications

in the TPPA. Its submission urged the USTR to ensure that all basic and
value-added telecom services are unrestricted for both foreign investment
and supply across the border. Telecommunications should be governed
by ‘fair, transparent and pro-competitive regulatory processes’ that ensure
‘pro-competitive, cost based interconnection’ and the elimination of cross
subsidies and other ‘anti-competitive practices’.22 Independent regulators
should have powers to sanction abuses by monopolies.
One major aim is to relieve foreign telcos of the costs of contributing to
the national telecommunications infrastructure. The GATS already contains
some rules along those lines, which the US used successfully in a WTO case
against Mexico in 2006. The WTO dispute panel in Mexico-Telecommunications
found that the Mexican government had failed to ensure a competitive low-
cost market for US telcos by favouring the privatised Telefonos de Mexico
(owned by Carlos Slim, ranked as the world’s richest man by Forbes magazine
in 2010) and by its choice of pricing system to compensate the company for
the costs of meeting universal service obligations.23
In addition to strengthening those rules, the coalition also wants all
providers in the fixed line and mobile sectors to have the same guarantees
to rights-of-way over property, portability of numbers across providers and
rights to resell services. ‘Transparency’ should ensure that foreign firms are
consulted about any proposed changes to regulations or practices. Investor–
state dispute procedures would allow them to challenge such decisions through
international arbitration.
How might such rules play out in New Zealand? Readers who remember
the early 1990s will recall that the first private owners of Telecom New
Zealand – US firms Bell Atlantic and Ameritech, with a small holding by Fay
Richwhite – shamelessly exploited its natural monopoly; subsequent owners
were little better.24 Successive governments were reluctant to re-regulate
both for ideological reasons and because they feared the systemic effect of a
crisis of investor confidence in the largest corporation on the New Zealand
stock exchange. Telecom doggedly resisted pressure to ‘unbundle the local
loop’, which would allow competitors to connect to their customers through
Telecom’s exchanges on competitively neutral terms. It remained recalcitrant
even after the Labour government introduced legislation in 2006 to require
Telecom to open the network to competitors, and to split its operations in
order to separate network access from the wholesale and retail units.
If the more rigorous rules to restrain anti-competitive practices that are
being proposed for the TPPA had applied at the time, the New Zealand
government would have had to intervene more quickly and more rigorously,
which many would have welcomed. But it could also have had perverse
consequences. A report prepared for the New Zealand Business Roundtable
has described the 2006 Telecommunications Amendment Act as a ‘taking’
226 JANE KELSEY

of Telecom’s property rights for which it should be compensated.25 (This is

part of a controversial Roundtable-led push to have such rights introduced in
New Zealand law through a Regulatory Responsibility Act.26) The proposal
that the TPPA should protect investors against ‘measures tantamount to
expropriation’ is equivalent to that ‘takings’ rule. As Bill Rosenberg explains
in Chapter 14, an interpretative note on the meaning of ‘expropriation’ has
been included in recent FTAs. That note allows governments more regulatory
space when pursuing public purposes and for adopting measures that may
be reasonably justified in the protection of the public welfare. However,
investors in Telecom that come from another TPPA country could still have
brought a dispute, claiming the measure that was adopted did not satisfy
those conditions. The mere threat of such litigation could have a powerful
chilling effect on regulators. Further, the interpretative note would not have
applied to the separate obligation to guarantee fair and equitable treatment
of investors.
Future moves to increase competition in the telecommunications market
that also reduce the share value and future earning potential of Telecom
could attract similar complaints about expropriation and a breach of fair and
equitable treatment under a TPPA. For example, the Kiwishare obligations
that were imposed when the state-owned enterprise was privatised in 1990
require Telecom to maintain a free-calling option for residential users, keep
line-rental charges below a set price, and maintain network coverage at the
level of 1990. As of 2010, the costs of the telecommunications service obligation
were shared across eleven firms.
An obligation on the government to ensure ‘pro-competitive, cost-based
interconnection’ (which builds on the reasoning in the Mexico-Telecommunications
case) could mean the other telcos were no longer required to share the cost of
meeting the Kiwishare obligations. If Telecom was left to fund the obligations
on its own, its shareholders from other TPPA parties could trigger an investor–
state dispute, alleging an indirect expropriation or a breach of fair and equitable
treatment. To avoid that risk, the government could agree to subsidise the
Kiwishare and then put the obligation out to competitive tender. The socially
regressive alternative for the government would be to terminate the Kiwishare
obligation to maintain a universally accessible telephone network.
The New Zealand government would have an arguable defence to an
investor–state dispute if it maintained the reservations on telecommunications
in a TPPA that it has listed in Annex IV of the P-4.27 Although Annex IV
makes no reference to the Kiwishare, New Zealand has preserved a broad
right to adopt or maintain measures on social services for a public purpose,
including ‘public utilities’. Obviously, that would still be open to challenge
before an international arbitration court, which is expensive to defend and
potentially damaging to investor confidence. The risk would be far greater
if the government agreed to wind back those broad reservations in its TPPA
 15. TRADE IN SERVICES 227

annex; judging by the US approach in the AUSFTA, New Zealand will be

under considerable pressure to do so in the TPPA negotiations.
These examples relate to existing technologies. The US services coalition
also argued for ‘technological neutrality’ in commitments and rules on
telecoms, e-commerce and audio-visual services. That means the existing
obligations apply automatically to new technologies that did not exist at
the time they were made (as with the worldwide web at the time GATS was
signed off in 1994). In addition, they want a guarantee that governments will
not discriminate in favour of their nationals in relation to digital products,
aside from consumer protection measures, and that regulatory frameworks
will minimise the burden on e-commerce.
The US has a long-standing position that rules and commitments relating
to the medium of carriage (being telecommunications or computer services)
should also cover the content (such as entertainment, sports events or
educational programmes). Those guarantees would therefore have a far-
reaching effect. A TPPA that combined those guarantees on computer services,
telecommunications and e-commerce with intellectual property and investment
promotion and protection would entrench the control of the major information
technology and telecommunications firms over emergent technologies and
transactions conducted through them. It would also guarantee their leverage
over domestic governments that sought to reduce their market power and
reverse the digital divide.

Private Finance Initiatives for Public Services

Constraints on regulation of services and investment in a TPPA would be
formally linked in the agreement to other chapters on government procurement,
competition and transparency to reflect their functional inter-relationship
in global services markets.
Public Private Partnerships (PPPs) or, more accurately Private Finance
Initiatives (PFIs), are the latest fashion in privatisation. The state enters a
long-term contract for a private company to design, finance, construct and/
or operate a facility for public use. Internationally, PFIs are being applied to
almost every conceivable public service, including hospitals, schools, water
supply, roads and prisons. The New Zealand Council for Infrastructure
Development, which includes numerous Australian and US-affiliated firms,
was formed in 2004 to lobby for the use of PFIs in New Zealand.28 The Labour
government rejected the PFI model for many years but eventually adopted
it for the Waterview Interchange roading project in Auckland. The National
government initially announced it would test PFIs on private prisons and later
extended them to core public services facilities, such as schools and hospitals.29
The standard PFI contract gives the company the right to own and manage
the facility, usually for between twenty-five and forty years. In return, they
receive an annual fee and/or the right to levy user charges and profit from
228 JANE KELSEY

other commercial use of the facilities. Often, but not always, the assets are
transferred to the state at the end of the contract.
The contract is almost always with a ‘special purpose vehicle’ – a shell
company that is owned by a consortium of a construction company, which will
subcontract most of its work to subsidiaries; a finance arm, which is backed by
banks, equity and pension funds, and insurance companies; and a facilities
management company that also subcontracts most of its operations. A standard
PFI contract will include a service agreement with the state’s purchasing
agency that sets the performance standards for running the school, hospital,
prison, roads or whatever. Because the contracts are commercially sensitive,
most of their terms and assessment of performance remain secret.
Private finance initiatives are creative accounting exercises that disguise a
massive transfer of wealth to the private sector with guaranteed returns and
minimal accountability. They are also a classic example of socio-regulatory
adjustment, whereby public services become a purely commercial venture
detached from their social purpose.
Governments find PFIs attractive for two reasons. First, they move the
debt for major projects off the public-sector balance sheet, even though the
government assumes a long-term contractual liability that will take precedence
over ordinary government expenditure and much of its other debt. Second,
the contract purportedly transfers the major risk of the project from the
government to the private firm. However, the shell company is commonly
financed by highly leveraged investment banks or private equity firms; their
contracts are increasingly traded on secondary markets to investors seeking
an even higher and faster return from a government-guaranteed investment.
The contractors know the government remains the provider of last resort, with
a political obligation to step back in if the private company or its service fails,
as Australia’s very mixed record of PFIs in hospitals, roading, and refugee
detention camps and prisons shows.30
The primary contract for PFIs is explicitly covered in the government
procurement chapter of US free trade agreements, which requires fully open
competitive tendering and prohibits favouritism to local firms. If the multiple
layers of subcontracting are also governed by the procurement contract, the
government cannot require the use of local suppliers as ‘offsets’ if the value of
the contract is above a certain threshold. The battle to exclude the processing
of blood products used by Australian health services from the requirement
for competitive tendering under the government procurement chapter of the
AUSFTA was outlined in both Chapters 2 and 6.
Alternatively, foreign sub-contractors may gain rights under the services and
investment chapters. The government’s commitments on finance, construction,
management, communications, distribution and other sector-specific services,
such as midwife, ambulance or blood-testing services, may prevent it from
imposing ‘discriminatory’ standards for activities like PFI hospitals, such
 15. TRADE IN SERVICES 229

as operating through a joint venture with a local firm, having a majority of

local directors, or restricting foreign firms or its staff to situations where no
local firm is available and competent to perform the work. Government’s
regulatory space would depend on how much of the P-4 annex that excludes
social services for a public purpose it could retain in a TPPA negotiation.
Māori also have an interest in a number of PFIs, starting with the private
prisons. The P-4 contains a Treaty of Waitangi exception in Article 19.5 that
allows the government to adopt measures ‘it deems necessary’ to give Māori
more favourable treatment ‘in fulfillment of its obligations under the Treaty
of Waitangi’ – the meaning of which the government alone can determine.
However, discrimination in favour of Māori could be challenged as ‘arbitrary
or unjustified’ or as a disguised restriction on trade in goods and services. It
remains to be seen whether the US will oppose this provision, assuming a
National government seeks to retain it.
Further, US FTAs define turnkey, construction, management, concession
and revenue-sharing contracts as investments that are protected against
expropriation under the investment chapter and are subject to an investor-
initiated dispute process. If a foreign investor from a TPPA country secured
a primary or sub-contract that the government judged had failed and
compulsorily resumed control of the service, the investor could claim damages
for expropriation. There is a litany of international arbitrations of this kind.
The most controversial (involving water concessions) illustrate how potent the
investment chapters of ‘trade’ agreements can be, especially when governments
exercise their responsibilities and resume control to remedy a failed service
or restore social order.31
Removal or reduction of the current reservations in the P-4 on social
services (including hospitals and schools) and the separate exclusion for
water services would confer extensive rights on consortia of foreign firms to
secure contracts to run New Zealand schools, hospitals and water supply,
and tie the hands of future governments if they fail.

Conclusion
The principal objective of a services chapter in a TPPA would be to constrain
the policy choices available to governments, and bind them to a light-handed,
pro-market model for regulating services in perpetuity. Foreign investors
would also extend their existing leverage over national policy and regulation
in the name of ‘transparency’ and maintaining investor confidence, with the
capacity to threaten or take legal action directly against the state for allegedly
breaching its obligations.
If the US CSI succeeded in its demands, the New Zealand government would
effectively cede control over core regulatory functions to other TPPA states
and their corporations. The government would have to justify its actions to
a foreign trade or investment-arbitration tribunal as conforming to the rules
230 JANE KELSEY

or falling within a small number of market-oriented exceptions. One public

policy school describes these techniques approvingly as ‘stacking the decks’
and installing the ‘fire alarms’ to prevent a retreat from neoliberalism.32
The TPPA would be only the start. These agreements routinely include
a pre-commitment to periodic new rounds of negotiations to extend their
commitments and review the rules. That is a high-risk strategy designed by
and for the large (predominantly US) corporations that dominate the markets
for services. It constitutes an unacceptable cost to democratic governance
and threat to the legitimate pursuit of social obligations. It also ignores New
Zealand’s history of failed privatisations, notably Air New Zealand, Tranzrail
and the banking system, and the unresolved legacy of light-handed regulation,
such as leaky buildings, Telecom’s abuse of its private monopoly, and the
reckless and usurious finance industry.
16. The TPPA and Financial Sector
Deregulation
Nan Seuffert and Jane Kelsey

The Bush administration announced that it was joining the negotiations

on the unfinished business of financial services and investment between
the parties to the Trans-Pacific Strategic Economic Partnership Agreement
(or P-4) in February 2008. At that time, the sub-prime mortgage market was
collapsing; the British government had bailed out Northern Rock; and iconic
US financial institutions, such as Citigroup, Merrill Lynch and AIG, were in
a precarious state.1
These and further signs of a systemic financial meltdown should have rung
alarm bells about an agreement that would deepen the global integration of
financial markets, enhance the expansion of financial institutions that were
deemed ‘too big to fail’, and facilitate the trade in ‘innovative’ financial products
that turned toxic. Instead of reviewing the wisdom of these agreements, the
US, Chile, Singapore, Brunei Darussalam and New Zealand governments
engaged in three rounds of negotiations on financial services and investment
in the P-4 in March, June and September of 2008.
The detailed substance of those talks is unknown; only that a still-secret
text has many square brackets around points of disagreement. However, the
US government was working to a template for free trade agreements (FTAs)
that extends well beyond the original Financial Services Agreement at the
World Trade Organization (WTO), and seeks ever-higher levels of liberalisation
and deregulation. It is therefore very likely that the P-4 negotiations built on
the existing US free trade agreements, especially with Chile and Singapore.
New Zealand currently has no equivalent financial services and investments
obligations.
If the financial services industries in the US, Australia and Singapore have
their way, a ‘state of the art’ TPPA will commit at least eight governments
to even more extensive financial sector liberalisation. The rules are likely to
include a regulatory regime for the finance sector that is light-handed (or even
self-regulating) requires unrestricted capital flows, and guarantees greater
232 NAN SEUFFERT AND JANE KELSEY

rights and protections for the foreign financial industry and its investments
than existed in any previous agreements.
This chapter argues that such a TPPA would generate a more deeply
integrated, and potentially more unstable, version of the financial services
regime that has recently imploded. Commitment to the rules of a TPPA would
also restrict the ability of governments to reduce the risks of future crises by
re-regulating financial services and products, investments and capital flows,
and to respond appropriately to such crises as they occurred.
The discussion in this chapter begins by tracing the connections between
trade in financial services agreements and the dominant players in the finance
industry, and outlines their current demands in relation to the TPPA. Next, it
explains the link between the globally deregulated financial markets sought
by these players and the global financial crisis. The third section relates that
experience to failures in New Zealand’s financial regulation. The chapter
then projects the minimum basic rules that might be expected from a TPPA,
based on recent US free trade agreements, and their particular relevance to
New Zealand. The final section identifies the constraints a TPPA agreement
would impose on New Zealand and other governments in addressing the
failure of the market-led approach to regulation. The chapter concludes by
supporting the call by financial experts to rethink the appropriate regime to
govern international financial services transactions; prominent amongst these
is the 2009 report from the United Nations (UN) Commission of Experts on
Reforms of the International Monetary and Financial System, chaired by
Joseph Stiglitz (the Stiglitz Report).2

The Financial Industry’s Agenda

The genesis of trade in services agreements in the US in the later 1970s can
be traced directly to Wall Street. A select group from the finance sector that
included American Express, AIG and Citicorp propagated the concepts of
‘trade in services’ and ‘financial services’ and successfully lobbied the US
Trade Representative (USTR) to pursue a multilateral trade agreement that
would liberalise global services markets.3
At their urging, the USTR made the inclusion of services a pre-requisite for
the Uruguay round of negotiations to extend the General Agreement on Tariffs
and Trade (GATT) that began in 1986. The US later insisted that negotiations
on financial services continued for two years after the round concluded to
secure more extensive commitments. An international Financial Leaders
Group, led from Wall Street, drove those extended negotiations; they set the
agenda for financial services in new negotiations on the General Agreement
on Trade in Services (GATS) that began in 2000 and were absorbed into the
Doha round in 2001.4
The financial industry lobby spans the major insurance and banking
institutions, investment banks and auxiliary financial services providers, from
 16. FINANCIAL SECTOR DEREGULATION 233

funds managers to credit-rating agencies and even the news agency Reuters.
The goal is to remove impediments to their seamless operations anywhere in
the world, whether they establish a local presence or conduct the transaction
across the border or in an offshore financial centre. Achieving that goal
requires unrestricted international flows of data and capital, full currency
convertibility and the right to process financial information offshore. State
activities, including pensions, social security or workplace insurance, need
to be fully open to international competition. Clients must have access to
competitive investment advice, analysis and ratings.
The industry also argues that incentives to generate ever-greater wealth
through innovation require a light-handed approach to regulating new
financial services and products, and industry consultation to avoid over-
prescriptive regimes. The few very large players that dominate the globally
integrated industry claim that the scale and complexity of the financial
services marketplace means they should be trusted to regulate themselves.
The WTO failed to deliver on these demands, fuelling the industry’s calls
for deregulation and liberalisation of financial services through free trade
agreements. The US and Australian finance lobbies have enthusiastically
welcomed the TPPA as an opportunity to achieve these goals.
The US Coalition of Service Industries that was created to lobby for free
trade agreements (FTAs) has an active finance industry membership. In early
2010 the CSI made a lengthy submission setting out its goals for the TPPA
negotiations. On behalf of the finance industry, it asked for a TPPA that builds
on the ‘best of breed’ provisions from recent FTAs. The broad-brush demands
include ‘the right to establish and own 100% of any investment, choice of
juridical form, full national treatment and elimination of non-prudential
regulatory barriers to achieve equal conditions of competition, and enhanced
terms of transparency’.5
The CSI sees greater ‘transparency’ as extending the already significant
leverage of the financial services industry over regulatory decisions by
guaranteeing it is consulted about proposed regulation and given an explanation
for the ultimate decision. Current US FTAs require governments to consult
and provide comments to the industry ‘to the extent practicable’.
The Coalition submission urges the development of innovative mechanisms
to address regulatory restrictions and lack of regulatory coherence. For example,
a TPPA should require ongoing dialogue between regulators to promote
‘continued reform and the alignment of participating countries’ financial
services regulations with global best practices as these develop’. Their ideal
model is the US–Japan Regulatory Reform and Competition Policy Initiative
where the governments exchange their reform recommendations annually and
officials use these as the basis for annual reports to their respective political
leaders on reform measures to be undertaken.6
A separate and extensive set of demands relates to the rapidly expanding
234 NAN SEUFFERT AND JANE KELSEY

electronic payments industry, which includes credit, stored value and loyalty
cards, ATM management and payment system operators like PayPal. In
particular, the US financial services industry wants the right to process all
elements of a transaction, whether authorisation, clearing or settlement,
offshore.
Australia’s financial services industry also argues for more extensive
provisions than exist in the Australia–US Free Trade Agreement (AUSFTA). The
Investment and Financial Services Association (IFSA) of Australia represents
145 members in retail and wholesale funds management, superannuation
and life insurance industries. When it made its submission to the Australian
Department of Foreign Affairs and Trade on the TPPA in late 2008 – at the
time Australia was considering joining the negotiations – the IFSA aspired to
increase the contribution of financial services from 2.9 to 5 per cent of GDP.7
Thanks largely to its compulsory superannuation scheme, Australia already
hosts the fourth-largest funds-management business in the world, including
familiar names like Macquarie Bank and AMP Capital Investors.
The IFSA targeted four ‘barriers’ for the TPPA negotiations: foreign
restrictions on capital and investment flows; foreign regulations that restrict
the operations of Australian fund managers in offshore markets through
caps on foreign equity and requirements for joint ventures; discriminatory
tax settings that deter locals from investing in offshore managed funds; and
non-recognition of Australia’s financial services regulatory regime. The
Australian Chamber of Commerce in Singapore echoed that last point, calling
for standardisation of financial services regulation across all TPPA countries.8
Of the other negotiating TPPA parties, the Singapore government is most
likely to press for ‘higher quality’ financial services rules and commitments.
According to its website, Singapore’s state investment agency Temasek
manages a US$120 billion portfolio, mainly in Singapore, Asia and emerging
economies including Latin America. Since 2006 Singapore has used tax
and other incentives to boost its status as a hub for financial services and
asset management, including cross-border operations. The City of London’s
global financial index in 2009 ranked Singapore as the most competitive
financial centre in Asia and third in the world after London and New York.9
Like Australia, Singapore already has extensive US FTA obligations. Both
countries’ banking sectors were less exposed to the sub-prime mortgage and
other toxic products than the US and Europe and are seeking to expand their
global market share.
There are signs that New Zealand may have similar pretensions. The
National-led government announced in February 2010 that it was exploring
the business case for New Zealand to become an ‘Asia-Pacific financial
services hub’ for back office facilities, which the Capital Markets Development
Taskforce had recommended.10 Prime Minister John Key, a former Merrill
 16. FINANCIAL SECTOR DEREGULATION 235

Lynch currency trader, speculated that the financial centre could create 3000 to
5000 reasonably well-paid jobs for New Zealanders.11 The chair of the Securities
Commission provided a reality check, observing that New Zealand’s financial
regulation was not good enough to be recognised by investors in Singapore
and Hong Kong.12 Moves in late April 2010 to establish a unitary financial
regulatory authority within the year would have to reconcile demands for
effective re-regulation to redress this image and restore investor confidence
with the finance industry’s deregulatory agenda for the TPPA.13
Of the remaining countries negotiating the TPPA, Peru already has extensive
financial services commitments in its FTA with the US, and Vietnam was
required to do so in its WTO accession. Chile is different. Of all the US FTAs,
Chile has maintained the most capacity to regulate financial institutions,
investments and services and to impose some constraints on capital flows. Even
then, it had to make concessions that left its national regulators uncomfortable.
It was Chile that sought a hiatus in negotiations on financial services and
investment in the original P-4 to allow time to review its approach.14 The
agreement required those negotiations to be completed within two years.
Once the US joined that process,15 it seemed inevitable that Chile would face
pressure to remove the reservations from its free trade agreement with the
US and match the advances the US had made in more recent agreements.16

Deregulation and Financial Instability

Despite the post-2007 financial crisis, there has been almost no criticism of
the financial services industry’s demands for even more extensive rights and
guarantees within a TPPA. These include: the right of the finance services
industry to operate globally in whatever form it may prefer; the elimination
of non-prudential regulatory barriers; further restrictions on the power of
domestic lawmakers to tighten regulatory provisions for financial services;
and consultation with the industry in any regulation-making.
The reluctance to question the trend to privatise, liberalise and deregulate
the financial sector reflects the way that ‘financialisation’ has come to dominate
the global economy since the late 1970s. Finance, insurance and real estate
(FIRE) have become the principal sources of wealth creation in the global
economy,17 and trade in financial instruments the favoured means of solving
the world’s problems, even climate change (see Chapter 9). The quest for
financialisation to generate ever-greater returns has produced a complex
and highly unstable financial system. Ian MacFarlane, the former governor
of the Australian Reserve Bank, noted in 2008 that eight financial crises have
occurred in just over a decade.18
The most recent crisis involved a debt-fuelled housing boom and a broader
debt-driven economic boom in the US that crashed spectacularly in 2008.19
The crash rapidly infected international financial markets and became known
236 NAN SEUFFERT AND JANE KELSEY

as the global financial crisis. Alan Greenspan, Chairman of the Federal

Reserve of the US from 1987 to 2006, predicts that it is ‘likely to be judged the
most virulent financial crisis ever’.20 The exact causes of the crisis are hotly
debated. Contenders include: the prevailing economic policies of deregulation
and market liberalisation; the failure of lawmakers and regulators in the US
and the UK to intervene in the spiralling and ever more leveraged risk-taking
of some of the big investment banks and insurers; the booming sub-prime
mortgage markets; and the creation of unregulated innovative ‘toxic’ financial
products based on these mortgages. All these elements are facilitated by the
deregulatory model promoted through financial services agreements.
The fallout from the global financial crisis has been severe. The credit
crunch, plummeting business confidence, and the collapse of property
markets flowed through to the real economy in the US and spread across
a world that has become dependent on US consumption. In New Zealand,
as elsewhere, rapidly rising inequalities of wealth had become masked by
debt-funded lifestyles that workers and families could not otherwise afford.
That lifestyle was funded by overseas borrowing, much of which was secured
against the rising value of the property market.21 The major Australian-owned
banks acted as the promoters and middlemen, funding this massive growth
in long-term personal debt by rolling over short-term commercial paper that
was sourced offshore.22
A critical lesson from the global financial crisis is that ‘orthodoxies’ are
contingent and transitory. During his term at the Federal Reserve, Greenspan
was a strong proponent of the prevailing economic policy, and he relied on
markets to self-correct, refusing to intervene at a number of key moments
in the boom. In October 2008 he famously apologised for putting too much
faith in deregulation and self-correcting markets;23 the prevailing approach
to regulating (or not) the financial sector had spectacularly failed. Likewise,
MacFarlane warned Australians that, from an international perspective, the
depth and contagion of the global financial crisis had invalidated the model
of deregulated financial systems that has operated in recent decades.

New Zealand’s Failed Financial Regulation

Despite these acknowledgements and the ongoing effects of a devastating
global financial crisis, the parties negotiating the TPPA will seek to further
liberalise and deregulate the already light-handed regulation of financial
markets and services, and to lock in not only this liberalisation but future
liberalisation measures as well.
New Zealand, with a track record of being ‘first to liberalise, last to regulate’,
has a litany of reasons to reject such moves. At least until 2000, New Zealand
had fewer investor protections even than other strongly neoliberal countries,
earning it a reputation as the ‘wild west’ of financial markets.24 Governments
 16. FINANCIAL SECTOR DEREGULATION 237

between 2000 and 2008 passed some moderate re-regulation of financial

markets, bringing the country’s regulations more into line with the prevailing
policy approach prior to the global financial crisis.
Despite that shift, an international study of best practices in mutual
fund industries (which includes Kiwisaver funds) across sixteen countries
in 2009 still ranked New Zealand sixteenth with a D-rating.25 In early 2010,
controversy erupted regarding the practices of some Kiwisaver funds. Some
of these practices breached existing laws and regulations. But the Minister of
Commerce also acknowledged ‘growing concern regarding the regulation of
Kiwisaver schemes’, and fast-tracked a review on reporting and supervision.
The Securities Commission’s response was merely to issue a Guidance Note
that observed it might need to recommend legislation;26 its failure to act directly
against those engaged in these practices was labelled ‘pathetically weak’.27
New Zealand has also seen the collapse of dozens of minimally regulated
finance companies, with many small investors who bought the companies’
unrated debentures (that is, lent the companies money) reportedly losing their
life savings.28 The collapses were due to fragmented, light-handed and self-
regulation by financial advisers, banks, corporate governance and securities,
combined with poor enforcement. One commentator observed that by 2008 a
number of the companies were effectively running Ponzi schemes, and that
the Securities Commission response was hampered by

… large and influential public issuers having lobbied against the Commission
developing strong enforcement powers; the organisation being underfunded;
security industry enforcement powers being weak in New Zealand; and the
fact that the Commission hasn’t had a strong determination to intervene
when malpractices occur.29

Many of the 4000 investors in Blue Chip New Zealand Limited that lost
an estimated NZ$84 million reportedly felt misled into signing complex
investment property and loan agreements they did not understand and that
involved undisclosed inter-party lending.30 The Securities Commission took
the position that the investments sold by Blue Chip were not securities, so the
protections of the securities laws and regulations did not apply.31 Investors
were left to seek redress by suing privately.32 As of April 2010, the Serious
Fraud Office was still deciding whether charges would be brought against
directors, more than two years after the Blue Chip companies collapsed.33
In addition, New Zealand has seen a recent proliferation of property-
proportionate ownership schemes (PPOS). The Securities Commission
exempted these schemes from some of the provisions of the relevant law in
2002. In 2009, journalist Brian Gaynor called PPOS ‘deadly minefields [that
are] illiquid, offer unrealistic returns and will probably lead to large capital
losses for investors’; he suggested ‘they are not too dissimilar to the disastrous
238 NAN SEUFFERT AND JANE KELSEY

securitised property products developed by Wall St that are the foundation

of the current economic crisis’.34
These recent examples show what a minimalist approach to regulation of
financial services and products means for retail, or ‘mum and dad’, investors.
All investments carry some risk, and laws and regulations cannot guarantee
a return on an investment. Nevertheless, the institutional weakness of the
Securities Commission (along with other government agencies) and a lack of
political will have resulted in tardy enforcement and inadequate re-regulation.
The Capital Markets Development Task Force report in 2010 acknowledged
what amounts to systemic market failure, ranging from insufficient analysis to
bad governance, but its recommendations that form the basis for the proposed
new Financial Markets Authority generally maintained a deregulatory and
market-driven, as opposed to investor-protection, focus. A ‘best of breed’ TPPA
would be expected to lock New Zealand into that approach and constrain its
regulatory options if stronger rules are subsequently needed.

Implications of a Likely TPPA Text

This section analyses various aspects of a potential TPPA text and their
implications for New Zealand. As there is no financial services and investment
chapter in the P-4, it is presumed that the existing US FTA texts are the baseline
for the TPPA negotiations and that all parties will be pressed to match and
exceed the strongest liberalising and deregulatory provisions among them.
Given that there is already a high level of liberalisation among the parties,
especially in foreign investment, the negotiations seem likely to focus on
non-discriminatory domestic regulation.
The US agreements with Chile, Australia and Peru, and most recently with
South Korea, follow a standard template with minor variations (aside from the
exclusion of investor–state disputes in the AUSFTA). All have separate chapters
on financial services that combine cross-border services and investment, and
expand on key provisions in the voluntary GATS Understanding on Financial
Services. New Zealand is differently placed from other TPPA parties. It has
adopted the Understanding, subject to reservations. But none of its FTAs has
a discrete financial services chapter. A TPPA would impose significant new
obligations, especially if the US finance industry achieved its goals.
Several preliminary points should be noted. First, ‘financial services’ is
defined in these agreements open-endedly to ‘include’ every service and product
currently imaginable: life and pension insurance, insurance intermediation
and risk assessment, banking deposits, mortgage lending and financial leasing,
trading in derivatives and securities, asset and hedge fund management, stock
exchange and futures markets, credit ratings, investment advice, intermediation
on all those activities, and much more. Second, a financial services chapter
will combine financial services with ‘investments’, which include a range of
debt instruments, equity, mortgages, futures and derivatives, as well as an
 16. FINANCIAL SECTOR DEREGULATION 239

enterprise. Third, the rules will cover all phases of commercial activities –
from the establishment, acquisition and expansion of financial institutions
and investments to their management, conduct, operation and sale or other
disposition. Fourth, a country’s commitments are likely to apply equally to
foreign investment and the supply of financial services from offshore through
the Internet or in another party, unless it states otherwise.

Foreign Control of the Banking System

One aim of the finance industry is to remove all restrictions on foreign
investment and limits on the size of individual enterprises. That would
perpetuate the conditions that have enabled a few major financial institutions
to dominate global markets and become ‘too big to fail’. New Zealand’s banking
system already faces that situation. The multi-party parliamentary inquiry
on banking in 2009 reported that four Australian banks control 89.6 per cent
of total New Zealand bank assets, with ANZ-National holding one third of
the total; New Zealand-owned banks held only 4 per cent.35
The limited impact of the global financial crisis on New Zealand is often
attributed to the stability of Australian banks and their lack of exposure to the
toxic products at the centre of the crisis. This view fosters an unwarranted
complacency in relation to the TPPA.
First, Australia has experienced its own crises. MacFarlane identifies the
asset boom of the 1980s that burst in the early 1990s as the most severe: ‘two
significant banks failed (both state government owned), as did the second
biggest building society, the biggest credit union, three merchant banks, a
mortgage trust and a friendly society’.36 That crisis quickly spread to New
Zealand.
Second, the current stability of Australia’s commercial banks is attributed
largely to the ‘four pillars’ policy that prevents the four main commercial
banks from merging. This policy mercifully survived pressure from the banks
in the 1990s to dismantle it.37 In the AUSFTA, Australia reserved the right
to refuse US investments that would lead to an ‘unacceptable’ shareholding
situation or to effective control of an existing financial sector company. A
side-letter records the principle that any large-scale transfer of ownership of
the Australian financial system would be contrary to the national interest,
but states there is no blanket prohibition of foreign ownership of particular
institutions. That policy may come under pressure in the TPPA. Any mergers
or takeovers of Australian banks would have flow-on effects to New Zealand.
Third, it is fortuitous under New Zealand’s laissez-faire approach to foreign
investment that the banks are owned by Australians and not by Citigroup,
the Bank of Scotland or Iceland’s Kaupthing. There is nothing to stop such
ownership happening in the future, if the Australian banks wanted to sell.
The threshold for vetting foreign direct investment as of 2009 is NZ$477
million, so most foreign banks would still require approval, although smaller
240 NAN SEUFFERT AND JANE KELSEY

financial services providers might not. But there is no special ‘national interest’
consideration for the financial sector equivalent to that for land, and New
Zealand’s existing FTAs would prevent one being added (see Chapter 14).
Those restrictions are likely to apply automatically to all TPPA parties under
a most-favoured nation (MFN) provision.
Lastly, those who applaud the Australian banks have short memories. The
failure to service poor people and rural communities led to the establishment
of Kiwibank. In Kiwibank’s early days, competitors complained that the new
bank was being subsidised because New Zealand Post provided access to its
premises and networks and credited income from its lucrative agency business,
such as bill payments, to Kiwibank. That was arguably a breach of New
Zealand’s national treatment commitments on banking services in the GATS,
which prevent preferences to local institutions and do not exempt subsidies.
The GATS schedule excludes ‘enterprises currently in State ownership’, but
Kiwibank did not exist in 1994 and is not protected by that reservation.
If Kiwibank is privatised, as some propose, a future government may face
a repeat situation of service failure. Establishing another viable new bank
would require initial government support. Under a TPPA, Australian and
US banks could bring a dispute alleging that government support was an
anti-competitive practice and a breach of both national treatment and fair
and equitable treatment obligations (as discussed in Chapter 14). There are
no general exceptions in these agreements for social objectives.
Proposals to privatise the Accident Compensation Corporation (ACC)
also risk future pressure from US insurers like AIG. ACC operates as a partial
monopoly over accident insurance and excludes foreign insurers from access
to that part of New Zealand’s market. New Zealand’s reservations in the GATS
and in the Singapore (and China and ASEAN) free trade agreements record
that ‘compulsory worker’s [sic] compensation insurance via levies on vehicle
owners, employers, employees and the self-employed is provided solely by
the Accident Compensation Corporation’ (emphases added).38 Hence, the
workers’ compensation activities of ACC are protected from any market access
obligations, but not its non-workers’ scheme, and this protection applies only
so long as the corporation’s monopoly continues.
The situation of non-workers’ compensation might be saved by an exception
for activities or services conducted by a public entity with the guarantee of
the government. However, if people and employers could choose to opt out
by insuring elsewhere, as in the later 1990s, there would be a competitive
market and neither the exception nor the previous reservation for workers’
compensation would apply. Arguably, ACC is also covered by the state-
enterprise exception mentioned above, so long as it remains state-owned;
that protection would cease if ACC was partially or wholly privatised or
disbanded. Any subsequent moves to revoke the privatisation, as the Labour
government did in 2001, would open the government to an investor-initiated
 16. FINANCIAL SECTOR DEREGULATION 241

dispute by insurance firms from other TPPA countries. Last time ACC was
part-privatised, 40 per cent of workplace cover ended up with Australian
insurance firm HIH, which later became insolvent in 2001. Such a firm would
have an obvious incentive to sue the New Zealand government for damages.

Regulating Toxic Financial Products

A ‘best practice’ TPPA would pre-commit New Zealand governments to
allowing foreign financial institutions to supply ‘new financial services’ (and
products). These are defined as services and products that the foreign firm is
already supplying offshore and that New Zealand law allows New Zealand
institutions to provide ‘in like circumstances’, but which the local firms are
not supplying.
‘New financial services’ is code for the kind of ‘innovative’ collateralised
debt obligations, mortgage-backed securities, credit default swaps and similar
toxic products at the centre of the global financial crisis. Financial innovations
are the source of massive wealth, profits and fees. New variants are already
emerging. Under a TPPA, if they were being supplied in one country that
was party to the agreement, New Zealand would have to allow them to be
sold in New Zealand, even if they were not governed by any regulation. This
would often be the case, as financial innovations are, by definition, novel,
and usually complex and opaque. Indeed, new financial products are often
designed specifically to circumvent regulatory barriers.
The AUSFTA says new financial services can be provided from offshore as
well as by foreign investors in Australia. A government can require that the
service or product is supplied through a particular institutional or legal form.
It can also require its authorisation, but can decline that authority only for
prudential reasons, which would often be difficult to prove for new financial
services, as explained below.
New Zealand currently has no equivalent obligations in its FTAs. The only
relevant provision is in the GATS Understanding, which allows countries to
limit its application. New Zealand reserved the ability to prevent a new financial
service being supplied if it was not covered by any regulatory framework or
did not comply with those regulations.

Investor Leverage
A TPPA could potentially increase the political leverage of the financial
industry in three ways: ‘transparency’ provisions that guarantee the foreign
finance industry the right to be consulted on any proposed regulation; a formal
annual review of the regulatory ‘barriers’ identified by the finance industry
in every TPPA country; and threatened or actual resort to the investor–state
dispute mechanism that would allow foreign financial investors to sue the
New Zealand government directly for damages in an international arbitral
tribunal without the involvement of their home country.
242 NAN SEUFFERT AND JANE KELSEY

It is not hard to think of examples where that leverage could operate. New
Zealand introduced a Takeovers Code, which came into force in 2001, to
protect investors from practices that were considered coercive of ‘mum and
dad’ investors and that arguably resulted in companies that were takeover
targets being bought at bargain-basement prices. Opponents objected that
its regulations would significantly limit the market for buying and selling
companies, resulting in fewer buyers, less competition and higher prices. They
could cite academic commentary to support claims that measures preventing
mergers and hostile takeovers were non-discriminatory barriers to trade in
the competitive markets for purchasing companies.39
Pensions and asset management are highly lucrative markets. The industry
wants the right under a TPPA to invest and hold, and presumably operate,
such funds offshore.40 New Zealand’s current FTAs guarantee not to restrict
pension-related management by foreign investors in New Zealand, but those
obligations do not extend to cross-border supply or offshore management.
Financial services agreements have a standard exception for pension funds, but
that applies only to non-competitive provision of pension services. Kiwisaver
currently involves competition internally between the private-sector fund
managers and externally with non-Kiwisaver-defined contribution retirement
schemes, so it does not fall within that exception.
New Zealand could exclude offshore management in its Annex of non-
conforming measures in a TPPA, but that only applies to the extent of
existing regulation. Alternatively, the government could list pensions or the
Kiwisaver scheme as an exclusion, but that does not apply to the provisions
for expropriation or fair and equitable treatment. It would not take many
fund failures through mismanagement, fraud or financial crises to provoke a
collapse of Kiwisaver and impel a government to consider resuming control
of the state pension scheme. That move would trigger the mandatory prior
consultations with the funds management industry and raise the potential
for legal action by Kiwisaver providers from another TPPA country on the
grounds of indirect expropriation or a breach of fair and equitable treatment.

Inadequate Exceptions
The systemic importance of the financial sector and the unique risks of
instability and financial loss are reflected in three exceptions.
All financial services agreements allow ‘non-discriminatory measures of
general application’ in pursuit of monetary and related credit and exchange-
rate policies. Governments can restrict payments and transfers between related
parties through the ‘equitable, non-discriminatory and good faith’ application
of measures that relate to maintaining the soundness, integrity or financial
responsibility of financial institutions or cross-border suppliers of financial
services. However, under recent US FTAs, governments cannot impose foreign
 16. FINANCIAL SECTOR DEREGULATION 243

exchange-related restrictions as a condition of making foreign investments.

A second traditional exception allows governments to suspend their
obligations during a balance-of-payments crisis under quite strict conditions.
All US FTAs since Chile have required governments to commit to full capital
account liberalisation, preventing any restriction on inflows and outflows
of capital. They have also removed the right of countries to suspend their
obligations even in a balance-of-payments emergency (see Chapter 14). If this
obligation not to restrict ‘hot money’ flows is maintained in a TPPA, it will
intensify the risk of financial and exchange rate instability in, and potentially
beyond, all the participating countries.
The third, crucial exception allows governments to adopt measures for
specified prudential reasons. The provision is often misleadingly called
a ‘prudential carve-out’. It is actually an exception that governments can
invoke in defence to complaints that certain measures have breached their
obligations. The burden of proof is on the government relying on the defence.
Its scope and meaning are uncertain and contested.41 First, a government
would have to satisfy the TPPA’s dispute body, or arbitrators in the case of an
investor-initiated dispute, that the measure is ‘prudential’. US FTAs define
prudential as ‘including’ measures to protect consumers or to ensure the
integrity and stability of the financial system or individual institutions. The
words ‘protecting’ consumers and ‘ensuring’ stability imply that a government
must demonstrate the existence of some risk that requires action, and that
the measure adopted would effectively address that risk. That onus would
pre-empt a broader precautionary approach being taken before the risk of a
new service or product could be demonstrated. It is possible the TPPA might
go further and mirror the prudential provision in the European Union’s recent
agreements that require a government to demonstrate that the particular
measure was ‘necessary’ to achieve the prudential objectives – meaning there
was not a less intrusive response reasonably available to it.
Examples of prudential measures cited in a WTO paper in 1998 include capital
adequacy ratios, limits on risk concentration and management, prohibitions
on insider trading, and transparency and disclosure requirements.42 Some
of the regulatory measures adopted in New Zealand in response to market,
regulatory and policy failure would clearly fall within the carve-out. The
insider-trading regime passed in 2006, which replaced the private-enforcement
regime with criminal and civil sanctions and empowered government agencies
with enforcement, would fit within the investor protection element. 43 So
would recent reforms to regulations requiring the disclosure of information
to investors in company prospectuses.44
However, even if a measure satisfies the definition, the government must
then satisfy the dispute tribunal that it is not being used to avoid the country’s
commitments.45 For example, quantitative restrictions on one bank’s share
244 NAN SEUFFERT AND JANE KELSEY

of the nation’s deposits or a ban on commercial banks engaging in securities

trades on its own account are measures that address the concentration and
management of risk. Both were among measures proposed by the Obama
administration – and they are both overtly inconsistent with market access
rules and the GATS Understanding on Financial Services. In the New Zealand
context, Bill Rosenberg (Chapter 14) cites the Reserve Bank’s powers to
regulate the size and nature of a bank’s business, require the separation of
its banking from other business and limit outsourcing; all of these constitute
market access restrictions and have a prudential objective. It is not possible
to predict how a dispute body would resolve that tension.
It is unclear whether governments must prove good faith when claiming
that measures that conflict with an obligation under the agreement are
prudential and whether even that would be enough if the measure also had
demonstrable ‘protectionist’ economic benefits. This uncertainty makes it
risky for governments to intervene – especially if the banks threatened a
destabilising exit or a formal dispute if the regulations proceeded. The mere
threat of litigation could have a chilling effect on government action.
Finally, ‘prudential’ would not exempt measures that are designed to
meet economic stability and employment objectives. It would certainly not
extend to measures that have a social objective, such as the renationalisation
of accident compensation, a public monopoly for Kiwisaver or establishing
a state-owned bank with a social charter to fill a void left by private banks.

Conclusion
This chapter shows why it would be reckless to enter into further commitments
on financial services and investments that tie New Zealand even more deeply
into a model that has suffered repeated systemic failures.
Those responsible for the TPPA negotiations should heed the warning of
the 2009 Stiglitz Report. It concluded that trade-related financial services
liberalisation has been advanced under the rubric of these agreements ‘with
inappropriate regard for its consequences on orderly financial flows, exchange
rate management, macro-economic stability, dollarisation, and the prudential
regulation of domestic financial systems’. Moreover, their framework of
financial market liberalisation ‘may serve to restrict the ability of governments
to change the regulatory structure in ways which support financial stability,
economic growth, and the welfare of vulnerable consumers and investors’.
The Stiglitz Report called for a review of the GATS agreement on financial
services

… to ensure that it becomes more consistent with the need for an inclusive
international regulatory framework more conducive to crisis prevention
and management, counter-cyclical and prudential safeguards, provision of
development and inclusive finance as well as generally cheaper and better
 16. FINANCIAL SECTOR DEREGULATION 245

finance for developing countries. Agreements which restrict countries’

revising their regulatory regimes in light of what has been learned about
their deficiencies in this crisis obviously have to be altered. 46

The TPPA parties should use these negotiations to revoke the financial
services and investment chapters in their existing free trade agreements,
rather than dig themselves deeper into a model that has patently failed.
Epilogue

As this book goes to print, a fourth round of TPPA negotiations has been
scheduled for New Zealand in December 2010. The TPPA advocates can be
expected to talk up the prospects for the deal and its benefits for New Zealand,
Australia and the other parties. Yet these benefits are not clear, and they cannot
be taken on trust. Given the extensive constraints that will be imposed on
governments through such an agreement, this book argues that the onus of
proof should lie on its proponents. Indeed, since the chapters were written, a
draft research report commissioned by the pro-market Australian Productivity
Commission has cast serious doubt on the benefits to Australia from FTAs;1
there remains no evidence of substantive benefits to New Zealand.
As Bryan Gould and John Quiggin observe in their chapters, the lack
of substantive evidence in support of an agreement is compounded by the
secrecy that surrounds free trade negotiations. It has been standard practice
with bilateral and regional free trade agreements not to release draft texts
and position papers during the negotiations. As a result, the public is only
able to read the agreement and assess its implications once the text has been
signed. Just as that degree of secrecy would not be acceptable for an Act of
Parliament, it should not acceptable for a treaty that will constrain what
future parliaments can do. The stakes are simply too high. It is significant
that even the World Trade Organization has enabled greater public scrutiny
during the Doha round of negotiations by publishing Members’ position
papers, status reports from the chairs of the sectoral committees, and draft
texts in sensitive areas, such as domestic regulation.
As the Introduction observed, there is a deep irony also in the fact that
while political leaders of Australia, the US and New Zealand have recognised
the failures of neoliberalism in the wake of the global financial crisis, they
have engaged in negotiations that would embed that model in perpetuity.
Recent shifts in the political climate have made those contradictions even
more sensitive. In New Zealand, there has been a popular backlash against
foreign ownership of farmland, mining in national parks and bailouts of poorly
regulated finance companies. In Australia, US pressure to re-open negotiations
 EPILOGUE 247

on the Pharmaceutical Benefits Scheme, investor–state disputes, culture and

government procurement will be especially sensitive, given the marginal
hold on power of the minority Labor government in Australia following the
hung election of August 2010. With President Obama’s poll ratings at an all-
time low and a mid-term election due in November 2010, the Democratic
administration faces its own political turmoil as it seeks to placate both its
core constituency and the powerful corporate lobby.
These developments, among many others, signal a period of ongoing
uncertainty and instability for the prevailing market-led paradigm. The TPPA
must be understood in this context. The problem is not just with the ‘democratic
deficit’, the denial of indigenous self-determination and the closure of policy
space available to governments. A constant theme throughout the book is the
way in which a TPPA, through a variety of legal mechanisms, would empower
foreign corporate interests ahead of national citizens in making decisions on
policy and regulation in every participating nation. This constraint affects
all areas of society and culture, as well as the environment and the economy.
As a result, governments could find themselves locked into a market model
of deregulation, irrespective of financial crises, global warming, deepening
social distress, exhaustion of indigenous resources or other catastrophes.
Our governments do not have a mandate to commit future generations to
that destiny.
Endnotes

INTRODUCTION Worth the Fuss?’, Free Trade Bulletin 40, 15

March 2010, Table 1, http://www.cato.org/
1 A US–Vietnam Bilateral Trade Agreement
pub_display.php?pub_id=11443, accessed 4
was signed in 2001 in advance of Vietnam’s
July 2010.
accession to the World Trade Organization,
15 Ibid.
which was formalised in 2006. The US
16 ‘Clinton’s Economist Warns NZ of US Trade
also has Trade and Investment Framework
Deal’, Sunday Star Times, 9 March 2008, A13.
Agreements, which set the frameworks and
17 The Members of APEC are referred to as
principles for dialogue, that were signed with
‘economies’, partly to quarantine non-
New Zealand in 1992 and Brunei in 2002.
commercial issues like human rights and
2 Since December 2009, Brazil, Taiwan, South
labour standards and partly to enable the
Korea and Indonesia have all adopted some
participation of the People’s Republic of
form of currency controls.
China, Chinese Taipei and Hong Kong,
3 Kevin Rudd, ‘Social Democracy and the
China SAR.
Global Financial Crisis’, in Goodbye to All
18 Jane Kelsey, Reclaiming the Future. New
That? On the Failure of Neo-liberalism and the
Zealand and the Global Economy, Bridget
Urgency of Change, eds Robert Manne and
Williams Books, Wellington, 2003, pp. 223–33.
David McKnight, Black Inc, Melbourne, 2010,
19 Tim Groser, ‘Beyond CER: New Trade
pp. 73–98, p. 85.
Options for NZ’, address to the Institute
4 ‘Barack Obama’s Acceptance Speech’, New
of Policy Studies, Victoria University of
York Times, 28 August 2010, http://www.
Wellington, 15 March 2000.
nytimes.com/2008/08/28/us/politics/28text-
20 CTS Issues Brief for Congress, ‘Trade
obama.html, accessed 4 July 2010.
Negotiations During the 109th Congress’,
5 ‘John Key’s Address to APEC CEO Summit’,
Library of Congress, 19 January 2005.
22 November 2008, http://www.scoop.co.nz/
21 However, Australia and New Zealand
stories/PA0811/S00199.htm, accessed 4 July
secured agreement from ASEAN to launch
2010.
negotiations for a combined FTA in 2005,
6 USTR, ‘U.S. Engagement with the Trans-
which was concluded in 2009.
Pacific Partnership: Action to Date’, Fact
22 Ministry of Foreign Affairs and Trade,
Sheet, 14 November 2009, http://www.ustr.
Information Bulletin, 22 February 2008, http://
gov/about-us/press-office/fact-sheets/2009/
www.nzuscouncil.com/index.php/news/
december/tpp-statements-and-actions-date,
coverage/p4_united_states/, accessed 8 October
accessed 4 July 2010.
2009.
7 Ibid.
23 Letter from Susan C. Schwab to the Hon.
8 Letter from Demetrios Marantis, Deputy
Nancy Pelosi, Speaker, U.S. House of
US Trade Representative, Washington, Wall
Representatives, 22 September 2008, http://
Street Journal, 5 May 2010.
ustraderep.gov/assets/World_Regions/
9 ‘Australia Trans-Pacific Partnership Trade
Southeast_Asia_Pacific/Trans-Pacific_
Talks a Milestone: Crean’, Sydney Morning
Partnership_Agreement/Other_Documents_
Herald, 15 March 2010, http://www.bilaterals.
(Letters,_etc)/asset_upload_file775_15142.pdf,
org/spip.php?article16939, accessed 4 July
accessed 4 July 2010.
2010.
24 Simon Crean, ‘APEC Ministers Build on
10 Tim Groser, ‘Eight-nation Free Trade
G20 Leaders’ Momentum’, 21 November
Negotiations Begin’, Press statement, 15
2008, http://www.trademinister.gov.au/
March 2010.
releases/2008/sc_094.html, accessed 7 October
11 Ibid.
2009.
12 References to the position of New Zealand
25 USTR, ‘Request for Comments and Notice
officials are based on a discussion with the
of Public Hearing: Proposed Trans-Pacific
lead negotiator in May 2010.
Partnership Free Trade Agreement’, Federal
13 International Brotherhood of Teamsters,
Register, 74, no. 15, 26 January 2009, http://
‘Comments on the Proposed Trans-Pacific
www.thefederalregister.com/d.p/2009-01-
Partnership Trade Agreement’, submitted
26-E9-1515.
to Office of the US Trade Representative, 25
26 ‘U.S. Delays TPP Talks to Allow Obama
January 2010.
Cabinet Members to Take Office’, Inside US
14 Sallie James, ‘Is the Trans-Pacific Partnership

Trade, 24 February 2009.
27 ‘54 House Members Send Letter to President
Obama on the Future American Trade and
Globalization Agenda’, 26 February 2009,
http://www.michaud.house.gov/index.
php?option=com_content&task=view&id=575
&Itemid=76, accessed 7 October 2009.
28 Letter from Ellen O. Tauscher and others to
President Barack Obama, 10 March 2009.
29 USTR, ‘Increasing U.S. Exports, Creating
American Jobs: Engagement with the Trans-
Pacific Partnership’, Fact Sheet, 14 November
2009, http://www.ustr.gov/about-us/press-
office/blog/2009/november/increasing-us-
exports-creating-american-jobs-engagement-
tra.
30 USTR, ‘U.S. Engagement with the Trans-
Pacific Partnership: Action to Date’, Fact
Sheet, 14 November 2009, http://www.ustr.
gov/about-us/press-office/fact-sheets/2009/
december/tpp-statements-and-actions-date,
accessed 4 July 2010.
31 Michael Priestley, ‘Australia’s Free Trade
Agreements; Background Note’, December
2008, http://www.aph.gov.au/library/pubs/
bn/2008-09/AustFreeTradeAgreements.htm,
accessed 4 July 2010.
32 NZ–US Council, Free Trade with the US: The
Time is Now, July 2008, Wellington, p. 6,
http://www.nzuscouncil.com/images/uploads/
NZUS_Council_FTA_Marketing_Doc_FINAL.
pdf, accessed 4 July 2010.
33 Fred Bergsten and Robert Scollay, ‘The Case
for a Model Free Trade Agreement between
the United States and New Zealand’, Institute
for International Economics, Washington,
2002, p. 11. The draft report also refers to
a preliminary assessment of the economic
effects of free trade between the US and
New Zealand by John Gilbert of Utah State
University.
34 Ibid, p. 1.
35 John Ballingall, ‘NZ, the US and Trade
Liberalisation: Don’t Panic’, New Zealand
Herald, 26 March 2010, http://www.
nzherald.co.nz/business/news/article.cfm?c_
id=3&objectid=10634537, accessed 4 July 2010.
36 MFAT, ‘Trans-Pacific Strategic Economic
Partnership Agreement Negotiations with the
United States. Call for Public Submissions’,
October 2008.
37 ‘Canada Prioritizing FTAs Over Doha Round,
But Has Yet to Decide on TPP’, Inside US
Trade, 26 April 2010.
38 Sallie James, ‘Is the Trans-Pacific Partnership
Worth the Fuss?’, Free Trade Bulletin, 40, 15
March 2010, Table 1, http://www.cato.org/
pub_display.php?pub_id=11443, accessed 4
July 2010; ‘Clinton’s Economist Warns NZ of
ENDNOTES [to pages 17–31] 249
US Trade Deal’, Sunday Star Times, 9 March
2008, A13.
39 Bernard Hickey, ‘Why an American Free
Trade Deal is Ludicrous and Dangerous Idea’,
24 September 2008, http://www.interest.co.nz/
ratesblog/index.php/2008/09/24/why-an-
american-free-trade-deal-is-ludicrous-and-
dangerous-idea, accessed 4 July 2010.
40 Bernard Hickey, ‘Why Bother with a US FTA’,
23 March 2010, http://www.nzherald.co.nz/
news/print.cfm?objectid=10633801&pnum=3.
41 ‘Malaysia and the TPP’, Washington Trade
Daily, 15 April 2010.
42 ‘TPP Negotiators to Seek Market Access
Structure Deal at August Meeting’, Inside US
Trade, 25 June 2010.
43 Discussion with the author, 30 April 2010.
44 Jerry Hagstrom, ‘Kirk Sees Hill Support for
Pacific Deal’, CongressDailyPM, 18 February
2010.
45 In particular, they are seeking harmonisation
and mutual recognition of standards (testing
protocols, accreditation procedures, product
certification and labelling, and adoption
of standards generated by bodies that are
increasingly run by the industry themselves)
and rules of origin; facilitated integration
of production, procurement and supply
chains across goods, services and travel;
regulatory coherence in specific sectors
and broad principles, such as guaranteed
rights to comment on proposed regulation;
and restrictions on regulating of emerging
areas, like nanotechnology: ‘TPP Negotiators
Unable to Reach Consensus on Key Structural
Issues’, Inside US Trade, 18 June 2010.
46 ‘Kirk: USTR Wants to Continue TPP
Negotiations, Panama Work Ongoing’, Inside
US Trade, 21 May 2009.
47 ‘U.S. Resisting Demands on Immigration
Concessions within TPP Talks’, Inside US
Trade, 18 June 2010.
48 Ibid.
49 Amy Tsui, ‘Negotiators Discuss How to Start
Drafting Texts for Next Round of TPP Talks
in October’, International Trade Daily, 16 June
2010.
50 ‘Unions Call for Transparency in Pacific
Rim Trade Talks’, 18 May 2010, http://www.
imfmetal.org/index.cfm?c=23027, accessed 4
July 2010.
51 Kenneth Davidson, ‘Democracy a Loser in
Trade Free-for-all’, The Age, 29 March 2010.
1. POLITICAL IMPLICATIONS FOR NEW
ZEALAND
1 See the speech by Prime Minister John Key
to the US–NZ Council, Washington, 14 April
250 ENDNOTES [to pages 31–42]

2010, http://www.johnkey.co.nz/archives/928- 2. THE POLITICS OF THE TPPA IN

Speech-Notes-to-USNZ-Council.html. AUSTRALIA
2 I develop these arguments fully in Bryan
1 Joseph Stiglitz and Andrew Charlton, Fair
Gould, The Democracy Sham, Craig Potton
Trade for All, Oxford University Press, New
Publishing, Nelson, 2006.
York, 2005.
3 OECD GDP per capita figures show that
2 Kevin Rudd, ‘The Global Financial Crisis’,
New Zealand slipped from eighteenth to
The Monthly Magazine, February 2009. This
twenty-second out of thirty OECD members
article underplays the influence of neoliberal
between 1985 and 2006. More worrying is
policies on ALP governments, which was
the fact that the gap between New Zealand
considerable, although not as thoroughgoing
and comparable countries has widened
as their influence on the Howard government.
substantially. In 1984, New Zealand’s figure
3 Kyla Tienhaara, The Expropriation of
was 89 per cent of Australia’s; by 2006 it had
Environmental Governance: Protecting Foreign
fallen to 71 per cent, and will have fallen
Investors at the Expense of Public Policy,
further since then. New Zealand would need,
Cambridge University Press, 2009.
in other words, more than a 40 per cent
4 Robert Zoellick, Letter to the US Senate,
increase in GDP per capita to catch up with
Washington, 13 November 2002.
Australia.
5 Pharmaceutical Research and Manufacturers
4 See the Green Party’s submission on the New
of America, ‘National Trade Estimate Report
Zealand–China Free Trade Agreement to the
on Foreign Barriers to Trade of December
Foreign Affairs Defence and Trade Select
2003’, Washington, 12 December 2003.
Committee, 7 May 2008, http://www.greens.
6 Patricia Ranald and Louise Southalan, ‘The
org.nz/submissions/green-party-submission-
Australia–US Free Trade Agreement: Trading
nzchina-free-trade-agreement.
Australia Away?’, Australian Fair Trade and
5 See the speech by Phil Goff to Federated
Investment Network, April 2003, http://www.
Farmers, 19 March 2009, http://www.labour.
aftinet.org.au.
org.nz/news/speech-federated-farmers-
7 Don Henry, ‘Free-trade Clause Would be a
national-council.
Dangerous Weakening of the Law’, Sydney
6 See John Key’s speech to the US/NZ Council,
Morning Herald, 23 October 2003, p. 15; and
14 April 2010.
Australian Broadcasting Corporation Radio
7 See the NZCTU’s submission on the New
National, ‘Groups Outline Case against Free
Zealand–China Free Trade Agreement to the
Trade Deal’, transcript of The World Today,
Foreign Affairs Defence and Trade Select
ABC Radio National, 24 November 2003,
Committee, May 2008, http://union.org.nz/
http://www.abc.net.au/theworldtoday.
policy/submission-on-the-china-free-trade-
8 Ann Capling, All the Way with the USA:
agreement.
Australia, the US and Free Trade, UNSW Press,
8 Mike Moore, Saving Globalization, Wiley, New
Sydney, 2004; and Linda Weiss, Elizabeth
York, 2009.
Thurbon and John Mathews, How to Kill a
9 A NZ Herald Digipoll, published in the New
Country: Australia’s Devastating Trade Deal
Zealand Herald, 31 March 2008.
with the United States, Allen & Unwin, Sydney,
10 See, for example, Claude Barfield and Philip
2004.
J. Levy, Tales of the South Pacific, published
9 Ross Garnaut, Evidence Given to the Joint
for the American Enterprise Institute for
Standing Committee on Treaties, Australia–
Public Policy Research, http://www.aei.org/
United States Free Trade Agreement
outlook/100927.
Hearings, 3 May 2004, Official Committee
11 See the memorandum sent by the National
Hansard, Canberra, p. 64.
Milk Producers Federation to US Trade
10 Tim Colebatch, ‘Why Latham Should Reject
Representative Ron Kirk on 25 January 2010,
the FTA’, The Age, 27 July 2004, p. 10; Ross
http://www.nmpf.org/files/file/NMPF TPP
Gittens, ‘Selling Off a Slice of Our Country’,
FTA Comments_012509.pdf.
Sydney Morning Herald, 11 August 2004, p. 17;
12 See Chapter 2 by Patricia Ranald.
Ken Davidson, ‘Why Rush a Free Trade Deal
13 New Zealand Debt Management Office
Mr Howard?’, The Age, 1 July 2004, p. 11; Alan
figures show that New Zealand had, by 2008,
Wood, ‘Free Trade Deal Could be a Political
sold to foreign owners assets worth NZ$93.3
Liability for the PM’, The Australian, 9 March
billion, up nearly 900 per cent since 1989.
2004, p. 13.
14 See Chapter 6 by John Quiggan.
11 The Australia Institute, ‘Trading in our
15 A term first used by US Secretary of State,
Health System?’, Canberra, 2003, http://www.
John Foster Dulles, in 1953 when addressing
tai.org.au/; Peter Drahos, et al., ‘The FTA
the issue of European defence cooperation.
and the PBS: Submission to the Senate Select

Committee on the Australia–US Free Trade
Agreement’, Canberra, 2004; Australian
Broadcasting Corporation, ‘Bitter Pill?’,
transcript of Four Corners, 2 August 2004,
http://www.abc.net.au/4corners/content/2004/
s1167518.htm.
12 Vincent Morello, ‘Nothing Secret in Claudia’s
Plea’, The Australian, 5 April 2004; Anna Krien
and Holly Byrnes, ‘The Logies Turn Political,
Local Content Sold Out: Actors’, Sun-Herald,
18 April 2004.
13 Hawker Britton, ‘US Free Trade Agreement
Disappoints Australia’, Media Release,
Sydney, 19 February 2004, http://www.
hawkerbritton.com.au; and Ivan Cook,
Australians Speak 2005: Public Opinion and
Foreign Policy, The Lowy Institute, Sydney,
2005.
14 Senate Select Committee on the Free Trade
Agreement between Australia and the United
States of America, Final Report, Canberra,
August 2004.
15 Mark Latham, ‘Joint Statement by Federal
Labor Leader Mark Latham and Deputy
Leader of the Opposition in the Senate and
Shadow Minister for Trade Steven Conroy’,
Media Release, Canberra, 4 August 2004.
16 Mark Latham, ‘Labor to Refer Australia–US
FTA to Senate Committee’, Media Release,
Sydney, 31 January 2004.
17 See Michael Priestley, ‘Australia’s Free Trade
Agreements’, Background note prepared by
Australian Parliamentary Library, 2008; and
Rodney Tiffen, ‘Mind the Gap: Benefits from
Free Trade Haven’t Quite Gone the Distance’,
Sydney Morning Herald, 3 March 2010.
18 The Australia Institute, ‘Trading in Our
Health System’, p. 2.
19 Pharmaceutical Research and Manufacturers
of America, ‘National Trade Estimate Report’,
p. 6.
20 Australia–United States Free Trade
Agreement (AUSFTA) Text, 2004, Annex 2c,
http://www.dfat.gov.au/trade/negotiations/
us_fta/final-text/index.html.
21 Department of Health and Ageing,
Pharmaceutical Benefits Scheme Reform, 2007,
http://www.health.gov.au/internet/wems/
publishing.nsf/Content/pbs_reform_02feb07.
22 Andrew Laming, ‘Let’s Overhaul the
Pharmaceutical Benefits Scheme’, The
Australian, 10 January 2006, p. 10.
23 Tom Faunce, et al., ‘The Impact of the
Australia–US Free Trade Agreement on
Australian Medicines Regulation and Prices’,
Journal of Generic Medicines, 7, no. 1, January
2010, pp. 18–29.
24 Philip Clarke and Edmund Fitzgerald,
‘Expiry of Patent Protection on Statins:
ENDNOTES [to pages 42–47] 251
Effects on Pharmaceutical Expenditure in
Australia’, Medical Journal of Australia, (online
publication), 27 April 2010, p. 8, http://www.
mja.com.au/public/issues/192_11_070610/
cla11057_fm.html.
25 Ibid, pp. 9–10.
26 Department of Health and Ageing, The
Impact of PBS Reform, Report to Parliament
on the National Health Amendment
(Pharmaceutical Benefits Scheme) Act 2007,
Commonwealth of Australia, 2010, p. 15.
27 Medicines Australia, Presentation, questions
and evidence to the Senate Community
Affairs Committee Reference Inquiry into
Consumer Access to Pharmaceutical Benefits,
7 May 2010, http://www.aph.gov.au/hansard/
senate/commttee/S12998.pdf.
28 National Blood Authority, ‘2001 Review of
the Australian Blood Banking and Plasma
Product Sector’, 2001, http://www.nba.gov.au/
review.htm.
29 See Chapter 13 by Ted Murphy on government
procurement.
30 Baxter Healthcare, ‘Submission to Joint
Standing Committee on Treaties’, 14 April
2004, p. 3.
31 Australia–United States Free Trade
Agreement, Side Letter on Blood
Fractionation.
32 Australian Red Cross, Submission to the
Review of Australia’s Plasma Fractionation
Arrangements, April 2006; and Hilary
Bambrick, et al., ‘The Potential Impact of the
AUSFTA on Australia’s Blood Supply’, Medical
Journal of Australia (online publication), 4
July 2006, http://www.mja.com.au.
33 Australian Health Ministers’ Conference,
‘Australian Health Ministers’ Conference
Statement on National Self-sufficiency in the
Supply of Blood and Blood Products’, April
2006, p. 1.
34 Philip Flood, et al., Review of Australia’s Blood
Fractionation Arrangements, Commonwealth
of Australia, Canberra, December 2006, pp.
6–8.
35 Tony Abbott, ‘Free Trade Agreement
(AUSFTA)’, Minister for Health Media
Release, 15 December 2006, http://www.
health.gov.au/internet/ministers.
36 Tony Abbott, ‘Blood Fractionation
Arrangements’, Minister for Health Media
Release, 30 March 2007.
37 John Breusch and Tracy Sutherland, ‘Blood
Feud with US Brewing’, Australian Financial
Review, 8 February 2007.
38 Australia–United States Free Trade
Agreement, Articles 10.2, 10.4, 10.7.
39 Angus Grigg, ‘Snowy Hydro a Political
Football’, Australian Financial Review, 27 July
252 ENDNOTES [to pages 48–54]
2006, p. 61; National Farmers’ Federation,
‘NFF Concerned about Snowy Hydro
Privatization’, Media Release, 30 May 2006.
40 Rod Myer, ‘Free Trade Fears in Snowy
Backflip’, The Age, 12 June 2006.
41 John Howard, ‘Australian Government
Withdraws from Sale of Snowy Hydro
Limited’, Office of the Prime Minister Media
Release, 2 June 2006.
42 Pharmaceutical Research and Manufacturers
of America, 10 March 2009, Submission to the
Office of the US Trade Representative, http://
www.regulations.gov.search/regs/home.html
#docketDetail?R=0900006480fa6a1.
43 Motion Picture Association of America, 11
March 2009, Submission to the Office of
the US Trade Representative, http://www.
regulations.gov.search/regs/home.html#docke
tDetail?R=0900006480fa6a1.
44 Biotechnology Industry Organization, 11
March 2009, Submission to the Office of
the US Trade Representative, http://www.
regulations.gov.search/regs/home.html#docke
tDetail?R=0900006480fa6a1.
45 National Pork Producers Council, 11 March
2009, Submission to the Office of the US
Trade Representative, http://www.regulations.
gov.search/regs/home.html#docketDetail?R=
0900006480fa6a1.
46 Coalition of Service Industries, 11 March
2009; and TechAmerica, 11 March 2009,
Submissions to the Office of the US Trade
Representative, http://www.regulations.gov.
search/regs/home.html #docketDetail?R=090
0006480fa6a1.
47 US Sugar Alliance, 11 March 2009, and
Dairy Farmers of America, 10 March 2009,
Submissions to the Office of the US Trade
Representative, http://www.regulations.gov.
search/regs/home.html #docketDetail?R=090
0006480fa6a1.
48 Office of the United States Trade
Representative, ‘National Trade Estimate
Report on Foreign Trade Barriers in Australia,
2010’, http://www.ustr.gov/about-us/press-
office/reports-and-publications/2010.
49 Australian Labor Party, National Platform
and Constitution, 2009, ALP Canberra,
Chapter 2, pp. 4–6.
50 Simon Crean, ‘Pushing Forward with
the Korean FTA and the Trans-Pacific
Partnership’, Media release,15 March 2010,
http://www.dfat.gov.au/minister.index.html.
51 Quoted in Jacob Saulwick, ‘Nations Ponder
Terms for Pacific Free Trade’, Sydney Morning
Herald, 16 March 2010, p. 6.
52 ‘Don’t Trade Away Health, Environmental
and Social Policies’, Statement from 33
organisations sent to the Trade Minister,
http://www.aftinet.org.au.
53 Ibid, p. 2.
54 ‘Proposed Pacific Statement Must Deliver
For Workers, Jobs and the Environment’,
International Statement from the Australian
Council of Trade Unions, the New Zealand
Council of Trade Unions, the Singapore
National Trade Union Congress, American
Federation of Labor and Congress of
Industrial Organizations, http://www.actu.org.
au.
55 As well as these statements, there were
opinion pieces critical of the TPPA in the
Melbourne Age and the Canberra Times.
See Saulwick, ‘Nations Ponder’, p. 6; Tim
Colebatch and Ben Schneiders, ‘Free Trade
Talks Turn to the Pacific’, The Age, 15 March
2010, p. 4; Ken Davidson, ‘We’ve Nothing
to Gain from US Trade Deal’, The Age, 22
March 2010, p. 11; Thomas Faunce and
Ruth Townsend, ‘Big Pitfalls and Fewer
Freedoms in New Trade Agreement with US’,
Canberra Times, 15 March 2010, p. 9; Kyla
Tenhaara, ‘Trade Discord a Deal Breaker’,
Canberra Times, 22 March 2010, p. 15; and
ABC Radio National, ‘Fears New Regional
Trade Deal to Undermine Public Interest’, PM
Programme, 15 March 2010, http://abc.net.au/
radionational/pm.
56 Quoted in Saulwick, ‘Nations Ponder’.
57 For the Philip Morris case against Uruguay,
see International Centre for Trade and
Sustainable Development, Bridges Weekly,
10 March 2010, http://ictsd.org/i/news/
bridgesweekly/71988/.
And for the threat to sue the Australian
government, see Nick O’Malley, ‘Hard Sell in
a Dark Market’, Sydney Morning Herald, 24
April 2010, features, p. 1. For an assessment
of the current legal situation in Australia, see
Mark Davison, ‘Big Tobacco’s Huff and Puff is
Just Hot Air’, The Age, 4 May 2010, p. 11.
3. US POLITICS AND THE TPPA
1 Robert Scott, ‘Unfair China Trade Costs
Local Jobs’, Economic Policy Institute, March
2010, http://epi.3cdn.net/91b2eeeffce66c1a10_
v5m6beqhi.pdf.
2 For more, see Lori Wallach and Patrick
Woodall, Whose Trade Organization?, The
New Press, New York, 2005.
3 http://www.democracycorps.com/
strategy/2008/09/the-changing-presidential-
race-after-the-conventions/.
4 http://online.wsj.com/public/resources/
documents/WSJ-POLL-20071003.pdf.
5 Kate Zernike, ‘With No Jobs, Plenty of Time
for Tea Party’, New York Times, 27 March 2010.

6 Public Citizen, ‘Election 2008: Fair
Trade Gets an Upgrade’, November
2008, http://www.citizen.org/documents/
ElectionReportFINAL.pdf.
7 http://www.citizen.org/trade/politics/2008.
8 http://www.youtube.com/
watch?v=9vt4O4mYnSI or http://www.
youtube.com/watch?v=ownOXa0JASA.
9 http://www.citizenstrade.org/pdf/Question-
nairePennsylvaniaFairTradeCoalition-
040108FINAL_SenatorObamaResponse.pdf.
10 http://www.citizen.org/documents/
TXFairTradeCoalitionObama.pdf.
11 http://www.citizen.org/documents/Obama_
IFTC.pdf.
12 http://www.citizenstrade.org/pdf/wftc_obam-
aresponsestotradequestionnaire_02182008.
pdf.
13 http://www.citizen.org/documents/
TXFairTradeCoalitionObama.pdf.
14 http://www.citizenstrade.org/pdf/wftc_obam-
aresponsestotradequestionnaire_02182008.
pdf.
15 http://www.citizenorg/documents/
ORFairTradeCoalitionObama.pdf.
16 http://factcheck.barackobama.com/
factcheck/2008/06/18/fact_check_on_fortune_
intervie.php.
17 Ruy Teixeira and Joel Rogers, Why the White
Working Class Still Matters, Basic Books,
Washington, DC, 2000; Bob Moser, Blue
Dixie: Awakening the South’s Democratic
Majority, Times Books, New York, 2008.
18 Todd Tucker and Lori Wallach, ‘The Rise and
Fall of Fast Track Trade Authority’, Public
Citizen, 2009.
19 Obama stated: ‘I will replace Fast Track with
a process that includes criteria determining
appropriate negotiating partners that includes
an analysis of labor and environmental
standards as well as the state of civil society
in those countries. Finally, I will ensure that
Congress plays a strong and informed role
in our international economic policy and
in any future agreements we pursue and in
our efforts to amend existing agreements’,
Letter to Wisconsin Fair Trade Coalition,
18 February 2008, http://www.citizen.org/
documents/WFTC_Obama_Letter.pdf.
20 USTR, ‘Congressional Notifications of Intent
to Negotiate a TPP’, 14 December 2009,
http://www.ustr.gov/webfm_send/1559.
21 See Memo on Canadian Conversation with
Austan Goolsbee, 8 February 2008, http://
www.nytimes.com/images/promos/politics/
blog/20070303canmemo.pdf.
22 Simon Romero, ‘Protesters Gird For Long
Fight Over Opening Peru’s Amazon’, New
York Times, 12 June 2009.
ENDNOTES [to pages 54–70] 253
23 Letter to USTR Ron Kirk from Senators
Sherrod Brown (D-Ohio), Russell D.
Feingold (D-Wis.), Jeff Merkley (D-Ore.),
and Patty Murray (D-Wash.), 12 March
2010, http://citizen.org/documents/
Letterfromsenatorstokirk.pdf.
24 House Trade Working Group Letter
on TPP to USTR Ron Kirk, 20 January
2010, http://citizen.org/documents/
TPPFTALettertoKirk.1-2010.pdf.
25 To see the current sponsorship broken down
by party and caucus, go to http://www.citizen.
org/documents/TRADEAct-AllCosponsors.
pdf.
26 Jon Ward, ‘$100 Million Campaign Promotes
Capitalism’, Washington Times, 15 October
2009.
27 Letter from Citizens Trade Campaign to
USTR Kirk, ‘Welcoming a New Day on Trade
and Globalization Policy’, 18 March 2009,
http://www.citizenstrade.org/pdf/Kirk_Letter_
final.pdf.
28 Letter from Citizens Trade Campaign to
President Obama, 25 January 2010, http://
www.citizenstrade.org/pdf/TPP_CTC_
President.pdf.
29 House Committee on Ways and Means,
‘Lawmakers on Announcement of U.S.
Engagement on Trans Pacific Partnership
Free Trade Agreement’, 16 November 2009,
http://waysandmeans.house.gov/News.
asp?FormMode=release&ID=969.
30 US State Department, ‘Country Report
on Human Rights Practices: Vietnam’,
March 2008, http://www.state.gov/g/drl/rls/
hrrpt/2007/100543.htm.
31 International Trade Union Confederation,
Country Report on Brunei, February 2008,
http://www.ituc-csi.org/IMG/pdf/Brunei.
final2008.pdf.
32 US State Department, ‘Country Report on
Human Rights Practices: Brunei’, February
2009, http://www.state.gov/g/drl/rls/
hrrpt/2008/eap/119034.htm.
33 US State Department, ‘Senior State
Department Officials on Honduras’,
Conference Call Transcript, 25 August
2009, http://www.state.gov/r/pa/prs/ps/2009/
aug/128373.htm.
34 Available at http://citizen.org/documents/
Letterfromsenatorstokirk.pdf; http://citizen.
org/documents/TPPFTALettertoKirk.1-2010.
pdf.
4. THE TPPA AND INDIGENOUS PEOPLES:
LESSONS FROM LATIN AMERICA
1 http://www.ustr.gov/about-us/press-office/fact-
sheets/2009/december/tpp-statements-and-
254 ENDNOTES [to pages 70–78]
actions-date, accessed 14 April 2010.
2 Ibid.
3 The first FTA signed by the US in the
Americas was the Canada–US Free Trade
Agreement in 1988.
4 These last two have been signed, but the US
Congress must enact legislation to approve
and implement these agreements in order for
them to come into effect. See http://www.ustr.
gov/trade-agreements/free-trade-agreements,
accessed 15 April 2010.
5 http://rc.direcon.cl/pagina/1897, accessed 20
April 2010.
6 http://www.ustr.gov/trade-agreements/free-
trade-agreements/chile-fta, accessed 15 April
2010.
7 Rodrigo Pizarro, The Free Trade Agreement
Between the USA and Chile: An Instrument of
Commercial Interests, 2006, p. 2, http://www.
networkideas.org/working/oct2006/02_2006.
pdf, accessed 30 March 2010.
8 Arbitration procedures of the ICSID between
private investors and states are known for
conceding a higher level of protection to
investors and for being reluctant to apply
international human rights law.
9 http://www.ustr.gov/sites/default/files/uploads/
factsheets/2007/asset_upload_file585_13067.pdf,
accessed 15 April 2010.
10 The ejidos are a consequence of the agrarian
reform process undertaken after the
Mexican Revolution (1910–20). From 1930
to 1990, approximately 28,000 communally
owned ejidos were created serving as both
employment and residence for 3 million rural
Mexicans, most of whom were indigenous
peoples.
11 Margaret Wilder, ‘Water, Power and Social
Transformation: Neoliberal Reforms in
Mexico’, Vertigo hors-série, 1, September 2005,
http://www.vertigo.revues.org/1925?file=1,
accessed 10 April 2010.
12 Alberto Arroyo Picard, ‘Impacts of the
North America Free Trade Agreement in
Mexico: Lessons for the Free Trade Area of
the Americas Negotiations’, Mexican Action
Network on Free Trade, 2003, http://quest.
quixote.org/sites/quest.quixote.org/files/pdfs/
albertoarroyo.pdf, accessed 28 March 2010.
13 Suzanne York, ‘Genetic Pollution of Mayan
Corn’, in Paradigm Wars. Indigenous Resistance
to Globalization, eds Jerry Mander and
Victoria Tauli-Copuz, University of California
Press, 2006, pp. 145–8.
14 Subsoil resources are largely located in
the North of Chile in the territory of the
Andean peoples (Aymara, Lickanantai,
Quechua, Coya and Diaguita). Water and
forest resources are located in the south of
the country, in the territory of the Mapuche
people.
15 Office of the United States Trade
Representative, U.S.–Chile Trade Facts, http://
www.ustr.gov/countries-regions/americas/
chile, accessed 10 April 2010.
16 Fraser Institute, ‘Annual Survey of Mining
Companies 2008/2009’, http://www.
fraserinstitute.org/, accessed 30 March 2010.
17 Manuel Riesco, ‘El alza de impuestos de
Piñera’, 20 April 2010, El Mostrador, http://
www.elmostrador.cl/opinion/2010/04/19/
el-alza-de-impuestos-de-pinera, accessed 21
April 2010.
18 Most of the investment in forestry in
Chile has been made by two large national
holdings, Arauco (COPEC) and CMPC. The
first of the two companies had a joint venture
initially (1987–2000) with Carter Holt Harvey,
a New Zealand company, and later with
International Paper (2000–4), a US company
that later bought Carter Holt Harvey.
19 IWGIA, Mundo Indígena 2009, IWGIA,
Copenhagen, 2009, http://www.iwgia.org,
accessed 15 March 2010.
20 Observatorio Ciudadano, comp., Los Derechos
Humanos en Chile: La Evaluación de la Sociedad
Civil, los Pueblos Indígenas y las Naciones
Unidas, Observatorio de Derechos de los
Pueblos Indígenas, 2009.
21 Naciones Unidas, Observaciones sobre
la Situación de los pueblos Indígenas de la
Amazonía y los sucesos del 5 de Junio y días
posteriores en las provincias de Bagua y
Utcubamba, Perú, Informe del Relator
Especial sobre la situación de los derechos
humanos y las libertades fundamentales de
los indígenas, Sr. James Anaya, /HRC/12/34/
Add.8, 18 de agosto de 2009. See http://unsr.
jamesanaya.org/PDFs/Peru_special.pdf,
accessed 25 March 2010.
22 ‘Committee on Elimination of Racial
Discrimination Considers Report of Chile’,
Press statement, 14 August 2009, available
on http://www.unog.ch/unog/website/news_
media.nsf/(httpNewsByYear_en)/8CFEA19E9
226F030C1257612002F72E5.
23 Such legislative powers were granted by Law
No. 29157 of 18 December 2007. This law was
aimed at ‘facilitating the execution of the
Trade Promotion Agreement Peru–United
States and its Amendment Protocol, and in
order to support economic competitiveness
for its use’.
24 FIDH (International Federation for Human
Rights), Peru – Bagua. Bloodshed in the Context
of Amazon Protest. Urgent Need for Good Faith
Dialogue, October 2009, No. 529a, pp. 14–16,
http://www.fidh.org/Bagua-Bloodshed-in-

the-context-of-Amazon-protest, accessed 28
March 2010.
25 IWGIA, Mundo Indígena 2010, in press.
26 Observation, CEACR 2008/79a conference,
http://webfusion.ilo.org/public/db/standards/
rulees/appl/appl-displaycomment.cfm?hdroff
=1&ctry=0490&year=2008&type=O&conv=C1
69&lang=EN, accessed 30 March 2010.
27 IWGIA, 2010.
28 Naciones Unidas, Observaciones sobre
la Situación de los pueblos Indígenas de la
Amazonía y los sucesos del 5 de Junio y días
posteriores en las provincias de Bagua y
Utcubamba, Perú, Informe del Relator
Especial sobre la situación de los derechos
humanos y las libertades fundamentales de
los indígenas, Sr. James Anaya, /HRC/12/34/
Add.8, 18 de agosto de 2009. See http://unsr.
jamesanaya.org/PDFs/Peru_special.pdf,
accessed 25 March 2010.
29 Chile ratified Convention 169 of the ILO in
2008. It entered into effect in 2009.
30 Mama Quta Titijaja Declaration, IV
Continental Indigenous Summit of Abya Yala,
Puno Peru, 31 May 2009, http://www.art-us.
org/content/mama-quta-titijaja-declaration-
iv-continental-indigenous-summit-abya-yala,
accessed 10 March 2010.
31 Ecuatorian Constitution (2008) recognises it
as the duty of the state to promote good life
(samak kawsay in Quichua) (art. 3). Similarly,
Bolivia’s Constitution (2009) assumes and
promotes the ethical and moral principles
of the plural society encapsulated in the
Quechua concept of teko kavi (good life) (art.
8). Furthermore, the Constitution of Ecuador
introduces the notion of the rights of nature,
which challenges the prevailing concept that
only individuals or groups can be the subjects
of rights. As affirmed in article 71 of the
Constitution: ‘Nature or Pachamama, where
life is reproduced and exists, has the right
to exist, persist, maintain and regenerate
its vital cycles, structure, functions and its
processes in evolution.’
32 Federation of Māori Authorities,
‘The Federation of Maori Authorities
Submission on the New Zealand China
Free Trade Agreement’, 6th May 2008,
http://www.foma.co.nz/panui/documents/
FoMAFTASubmission08.pdf, accessed 15
March 2010.
33 Strategy with Engagement of Māori on
International Treaties,http://www.mfat.govt.
nz/Treaties-and-International-Law/03-Treaty-
making-process/Engagement-with-Maori.
php, accessed 15 March 2010.
34 International Federation of Human Rights;
ENDNOTE [to pages 78–85] 255
Human Rights and Business, ‘Upholding
Human Rights and Ensuring Coherence,
Submission to the Special Representative of
the Secretary General on the Issue of Human
Rights and Transnational Corporations and
other Business Enterprises’, October 2009,
http://www.fidh.org, accessed 15 March 2010.
35 Statement of Non-Governmental
Organizations and Organizations
Representing Affected Communities by
Enterprises, The Regional Consultation
of the Representative of the Secretary
General of United Nations for Human
Rights, Transnational Corporations and
Other Business Enterprises, Buenos Aires,
Argentina, 14 and 15 May 2009.
5. SECURITY IMPLICATIONS OF THE TPPA
1 On issue linkage, see Andrew G. Long,
‘Defense Pacts and International Trade’,
Journal of Peace Research, 40, no.5 (2003), pp.
537–52; Andrew. G. Long and Brett A. Leeds,
‘Trading for Security: Military Alliances
and Economic Agreements’, Journal of
Peace Research, 43, no. 4 (2006), pp.433–51;
Edward D. Mansfield and Rachel Bronson,
‘Alliances, Preferential Trade Agreements
and International Trade’, American Political
Science Review, 81, no. 1 (1997), pp. 94–107;
Michael D. McGinness, ‘Issue Linkage and
the Evolution of International Cooperation’,
Journal of Conflict Resolution, 30, no.1 (1986),
pp.141–70. On Soviet approaches to issue
linkage, see e.g. Peter Shearman, ‘Soviet
Foreign Policy in Africa and Latin America: A
Comparative Case Study’, Millennium Journal
of International Studies, 15 (December 1986),
pp. 339–65.
2 On the evolution of New Zealand foreign
policy after 1973, see Paul G. Buchanan,
‘Lilliputian in Fluid Times: New Zealand
Foreign Policy after the Cold War’, Political
Science Quarterly, 125, no. 2 (Summer 2010),
pp. 255–80, esp. 258–63.
3 As an example of the lack of a national
regime focus in the literature, see Robert
Gilpin, The Political Economy of International
Relations, Princeton University Press, 1987.
In this seminal work Gilpin goes to some
length to show the multiplicity of actors and
approaches to international trade, yet not
once mentions different national regime
characteristics and consistently refers to
‘states’ when discussing the behaviour of
national actors.
4 On the subject of issue linkage, institutional
isomorphism and regime type as it applies to
Pacific Rim trade and security agreements,
256 ENDNOTES [to pages 85–104]
see Paul G. Buchanan and Lin Kun-Chin,
‘Symmetry and Asymmetry in Post-Cold
War Approaches to Trade and Security in
the Pacific Rim’, Association of Pacific Rim
Universities, December 2006, http://www.
apru.org/_…/Symmetry_and_Asymmetry_in_
Pacific_Rim_approaches_ to_trade_and_security_
agreements final1.doc.
5 Ibid.
6 For a recent exploration of the theme, see
Berta Esperanza Hernandez-Truyol and
Stephen J. Powell, Just Trade: A New Covenant
Linking Trade and Human Rights, New York
University Press, 2009.
7 It should be noted that Brunei, Singapore and
Vietnam are not signatories of the UDHR and
two other TPPA partners, Chile and Peru,
systematically violated human rights in the
name of national security during periods of
authoritarian rule. On the UDHR, see http://
www.un.org/en/documents/udhr/. For its
subsequent addenda and protocols, see http://
www.un.org/en/documents/udhr/. It should
be noted also that there are no Amnesty
International or other independent human
rights monitor organisations present in the
first three states.
8 Data on military expenditures for these
countries is found at http://milexdata.sipri.
org.
9 Charles Barfield and Philip Levy, ‘Tales of
the South Pacific: President Obama, the
Trans-Pacific Partnership and US leadership
in Asia’, http://www.voxeu.org/index.
php?q=node/4533, accessed 17 March 2010.
10 It should be noted that China’s US dollar
reserves are roughly equivalent to the amount
of US Federal debt, which means that if
China starts selling its dollar assets on the
world market, the US currency could enter a
free-fall that would have disastrous economic
consequences.
11 ‘Indonesia and the US Effort to Re-Engage
Southeast Asia’, http://www.stratfor.com, 4
March 2010, accessed 5 March 2010.
12 For a two part summary of the US–China
strategic competition in the Western Pacific,
see Paul G. Buchanan, ‘China on the Horizon
(Part One)’, 14 September 2009, http://www.
scoop.co.nz/stories/HL0909/S00099.htm; and
Paul G. Buchanan, ‘The Giants Rival, Part
Two’, 21 September 2009, http://www.scoop.
co.nz/stories/HL0909/S00176.htm.
13 http://www.sipri.org/databases/armstransfers,
accessed 16 March 2010.
14 The US supplies Australia with almost 100
per cent of its weapons.
15 New Zealand spends 1.6 per cent on external
defence, and has recently announced that the
long freeze on military-to-military contacts
with the US occasioned by its non-nuclear
stance has been rescinded.
16 At the time, Chile was a temporary member of
the UN Security Council.
17 http://www.ustr.gov/trade-agreements/free-
trade-agreements/peru-tpa/final-text.
18 http://www.newsvine.com/_
news/2010/01/22/3792257-nz-reviews-
company-rules-after-arms-smuggling-link.
19 Ibid.
20 http://www.nzherald.co.nz/world/news/article.
cfm?c_id=2&objectid=10347627.
21 http://www.nzherald.co.nz/israeli-spy-case/
news/article.cfm?c_id=606&objectid=3596863.
22 For an example of the intelligence-gathering
activities of one New Zealand FTA partner,
see http://www.stratfor.com/node/156898/
analysis/20100314_intelligence_services_part_1_
spying_chinese_characteristics, accessed 25
March 2010.
6. LESSONS FROM THE AUSFTA
1 New York Times Editorial, ‘A Triumph for Big
Sugar’, New York Times, 14 February 2004,
http://www.nytimes.com/2004/02/14/opinion/
a-triumph-for-big-sugar.html.
2 Alan Oxley, ‘Free Trade Agreements in the
Era of Globalization – New Instruments
to Advance New Interests – The Case of
Australia’, AUSTA: The Australia United
States Free Trade Agreement Business Group,
2002, http://www.austa.net/reports/report1.
htm.
3 Centre for International Economics,
‘Economic Impacts of an Australia–
United States Free Trade Area’, Centre for
International Economics for the Department
of Foreign Affairs and Trade, Canberra, 2001.
4 Centre for International Economics,
‘Economic Analysis of AUSFTA: Impact of
the Bilateral Free Trade Agreement with
the United States’, Centre for International
Economics for the Department of Foreign
Affairs and Trade, Canberra, 2004, http://
www.intecon.com.au/reports/AUSFTA.pdf.
5 A. Hilaire and Y. Yang, ‘The United States
and the New Regionalism/Bilateralism’,
International Monetary Fund, Working
Paper, WP/03/206, October 2003, http://www.
imf.org/external/pubs/ft/wp/2003/wp03206.
pdf.
6 See, for example, Philippa Dee, ‘The
Australia-US Free Trade Agreement:
An Assessment’, Paper prepared for the
Senate Select Committee on the Free Trade
Agreement between Australia and the
United States of America APSEG, Australian

National University, 2004.
7 See, for example, Ross Garnaut and Bill
Carmichael, ‘Australia’s Approach to
International Trade Negotiations. A Case
Study: The USFTA’, Submission to the Joint
Standing Committee on Treaties, 2004.
8 For example, Oxley, ‘Free Trade Agreements
in the Era of Globalization’.
9 Ibid.
10 Michael Priestley, ‘Background Note:
Australia’s Free Trade Agreements’, 2008,
http://www.aph.gov.au/library/pubs/
bn/2008-09/AustFreeTradeAgreements.htm,
Australian Parliamentary Library.
11 L. Weiss, E. Thurbon and J. Matthews, How
to Kill a Country: Australia’s Devastating Trade
Deal With the United States, Allen & Unwin,
Crows Nest, NSW, 2004.
12 Ibid.
13 Australian Industry Group, ‘Business
Seeks Better Returns from Free Trade
Agreements’, 2010, http://www.aigroup.com.
au/mediacentre/releases/archive2010.
14 Rodney Tiffen, ‘Mind the Gap: Benefits from
Free Trade Haven’t Quite Gone the Distance’,
Sydney Morning Herald, 3 March 2010, http://
www.smh.com.au/opinion/politics/mind-the-
gap-benefits-from-free-trade-havent-quite-
gone-the-distance-20100302-pg6p.html.
15 Priestley, ‘Australia’s Free Trade Agreements’.
16 Australian Government, Department
of Health and Aging, ‘Public Summary
Documents by Meeting’, 2006, http://www.
health.gov.au/internet/main/publishing.nsf/
Content/pbac-psd-teriparatide-nov06.
17 National Prescribing Service, ‘Teriparatide
(Forteo) for severe osteoporosis’, 2009,
http://www.nps.org.au/health_professionals/
publications/nps_radar/2009/may_2009/
teriparatide.
7. THE TPPA, AGRIBUSINESS AND RURAL
LIVELIHOODS
1 United Nations Food and Agriculture Organi-
zation, The State of Food Insecurity in the World,
FAO, Rome, 2009,http://www.fao.org/publica-
tions/sofi/en/; World Bank, World Development
Report 2008: Agriculture for Development,
Washington, DC, 2007.
2 In line with the FAO definition of an
average daily food intake of less than 2,200
kilocalories.
3 See R. Kiely, The Clash of Globalisations:
Neo-liberalism, the Third Way and Anti-
globalisation, Brill, Leiden and Boston, 2005;
P. McMichael, Development and Social Change
(4th ed.), Pine Forge Press, Los Angeles, 2008.
4 See A. Bonanno, L. Busch, W. H. Friedland,
ENDNOTES [to pages 104–114] 257
et al., (eds.), From Columbus to ConAgra:
The Globalization of Agriculture and Food,
University Press of Kansas, Lawrence, 1994;
B. Vorley, A. Fearne and D. Ray (eds.),
Regoverning Markets: A Place for Small-scale
Producers in Modern Agrifood Chains?, Gower,
Aldershot, 2007.
5 United Nations Conference on Trade and
Development (UNCTAD) data from the
UNCTAD Handbook of Statistics Online,
http://www.unctad.org/Templates/Page.
asp?intItemID=1890&lang=1; UNCTAD,
World Investment Report 2009: Transnational
Corporations, Agricultural Production and
Development, UNCTAD, New York, 2009, p.
241, table A.III.6.
6 Wal-Mart Stores – the largest food retail TNC
– had total sales of US$375 billion in 2007. See
UNCTAD, World Investment Report 2009, p.
242, table A.III.7.
7 See World Bank, World Development Report
2008: Agriculture for Development. World Bank,
Washington, DC, 2007.
8 For a full list, see Jane Kelsey’s introductory
chapter in this volume, Table 1.
9 Statistics New Zealand, Global New Zealand
– International Trade, Investment, and Travel
Profile, Statistics New Zealand, Wellington,
2009.
10 Tables 7.2 and 7.3 are based on United
Nations Food and Agriculture Organization
data. Table 7.2 is derived from the FAOSTAT
database, http://faostat.fao.org/default.
aspx; while Table 7.3 is derived from the
FAO Statistical Yearbook 2009, 2010,http://
www.fao.org/economic/ess/publications-
studies/statistical-yearbook/fao-statistical-
yearbook-2009/en/. Despite potential
limitations to FAO agricultural data (see
FAO, ‘Problems in Compiling Internationally
Comparable Agricultural Statistics’,
2010, http://www.fao.org/economic/ess/
methodology/methodology-systems/en/), it
has been used here because it offers decent
comparability across the eight nations.
11 See W. E. Murray and E. R. T. Challies, ‘New
Zealand and Chile: Partnership for the Pacific
Century?’, Australian Journal of International
Affairs 58, no. 1 (2004), pp. 89–103.
12 In the first round of public consultation from
12 October to 8 December 2008, which was
focused on P-4 + the USA, MFAT received
sixty-five submissions from individuals
and private sector and civil society groups,
see, http://www.mfat.govt.nz/Trade-and-
Economic-Relations/Trade-Agreements/
Trans-Pacific/index.php. Since then,
despite Peru, Australia and Vietnam joining
the discussions, there has been ongoing
258 ENDNOTES [to pages 114–120]
consultation with business but no call for
further public submissions.
13 United Nations Development Programme,
Human Development Report 2009: Overcoming
Barriers: Human Mobility and Development,
UNCTAD, New York, 2009. The 2009
Human Development Index ranks the TPPA
partners by level of human development
(incorporating health, income and education
indicators) as follows (out of 180 countries):
Australia (2), USA (13), New Zealand (20),
Singapore (23), Brunei Darussalam (30), Chile
(44), Peru (78) and Vietnam (116).
14 UNCTAD, World Investment Report 2009, p.
117, Table III.9.
15 W. E. Murray, ‘The Neoliberal Inheritance:
Agrarian Policy and Rural Differentiation in
Democratic Chile’, Bulletin of Latin American
Research 21, no. 3 (2002), pp. 425–41. See also
J. Collins and J. Lear, Chile’s Free Market
Miracle: A Second Look, Food First, Oakland,
1995; C. Kay, ‘Chile’s Neoliberal Agrarian
Transformation and the Peasantry’, Journal of
Agrarian Change 2, no. 44 (2002), pp. 464–501.
16 For an account of New Zealand investment
in the Chilean dairy sector (in processing
and primary production), and Latin America
more generally, see E. Chisholm, ‘The
Effects of New Zealand Foreign Investment
into the Chilean Dairy Industry’, Masters
thesis, University of Cambridge, 2008. For
a comparison of restructuring in the dairy
sectors of New Zealand and Chile, see E.
R. T. Challies, ‘Towards Closer Economic
Partnership? A Comparison of Neoliberal
Restructuring in the Dairy Complexes of
Chile and New Zealand’, Masters thesis,
Victoria University of Wellington, 2004; E.
R. T. Challies and W. E. Murray, ‘Productive
Transformations and Bilateralism in the
Semi-Periphery: A Comparative Political
Economy of the Dairy Complexes of New
Zealand and Chile’, Asia Pacific Viewpoint 47,
no. 3 (2006), pp. 351–65.
17 In September 2001, the amalgamation of the
New Zealand Dairy Group of Companies Ltd
and Kiwi Co-operative Dairies Ltd saw the
deregulation of the dairy industry with the
new Fonterra Co-operative Group Ltd taking
ownership of the NZDB.
18 Chisholm, ‘The Effects of New Zealand
Foreign Investment’.
19 Aside from Fonterra, other significant
agribusiness transnational corporations
involved in the sector include Nestlé and
Unilever.
20 See Challies, ‘Towards Closer Economic
Partnership?’.
21 FAO, FAO Statistical Yearbook 2009.
22 Citizens’ Trade Campaign, ‘President Obama
Hosts First Major U.S. Trade Negotiations as
TransPacific Partnership Countries Gather
Today’, press release, 14 June 2010, http://
www.citizenstrade.org.
23 See http://www.ustr.gov/2010-trade-policy-
agenda.
24 USTR Ron Kirk speaking to the US Chamber
of Commerce on 18 May 2010, cited in ‘Kirk:
U.S. Seeks To Retain as Many Existing FTA
Benefits as Possible in TPP’, Inside US Trade
28, no. 20, 21 May 2010.
25 Letter from the American Farm Bureau
Federation and nineteen other US
agricultural producers’ organisations to
Ambassador Islam Siddiqui and Under
Secretary Jim Miller, 11 May 2010, http://
www.farmpolicyfacts.org/ne_Agricultural-
Community-Offers-Advice-on-TPP-Trade-
Deal.cfm.
26 J. Strawbridge, ‘Agriculture Producers,
Processors Split On TPP Relationship To Past
FTAs’, Inside US Trade 28, no. 19, 14 May 2010.
27 Letter from the American Farm Bureau
Federation and nineteen other US agricultural
producers’ organisations, 11 May 2010.
28 Strawbridge, ‘Agriculture Producers,
Processors Split On TPP Relationship To Past
FTAs’.
29 Written testimony by the National Milk
Producers Federation to the International
Trade Commission Concerning the
US–Trans-Pacific Partnership Free Trade
Agreement: Advice on Probable Economic
Effect of Providing Duty Free Treatment for
Imports Investigation, 18 February 2010,
http://www.nmpf.org/files/file/NMPF-TPP-
ITC-Submitted-Written-Testimony-021810.
pdf.
30 United States Dairy Export Council and
National Milk Producers Federation joint
press release, ‘US, New Zealand Dairy
Trade Should be Excluded in Trans-Pacific
Agreement, Urge NMPF and USDEC’, 17
December 2009, http://www.usdec.org/
Library/NRList.cfm?navItemNumber=82599.
31 Letter from Senators Feingold, Crapo, Specter
and twenty-seven other US senators to the
United States Trade Representative Hon. Ron
Kirk, 11 March 2010, http://feingold.senate.
gov/pdf/ltr_031110_tpp.pdf.
32 ‘USTR Resisting Dairy Industry Demand
to Exclude Sectors from the TPP’, Inside US
Trade, 1 May 2010.
33 Public submissions, received between 12
October and 8 December 2008, available
online at http://www.mfat.govt.nz/Trade-
and-Economic-Relations/Trade-Agreements/
Trans-Pacific/.

34 Submission by Fonterra Co-operative Group
Limited to the New Zealand Ministry of
Foreign Affairs and Trade on investment and
financial services negotiations between the
P-4 and United States, 25 March 2008.
35 Submission by DairyNZ to the New Zealand
Ministry of Foreign Affairs and Trade on
Trans-Pacific Strategic Economic Partnership
Agreement negotiations with the United
States, 8 December 2008.
36 Letter from New Zealand Federated Farmers
President Don Nicholson to thirty US
senators who expressed concerns about the
TPPA and its implications for US dairy, April
2010, http://www.fedfarm.org.nz/n1981.html.
37 Letter from New Zealand Federated Farmers
President Don Nicholson to thirty US
senators, April 2010.
8. QUARANTINE AND FOOD SAFETY
ISSUES IN A TPPA
1 For example, the savannah cat, which is
hybrid between a wild African serval cat and
domestic cats, was deemed too great a risk to
be allowed into Australia due to the possibility
of its interbreeding with some of the 12
million feral cats currently in Australia. See A.
Markula, M. Hannan-Jones and S. Csurhes,
Pest Animal Risk Assessment: Serval Hybrids:
Hybrids of Leptailurus Serval (Serval) and Felis
Catus (Domestic Cat), Including the ‘Savannah
Cat’, Biosecurity QLD, DPI, Brisbane, 2009;
see http://www.environment.nsw.gov.au/
pestsweeds/FeralCats.htm.
2 Exotics is a general term to describe all
threats: insects, vertebrates, plants, other
invertebrates, pathogens, diseases and
viruses.
3 Fire Blight (Erwinia amylovora) is a bacterial
disease of pome fruit. See Biosecurity
Australia, Final Import Risk Analysis Report for
Apples from New Zealand, Part B, Biosecurity
Australia, Canberra, 2006.
4 See http://www.wto.org/english/news_e/
news10_e/367r_e.htm.
5 In 2006 the New Zealand Department of
Conservation had a contingency plan to
vaccinate all kiwi in captivity if bird flu made
it to Australia, http://www.savethekiwi.org.nz/
news/bird-flu-the-plan-for-kiwi.html.
6 ‘EC Measures Concerning Meat and Meat
Products’, (EC-Hormones), WT/DS26/AB/R, 16
January 1988, para 124.
7 See http://www.nytimes.com/1989/06/03/us/
apple-chemical-being-removed-in-us-market.
html?pagewanted=1.
8 PPM = parts per million, MRL = maximum
residue limits: these are normally set well
ENDNOTES [to pages 121–130] 259
below levels that could have any adverse
impacts on human health. If a MRL does
not exist for a product, there must be no
determinable trace of that residue when foods
are tested. See http://www.foodstandards.
gov.au/scienceandeducation/factsheets/
factsheets2002/limitingchemicalresi1424.cfm.
9 See http//www.naega.org/images/pdf/Taiwan_
DOH_MRL_8-12-07.pdf.
10 D. Adamson, ‘The Benefit of the CSIRO
Stored Grain Research Laboratory to the
Australian Grain Industry’, Technical Paper
No. 39, CSIRO, Canberra, May 2002.
11 See, on the use of supplements in the US
beef industry, K. H. Mathews, ‘Economic
Effects on a Ban Against Antimicrobial
Drugs Used in U.S. Beef Production’, Journal
of Agricultural and Applied Economics 34,
no. 3 (2002), pp. 513–30; and J. D. Lawrence
and M. A. Ibarburu, ‘Economic Analysis of
Pharmaceutical Technologies in Modern Beef
Production’, paper presented to NCCC-134
Conference on Applied Commodity Price
Analysis, Forecasting, and Market Risk
Management, Chicago, Illinois, 2007.
12 A transcript from the hearing on the proposed
ban on feeding ruminants to ruminants, see
http://www.fda.gov/NewsEvents/Testimony/
ucm114968.htm.
13 For details about a campaign to prevent
poultry litter being fed to cattle, see http://
www.thecattlesite.com/news/28174/fact-
petitions-to-end-poultry-litter-as-cattle-feed.
14 G. P. Gruere and S. R. Rao, ‘A Review of
International Labeling Policies of Genetically
Modified Food to Evaluate India’s Proposed
Rule’, AgBioForum 10, no. 1 (2007), pp. 51–64.
15 National Registration Authority, ‘(Dihydro)
Streptomycin/ Penicillin Combination
Products and (Dihydro) Streptomycin
Products, March 1999, by Authority’, NRA
Special Review Series 99.1, Commonwealth of
Australia, 1999.
16 JETACAR, ‘The Use of Antibiotics in
Food-Producing Animals: Antibiotic-
Resistant Bacteria in Animals and Humans’,
Commonwealth Department of Health and
Aged Care, Commonwealth Department of
Agriculture, Fisheries and Forestry Australia,
Canberra, 1999.
17 There are some exceptions to this rule, for
example, Ceftiofur which is a third-generation
cephalospaorin. To date, no antimicrobial
resistance has been detected to Ceftifur in
Australian livestock as it used rarely. See
D. Jordan, ‘Antimicrobial Resistance in
Animals and Impacts on Food Safety and
Public Health’, Microbiology Australia 28,
no. 4 (2007), pp. 163–4. Third-generation
260 ENDNOTES [to pages 130–136]
cephalospaorins are considered highly
important to treat C. difficile in humans.
See C. Thomas and T. V. Riley, ‘Restriction
of Third Generation Cephalosporin Use
Reduces the Incidence of Clostridium
Difficile-associated Diarrhoea in Hospitalised
Patients’, Communicable Diseases Intelligence
27, no. Supplement: Antimicrobial resistance
in Australia (May 2003), pp. S28–S30, http://
www.health.gov.au/internet/main/publishing.
nsf/Content/cdi27suppl-1.
18 J. Németh, ‘Practice of Applying Streptomycin
to Control Fireblight in Hungary, EPPO
Bulletin 34, no. 3 (2004), pp. 381–2.
19 Department of Agriculture, Fisheries and
Forestry, Pilot Surveillance Program for
Antimicrobial Resistance in Bacteria of Animal
Origin, DAFF, Canberra, 2007.
20 APHIS, ‘Escherichia Coli on U.S. Swine Sites
– Antimicrobial Drug Susceptibility’, Animal
and Plant Health Inspection Service, United
States Department of Agriculture, 11 April
2010, http://www.aphis.usda.gov/vs/ceah/
ncahs/nahms/swine/swine2006/Swine2006_
ecoli_infosheet.pdf.
21 H. Van Gessel, T. Riley and A, McGregor,
‘Clostridium Difficile Infection: An Update for
Infection Control Practitioners’, Healthcare
Infection 14 (2009), pp. 115–18.
22 J. G. Songer and M. A. Anderson,
‘Clostridium Difficile: An Important Pathogen
of Food Animals’, Anaerobe 12, no. 1 (2006),
pp. 1–4.
23 For United Kingdom statistics of deaths
involving antimicrobial resistance and C.
difficile deaths, see http://www.statistics.gov.
uk/pdfdir/deaths0207.pdf.
24 For warning on C. difficile before it was
detected in Australia by Professor Tom
Riley, see http://www.mja.com.au/public/
issues/185_03_070806/ril10472_fm.html.
25 http://www.theaustralian.com.au/news/
health-science/no-way-to-fingerprint-deadly-
hospital-bug-clostridium-difficile/story-
e6frg8y6-1225872291668.
26 For news article that has Professor Tom Riley
linking the low use of antibiotics, different
farming systems and strict quarantine
with the different profile of C.difficle in
Australia, see http://www.couriermail.com.
au/news/dont-let-zoonosis-bug-you/story-
e6frf029-1225717907551.
27 J. Webber, A Comprehensive Integrated
Surveillance Program to Improve Australia’s
Response to Antimicrobial Resistance: A Report
Prepared for the NHMRC’s Expert Advisory
Group on Antimicrobial Resistance (EAGAR), JJ
Webber Consulting, Booyong, NSW, 2006.
28 B. Coffey, J. Mintert, S. Fox, T. Schroeder
and L. Valentin, The Economic Impact of BSE
on the U.S. Beef Industry: Product Value Losses,
Regulatory Costs, and Consumer Reactions,
Kansas State University Agricultural
Experiment Station and Cooperative
Extension Service, Manhattan, KS, 2005.
29 USTR, 2010 Report on Sanitary and
Phytosanitary Measures, United States Trade
Representative, 2010.
30 The National Livestock Identification
Scheme tracks all food animals (cattle, sheep,
goats and pigs), and statutory declarations
are required when animals are domestically
transported. See http://www.mla.com.
au/TopicHierarchy/IndustryPrograms/
NationalLivestockIdentificationSystem/
default.htm. Other systems exist in the
Australian grains industry, see http://www.
abc.net.au/news/stories/2008/04/21/2222442.
htm?site=news.
31 Full text of the United States–Singapore Free
Trade Agreement can be found at http://
www.ustr.gov/sites/default/files/uploads/
agreements/fta/singapore/asset_upload_
file708_4036.pdf.
32 Full text of the Agreement between the United
States of America and the Socialist Republic
of Vietnam on Trade Relations can be found
at http://www.fas.usda.gov/itp/agreements/vt-
text.pdf. The SPS provision is on page 3 and
the issues on food safety are referred to on
page 4, each a paragraph long.
33 USTR, 2010 Report on Technical Barriers to
Trade, United States Trade Representative,
2010.
34 New Zealand is also an active participant
in disputes regarding the SPS agreements,
especially as a third party.
35 USTR, 2010 Report on Sanitary and
Phytosanitary Measures. United States Trade
Representative, 2010.
9. BORDER CARBON ADJUSTMENTS AND
CLIMATE CHANGE POLICY
1 Jean-Marc Burniaux and Joaquim Oliveira
Martins, Carbon Emission Leakages: A
General Equilibrium View, OECD Economics
Working Paper 242, Paris, 2000; Mustafa
Babiker, ‘Climate Change Policy, Market
Structure, and Carbon Leakage’, Journal of
International Economics 65 (2005), pp. 421–45;
Joseph E. Aldy and William A. Pizer, The
Competitiveness Impacts of Climate Change
Mitigation Policies, Pew Center on Global
Climate Change, Washington, DC, May 2009,
http://www.pewclimate.org/docUploads/
competitiveness-impacts-report.pdf, accessed
30 March 2010.

2 Roland Ismer and Karsten Neuhoff, Border
Tax Adjustments: A Feasible Way to Address
Nonparticipation in Emission Trading,
Cambridge Working Papers in Economics
CWEP0409, 2004, http://ideas.repec.org/p/
cam/camdae/0409.html, accessed 30 March
2010; Joseph Stiglitz, ‘A New Agenda for
Global Warming’, The Economists’ Voice 3,
no. 7 (2006), Article 3; Stephen Charnovitz,
‘Trade and Climate: Potential Conflicts
and Synergies’, in Beyond Kyoto: Advancing
the International Effort Against Climate
Change, Pew Center on Global Climate
Change, Washington, DC, 2003, pp. 141–67;
Jeffrey Frankel, Kyoto and Geneva: Linkage
of the Climate Change Regime and the Trade
Regime, Kennedy School of Government,
Harvard University, 2004, http://web.hks.
harvard.edu/publications/workingpapers/
citation.aspx?PubId=2113; Jeffrey Frankel,
Global Environmental Policy and Global Trade
Policy, Kennedy School of Government
Working Paper No. RWP08-058, Harvard
University, 2008, http://web.hks.harvard.
edu/publications/workingpapers/citation.
aspx?PubId=5978; Gavin Goh, ‘The World
Trade Organization, Kyoto and Energy
Tax Adjustments at the Border’, Journal of
World Trade 38, no. 3 (2004), pp. 395–423;
Ben Lockwood and John Whalley, Climate-
Change-Related Border Tax Adjustments,
Center for International Governance
Innovation Policy Brief No. 4, June 2008, se1.
isn.ch/serviceengine/Files/ISN/.../Policy_Brief_
no4.pdf; John Whalley, On the Effectiveness
of Carbon-Motivated Border Tax Adjustments,
Asia-Pacific Research and Training Network
on Trade Working Paper Series, No. 63,
March 2009; Steven Shrybman, The World
Trade Organization: A Citizen’s Guide, 2nd ed.,
Lorimer, Toronto, 2001, pp. 77–78; Aaron
Cosbey, Border Tax Adjustment: Background
Paper, International Institute for Sustainable
Development, Winnipeg, 2008, http://www.
gmfus.org/doc/economics/GMF-Border.pdf.
3 Aadiya Massoo, Arvind Subramanian,
Dominique van der Mensbrugghe and
Jianwu He, Reconciling Climate Change and
Trade Policy, World Bank Policy Research
Working Paper 5123, November 2009, http://
www-wds.worldbank.org/external/default/
WDSContentServer/IW3P/IB/2009/11/12/0
00158349_20091112173455/Rendered/PDF/
WPS5123.pdf; Aaron Cosbey, Border Tax
Adjustment: Background Paper, International
Institute for Sustainable Development,
2008, http://www.gmfus.org/doc/economics/
GMF-Border.pdf; Aaron Cosbey and Richard
Tarasofsy, Climate Change, Competitiveness
ENDNOTES [to pages 136–139] 261
and Trade, RIIA, London, 2007; Andrew
Green and Tracey Epps, ‘Is There a Role
for Trade Measures in Addressing Climate
Change?’, University of California Davis
Journal of International Law and Policy 15,
no. 1 (2008), pp.1–30; Harro Van Asselt and
Thomas Brewer, ‘Addressing Competitiveness
and Leakage Concerns in Climate Policy: An
Analysis of Border Adjustment Measures in
the US and the EU’, Energy Policy 38 (2010),
pp. 42–51.
4 Yan Dong and John Whalley, ‘Carbon, Trade
Policy, and Carbon Free Trade Zones’, Vox, 28
November 2008, http://www.voxeu.org/index.
php?q=node/260, pp. 3–4.
5 Geoff Bertram and Simon Terry, The Carbon
Challenge: New Zealand’s Emissions Trading
Scheme, Bridget Williams Books, Wellington,
2010.
6 This point was made forcefully (but without
effect) in a joint submission by the Climate
Change Research Institute and the Institute
of Policy Studies to the select committee
hearings on the 2009 ETS legislation;
see http://www.parliament.nz/en-NZ/PB/
SC/Documents/Evidence/c/a/8/49SCFE_
EVI_00DBHOH_BILL9597_1_A15141-Institute-
of-Policy-Studies-and.htm.
7 Barack Obama, Remarks by President Barack
Obama at Suntory Hall, 14 November 2009,
http://www.whitehouse.gov/the-press-office/
remarks-president-barack-obama-suntory-
hall.
8 Ministry of Foreign Affairs and Trade, The
Trans-Pacific Strategic Economic Partnership
Agreement, 2009, http://www.mfat.govt.nz/
downloads/trade-agreement/transpacific/
transPac-Factsheet-2Mar09.pdf.
9 Christopher Weber and Glen P. Peters,
‘Climate Change Policy and International
Trade: Policy Considerations in the US’,
Energy Policy 37, no. 2 (February 2009), p. 434.
10 See http://thinkcarbon.wordpress.
com/2009/06/24/the-waxman-markey-bill-at-
a-glance/.
11 HR25454 p. 1123 section 768(a)(1)(C),
http://energycommerce.house.gov/
Press_111/20090701/hr2454_house.pdf.
12 Bertram and Terry, The Carbon Challenge.
13 Greg Mankiw, ‘The Fundamental Theorem
of Carbon Taxation’, http://gregmankiw.
blogspot.com/2007/08/fundamental-theorem-
of-carbon-taxation.html, accessed 30 March
2010.
14 John M. Broder, ‘“Cap and Trade” Loses
Its Standing as Energy Policy of Choice’,
New York Times, 25 March 2010, http://
www.nytimes.com/2010/03/26/science/
earth/26climate.html. Similar comments are
262 ENDNOTES [to pages 140–147]
in Lexington, ‘A Refreshing Dose of Honesty’,
The Economist, 4 February 2010.
15 In May 2010 the Kerry-Lieberman ‘American
Power Act’ was introduced to the Senate.
For the text, see http://kerry.senate.gov/
americanpoweract/pdf/APAbill.pdf. Space
and time constraints preclude an analysis
here; in any case, the Kerry-Lieberman Bill
was abandoned a month later when the
Obama administration gave up on its hope
of passing climate change legislation before
the mid-term congressional elections later in
2010.
16 See http://cantwell.senate.gov/issues/CLEAR
Act - Leg Text.pdf.
17 GATT, Report of the Working Party on Border
Tax Adjustment, 2 December 1970, GATT Doc.
L/3464, http://www.wto.org/gatt_docs/English/
SULPDF/90840088.pdf.
18 Green and Epps, ‘Is There a Role for Trade
Measures in Addressing Climate Change?’,
p. 9; Ton Manders and Paul Veenendaal,
Border Tax Adjustments and the EU-ETS, CPB
Document No. 171, Netherlands Bureau for
Economic Policy Analysis, October 2008, p.
15, see http://www.cpb.nl/eng/pub/cpbreeksen/
document/171/.
19 Ben Lockwood and John Whalley, ‘Carbon
Motivated Border Tax Adjustments: Old Wine
in Green Bottles?’, NBER Working Papers No.
14025, May 2008.
20 Robert Howse, ‘The Appellate Body
Rulings in the Shrimp/Turtle Case: A
New Legal Baseline for the Trade and
Environment Debate’, Columbia Journal
of Environmental Law 27, no. 2 (2002), pp.
491–521. On PPMs, see Michael Weinstein
and Stephen Charnovitz, ‘The Greening of
the WTO’, Foreign Affairs 80, no. 6 (2001),
pp. 147–56; and Stephen Charnovitz, ‘The
Law of Environmental “PPMs” in the WTO:
Debunking the Myth of Illegality’, The Yale
Journal of International Law 27, no. 1 (Winter
2002), pp. 59–110.
21 Ludivine Tamiotti, Robert Teh, Vesile
Kulaçoğlu, Anne Olhoff, Benjamin Simmons
and Hussein Abaza, Trade and Climate
Change: A Report by the United Nations
Environment Programme and the World Trade
Organization, WTO, Geneva, 2009.
22 See http://www.mfe.govt.nz/cabinet-papers/
topics/advice-on-a-moderated-nz-ets.html.
23 John Ballingal, James Zuccollo, James
Lennox and Niven Winchester, Border
Adjustments. Initial Analytical Scoping
Research, Ministry for Foreign Affairs and
Trade, Wellington, 2009, unpublished.
24 Robbie Andrew, James Lennox, D. Drysdale,
M. Lenzen, T. Ndebele, Glen Peters, N.
Smith, T. Wiedmann, J. Zhang and G.
McDonald, Greenhouse Gases Embodied in
New Zealand’s Trade: Preliminary Headline
Results, Report to MAF, Landcare Research,
Lincoln, 2010; James Lennox , Robbie
Andrew, T. Wiedmann, N. Smith, J. Zhang,
G. McDonald, B. Nebel and D. Drysdale,
Greenhouse Gases Embodied in New Zealand’s
Trade: Year One Report. Report to MAF, New
Zealand Centre for Ecological Economics, 80
pp., Landcare Research, Lincoln, 2009. Both
unpublished at March 2010.
25 HR2454 p.1124 section 768(a)(1)(E) and p.1120
section 767(c), http://energycommerce.house.
gov/Press_111/20090701/hr2454_house.pdf.
26 According to the World Resources Institute
CAIT database, figures for 2005.
27 See http://www.census.gov/foreign-trade/
balance/.
28 Stiglitz, ‘A New Agenda’.
29 Caroline M. Saunders and A. Barber,
Comparative Energy and Greenhouse Gas
Emissions of New Zealand’s and the UK’s Dairy
Industry, AERU Research Report No. 297,
Lincoln University, July 2007; Caroline M.
Saunders, A. Barber and G. Taylor, Food Miles
– Comparative Energy/Emissions Performance
of New Zealand’s Agriculture Industry, AERU
Research Report No. 285, Lincoln University,
July 2006; Caroline M. Saunders and A.
Barber, ‘Carbon Footprints, Life Cycle
Analysis, Food Miles – Global Trade Trends
and Market Issues’, Political Science 60, no. 1
(2008) pp. 73–88.
30 Robbie Andrew, Glen Peters and James
Lennox, New Zealand’s Carbon Balance: MRIO
Applied to a Small Developed Country, paper
presented to International Input-Output
Meeting on Managing the Environment,
Seville, 9–11 July 2008.
31 Ibid, p. 9.
32 Tracey Epps and Niven Winchester, ‘Trade
Policy and Climate Change: Using Trade
Measures to Address Competitiveness
Concerns’, mimeo, University of Otago, April
2008, Table 1, p. 48.
33 Rahel Aichele and Gabriel Felbermayr,
‘Kyoto and the Carbon Content of Trade’,
FZID Discussion Paper 10-2010, Universitat
Hohenheim, 2010, Vox, 4 February 2010,
http://www.voxeu.org/index.php?q=node/4557.
See also Glen P. Peters and Edgar G.
Hertwich, ‘CO2 Embodied in International
Trade with Implications for Global Climate
Policy’, Environmental Science and Technology
42, no. 5 (2008), pp. 1401–7.
34 Inga J. Smith and Craig J. Rodger, ‘Carbon
Offsets for Aviation-Generated Missions
Due to International Travel to and from New
 ENDNOTES [to pages 149–157] 263

Zealand’, Energy Policy 37, no. 9 (2009), Figure 11 PhRMA, ‘Special 301 Submission 2009’,
7, p. 3444. http://www.ipophil.gov.ph/ipenforcement/
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10. PUBLIC HEALTH AND MEDICINE Submission of PhRMA to USTR, Docket ID:
POLICIES USTR-2009-0041, p. 6.
12 PhRMA, ‘Special 301 Submission 2010’
1 Australian Department of Foreign Affairs and
(undated), http://keionline.org/sites/default/
Trade, ‘Report of TPP Negotiations’, 13 April
files/USTR-2010-0003-0245.1.pdf, accessed
2010.
March 2010; PhRMA, ‘Statement on
2 ‘Submission to the Department of Foreign
Global Intellectual Property Agenda: 2009
Affairs and Trade on the Trans-Pacific
Special 301 Report’, http://www.phrma.org/
Partnership Agreement on behalf of the
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trade/fta/tpp/subs/tpp_sub_aftinet_081103.
13 Mark Vaile, Deputy Prime Minister and
pdf, accessed March 2010; Patricia Ranald
Minister for Trade, Joint press conference
and Louise Southalan, ‘The Australia–US
at the office of the United States Trade
Free Trade Agreement: Trading Australia
Representative, Washington, DC, 7 March
Away?’, Australia Fair Trade and Investment
2006.
Network, 2003, http://www.aftinet.org.au,
14 PhRMA ‘Special 301 Submission 2009, p. 115.
accessed April 2010.
15 Ibid.
3 Thomas Faunce, Jimmy Bai and Duy
16 Martin Johnston, ‘Quicker Drugs – At a Cost’,
Nguyen, ‘Impact of the Australia–US Free
New Zealand Herald, 22 April 2010, http://
Trade Agreement on Australian Medicines
www.nzherald.co.nz/nz/news/article.cfm?c_
Regulation and Prices’, Journal of Generic
id=1&objectid=10639982, accessed September
Medicines 7, no. 1 (2010), pp. 18–29.
2010.
Thomas Faunce, ‘Reference Pricing for
17 Thomas Faunce, Hans Lofgren, Ken Harvey
Pharmaceuticals: Is the Australia-United
and Kelly Johnston, ‘Tendering for Low Cost
States Free Trade Agreement affecting
Generics in Australia’, Health Issues 87 (2006)
Australia’s Pharmaceutical Benefits Scheme?’,
pp.26–29; Johnston, ‘Quicker Drugs – At a
Medical Journal of Australia 187, no. 4 (2010)
Cost’.
pp. 240–2.
18 Martin Johnston, ‘Quicker Drugs – At a Cost’,
4 Submission of the Pharmaceutical Research
New Zealand Herald, 22 April 2010, http://
and Manufacturers of America (PhRMA)
www.nzherald.co.nz/nz/news/article.cfm?c,_
to USTR, Docket ID: USTR-2009-0041,
id=1&objectid=10039982.
p. 2, http://www.regulations.gov/search/
19 PhRMA, ‘Special 301 Submission 2009’, p.
Regs/home.html#docketDetail?R=US
218.
TR-2009-0041, accessed April 2010.
20 Decisions 89-AI 2000, 01-AI-2001 and 34-AI-
5 Therapeutic Goods Act 1989 (Cth) s26B, http://
2001.
www.austlii.edu.au/cgi-bin/sinodisp/au/legis/
21 That is a reflection of the decision handed
cth/consol_act/tga1989191/s26b.html, accessed
down in the British courts in 2000. See
April 2010.
Bristol-Myers Squibb Company v Baker Norton
6 National Health Act 1953 (Cth) s101 3A, http://
Pharmaceuticals Inc & Anor [2000] EWCA Civ
www.austlii.edu.au/cgi-bin/sinodisp/au/
169, 23 May 2000.
legis/cth/consol_act/nha1953147/s101.html,
22 PhRMA, ‘Special 301 Submission 2009’.
accessed April 2010.
23 European Chamber of Commerce in Vietnam
7 Submission of PhRMA to USTR, Docket ID:
(undated), Pharmaceuticals, http://www.
USTR-2009-0041, p. 5.
eurochamvn.org/downloads/6_PHARMA%20
8 Novartis submission to USTR, Document ID:
Position%20Paper_FINAL.pdf, accessed
USTR-2009-0041-0007,
August 2010.
http://www.regulations.gov/search/Regs/
24 Submission of Philip Morris International
home.html#documentDetail?R=0900006480
in Response to the Request for Comments
a7c755, accessed April 2010.
Concerning the Proposed Trans-Pacific
9 19 U.S.C. § 2411.
Partnership Trade Agreement to the USTR
10 Jean Heilman Grier, ‘Section 301 of the 1974
TPP consultation, http://www.regulations.
Trade Act’, Office of the Chief Counsel for
gov/search/Regs/home.html#documentDe
International Commerce, undated, http://
tail?R=0900006480a81299, accessed April
www.osec.doc.gov/ogc/occic/301.html,
2010; Plain Tobacco Packaging (Removing
accessed April 2010.
Branding from Cigarette Packs) Bill 2009,
264 ENDNOTES [to pages 158–161]
http://parlinfo.aph.gov.au/parlInfo/download/
legislation/bills/s724_first/toc_pdf/0916020.pd
f;fileType%3Dapplication%2Fpdf, accessed
April 2010.
25 Submission of Philip Morris International to
USTR TPPA submissions.
26 David Schneiderman, ‘Taking Investments
Too Far: Exploitations in the Semi-periphery’,
in Governing Under Stress: Middle Powers and
the Challenge of Globalization, eds M. Cohen
and S. Clarkson, Zed Books, London, 2004.
27 S. Ganguly, ‘The Investor–State Dispute
Mechanism (ISDM) and a Sovereign’s Power
to Protect Public Health’, Columbia Journal of
Transnational Law 38 (1999), p. 113.
28 UNCTAD, Dispute Settlement: Investor–state,
United Nations Publication, 2003, http://www.
unctad.org/en/docs/iteiit30_en.pdf, accessed
April 2010.
29 Gus Van Harten and Martin Loughlin,
‘Investment Treaty Arbitration as a Species of
Global Administrative Law’, European Journal
of International Law 17, no.1 (2006), pp. 121–50.
30 Anthea Roberts, ‘Power and Persuasion
in Investment Treaty Interpretation: The
Dual Role of States’, American Journal of
International Law 104, (2010) pp. 179–225.
31 Dan Esty, ‘Bridging the Trade-Environment
Divide’, Journal of Economic Perspectives 15, no.
3 (2001), pp. 113–30.
32 William Dodge, ‘Investor–State Dispute
Settlement Between Developed Countries:
Reflections on the AUSFTA.’ Vanderbilt
Journal of Transnational Law 39, no.1 (2006),
pp. 1–37.
33 Submission of Philip Morris International.
34 Luke Eric Peterson, ‘Uruguay: Philip Morris
Files First Known Investment Treaty Claim
Against Tobacco Regulations’, Investment
Arbitration Reporter, 3 March 2010,
http://www.bilaterals.org/article.php3?id_
article=16921, accessed April 2010.
35 NAFTA – Chapter 11– Investment Cases
Filed Against the Government of Canada,
Cromptom (Chemtura) Corp v Government of
Canada, http://www.international.gc.ca/trade-
agreements-accords-commerciaux/disp-diff/
crompton_archive.aspx?lang=en, accessed
April 2010.
36 Governor of California Executive Order D-5-
99, 25 March 1999, cited in Sanford Gaines,
‘Methanex Corp v United States’, American
Journal of International Law 100, no. 3 (July
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States of America, http://www.state.gov/s/l/
c5818.htm, accessed April 2010.
37 Sun Belt Water Inc., Notice to submit a
claim to arbitration under Chapter 11 of
NAFTA, http://www.international.gc.ca/trade-
agreements-accords-ommerciaux/assets/pdfs/
Sunbelt.pdf, accessed April 2010.
38 US Department of State. v. G. Gallo v
Government of Canada, http://www.state.
gov/s/l/c29744.htm, accessed 12 April 2010.
39 ‘US Department of State Cases Regarding
the Border Closures due to BSE Concerns’,
http://www.state.gov/s/l/c14683.htm, accessed
April 2010. In the consolidated arbitration
under Chapter 11 of the NAFTA and the
UNCITRAL arbitration rules, Award on
Jurisdiction The Canadian Cattlemen for Fair
Trade v United States of America, http://www.
state.gov/documents/organization/99954.pdf,
accessed April 2010.
40 Metalclad Corp v United Mexican States, http://
www.state.gov/s/l/c3752.htm, accessed 12 April
2010.
41 US Department of State. Centurion Health
Corporation v Government of Canada, http://
www.state.gov/s/l/c29884.htm, accessed12
April 2010.
42 Ibid.
43 US Department of State Apotex Inc v USA,
http://www.state.gov/s/l/c27648.htm, accessed
12 April 2010.
44 Patrick M. McFadden, ‘Provincialism in US
Courts’, Cornell Law Review, 81 (1995), p. 32.
45 US Department of State Apotex Inc v USA,
http://www.state.gov/s/l/c31326.htm, 12 April
2010.
46 Ibid.
47 The Council of Canadians, ‘NAFTA’s Chapter
11 Investor–state Dispute Process’, undated,
http://www.canadians.org/trade/issues/
NAFTA/buy-local/NAFA.html, accessed April
2010.
48 US Department of State, Ethyl Corp v
Government of Canada, http://www.state.
gov/s/l/c3745.htm, accessed 12 April 2010.
49 US Department of State, Dow AgroSciences
LLC v. Government of Canada, http://www.
state.gov/s/l/c29885.htm, accessed 12 April
2010.
50 Notice of Arbitration Dow Agrosciences LLC v
Government of Canada, Foreign Affairs and
International Trade Canada, http://www.
international.gc.ca/trade-agreements-
accords-commerciaux/assets/pdfs/
DowAgroSciencesLLC-2.pdf, accessed April
2010.
51 Pennsylvania Fair Trade Coalition 2008,
Presidential Candidate Questionnaire Barack
Obama Response, http://www.citizenstrade.
org/pdf/QuestionnairePennsylvaniaFairTra-
deCoalition040108FINAL_SenatorObamaRe-
sponse.pdf, accessed April 2010.
52 Minister for Trade, Simon Crean, Canberra
Times, 17 March 2010.
 ENDNOTES [to pages 161–173] 265

53 PhRMA, Special 301 Submission 2009, p. 52. Zealand’s, acts permitted for such purposes
are circumscribed and defined in much
11. INTELLECTUAL PROPERTY IN NEW statutory detail as to what amounts to
ZEALAND AND THE TPPA research, criticism, review, education and so
on.
1 The word ‘of ’ does not appear in the text of
9 Copyright law even goes as far as to protect
the agreement.
those technological protection mechanisms
2 See Susy Frankel, ‘WTO’s Application of “the
as copyright works.
Customary Rules of Interpretation of Public
10 The law is also different from British law on
International Law” to Intellectual Property’,
which most New Zealand copyright law has
Virginia Journal of International Law, 45
been based.
(2006), p. 365.
11 TRIPS Agreement, Article 27:1.
3 In other countries, these sorts of products
12 In the United States, an inventive step
may be protected by copyright, but such
is called non-obviousness. The same
industrial products are often protected by
terminology is used in New Zealand, but the
other intellectual property rights including
Patents Bill uses the phrase ‘inventive step’.
design rights and some patents.
Under the TRIPS Agreement, the terms are
4 In New Zealand’s copyright law, these
treated as having the same meaning and
are called communication works, which
are interchangeable. See TRIPS Agreement,
is intended to be technologically neutral.
Article 27:1, footnote 5.
‘Communication work’ is not a worldwide
13 An example is what is known as the Swiss
term, and what it covers is protected in other
claim patent, which is a patent for the
jurisdictions under other terminology.
manufacture of a pharmaceutical that is for
5 The rules for calculating term vary in detail
a new use, even though the pharmaceutical
from country to country, but the rules stated
compound was known. See Pharmaceutical
above are the broad rules.
Management Agency v Commissioner of Patents
6 See Eldred v Ashcroft (2003) 239 F. 3d 372; 537
[2000] 2 NZLR 529 (CA).
U.S. 186 (US Sup Ct).
14 In New Zealand, pharmaceuticals cannot be
7 The original proposal was an extension of
sold to the public until they have approval
term to ninety-five years. For discussion of the
under the Medicines Act. Similar regularity
proposal, see European Commission, ‘Term
requirements are found in many countries.
of Protection’, http://ec.europa.eu/internal_
15 In New Zealand, this requires approval under
market/copyright/term-protection/term-
the Medicines Act 1981.
protection_wn.htm; Centre for Intellectual
16 The European Union, United States and
Property and Information Law, University
Australia each have different methods of
of Cambridge, ‘Review of the Economic
calculating the extension of term.
Evidence Relating to Term of Copyright in
17 See Ministry of Economic Development,
Sound Recordings’, http://www.cipil.law.cam.
Review of the Patents Act 1953: The
ac.uk/policy_documents/gowers_cipilreport.
Pharmaceutical Patent Term in New Zealand,
pdf; ‘Address by Professor Lionel Bentley to
http://www.med.govt.nz/templates/
the Legal Affairs Committee of the European
ContentTopicSummary____1711.aspx.
Parliament’, 4 November 2008, http://www.
18 Patents Bill at http://www.parliament.nz/
cipil.law.cam.ac.uk/Address%20to%20
NR/rdonlyres/B6E4F834-C47A-426A-86B8-
the%20European%20Parliament.pdf; Nadine
F573ED4F5E04/133805/DBSCH_SCR_4679_
Klass, Josef Drexl, Reto M. Hilty, Annette
PatentsBill2352_7434_3.pdf.
Kur and Alexander Peukert, ‘Statement of the
19 TRIPS Agreement, Article 39:3.
Max Plank Institute for Intellectual Property,
20 There are other aspects of these provisions
Competition and Tax Law Concerning
that effect the availability and price of
the Commission’s Plans to Prolong the
pharmaceuticals; they are discussed in
Protection Period for Performing Artists and
Chapter 10.
Sound Recordings’, International Review of
21 21 USC 355(c)(3)(E)(ii,iii).
Intellectual Property and Competition Law,
22 The provisions are found in the Medicines
39, no. 5 (2008), p. 586; and Natali Helberger,
Act 1981, Section 23B and Section 23C, with
Nicole Dufft, Stef Van Gompel and P. Bernt
relevant definitions in Section 23A. Data
Hugenholtz, ‘Never Forever: Why Extending
exclusivity provisions relating to agricultural
the Term of Protection for Sounds Recordings
chemicals and other products are also
is a Bad Idea’, European Intellectual Property
found in the Agricultural Compounds and
Review, 30, no. 5 (2008), p. 174.
Veterinary Medicines Act 1997, Sections
8 In many copyright laws, including New
70–72, and in the Hazardous Substances and
266 NO ORDINARY DEAL [to pages 173–182]
New Organisms Act 1996.
23 Patents Bill, above n. 18, clause 15.
24 Pfizer v Commissioner of Patents [2005] 1 NZLR
362 (CA).
25 See Henry Hughes, Reinventing Patent Law,
at http://www.henryhughes.co.nz/articles/
Reinventing_Patent_Law.asp.
26 At the time of writing, the report in what
is known as the WAI 262 claim is not yet
published. The WAI 262 claim is a claim
brought by some Māori against the Crown.
The claim has been heard by the Waitangi
Tribunal and includes several claims relating
to intellectual property law. The statement
of issues that are the subject of the WAI
262 claim is online at http://www.waitangi-
tribunal.govt.nz/doclibrary/public/wai262/
SOI/Wai262SOI(doc2.314)small.pdf. For a
discussion of Māori and intellectual property,
see Susy Frankel and Geoff McLay, Intellectual
Property in New Zealand, Butterworths, Lexis
Nexis, 2002, Chapter 3.
12. CULTURE AND INFORMATION
1 David Drummond (SVP, Corporate
Development and Chief Legal Officer,
Google), ‘A New Approach to China: An
Update’, 22 March 2010, http://googleblog.
blogspot.com/2010/03/new-approach-to-
china-update.html; David Drummond, ‘A
New Approach to China’, 12 January 2010,
http://googleblog.blogspot.com/2010/03/
new-approach-to-china-update.html, both
accessed 12 April 2010.
2 Johnny Ryan and Stefan Halper, ‘Google
vs China: Capitalist Model, Virtual Wall’,
openDemocracy, 22 January 2010, http://www.
opendemocracy.net/johnny-ryan-stefan-
halper/google-vs-china-capitalist-model-
virtual-wall, accessed 12 April 2010.
3 Timothy Garton-Ash, ‘Beyond Google’s Clash
with China, We Must Find Rules for a Global
Village’, guardian.co.uk, 24 March 2010,
http://www.guardian.co.uk/commentisfree/
libertycentral/2010/mar/24/china-google-
censorship-netizens-freedom, accessed 14
April 2010.
4 Jock Given, America’s Pie: Trade and Culture
after 9/11, University of New South Wales
Press, Sydney, 2003, p. 14.
5 UNESCO, Universal Declaration on Cultural
Diversity, UNESCO, Paris, 2001.
6 Terry Flew, Understanding Global Media,
Palgrave Macmillan, Houndmills,
Basingstoke, 2007, p. 196.
7 Ibid.
8 Toby Miller, Nitin Govil, John McMurrin,
Richard Maxwell and Tina Wang, Global
Hollywood 2, British Film Institute/Palgrave
Macmillan, London, 2009, p. 80.
9 Ted Magder, ‘Transnational Media,
International Trade and the Idea of Cultural
Diversity’, Continuum: Journal of Media and
Cultural Studies 18, no. 3 (2004), pp. 380–97.
10 UNESCO, ‘Ten Keys to the Convention on the
Protection and Promotion of the Diversity of
Cultural Expressions’, UNESCO, Paris, 2005.
11 UNESCO, Convention on the Protection
and Promotion of the Diversity of Cultural
Expressions, UNESCO, Paris, 2005, Article 1.
12 UNESCO, ‘Ten Keys’.
13 UNESCO, Convention on the Protection
and Promotion of the Diversity of Cultural
Expressions, Article 20(2).
14 Tania Voon, Cultural Products and the World
Trade Organization, Cambridge University
Press, Cambridge, 2007, p. 249.
15 Jane Kelsey, Serving Whose Interests?
The Political Economy of Trade in Services
Agreements, Routledge-Cavendish, Abingdon,
2008, pp. 238–41.
16 Hernan Galperin, ‘Cultural Industries
Policy in Regional Trade Agreements: The
Cases of NAFTA, the European Union and
MERCOSUR’, Media, Culture and Society 21
(1999), pp. 631–4.
17 Singapore–Australia Free Trade Agreement,
17 February 2003, Australian Annex 4-II(A)-
12, http://www.dfat.gov.au/trade/negotiations/
safta/index.html, accessed 14 April 2010.
18 ASEAN–Australian–New Zealand Free Trade
Agreement, 27 February 2009, Chapter 15,
Article 1(4), http://www.dfat.gov.au/trade/fta/
asean/aanzfta/index.html, accessed 14 April
2010.
19 Jock Given, ‘Judiciary 1, Executive 0: Are NZ
Programs Australian?’, Media International
Australia 83 (February 1997), pp. 38–40.
20 Australian Broadcasting Authority v Project Blue
Sky Inc & Ors [1996] FCA 1087 (12 December
1996).
21 Australian Communications and Media
Authority, ‘Comparison of Compliance
Results, Metropolitan Commercial Television
Networks, 2002–08’, 26 May 2009.
22 WTO, GATS – New Zealand – Schedule of
Specific Commitments, GATS/SC/62, 15 April
1994.
23 WTO, GATS, Article XXI, Modification of
Schedules; Kelsey, Serving Whose Interests?,
pp. 232–3.
24 Magder, ‘Transnational Media’, p. 390; Myra
Tawfik, ‘Competing Cultures: Canada and
the World Trade Organization – The Lessons
from Sports Illustrated’, 36 Canadian Yearbook
of International Law (1998), pp. 279–302.
25 WTO Notification of Mutually Agreed
Solution, Turkey – Taxation of Foreign Film

Revenues, DS43/3G/L/177, 24 July 1997.
26 Australian Communications and Media
Authority, Television Program Standard for
Australian Content in Advertising (TPS 23),
commencing 1 January 1992.
27 Kim Sung-jin, ‘Korea to Halve Screen Quota’,
Korea Times, 26 January 2006, http://www.
bilaterals.org/article.php3?id_article=3669,
accessed 14 April 2010; Kelsey, Serving Whose
Interests?, pp. 240–1.
28 Given, America’s Pie, pp. 34–37.
29 Voon, Cultural Products, p. 25; Martin Roy,
Juan Marchetti and Aik Hoe Lim, ‘The Race
Towards Preferential Trade Agreements in
Services: How Much Market Access is Really
Achieved?’, in GATS and the Regulation of
International Trade in Services, eds Marion
Panizzon, Nicole Pohl and Pierre Sauvé,
Cambridge University Press, Leiden, 2008,
pp. 93–96.
30 WTO Council for Trade in Services,
Communication from the United States
– Audiovisual Services, S/CSS/W/21, 18
December 2000.
31 Jock Given, ‘“Not unreasonably denied”:
Australian Content after AUSFTA’, Media
International Australia 111 (May 2004), pp.
8–22 at 15–6.
32 Voon, Cultural Products, pp. 156–9.
33 Ted Magder, ‘Gambling, the WTO and Public
Morals’, Television and New Media 7, no. 1
(February 2006), pp. 52–67.
34 WTO, United States – Measures Affecting the
Cross-border Supply of Gambling and Betting
Services: Report of the Appellate Body’, AB-
2005-1, WT/DS285/AB/R, 7 April 2005.
35 WTO Dispute Settlement, United States –
Measures Affecting the Cross-border Supply
of Gambling and Betting Services, DS285,
http://www.wto.org/english/tratop_e/dispu_e/
cases_e/ds285_e.htm, accessed 18 April 2010.
36 Roy, Marchetti and Lim, ‘The Race Towards
Preferential Trade Agreements in Services’.
37 MPAA, ‘Re Request for Public Comment on
the Proposed Trans-Pacific Partnership Free
Trade Agreement’, Washington, DC, 11 March
2009.
38 Ibid.
39 Annexes I-14, II-6 to II-8; Given, ‘“Not
unreasonably denied”’.
40 Office of the USTR, 2010 National Trade
Estimate Report on Foreign Trade Barriers,
USTR, Washington, DC, 12 April 2010.
41 Jock Given, ‘Take Your Partners: Private
Public Interplay in Australian and New
Zealand Plans for Next Generation
Broadband’, Telecommunications Policy,
forthcoming, 2010; Federal Communications
Commission, Connecting America: The
ENDNOTES [to pages 182–194] 267
National Broadband Plan, Washington, DC,
April 2010.
42 The USTR says American industry is
‘concerned about the potential for Telstra
[in Australia] to abuse its monopoly power
and its aggressive use of litigation to delay
regulatory outcomes’, and says it will ‘monitor
the planned NBN [National Broadband
Network], particularly with respect to
whether, with or without such separation,
competitors are able to obtain reasonable
access to services and customers to complete
with Telstra’, Office of the USTR, 2010
National Trade Estimate Report – Australia.
43 Hillary Clinton (Secretary of State), Remarks
on Internet Freedom, Newseum, 21 January
2010.
44 Robert Zoellick (President, World Bank
Group), ‘The End of the Third World?
Modernising Multilateralism for a Multipolar
World’, Woodrow Wilson Center for
International Scholars, Washington, DC, 14
April 2010.
45 Myron Brilliant (Senior Vice President,
International Affairs, US Chamber of
Commerce), Oral Testimony on the Proposed
[TPPA] for the Trade Policy Staff Committee,
Office of the USTR, Washington, DC, 4
March 2009.
46 Office of the USTR, ‘Increasing U.S. Exports,
Creating American Jobs: Engagement with
the Trans-Pacific Partnership’, 19 November
2009.
13. GOVERNMENT PROCUREMENT AND
LABOUR ISSUES
1 The issue is the extent of the restrictions
in free trade agreements on preference
for national suppliers for government
procurement contracts.
2 ACTU Congress 2009, ‘Future of Work,
Government Procurement Policy, Australian
Jobs, Industry and Decent Industrial
Relations’, p. 2, http://actu.dev.creativefactory.
com.au/about/Congress/default.aspx.
3 Presumably SMEs covered by the exception
need to be identified by the definitions used
by the relevant governments at the time the
FTA was concluded.
4 Paul Howes, ‘Loyalty, mateship and the
AWU’, The Australian Worker, 2, 2009, p. 5.
5 The Australian Workers’ Union New Steel
Plan, p. 16.
6 ACTU Congress 2009 Government
Procurement Policy, p. 5, paragraph 18.
7 The Plans predated the conference and
have their origins in a 2001 meeting of
Commonwealth, State and Territory
268 ENDNOTES [to pages 194–206]
governments, well before the election of the
Rudd government.
8 Labor Declaration on the Negotiation of the
Trans-Pacific Partnership Trade Agreement,
15 March 2010, p. 3, section 5, http://www.actu.
org.
9 Joint Statement on the Proposed US–
Australia Free Trade Agreement, August 2003,
p. 1, Workers Rights section.
10 AUSFTA, Chapter 18, Labour, Article 18.6.5;
and Chapter 21, Institutional Arrangements
and Dispute Settlement, 21.2 and 21.5.
11 Labor Declaration, 2010, p. 3, Workers’
Rights.
12 For the memorandum, see http://www.
mfat gov.nz./downloads/trade-agreement/
transpacific/labour-mou.pdf, and for the
exhange of letters, http://www.mfat gov.nz/
downloads/trade-agreement/transpacific/
labourletter-initiating.pdf and http://www.
mfat gov.nz/downloads/trade-agreement/
transpacific/labourletter-response.pdf.
13 ITUC, ‘2009 Annual Survey of Violations of
Trade Union Rights’, Geneva, 2010, http://
survey09.ituc-csi.org/survey.php?IDContinent
=3&IDCountry=BRN&Lang=EN, accessed 16
September 2010.
14 Ibid., http://survey09.ituc-csi.org/survey.php
?IDContinent=3&IDCountry=VNM&Lang=
EN.
15 ALP National Platform and Constitution
2009, Chapter 2, Paragraph 78, ALP,
Canberra.
14. INTERNATIONAL CAPITAL AND
INVESTMENT
1 Ron Kirk, ‘2010 National Trade Estimate’,
Office of the US Trade Representative,
2010, http://www.ustr.gov/uploads/
reports/2010/NTE/NTE_COMPLETE_WITH_
APPENDnonameack.pdf, accessed 7 April
2010.
2 Bank for International Settlements, Triennial
Central Bank Survey: Foreign Exchange and
Derivatives Market Activity in 2007, Bank for
International Settlements, Basel, Switzerland,
December 2007, p. 11, http://www.bis.org/publ/
rpfxf07t.pdf, accessed 14 March 2010.
3 For further details, see Bill Rosenberg, ‘Look
Ma, No Hands. Overseas Investment: Myopic
Deregulation’, Foreign Control Watchdog,
123 (2010), http://www.converge.org.nz/
watchdog/, from which some of the material
in this paper is also drawn.
4 Karyn Scherer, ‘Selling the Family Farm?’,
New Zealand Herald, 9 August 2010, http://
www.nzherald.co.nz/business/news/article.
cfm?c_id=3&objectid=10663996, accessed 29
August 2010.
5 Overseas Investment Commission and
Overseas Investment Office, ‘Statistical
Information on Decisions for December’,
various years.
6 Clayton Cosgrove and David Parker, ‘Overseas
Investment Act 2005: Reasons for Decision
by Relevant Ministers’, New Zealand
Government, 2008, http://www.beehive.
govt.nz/sites/all/files/04-11%20Auck%20
airport%20reasons%20for%20decision.pdf,
accessed 14 March 2010.
7 Rosenberg, ‘Look Ma, No Hands’.
8 Gareth Vaughan, ‘Agent for Private Equity in
NZ’, Press, 22 August 2007, p. C4.
9 UNCTAD, World Investment Report 2009:
Transnational Corporations, Agricultural
Production and Development, World
Investment Reports, New York and Geneva:
United Nations, 2009, p. 212, http://www.
unctad.org/en/docs/wir2009_en.pdf, accessed
14 March 2010, Annex table A.I.1.
10 For a discussion of the proposed Regulatory
Responsibility Act, see Policy Quarterly 6, no.
2 (May 2010).
11 See for example ‘Arbitrator Challenges and
Recusals – Investment Arbitration Reporter
(IAReporter)’, http://www.iareporter.com/
categories/20090724_6, accessed 29 August
2010; Jernej Sekolec, ICS Inspection and
Control Services Limited (United Kingdom)
(the ‘Claimant’) – and – The Republic of
Argentina: Decision on Challenge to Arbitrator,
2009, http://ita.law.uvic.ca/documents/
ICSArbitratorChallenge.pdf, accessed 29
August 2010.
12 Cited in Catherine Yannaca-Small, ‘Indirect
Expropriation’ and the ‘Right to Regulate’
in International Investment Law, Working
Papers on International Investment, OECD,
September 2004, p. 15.
13 Dan Eaton, ‘“Rich pricks” Bemoan
Treatment’, Press, 15 May 2008, section A, p.
4.
14 E.g., Roger Kerr, Do Economists Agree
on Anything?, New Zealand Business
Roundtable, Wellington, 2008, pp. 33, 52,
62, 90, http://www.nzbr.org.nz/documents/
publications/Do%20Economists%20
Agree%20on%20Anything.pdf, accessed 18
April 2010.
15 Office of the United States Trade
Representative and the US State Department,
‘2004 Model BIT’, Office of the United States
Trade Representative and the US State
Department, 2004, p. 38, http://ustraderep.
gov/assets/Trade_Sectors/Investment/Model_
BIT/asset_upload_file847_6897.pdf.
16 Free Trade Agreement Between The Government

of New Zealand And The Government of
the People’s Republic of China, Annex 13:
Expropriation, paragraph 5, http://www.
chinafta.govt.nz/1-The-agreement/2-Text-of-
the-agreement/0-agreement-downloads.php.
17 US State Department, ‘Report of the Advisory
Committee on International Economic Policy
Regarding the Model Bilateral Investment
Treaty’, US State Department, 2009, Annex
B, p. 5, http://www.investmenttreatynews.
org/cfs-file.ashx/__key/CommunityServer.
Components.SiteFiles/ACIEP-report-model-
BIT.pdf.
18 Thailand-New Zealand Closer Economic
Partnership Agreement, 2005, http://www.mfat.
govt.nz/Trade-and-Economic-Relations/0-
-Trade-archive/0--Trade-agreements/
Thailand/0-nia-index.php, accessed 29 August
2010.
19 Agreement between the Government of Hong
Kong and the Government of New Zealand for
the Promotion and Protection of Investments,
1995.
20 Juan Antonio Montecino and Rebecca
Dreyfus, ‘Philip Morris vs. Uruguay’, Foreign
Policy in Focus, 2010, http://www.fpif.org/
articles/philip_morris_vs_uruguay, accessed 6
April 2010; Luke Eric Peterson, ‘Philip Morris
Files First-known Investment Treaty Claim
Against Tobacco Regulations’, Investment
Arbritration Reporter, 2010, www.iareporter.
com, accessed 6 April 2010.
21 Luke Eric Peterson, ‘More Details Emerge of
Miners’ Case against South Africa’, Investment
Treaty News, 2007; Damon Vis-Dunbar,
‘Suspension Extended in Piero Foresti, Laura
de Carli and Others v. Republic of South
Africa’, Investment Treaty News, 2009, p. 3.
22 Regulations Review Committee, Complaint
Regarding the Overseas Investment Amendment
Regulations 2008 (SR 2008/48): Report of the
Regulations Review Committee, Report of the
Regulations Review Committee, New Zealand
House of Representatives, Wellington,
September 2008, p. 45, http://www.
parliament.nz/NR/rdonlyres/CCED6E6B-
835B-4749-AF2F-F47C97B901E9/93914/
DBSCH_SCR_4225_62991.pdf, accessed 17
April 2010.
23 Denise McNabb, ‘Govt Tackled on Airport
Rule Changes’, The Independent, 1 October
2008, http://www.stuff.co.nz/business/
industries/regulation/653907, accessed 16
April 2010.
24 For example, Jessica Wilson, ‘Failing to
care’, Consumer, 2009, pp. 31-33; Rebecca
Todd, ‘Company Denies Understaffing’,
Press (Christchurch), 10 October 2009, p.
A3; Jessica Wilson, ‘Rest Home Roulette’,
ENDNOTES [to pages 206–214] 269
Consumer, 2009, pp. 26–29.
25 Joseph Stiglitz and José Antonio Ocampo,
Capital Market Liberalization and
Development, Oxford University Press, 2008;
Stephany Griffith-Jones, José Antonio
Ocampo and Joseph E. Stiglitz, Time for
a visible hand : lessons from the 2008 world
financial crisis, Oxford University Press, 2010.
26 José Antonio Ocampo, Shari Spiegel and
Joseph E. Stiglitz, ‘Chapter 1: Capital Market
Liberalization and Development’, in Capital
Market Liberalization and Development,
pp. 1–47, at p.1, http://www1.logobook.ru/
af/11257375/1898/0199230587_sample.pdf,
accessed 1 September 2010.
27 Jonathan D. Ostry and others, Capital Inflows:
The Role of Controls, IMF Staff Position Note,
International Monetary Fund, 19 February
2010, p. 5, http://www.imf.org/external/pubs/ft/
spn/2010/spn1004.pdf, accessed 1 September
2010.
28 For further details, see Bill Rosenberg,
‘Financial Crises, Trilemmas, and a Time
to Rethink’, Foreign Control Watchdog, 120
(2009), pp. 5–22.
29 Ministry of Finance of the Republic of Korea,
‘New Macro-Prudential Measures to Mitigate
Volatility of Capital Flows’, 14 June 2010,
http://english.mosf.go.kr/media/etc/3d75bc9
9dc9d75d910b1ee8e8edec9c1.pdf, accessed 1
September 2010
30 Deborah E. Siegel, ‘Using Free Trade
Agreements to Control Capital Account
Restrictions: Summary of Remarks on the
Relationship to the Mandate of the IMF’,
ILSA Journal of International and Comparative
Law 10 (2004), pp. 297–304.
31 Reserve Bank of New Zealand, ‘Foreign
Exchange Intervention Options’, Reserve
Bank of New Zealand, 2004, http://www.
rbnz.govt.nz/finmarkets/foreignreserves/
intervention/0147138.pdf, accessed 5 April
2010.
32 Reserve Bank of New Zealand, ‘Liquidity
Policy, Document BS13’, Reserve Bank of
New Zealand, 2010, http://www.rbnz.govt.
nz/finstab/banking/regulation/3675928.pdf,
accessed 5 April 2010.
33 Reserve Bank of New Zealand, ‘Regulatory
Impact Assessment: RBNZ Liquidity
Requirements for Locally Incorporated
Banks’, Reserve Bank of New Zealand, 2009,
http://www.rbnz.govt.nz/finstab/banking/
regulation/3786646.pdf.
15. TRADE IN SERVICES
1 Robert Wade, ‘Financial Regime Change?’,
New Left Review 53 (2008), p. 53.
270 ENDNOTES [to pages 215–229]
2 Jane Kelsey, Serving Whose Interests?
The Political Economy of Trade in Services
Agreements, Routledge, London, 2008, pp.
76–82.
3 William Drake and Kalypso Nicolaidis,
‘Ideas, Interests and Institutionalization:
“Trade in Services” and the Uruguay Round’,
International Organization 46, no. 1, (1992),
pp. 37–100 at p. 63.
4 Kelsey, Serving Whose Interests?, pp. 50–57.
5 APEC, 2009 Committee on Trade and
Investment Annual Report to Ministers,
November 2009, APEC, Singapore, Appendix
5, p. 69, http://publications.apec.org/
publication-detail.php?pub_id=945, accessed
31 March 2010.
6 US Trade Representative Ron Kirk, speech to
the Coalition of Service Industries Summit,
Washington, DC, 13 October 2009, http://
www.uscsi.org/ServicesSummit2009.html,
accessed 31 March 2010.
7 Calculated from country-specific data
in Office of the United States Trade
Representative, National Trade Estimate
Report on Foreign Trade Barriers for 2010,
http://www.ustr.gov/about-us/press-office/
reports-and-publications/2010, accessed 31
March 2010.
8 National Trade Estimate Report.
9 Australian Bureau of Statistics, International
Trade in Services, by Country, by State and by
Detailed Services Category, Financial Year,
2008–9, Tables 2, 9, 10 and 12.
10 ‘Relative size of education versus other
exports’, http://www.educationnz.org.nz/
policy-research-stats/statistics.
11 Chakravarthi Raghavan, ‘Financial Services,
the WTO and Initiatives for Global Financial
Reform’, Paper for the Intergovernmental
Group of 24, 2009, http://www.g24.org/cr0909.
pdf, accessed 31 March 2010.
12 Trans-Pacific Strategic Economic Partnership
Agreement 2005, Annex IV: Schedule of New
Zealand.
13 ‘TPP Negotiators Unable to Reach Consensus
on Key Structural Issues’, Inside US Trade, 18
June 2010.
14 The documents are not formally available.
The best collection is on the European
Services Forum website http://www.esf.be/
under ‘Collective Requests’.
15 http://www.uscsi.org, accessed 15 March 2010.
16 Coalition of Service Industries, ‘Statement
on the Proposed Trans-Pacific Partnership
Agreement for the Trade Policy Staff
Committee’, Office of the United States Trade
Representative, 4 March 2009.
17 Ibid, p. 3.
18 US Chamber of Commerce, ‘Statement
on the Proposed Trans-Pacific Partnership
Agreement to the Office of the US Trade
Representative’, 11 March 2009.
19 Wal-Mart, ‘Statement on the Proposed Trans-
Pacific Partnership Agreement to the Office of
the US Trade Representative’, 11 March 2009.
20 The Motion Picture Association of America,
‘Statement on the Proposed Trans-Pacific
Partnership Agreement to the Office of the US
Trade Representative’, 11 March 2009.
21 The Music Council of Australia, ‘Submission
regarding Australia’s Proposed Participation
in a Trans-Pacific Partnership Agreement’, 25
August 2009.
22 CSI Statement on the Proposed TPPA, 4
March 2009, p. 6.
23 WTO, Mexico – Measures Affecting
Telecommunications Services, 2004, Panel
report WT/DS204/R, 2 April 2004. J.G. Sidak
and H.J. Singer, ‘Überregulation Without
Economics: The World Trade Organization’s
Decision in the U.S. Mexico Arbitration
on Telecommunications Services’, Federal
Communications Law Journal 57, no. 1, (2004),
pp. 1–48.
24 Campaign Against Foreign Control of
Aotearoa, Roger Award Report 2007, http://
canterbury.cyberplace.org.nz/community/
CAFCA/publications/Roger/Roger2007.pdf,
accessed 31 March 2010.
25 Bryce Wilkinson, A Primer on Property Rights,
Takings and Compensation, New Zealand
Business Roundtable, Wellington, 2008, p. 35.
26 See Policy Quarterly 6, no. 2 (May 2010).
27 New Zealand’s schedules in the GATS and the
P-4 also preserve the restrictions in Telecom’s
constitution to a 49 per cent ownership
stake by a single foreign shareholder and the
requirement for a majority of New Zealand
directors.
28 Bill Rosenberg, ‘International Pressures to
Privatise’, Privatisation by Stealth Conference,
Christchurch, 16 March 2008, http://
canterbury.cyberplace.org.nz/community/
CAFCA/publications/index.html.
29 Hon. Bill English, ‘Speech to the New Zealand
Council for Infrastructure Development’, 11
August 2010, http://www.beehive.govt.nz/
speech/speech+new+zealand+council+infras
tructure+development+2, accessed 14 August
2010.
30 Dexter Whitfield, The Global Auction of
Public Assets: Public Sector Alternatives to
the Infrastructure Market and Public Private
Partnerships, Spokesman Books, London,
2010.
31 David Hall, Emanuele Lobina and Violeta
Corral, ‘Replacing Failed Private Water
Contracts’, Report for Public Services
 ENDNOTES [to pages 230–236] 271

International, Geneva, 2010. 10 Capital Markets Development Taskforce,

32 McNollgast, ‘Administrative Procedures as ‘Capital Markets Matter: Report of the Capital
Instruments of Political Control’, Journal Market Development Taskforce’, Ministry for
of Law, Economics and Organization, 3, no. 2 Economic Development, Wellington, 2009,
(1987), p. 261. pp. 12 and 18.
11 Television New Zealand, ‘Q&A’, 14 February
16. THE TPPA AND FINANCIAL 2010, http://tvnz.co.nz/q-and-a-news/q-guyon-
DEREGULATION espiner-interviews-john-key-3363950, accessed
31 March 2010.
1 Various chronicles of these developments are
12 Television New Zealand, ‘Q&A’, 18 April 2010,
now available, e.g. Gillian Tett, Fool’s Gold.
http://tvnz.co.nz/q-and-a-news/jane-diplock-
How Unrestrained Greed Corrupted a Dream,
interviewed-paul-holmes-3470800/video,
Shattered Global Markets and Unleashed a
accessed 23 April 2010.
Catastrophe, Little Brown, London, 2009;
13 There have been a number of significant
Vince Cable, The Storm: The World Economic
adjustments to New Zealand’s financial
Crisis and What it Means, Atlantic Books,
regulation regime since this chapter was
London, 2009.
written in April 2010.
2 United Nations, Preliminary Draft of the
14 Interview by Jane Kelsey with Chilean trade
Full Report of the Commission of Experts of
officials in Santiago, Chile in November 2004.
the President of the UN General Assembly on
15 It is not clear how the US might have joined
Reforms of the International Monetary and
only that aspect of the P-4.
Financial System, 21 May 2009, United
16 Deborah Elms, ‘From the P4 to the TPP:
Nations, New York, pp. 18–20 [Stiglitz Report].
Explaining Expansion Interests in the Asia
3 Harry Freeman, ‘Comments by Harry
Pacific’, paper presented at the Asia Pacific
Freeman’, in ‘Financial Services and the
Trade Economists’ Conference, Singapore,
GATS 2000 Round’, Pierre Sauvé and James
Bangkok, 2–3 November 2009, p. 10 fn. 22.
Gillespie (eds.), Brookings-Wharton Papers on
17 See Greta Krippner, ‘The Financialization
Financial Services 2000, Brookings Institution
of the American Economy’, Socio-economic
Press, Washington, 2000, pp. 456–62. For
Review 3 (2005), p. 173; John Bellamy Foster,
the history of the Uruguay round and the
‘The Financialization of Capitalism’,
role played by the financial services lobby,
Monthly Review 58, no. 11 (2007), http://www.
see Jane Kelsey, Serving Whose Interests?
monthlyreview.org/0407jbf.htm, accessed 31
The Political Economy of Trade in Services
March 2010; see Michael Hudson, ‘Saving,
Agreements, Routledge, London, 2008, pp.
Asset-Price Inflation, and Debt-Induced
76–81.
Deflation’, in Money, Financial Instability
4 ‘Financial Leaders Group’, 21 September
and Stabilization Policy, eds L. Randall
2001, http://www.hkcsi.org.hk/reports/reports/
Wray and Matthew Forstater, Edward Elgar,
FLG_WTO.htm, accessed 31 March 2010.
Cheltenham, 2006, p. 104.
5 Coalition of Service Industries, ‘Statement
18 Ian Macfarlane, ‘Australia and the
on the Proposed Trans-Pacific Partnership
International Financial Crisis’, 2008
Agreement’, 25 January 2010, pp. 4, 10, http://
Lowy Lecture, Sydney, 3 December 2008,
www.uscsi.org/press/TPP%20Statement%20
http://www.lowyinstitute.org/Publication.
January%202010.pdf, accessed 18 March
asp?pid=935, accessed 31 March 2010.
2010.
19 See Tett, Fool’s Gold, pp. 195–286.
6 Ibid. This regulatory dialogue is one of the
20 Alan Greenspan, ‘The Crisis’, Brookings
forums through which the US has objected
Papers on Economic Activity, 9 March 2010,
to new legislation in Japan that partially
Brookings Institution, Washington, p. 3,
revokes the privatisation of the insurance and
http://www.brookings.edu/~/media/Files/
banking operations of the Japan Post Office.
Programs/ES/BPEA/2010_spring_bpea_papers/
7 Investment and Financial Services
spring2010_greenspan.pdf, accessed 23 March
Association, ‘Submission regarding
2010.
Australia’s Participation in the Trans-Pacific
21 UN, Stiglitz Report, pp. 18–20.
Partnership Negotiations’, 31 October 2008.
22 Geoff Bertram, ‘New Zealand’s Overseas
8 Australian Chamber of Commerce
Debt, the Banks, and the Crisis’, Foreign
Singapore, ‘Submission regarding Australia’s
Control Watchdog 120 (2009), http://www.
Participation in the Trans-Pacific Partnership
converge.org.nz/watchdog/20/04.htm,
Negotiations’, 25 February 2010.
accessed 31 March 2010.
9 City of London, The Global Financial Centres
23 Edmund L. Andrews, ‘Greenspan Concedes
Index 2009, City of London, 2009.
Error on Regulation’, New York Times,
272 ENDNOTES [to pages 236–246]
24 October 2008, http://www.nytimes.
com/2008/10/24/business/economy/24panel.
html, accessed 1 April 2010.
24 Gareth Morgan, ‘Commission Salesmen:
A Plague Afflicting Financial Planning’,
Infometrics, Investment –18 March 2004,
http://nbr.infometrics.co.nz/commission-
salesmen--a-plague-afflicting-financial-
planning_896.html, accessed 31 March 2010.
25 John Rekenthaler, Michelle Swartzentruber
and Cindy Sin-Yi Tsai, Morningstar: Global
Fund Investor Experience, May 2009, p. 4,
http://hk.morningstar.com/ODS_Articles/
MRGFI.pdf, accessed 24 March 2010.
26 Securities Commission, ‘Guidance Note:
Kiwisaver Distribution and Disclosure’, 24
March 2010, para 2.4, 3.2, 3.11.
27 Tamsyn Parker, ‘Response to Kiwisaver
Problems “Pathetic”’, New Zealand Herald, 25
March 2010, B1, quoting Kiwisaver provider
and economist Gareth Morgan.
28 Securities Commission, ‘Regulating Finance
Companies’, April 2009, heading Articles on
Investing, http://www.sec-com.govt.nz/invest/
articles/0409-5.shtml, accessed 31 March
2010.
29 Brian Gaynor, ‘Diplock Strangely Silent
in Rocky Year’, New Zealand Herald, 20
December 2008, C2.
30 See Maria Slade, ‘Blue Chip Investors’ Battle
for Justice’, New Zealand Herald, 3 May 2009,
C4.
31 Greg Ninness, ‘Blue Chip Investors Act
While Securities Watchdog “liaises”’,
Sunday Star Times, 31 August 2008, A3. After
maintaining that the Blue Chip property-
based investments were not regulated by the
Securities Act 1978 until August of 2008, the
Securities Commission then conceded that
there was an argument that the Act applied.
32 Maria Slade, ‘Appeal for Blue Chip Investors’,
New Zealand Herald, 7 October 2009, B3.
33 Jared Savage, ‘SFO Shakeup to Ditch 5 Senior
Posts’, New Zealand Herald, 29 March 2010,
A2. The Blue Chip co-founder has admitted
to charges of failing to keep accounting books
and records brought by the enforcement unit
of the Ministry of Economic Development.
34 Brian Gaynor, ‘Property Syndicates Not for
the Faint of Heart’, New Zealand Herald, 30
May 2009, C2; the Securities Commission has
also cautioned investors against these risks,
SC Bulletin, July 2009, p. 1.
35 Report of the Parliamentary Inquiry into
Banking, November 2009, p. 8, Table
2, Wellington, http://www.issues.co.nz/
library_images/bankinquiry/report_of_the_
parliamentary_banking_inquiry.pdf, accessed
31 March 2010.
36 MacFarlane, ‘Australia and the International
Financial Crisis’, p. 3.
37 Recommendation 83 of the Wallis Inquiry into
financial regulation advocated removal of the
then ‘six pillars’ policy that banned in-market
mergers between the largest four banks and
two insurance companies. Financial System
Inquiry Final Report, Commonwealth of
Australia, 1997.
38 New Zealand–Singapore Closer Economic
Partnership Agreement 2001, Annex 2.1
Schedule of Commitments [on Services]: New
Zealand.
39 Sauvé and Gillespie, ‘Financial Services’, p.
444.
40 IFSA, ‘Submission on Australia’s
Participation in the TPP Negotiations’.
41 Ibid, pp. 432, 441–2; World Trade
Organization, Financial Services: Background
Note by the Secretariat, S/C/W/312, S/FIN/W/73,
3 February 2010, p. 8; Todd Tucker, ‘ “That’s
All They’ve Got?”: What Latest WTO
Secretariat Paper on Financial Crisis Does
and Does Not Say About GATS Disciplines
on Financial Regulation’, Public Citizen,
Washington, 2010, http://www.citizen.org/
documents/That’sAllTheyGot.pdf, accessed
31 March 2010.
42 WTO, ‘Financial Services, Background Note
by the Secretariat’, 1998, S/C/W/72, p. 10.
43 Securities Markets Act 1988, Subpart 1,
Insider conduct and market manipulation
prohibitions, ss. 8-10D.
44 Securities Disclosure Amendment Act 2009.
45 Ibid.
46 UN, Stiglitz Report, p. 87.
EPILOGUE
1 Australian Government Productivity
Commission, Bilateral and Regional Trade
Agreements. Productivity Commission Draft
Research Report, July 2010, http://www.pc.gov.
au/__data/assets/pdf_file/0006/99762/trade-
agreements-draft.pdf, accessed 17 September
2010.
List of Abbreviations

ABC Australian Broadcasting Corporation

AANZFTA ASEAN–Australia–New Zealand Free Trade Agreement (between
Brunei Darussalam, Burma, Malaysia, the Philippines, Singapore,
Vietnam, Australia and New Zealand)
ACC Accident Compensation Corporation
ACJ Andean Court of Justice (Andean Community including Peru)
ACTU Australian Council of Trade Unions
AFL–CIO American Federation of Labor and Congress of Industrial
Organizations
AFTINET Australian Fair Trade and Investment Network
AIDESEP Interethnic Association of the Peruvian Amazon
ALOP appropriate level of protection
ALP Australian Labor Party
AMWU Australian Manufacturing Workers’ Union
ANZCERTA Australia–New Zealand Closer Economic Relations Trade Agreement
(see also CER)
ANZSCEP Agreement between New Zealand and Singapore on a Closer
Economic Partnership
ANZUS Australia–New Zealand–United States (Security Treaty)
APEC Asia–Pacific Economic Cooperation
APT ASEAN+3 (China, Japan and the Republic of Korea)
ARENA Action Research and Education Network of Aotearoa (New Zealand)
ASC ASEAN Security Community
ASEAN Association of Southeast Asian Nations
AUSFTA Australia–US Free Trade Agreement
AWU Australian Workers’ Union

BIS Bank for International Settlements

BITs bilateral investment treaties
BSE Bovine Spongiform Encephalopathy
BTAs border tax adjustment

CAFCA Campaign Against Foreign Control of Aotearoa

CAFTA Central American Free Trade Agreement
CER Closer Economic Relations (agreement between Australia and
New Zealand) (see also ANZCERTA)
CIE Centre for International Economics (Australia)
CLEAR Act Carbon Limits and Energy for America’s Renewal Act (US)
CPP Certificate of Pharmaceutical Product (Vietnam)
CSI Coalition of Services Industries (US)
274 NO ORDINARY DEAL

DAFF Department of Agriculture, Fisheries and Forestry (Australia)

DFAT Department of Foreign Affairs and Trade (Australia)

EAI Enterprise for the Americas Initiative (US)

EAS East Asian Summit
EEP Export Enhancement Program (US)
ETS Emissions Trading Scheme

FAO Food and Agriculture Organization (UN)

FDA Food and Drug Administration (US)
FDI foreign direct investment
FIDH International Federation for Human Rights
FIRE finance, insurance and real estate
FPDA Five Power Defence Agreement
FSANZ Food Standards Australia and New Zealand
FSC Free Sales Certificate (Vietnam)
FTA free trade agreement
FTAA Free Trade Area of the Americas

GATS General Agreement on Trade in Services

GATT General Agreement on Tariffs and Trade
GDP gross domestic product
GE genetically engineered
GFC global financial crisis
GHG greenhouse gas
GIs geographical indications
GM genetically modified
GMP Good Manufacturing Practices (Vietnam)
GTAP Global Trade Analysis Project

HTWG House Trade Working Group (US)

ICSID International Centre for Settlement of Investment Disputes

IFSA Investment and Financial Services Association (Australia)
IGAE Intergovernmental Agreement on the Environment (Australia)
ILO International Labour Organization
IMF International Monetary Fund
IMPs intellectual monopoly privileges
IP intellectual property
IPPC International Plant Protection Convention
IPRs intellectual property rights
ITUC International Trade Union Confederation

LDs legislative decrees (Peru)

 LIST OF ABBREVIATIONS 275

MAF Ministry of Agriculture and Forestry (New Zealand)

MFAT Ministry of Foreign Affairs and Trade (New Zealand)
MFN most-favoured nation
MPAA Motion Picture Association of America
MPCs milk protein concentrates
MRL maximum residue limits
MTBE methyl tert-butyl ether
MWG Medicines Working Group (AUSFTA)

NAFTA North American Free Trade Agreement

NGO non-governmental organisation
NLIS National Livestock Identification Scheme
NMPF National Milk Producers Federation
NZCTU New Zealand Council of Trade Unions
NZIER New Zealand Institute for Economic Research
NZSIS New Zealand Security Intelligence Service

OECD Organisation for Economic Co-operation and Development

OIA Overseas Investment Act (New Zealand)
OIE World Organisation for Animal Health (Office International des
Epizooties)

P-3 Pacific 3, Trans-Pacific Strategic Economic Partnership Agreement

(between New Zealand, Chile and Singapore)
P-4 Pacific 4, Trans-Pacific Strategic Economic Partnership Agreement
(between New Zealand, Chile, Singapore and Brunei)
P-5 Pacific 5 (proposed agreement between Singapore, New Zealand,
Australia, Chile and the US)
PAFTC Pennsylvania Fair Trade Coalition
PBAC Pharmaceutical Benefits Advisory Committee (Australia)
PBS Pharmaceutical Benefits Scheme (Australia)
PeSFTA Peru–Singapore Free Trade Agreement
PFIs Private Finance Initiatives
Pharmac Pharmaceutical Management Agency (New Zealand)
PhRMA Pharmaceutical Research and Manufacturers of America
PIF Pacific Islands Forum
PM Philip Morris
PPM parts per million
PPMs process and production methods
PPOS property-proportionate ownership schemes
PPPs Public Private Partnerships
PRC People’s Republic of China
PTAC Pharmacology and Therapeutic Advisory Committee (New Zealand)

RMI Researched Medicines Industry Association of New Zealand

276 NO ORDINARY DEAL

SAFTA Singapore–Australia Free Trade Agreement

SC Securities Commission (New Zealand)
SIPRI Stockholm International Peace Research Institute
SMEs small and medium (corporate) enterprises
SPS Sanitary and Phytosanitary

TBT technical barrier to trade

TCF textiles, clothing and footwear
telco telecommunications company
TGA Therapeutic Goods Administration (Australia)
TPA Trade Promotion Agreement
TPP(A) Trans-Pacific Partnership (Agreement)
TRADE Act Trade Reform, Accountability, Development and Employment Act
(US)
TRIMS Agreement on Trade-Related Investment Measures
TRIPS Agreement on Trade-Related Aspects of Intellectual Property Rights
TRQs tariff-rate quotas

UAVs Unmanned Aerial Vehicles

UN United Nations
UNCTAD United Nations Conference on Trade and Development
UNDP United Nations Development Programme
UNEP United Nations Environment Programme
UNESCO United Nations Educational, Scientific and Cultural Organization
UNCITRAL United Nations Commission on International Trade Law
UNITAS Security exercises involving North, Central and South America
USDEC United States Drug Export Council
US FTAs US free trade agreements
USSFTA US–Singapore Free Trade Agreement
USTR Office of the US Trade Representative

WHO World Health Organization

WTO World Trade Organization
List of Figures and Tables

Table 1 Agreements among TPPA negotiating partners 22

Figure 6.1 Changes in real GDP: percentage deviation from baseline 103

Table 7.1 Bilateral trade matrix for TPPA negotiating parties:

merchandise exports (US$, millions) and share of
total exports (%), 2009 113

Table 7.2 TPPA negotiating parties: major agricultural commodities

in national production, export and import, 2007 115

Table 7.3 TPPA negotiating parties: agricultural trade data, 2007 115

Figure 8.1 Japanese beef imports by country of origin (kt) 131

Table 9.1 New Zealand share of some US import categories (%) 143

Table 9.2 Components of New Zealand’s overall greenhouse gas

balance in 2001 145

Figure 9.1 New Zealand’s greenhouse gas international trade balance by

Kyoto Protocol participation category 145

Table 9.3 CO2 production emissions by commodity (metric tons

per 2001 US$100,000) 146

Figure 9.2 Emissions-intensity of economic sectors: NZ and US compared 147

Table 15.1 Plurilateral requests by TPPA negotiating parties in the GATS

2000 negotiations 222
List of Contributors

David Adamson started his professional working life in 1994 as an economist in the
Cooperative Research Centre for Tropical Pest Management. The management of
the risks posed by human and animal diseases has been the focus of his research
ever since. He is currently doing a PhD looking at climate change impacts on
irrigation activities and agricultural pests.

José Aylwin is co-director of the Observatorio Ciudadano (Citizens’ Watch) (www.

observatorio.cl) and teaches law at the Universidad Austral de Chile. After studying
at the University of Chile and University of British Columbia, he has researched
and published internationally on topics including indigenous peoples’ land rights,
the ombudsman system in Latin America, and globalisation and human rights in
Latin America, especially Chile.

Geoff Bertram lectured in economics for many years at Victoria University of

Wellington, where he currently works as a researcher at the Institute of Policy
Studies and the Climate Change Research Institute. His research interests include
Latin America and the Pacific, and he has published extensively on issues related
to climate change. He is co-author, with Simon Terry, of The Carbon Challenge:
New Zealand’s Emissions Trading Scheme (Bridget Williams Books, 2010).

Paul Buchanan is the founder of Buchanan Strategic Advisors Ltd, a political-risk,

market-intelligence and strategic-analysis consulting firm. Formerly a policy analyst
and consultant to various US security agencies, he has taught at universities in the
US, New Zealand and Singapore. His academic work has focused on comparative
regime transitions, comparative labour politics, international security affairs and
strategic thought.

Edward Challies is a human geographer currently working as a researcher at the

School of Geography, Environment and Earth Sciences at Victoria University
of Wellington. His research is concerned with the broad themes of agri-food
globalisation and rural development, and focuses in particular on global value
chains and rural livelihoods in the global agri-food system. Recent publications
have drawn upon his research in Chile and New Zealand.

Tom Faunce is an Australian Research Council Future Fellow. An associate

professor at the College of Law and College of Medicine, Biology and the
Environment at the Australian National University, he is one of Australia’s
foremost academic researchers into regulation of the contemporary Australian
and global pharmaceutical industry. He has directed three Australian Research
Council Discovery Grant projects in this area.

Susy Frankel is a professor of law at Victoria University of Wellington and co-director

of the New Zealand Centre of International Economic Law. She researches in the
fields of intellectual property law and international trade law, and is co-author
 LIST OF CONTRIBUTORS 279

(with Geoff McLay) of Intellectual Property in New Zealand. She is a Hearings

Officer for the Intellectual Property Office of New Zealand, and a neutral arbitrator
and mediator for the World Intellectual Property Organization Arbitration and
Mediation Center.

Jock Given is professor of media and communications at Swinburne University’s

Institute for Social Research in Melbourne, and author of America’s Pie: Trade and
Culture after 9/11. He was previously director of the Communications Law Centre
and policy advisor at the Australian Film Commission. He worked in various
capacities on the AUSFTA, the GATS and the NZCER.

Bryan Gould was a New Zealand Rhodes Scholar who became a diplomat in the
British Foreign Office and a law don at Oxford before his election as a Labour
Member of Parliament in 1974. After serving in both Neil Kinnock’s and John
Smith’s Labour Shadow Cabinets, he left British politics in 1994 to become the
Vice-Chancellor of Waikato University, a post he held until his retirement in
2004. He now lives in the Bay of Plenty, and writes on globalisation and the New
Zealand economy.

Jane Kelsey specialises in law and policy and international economic regulation
at the University of Auckland School of Law. Her research addresses the interface
between neoliberalism and globalisation, with particular reference to trade
in services agreements. Jane is active in many NGO, union and social justice
networks in Asia, the South Pacific and internationally. Her most recent book
was Serving whose Interests? The Political Economy of Trade in Services Agreements
(Routledge, 2008).

Warwick Murray is professor of human geography at Victoria University of

Wellington. His current research explores the interface between geographies
of globalisation and development. He is author of Geographies of Globalisation
(Routledge, 2006) and former editor-in-chief (2002–2010) of Asia Pacific Viewpoint
(Wiley-Blackwell). He is the founding director of the Victoria Institute for Links
with Latin America.

Ted Murphy is a former national official with the National Tertiary Education
Union. For several years he advised the Australian Council of Trade Unions on
trade issues generally, and participated as an ACTU nominee on an Australian
Government WTO Advisory Committee and as member of Australia’s delegation
to the Cancun and Hong Kong WTO conferences. He has addressed union and
community groups on the pitfalls of trade liberalisation, particularly with respect
to trade in services.

John Quiggin is an Australian Research Council Federation Fellow in Economics

and Political Science at the University of Queensland. A leading research economist,
he is a frequent commentator on Australian economic policy. He has published
widely on topics such as risk analysis, production economics, environmental
economics, and written also on policy topics including unemployment policy,
micro-economic reform, privatisation, competitive tendering and the sustainable
management of the Murray–Darling system.
280 NO ORDINARY DEAL

Patricia Ranald is a research associate at the University of Sydney, and teaches

researchers in the Australian Council of Trade Unions education programme.
She has worked in academia and with community organisations, including the
Australian Fair Trade and Investment Network (AFTINET). She has published
widely on the social impacts of globalisation and trade agreements. Her books
include Trade Justice (Australian Catholic Social Justice Council, 2005), and Stopping
the Juggernaut: Public Interest versus the Multilateral Agreement on Investment (Pluto
Press, 1999).

Bill Rosenberg has been policy director and economist at the New Zealand Council
of Trade Unions Te Kauae Kaimahi, New Zealand’s peak union organisation, since
2009. For many years he has researched widely on foreign investment, trade and
New Zealand’s economic relationship with the world, publishing with CAFCA
(the Campaign Against Foreign Control of Aotearoa) and ARENA (the Action,
Research and Education Network of Aotearoa).

Nan Seuffert is a professor at the University of Waikato Faculty of Law where she
teaches and researches in securities regulation and critical legal theory. She has
published widely in New Zealand and international journals and book collections.
She has been a resident fellow at the University of California Humanities Research
Institute, and a visitor at the University of Kent Centre for Law, Gender and Sexuality.

Ruth Townsend is a lecturer in health law, ethics and human rights at the Australian
National University’s Medical School and College of Law. She has a history of
trade union activism, and she has taught applied law, ethics and the politics of
health to students across a range of health disciplines, including doctors, nurses,
paramedics and indigenous mental health workers.

Todd Tucker is research director with Public Citizen’s Global Trade Watch division.
His work focuses on the legal, economic and political implications of the WTO,
NAFTA, CAFTA and other trade agreements. He has been cited and published
by the Los Angeles Times, the Washington Post, the Wall Street Journal, The Nation
magazine, Foreign Policy in Focus and others. He is a graduate of Cambridge
University and George Washington University.

Lori Wallach is director of the Global Trade Watch division at Public Citizen, the
national, non-profit consumer advocacy organisation founded in 1971. A Harvard-
trained lawyer, she has promoted the public interest regarding globalisation and
international commercial agreements for nearly two decades. Her advocacy includes:
the implications of different models of trade and globalisation on jobs, livelihoods
and wages; the environment; public health and safety; equality and social justice;
and democratically accountable governance. Lori Wallach has served as a trade
commentator on CNN and numerous other US and foreign media outlets. Her
most recent book is Whose Trade Organization? A Comprehensive Guide to the WTO
(New Press, 2004).
Index
Abbott, Tony, 46
Accident Compensation Corporation (NZ), 240–1,
244
ACT Party (NZ), 32
Action Research and Education Network of
Aotearoa (ARENA), 33
Agreement on the Application of Sanitary and
Phytosanitary Measures (SPS Agreement)
(WTO), 126–7, 132–3, 135; see also technical
barriers to trade
Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS)
(WTO), 64, 150, 155, 158, 160, 164–5, 167, 168,
170, 171, 172, 173, 175
Agreement on Trade-Related Investment
Measures (TRIMS) (WTO), 204
agribusiness and agro-industrial activities, see
agriculture, fishing and forestry
agriculture, fishing and forestry, 15, 19–21, 23, 24,
37, 41, 43, 49, 71, 75, 99, 109–23, 125, 135,
200, 214; agribusiness and agro-industrial
activities, 20, 41, 42, 49, 60, 75, 109, 110–11,
116, 121–2, 139, 173; apples, 112, 115, 126,
127–8; beef, 19, 20, 43, 99–100, 101, 115, 129,
130–1, 134; dairy, 15, 19–20, 22, 23, 36, 43, 64,
67, 99, 101, 109, 111, 112, 114, 115, 116–17,
118–20, 142, 143, 146, 199, 202; fishing, 64,
67, 76, 77, 81, 201, 202, 220; forestry, 27, 77,
78, 81, 142, 143, 146; fruit, 114, 115, 116, 146;
grains, 75, 99, 114, 115, 128, 134; meat, 114,
115, 142, 143, 146; poultry, 20, 22, 134, 143;
sheep and lamb, 15, 20, 43, 115; soy, 75, 114,
115, 134; sugar, 19, 23, 43, 64, 67, 99–100, 101,
103, 115, 119, 199; wheat, 75, 99, 114, 115, 128;
wine, 43, 112, 114, 115, 142, 143, 174, 175, 178;
wool, 142, 143, 146; see also mad cow disease
aid, 34, 87
AIG, 200, 231, 232, 240
Air New Zealand, 200, 230
Amazon basin, 59, 70–71, 78, 80, 187
Amazon.com, 177, 187
American Farm Bureau Federation, 118–19
American Federation of Labor and Congress of
Industrial Organizations (AFL–CIO), see
trade unions
Anaya, James, 77, 79
Andean: Community, 80, 157; states, 74, 94
anti-dumping, 67, 99, 192
Antigua and Barbuda, 183
anti-nuclear policy, see New Zealand
ANZCERTA, see Closer Economic Relations
(CER) agreement
ANZUS, 83
APEC, 10, 11, 14–15, 16, 17–18, 19, 21–22, 23, 24, 48,
49, 59–60, 68, 87, 89, 113, 188, 197, 198, 216–17
APEC Business Advisory Council, 16
APEC Services Action Plan, 216
Apple Inc., 177, 187
ASEAN, 14, 21, 22, 30, 48, 85, 87, 91, 96, 113, 204,
206, 210, 240; see also Trade and Investment
Framework Agreement
ASEAN+3, 15, 87
ASEAN–Australia–New Zealand Free Trade
Agreement (AANZFTA), 22, 180, 205, 209,
240
ASEAN Security Community, 85, 91
Asia, 10, 14, 15, 17, 18, 21, 48, 51, 83, 87, 88, 92, 104,
105, 113, 114, 145, 146, 188, 234; Central,
88, 94; East, 15, 21; North, 21; South,
88; Southeast, 21, 30, 87–88, 90, 91, 94,
113, 146; Southwest, 88; West, 21; see also
China; India; Indonesia; Japan; Malaysia;
Singapore; Thailand; Vietnam
Asia-Pacific, 11, 16, 19, 48, 70, 98, 118, 176, 188,
234; see also Pacific Rim
Asian Cooperation Dialogue, 21
Auckland International Airport, 36, 203, 207, 219
AUSFTA, 11, 14, 19, 22, 24, 26, 27, 36, 40–51, 63, 67,
91, 98–108, 150, 151, 153, 154–5, 156, 158, 162,
164–5, 167, 168, 171, 173, 180, 183, 184–5, 186,
190–2, 193, 194–5, 197, 199, 204, 218, 220, 226,
234, 238, 239, 241
AUSFTA Medicines Working Group, 43, 44, 106,
152, 153, 154
Australia, 10, 14, 19, 21, 26, 27, 28, 35, 38, 41–42, 61,
76, 94, 95–96, 101–2, 103–4, 124, 125, 126–7,
134, 158, 178, 179, 193–4, 199, 200, 201, 214,
215, 218, 219, 221, 227, 228, 231, 233, 234, 241;
and agriculture, 64, 67, 114–15, 119, 125, 126,
128–30, 131–2; and Asia, 104, 105, 190; and
climate change issues, 143, 144, 145, 146;
and finance, 239; and FTAs, 14–16, 19, 22, 23,
24–25, 36, 37, 48, 65, 72, 180, 184, 190–3, 195,
197, 204, 205, 215, 224, 246; and intellectual
property rights, 102, 106–7, 164, 167, 168,
169, 170, 171, 172, 174, 181–2, 184, 185–6, 218,
224; and Japan, 129, 131; and New Zealand,
14, 25, 30, 31, 35, 37, 76, 82, 83, 126–6, 128–9,
130, 131, 134, 143, 144, 180, 186, 191, 201,
207, 211–12; and P-4, 14, 29, 30, 66, 82, 111;
and public health, 41, 43–47, 50, 106, 130,
150, 151, 152–5, 156, 157–8, 228; and security,
87, 90, 91; and TPPA, 9, 11, 19, 27, 28, 40–51,
57, 70, 84, 98–101, 104–5, 112, 113–15, 132,
155, 160–2, 183, 184, 189, 197, 204, 219, 220,
222, 233, 246; and trade unions, 26, 41, 48,
282 NO ORDINARY DEAL
50, 189, 192–3, 195; and US, 15–16, 23, 25, 41,
43, 48–49, 65, 66, 91, 98–108, 119, 133, 134,
143, 181, 199, 246–7; and water and energy
services, 47–48, 220; see also AUSFTA; Closer
Economic Relations (CER) agreement
Australia–Chile FTA, 22, 190, 191–2, 197
Australia Fair Trade and Investment Network
(AFTINET), 41, 49
Australian Broadcasting Corporation, 42, 185
Australian Catholic Social Justice Council, 50
Australian Chamber of Commerce, 234
Australian Conservation Foundation, 50
Australian Industry Group, 105
Australian Labor Party (ALP), 40, 42, 47, 49, 50,
51, 100, 189–90, 192, 193–4, 197
Australian Parliamentary Library, 19, 104
Australian Patents Act 1990, 155
Australian Pensioners and Superannuants
Federation, 50
Australian Productivity Commission, 246
Australian Pesticides and Veterinary Medicines
Authority, 129
Australian Services Commission, 222
Baidu, 177
banks, 10, 64, 76, 201, 209–10, 215, 218, 228, 230,
232, 234, 236, 237, 238–40, 243–4; Australian
owned, 211–12, 236, 239–40; Kiwibank, 240;
Macquarie Bank, 234; New Zealand, 210,
211–12, 239–40; see also finance; monetary
policy
Barfield, Charles, 87
Barrick Gold, 76
Baxter Healthcare (Australia), 46
Beazley, Kim, 50
Bell Atlantic, 225
bilateral investment treaties, see investment
biosecurity issues, 122, 125, 132
Blue Chip New Zealand Limited, see finance
companies
Bolivia, 72, 80, 90
border protection measures, 21
border tax adjustments, see climate change
Brazil, 72, 170, 171, 209
Brunei Darussalam, 18, 22, 23, 27, 48, 62, 63, 65,
66, 70, 82, 85, 91, 112, 133, 196; and P-4, 15,
22, 29, 30, 66, 72, 111, 133, 165, 196, 218, 231;
and TPPA, 9, 13, 14, 40, 65, 66, 98, 112, 113,
114–15, 219, 222
BSE (bovine spongiform encephalopathy), see
mad cow disease
Burma, 22; see also Myanmar
Bush administration, 16–17, 40, 48, 59–60, 61,
62–63, 68, 90, 98, 99, 106, 190, 231
Bush, George H. W., 52, 71
Bush, George W., 10–11, 15, 16–17, 52, 55, 56–58,
59–60, 63, 64, 68, 98
Business New Zealand, 33
Cairns Group, 99
Campaign Against Foreign Control of Aotearoa
(CAFCA), 33
Canada, 9, 16, 20, 22, 41, 71, 72, 75, 76, 80, 119, 150,
158–60, 179, 181, 182, 183, 215
Canada Pension Plan Investment Board, 203, 207
Cantrill-Collins Bill (US), 140–1, 142, 143
Capital Markets Development Task Force (NZ),
238
Carmichael, Bill, 104
Cato Institute, Washington, 12, 20
Central America, 59, 72, 85, 14
Central America Free Trade Agreement (CAFTA),
16, 54–55, 58, 59, 63, 65, 72
Centre for International Economics (CIE)
(Australia), 103–4
Centurion Health Corporation (US), 158–9
CER Investment Protocol, 201
Cerro Colorado, 76–77
Chambers of Commerce (NZ), 33
Chile, 9, 16, 20, 67, 70, 76–77, 79–80, 82, 87, 91,
92, 94, 109, 114, 116, 133, 152, 180, 196, 218,
222, 223, 235; and agriculture, 111, 114, 115,
116–17, 122; and Australia, 129, 190, 191, 192;
and FTAs, 22, 24, 48, 59, 65, 67, 71–72, 91,
121, 133, 164, 191–2, 231, 238; and intellectual
property rights, 168, 175, 180; and P-4, 15,
16, 22, 29, 30, 60, 66, 111, 133, 165, 175, 196,
231; and public health, 155; and TPPA, 9, 14,
15, 40, 82, 98, 112, 113, 115, 183, 210, 218, 219,
222; and US, 24, 48, 65, 71, 90, 91, 133, 152,
164, 183, 210, 238; see also Australia–Chile
FTA; Peru–Chile FTA; US–Chile FTA
China, 15, 16, 21, 22, 30–31, 38, 53, 66, 77, 80, 82,
94, 95, 96, 107, 129, 151, 176, 177; and climate
change issues, 144, 145, 146; and economic
and military expansion of, 87–89, 93, 188;
and FTAs, 72; and New Zealand, 129, 144,
204, 218, 240; and US, 91, 107; see also New
Zealand–China FTA
Citigroup, 200, 231, 232, 239
Citizens Trade Campaign (US), 61
climate change, 17, 20–21, 40, 135, 136–48, 220, 235,
247; border tax adjustments (BTAs), 136–42,
143–4, 147–8; cap-and-trade model, 138–40,
142; climate change summit, 17; emissions
trading scheme, 21, 122, 137, 138–9, 141, 142,
205; greenhouse gas emissions, 110, 136, 137,
138, 142, 144–5, 146, 147; Kyoto Protocol,
144, 147; see also Cantrill-Collins Bill;
Lieberman-Warner Bill
Clinton, Bill, 13, 15, 16, 52, 56, 58, 59, 60, 68
Clinton, Hillary, 54, 187
Closer Economic Relations (CER) agreement, 14,
22, 25, 30, 35, 37, 180, 181, 186, 191, 204, 207,
215; see also CER Investment Protocol
Coalition of Service Industries (CIS) (US), 217,
222–3, 229, 233
CODELCO, 76
Codex Alimentarius Commission (Codex), 126,

128, 134
Colombia, 9, 12, 16, 60, 61, 72, 80
Commonwealth National Health Act 1953
(Australia), 153–4
Congress (US), 12, 16–17, 24, 41, 54, 56–57, 58, 59,
60, 63, 65, 66, 67, 68, 75, 101, 120, 138, 187,
195, 196, 221
copyright, see intellectual property rights
core labour standards (ILO), 17, 49, 189–90,
195, 197; see also International Labour
Organization
Crean, Simon, 11, 49, 50, 161
crime, 22, 85–86, 92, 93–94; arms trade, 22; drugs,
64, 85, 93, 94; human smuggling, 85, 93, 96;
money laundering, 85, 93
culture, 25, 166, 176–88, 247; audio-visual sector
and services, 41, 42, 50, 177, 181, 182–5,
186, 187, 218, 222, 223, 224, 227; cultural
diversity and rights, 25–26, 176, 184, 224;
entertainment and entertainment industry,
26, 180, 185, 227; local content quotas, 42, 43,
49, 50, 181–2, 183, 184–6, 217–18, 224
Cunliffe, David, 32
currency exchange rates, 19, 26, 37, 88, 103, 208,
209, 210, 211, 218, 242–3
DairiConcepts (NZ–US), 121
Dairy Companies Association of New Zealand,
121
Dairy Farmers America, 121
Dairy Partners America, 109, 117
DairyNZ, 120, 121
Davidson, Kenneth, 28
Dee, Philippa, 104, 244
democracy and FTAs, 10, 16, 26–28, 29, 31, 39, 41,
46, 60, 65, 71, 82, 83, 85, 90, 92, 93, 134, 153,
161, 162, 178, 187, 204, 207, 214, 230, 247
Democratic Party (US), 10, 12, 16, 17, 39, 48, 53, 54,
56, 57, 58–59, 60, 61–62, 63, 65, 66, 67, 68, 75,
160, 196, 247
Department of Foreign Affairs and Trade (DFAT)
Australia, 49, 51, 103, 234
deregulation, 9, 62, 64, 107, 108, 176, 208, 212, 214,
219, 224, 231, 232, 233, 235–8, 247
digital media, 102, 166, 168, 169, 176–7, 179–80,
184–5, 186–8, 219, 224, 227; Google, 177, 186,
187; Internet, 102, 164, 165, 166, 169, 177, 186,
187, 216, 224, 227, 239
Digital Millennium Copyright Act (US), 102
disease, 37, 124, 125, 126–7, 129–30, 132, 134, 135; see
also mad cow disease
dispute settlement processes, 24, 46–47, 73, 74, 115,
174, 190, 191, 195–6, 197, 198, 224, 229, 240–1,
243–4; see also investor–state disputes; WTO
dispute process and settlement
Doha round, see WTO Doha round
East Asian Summit, 87
East Asian financial crisis, 15
Ecuador, 80, 90
INDEX 283
employment issues, 25, 33, 36, 49, 50, 65, 106, 107,
108, 120, 122, 189, 191, 196, 198, 214, 240, 244
energy issues, 14, 40, 64, 144, 218
energy services, 47–48, 102, 220, 221, 222, 223
Enterprise for the Americas Initiative (EAI), 71
environmental issues, 12, 20, 32, 37, 41, 47, 50, 53,
54, 55, 57, 58, 59, 60, 61, 62, 63–64, 67, 71, 72,
73, 74–75, 76, 78, 79, 86, 108, 109, 110–11, 115,
116, 117, 122, 123, 124–5, 126, 127, 132, 135, 137,
140, 158, 159–60, 162, 191, 194, 204, 205–6,
215, 223, 247
Epps, Tracey, 144
espionage and intelligence, 22, 86, 88, 93, 94–96
European Commission, 168–9
European Union, 29, 34, 72, 80, 83, 99, 129, 134,
137, 168, 172, 175, 243
evergreening, see intellectual property rights
farmers, smallholder, 110–11, 116–17
Fast Track negotiating authority (US), 16, 56–58,
63
Federal Reserve (US), see monetary policy
Federated Farmers (NZ), 33, 121
finance, 25, 40, 60, 71, 76, 93–94, 96, 103–4, 177,
192, 200–1, 209, 214–15, 221, 222, 224, 227–30,
231–45; balance-of-payments, 210, 216, 243;
Bank for International Settlements (BIS),
201; capital movements, 121, 208–9, 210, 212,
213; financial services, 16, 23–24, 25, 26, 60,
64, 88, 119, 121, 192, 200–1, 209–10, 212, 214,
216, 219, 220–1, 222, 223–4, 231–6, 238–45;
financialisation, 235; global financial crisis,
9, 10, 14, 26, 32, 40, 49, 51, 64, 110, 187, 188,
189, 192, 200–1, 208, 212, 214, 231, 232, 235–6,
237, 239, 241, 246; prudential measures, 208,
210, 211, 212, 221, 243–4; stock exchange, 37,
225, 238; see also GATS Understanding on
Financial Services; Securities Commission
finance companies, 211, 237, 246; Blue Chip New
Zealand Limited, 237
Financial Leaders Group (US), 232
Financial Markets Authority (NZ), 238
Finney, Charles, 34
fishing, see agriculture, fishing and forestry
Five Power Defence Agreement (FPDA), 91
Fonterra (NZ), 19–20, 33, 36, 109, 116–17, 119–22,
202
Food and Agriculture Organization (FAO) (UN),
113
Food and Drug Administration (FDA) (US), 129
food, export and import of, 75, 83, 99, 101, 110, 112,
113–15, 121, 125–6
food safety and standards, see sanitary and
phytosanitary measures
Food Standards Australia and New Zealand
(FSANZ), 128
Foreign Investment Review Board (Australia),
41, 218
foreign investment, see investment
foreign ownership, 20, 35, 36, 37, 47, 48, 106–7, 150,
284 NO ORDINARY DEAL
180, 217, 224, 239, 246
Fraser Institute Annual Survey of Mining
Companies, 76
Free Trade Area of the Americas, 16, 21, 59, 68,
71–72, 101
Free Trade Area of the Asia-Pacific, 49, 161, 176
Garcia, Alan, 74, 78, 79
Garnaut, Ross, 42, 104
Garton-Ash, Timothy, 177
GATS Understanding on Financial Services, 238,
244–5
Gaynor, Brian, 237–8
General Agreement on Tariffs and Trade (GATT)
(WTO), 137, 140–1, 147, 179, 181, 182, 186,
215, 232
General Agreement on Trade in Services (GATS)
(WTO), 150, 179, 181, 182–3, 203–4, 209–10,
215, 218, 219, 224, 225, 227, 232, 240, 241;
see also GATS Understanding on Financial
Services
genetic modification, 21, 36, 41, 43, 49, 50, 122, 127,
129, 134–5, 194
Gillard, Julia, 51
Global Services Coalition, 222
Global Trade Analysis Project (GTAP), 19, 144
globalisation, 10, 27, 31, 34, 37, 52, 71, 81, 84, 95,
101, 109, 110, 111, 124, 179, 222
Goff, Phil, 32
government procurement, 22, 23, 25, 26, 36, 41,
45–46, 49, 52, 55, 59, 62, 63–64, 66, 92, 115,
189–98, 218, 221, 227, 228, 247; see also Snowy
Mountains Hydro-electric Scheme
Green Party (Australia), 42, 51
Green Party (NZ), 32
Greenspan, Alan, 236
Groser, Tim, 11, 15, 33
Hickey, Bernard, 13, 20
Hong Kong, China, 15, 95, 177, 204, 206, 235
House Trade Working Group (US), 60
Howard government (Australia), 40, 44, 49, 51,
98–99, 100, 106, 108, 190, 195, 197
Howard, John, 47–48, 98
Howes, Paul, 192, 193–4
human rights, 12, 27, 53, 60, 61, 62, 65, 71, 75–81,
82, 85–86, 109, 177
Human Rights Council (UN), 77
immigration, 24, 55, 67, 86, 93, 96
Import Risk Analysis (Australia), 126
India, 21, 30, 38, 87, 89, 105, 170, 171, 175, 218
indigenous peoples, 16, 27, 59, 70–71, 74, 75–81, 82,
86, 117, 180, 185, 191, 247
Indonesia, 14, 16, 66, 87, 88, 89, 113
Industry Capability Network (Australia), 194
intellectual property rights, 25, 26, 37, 41, 43, 49,
73, 74, 98, 100–1, 102, 105, 106, 107, 108, 115,
119, 120, 138, 150–1, 157–8, 163–75, 186, 191,
223, 224, 225, 227; copyright, 73, 102, 119,
120, 150, 163–4, 165, 166–9; evergreening,
100, 151, 155, 156–7, 172; geographical
indications, 174–5; patents, 42, 43, 44–45, 52,
58, 64, 67, 73, 74, 75, 100, 102, 106, 149, 150,
151–2, 154, 155, 156–7, 159, 162, 163, 164, 165,
167, 170–4, 191; trade marks, 73, 150, 157, 163,
165, 167, 168, 174, 175; see also Agreement
on Trade-Related Aspects of Intellectual
Property Rights; World Intellectual Property
Organization
Intergovernmental Agreement on the
Environment (IGAE) (Australia), 159
International Centre for Settlement of Investment
Disputes (ICSID), 74, 81
International Federation of Human Rights, 81
International Forum on Globalization, 27
International Labour Organization (ILO), 50,
54, 62, 73, 78, 79–80, 195–6, 198; see also core
labour standards
International Monetary Fund, 104, 112, 137, 208,
209
International Plant Protection Convention
(IPPC), 126
International Trade Union Confederation, see
trade unions
investment, 16, 18, 20, 23–24, 26, 32, 33, 39, 47, 52,
59, 60, 74, 76, 78–79, 115, 199–201, 217–19,
227, 229, 232; and AUSFTA, 98, 102, 106,
199; bilateral investment treaties (BITs), 24,
76, 158, 205–6; expropriation, 73, 74, 78, 157,
204, 205–6, 207–8, 223, 226, 229, 242; fair and
equitable treatment, 204, 206–8, 226, 240,
242; foreign investment, 18, 20, 24, 25, 26, 36,
41, 50, 54, 59, 62–63, 67, 72, 76, 87, 102, 138,
158, 160, 194, 199–200, 209, 210, 212, 214, 217,
218, 219, 220, 223, 229, 225, 238, 239, 241, 242;
foreign direct investment (FDI), 66, 116–17,
200–4, 207–9, 211, 212–13, 215, 216, 218,
239–40; see also Foreign Investment Review
Board; Overseas Investment Act; Overseas
Investment Commission; Takeovers Code
Investment and Financial Services Association
(IFSA) (Australia), 234
investor–state disputes, 11, 24, 37, 41, 43, 49, 50, 51,
62, 63, 67, 121, 149, 150, 157–61, 162, 184, 200,
204–8, 225, 226, 238, 241, 247
Iraq war, 15, 90, 98
Israel, 92, 95–96
James, Sallie, 12
Japan, 15, 16, 21, 30, 38, 87, 129, 131, 134, 233; and
climate change issues, 145, 146
Kerry, John, 138
Key, John, 10, 202, 234–5
Kirk, Ron, 11, 17–18, 23, 24, 57, 60, 70, 217
Kiwibank, see banks
Kiwisaver, 237, 242, 244
Kiwishare, 226
Kozak, Jerry, 120

Labor government (Australia), 11, 26, 40, 42, 45,
47, 50, 51, 108, 160–1, 189–90, 192, 247
Labor Party, see Australian Labor Party
labour, issues of, 24, 26, 34, 49, 50, 53, 54–55, 59, 60,
61, 62, 64, 65, 67, 71, 72, 73, 74, 75, 82, 86, 111,
115, 117, 122, 123, 189–98, 214, 216; see also
trade unions
Labour government (NZ), 14, 30, 31, 32, 90, 181,
217–18, 225, 227, 240
Labour Party (NZ), 32–33
Landcare (New Zealand), 144
Latin America, 14, 16, 27, 70–81, 87, 109, 116–17,
234
Lehman Brothers, 9
Levy, Philip, 87
Liberal government (Australia), 14
Liberal–National coalition government
(Australia), 40, 45
liberalisation, 9, 11, 13, 14–15, 18, 19, 23, 24, 26, 72,
76, 85–86, 93, 99, 101, 103, 107, 110, 112, 113,
116, 118–19, 121, 122, 123, 161, 176, 177, 183,
187, 198, 200, 208, 210, 214, 219–20, 221, 222,
224, 231, 232, 235, 236, 238, 242, 243, 244
Lieberman-Warner Bill (US), 138–9
Lowy Institute (Australia), 42
MacFarlane, Ian, 235, 236, 239
mad cow disease (BSE), 37, 129, 130–2, 134
Malaysia, 9, 14, 16, 22, 30, 65, 87, 89, 91, 113
Manufacturers and Employers Association (NZ),
33
Manufacturers and Exporters Association (NZ),
33
Māori, 16, 27, 80–81, 175, 204, 229
McCain, John, 56
Meat and Wool New Zealand, 120
Medicines Working Group, see AUSFTA
Medicines Working Group
Merrill Lynch, 10, 231, 234
Mexico, 15, 16, 41, 55, 71, 72, 75, 150, 179–80, 205,
215, 225
Mexico-Telecommunications case, 225, 226
Microsoft, 177, 224
mining, 35, 76, 78, 79, 114, 116, 206, 246
Ministry of Agriculture and Forestry (MAF) (NZ),
93, 142
Ministry of Economic Development (NZ), 172
Ministry of Foreign Affairs and Trade (MFAT)
(NZ), 19, 120, 138, 141–2
monetary policy, 14, 38–39; Australian Reserve
Bank, 235; Federal Reserve (US), 236;
Reserve Bank of New Zealand, 211–12, 244;
see also Reserve Bank Act 1989
Moore, Mike, 34
most-favoured nation (MFN) treatment, 25, 182,
206, 215–16, 240
Motion Picture Association of America (MPAA),
184, 224
Multilateral Agreement on Investment, 21, 68,
102, 107
INDEX 285
Music Council of Australia, 224
Myanmar, 92; see also Burma
National Farmers’ Federation (Australia), 47
National government (NZ), 11, 14, 30, 33, 90, 181,
199, 218, 227, 229, 234
National Health Amendment (Pharmaceuticals
Benefits Scheme) Act 2007 (Australia), 154
National Milk Producers Federation (NMPF)
(US), 20, 36, 119–20
nationalisation, 48, 205, 244
natural resource exploitation/extraction, 16, 70,
72, 74–75, 76, 77, 78, 80, 87, 137; geothermal,
27, 81; minerals, 27, 114
neo-Keynesian policies, 9, 25
neoliberalism, 9–10, 11, 14, 18, 26–27, 40–41, 51, 60,
74, 80, 110, 116, 214, 215, 230, 236, 246
Nestlé, 20, 109, 117
New Zealand, 15, 16, 29–39, 40, 50, 59, 70, 72, 82,
84, 87–88, 90, 91, 92, 93–94, 95–96, 116–17,
124–7, 128, 130, 131, 134, 140, 151, 152, 161,
182, 187, 193, 195, 196, 206–7, 214, 216, 218,
221, 222, 225, 234–5, 236–7, 246; agriculture
in, 15, 19–21, 23, 36, 109, 111–15, 118–20, 122–
3, 125, 128–9, 131, 132, 136, 142–3, 144, 165,
199, 200, 202; and anti-nuclear policy, 15, 83,
90–91; and Asia, 83, 87; and Australia, 14, 25,
30, 83, 91, 112, 126–30, 165, 186, 191, 204, 207;
and China, 30–31, 34, 87–88, 94, 202, 204,
218; and climate change issues, 21, 136–8,
141–7; and financial regulation,199–213, 229,
232, 235, 236–8, 244; and FTAs, 9, 13, 14, 15,
16, 21–22, 23, 24–25, 29, 30–31, 34–35, 38, 90,
98, 121, 123, 133, 165, 175, 180, 204, 206, 220,
238, 240, 241–2; and intellectual property
rights, 26, 163–75; and investment, 199–213,
218–19, 220; and P-4, 14, 24, 30, 111–12, 165,
169, 196, 231; and privatisation, 203, 207,
219, 225–6, 227–9, 230, 240–1; and public
health, 155–6, 220; and TPPA, 9, 11, 13–14,
15, 19–21, 23–25, 26, 27, 32, 33–34, 36, 38, 40,
82, 93, 112, 120–3, 134–5, 147–8, 172–3, 195–6,
197, 219–21, 222, 231, 241, 246; and Treaty
of Waitangi, 80–81, 175, 229; and US, 15,
19–20, 25, 36–37, 66, 90–91, 112, 114, 118–20,
121–3, 134, 137, 141, 142–4, 147–8, 199, 217;
see also Closer Economic Relations (CER)
agreement; Singapore New Zealand Closer
Economic Partnership Agreement
New Zealand Business Roundtable, 205, 207,
225–6
New Zealand–China Free Trade Agreement,
30–31, 33, 34, 88, 96, 204, 205–6, 210, 240
New Zealand Council for Infrastructure
Development, 227
New Zealand Dairy Board, 116
New Zealand–Hong Kong, China Closer
Economic Partnership Agreement, 30
New Zealand Horticulture Export Authority, 120
New Zealand Institute of Economic Research
286 NO ORDINARY DEAL
(NZIER), 19, 142
New Zealand Security Intelligence Service
(NZSIS), 94, 96
New Zealand United States Council, 15, 19; see also
United States New Zealand Council
North America Free Trade Agreement (NAFTA),
16, 17, 24, 40, 41, 48, 52, 53, 54–55, 56–58, 59,
60–62, 63, 64, 66, 68, 70, 71, 73, 75, 118, 119,
123, 134, 150, 158–60, 205, 215
North American Export Grain Association, 128
Obama administration, 12, 17, 21, 24, 27, 48, 49,
57, 58, 61, 66, 90–91, 98, 112, 118, 123, 138,
141, 160
Obama, Barack, 10–11, 12, 17, 20, 23, 52, 54–58, 60,
62, 63, 64, 65, 68–69, 137, 160, 247
offshoring, 53, 54, 60, 63, 233–4, 241, 239, 242
Open Government Plan (US), 27
Organisation for Economic Cooperation and
Development (OECD), 14, 32, 102, 144,
200, 214
Overseas Investment Act 2005 (OIA) (NZ), 199,
201–3, 211
Overseas Investment Commission (NZ), 202
Oxley, Alan, 104
P-3 agreement, 15
P-4, see Trans-Pacific Strategic Economic
Partnership Agreement
P-5 agreement, 15
Pacific Islands Forum (PIF), 87
Pacific region, 22, 82, 83, 87, 88, 89, 91, 94, 120; see
also Asia Pacific
Pacific Rim, 18, 59, 70, 80, 83, 89, 90, 93, 94, 111,
118
Panama, 12, 16, 60, 61, 72
patents, see intellectual property rights
pensions, 228, 233, 238, 242
Peru, 27, 70–71, 72, 77–79, 80, 94, 116, 117, 121, 123,
152, 186, 218, 222, 235; and agriculture, 117,
122; and FTAs, 9, 16, 22, 58–59, 61, 62, 64,
65, 67, 71, 72, 74, 98, 111; and P-4, 14, 66; and
public health, 156–7; and TPPA, 9, 29, 30,
40, 48, 61, 70, 82, 87, 98, 111, 113, 114, 115,
116, 122, 221–2, 235; and US, 23, 74, 91, 133,
152, 156–7, 183; see also Special Multiparty
Commission; US–Peru TPA
Peru–Chile Free Trade Agreement, 22
Peru–Singapore Free Trade Agreement, 22
pharmaceuticals, 25, 26, 36, 41–45, 49, 74, 100,
106–7, 138, 150, 151–3, 154–5, 156–7, 170–3,
175, 194; generic medicines, 43–45, 100,
149, 150, 151–2, 154, 155–8, 159, 161–2, 163,
164, 167, 172, 173; Pharmac (NZ), 25, 36,
156; Pharmaceutical Benefits Advisory
Committee (PBAC) (Australia), 43, 100,
106, 153–4; Pharmaceutical Benefits
Scheme (PBS), 11, 25, 41, 43–45, 49–50, 100,
106, 107, 153–5, 156, 161, 162, 194, 246–7;
Pharmacology and Therapeutics Advisory
Committee (PTAC) (NZ), 156; PhRMA
(US), 151, 152–7, 161; Researched Medicines
Industry of New Zealand (RMINZ), 156; see
also AUSFTA Medicines Working Group
Philip Morris, 50–51, 157–8, 206
Philippines, 14, 22, 113
Pinochet, Augusto, 72, 215
PPMs, see process and production methods
precautionary principle, 158, 159–60, 162
Priestley, Michael, 105
privatisation, 9, 25, 28, 47, 48, 63, 75, 78, 106–7, 108,
187, 201, 203, 207, 214, 219, 225, 226, 227–9,
230, 235, 240–1; Private Finance Initiatives
(PFIs), 227–9; Public Private Partnerships
(PPPs), 227–9
Private Finance Initiatives, see privatisation
process and production methods (PPM), 140, 143
protectionism, 11, 12, 29–30, 38, 41, 101, 102, 110,
112, 118, 166,175, 184, 185, 199, 212, 225
prudential measures, see finance
Public Citizen (US), 22, 27
public health, 21, 25, 37, 40, 43–47, 48, 49, 63, 149,
152, 158–62, 204, 206; blood processing and
testing, 46, 195, 228; blood products, 25, 40,
45–46, 49, 194, 228; chemicals, 25, 94, 124,
126, 127–8, 129, 132, 134–5, 146, 147, 158, 173,
177; tobacco, 25, 50–51
Public Health Association of Australia, 50
Public Private Partnerships, see privatisation
public transport services, 46, 47, 102, 146, 147, 201,
215, 220, 221, 222
quarantine, see sanitary and phytosanitary
measures
reference pricing, 43, 44, 45, 106, 154, 157
regulatory coherence, 149, 152, 153, 156, 161, 162,
221, 224, 233
Regulatory Responsibility Bill (NZ), 204, 226
Republican Party (US), 10, 53–54, 56, 57, 58
Reserve Bank Act 1989 (NZ), 211
Rio Declaration on Environment and
Development, 159
Rio Treaty, 85, 91
Rogernomics, 30, 215
Rosenberg, Bill, 33
Rudd government, 189, 192, 193
Rudd, Kevin, 10, 40, 108
Ruggie, John Gerard, 81
sanitary and phytosanitary measures (SPS), 23,
119, 122, 126, 132–4, 135; food safety and
standards, 21, 35, 41, 43, 49, 50, 52–53, 62,
63, 64, 124–5, 127–32, 134; quarantine, 41,
49, 50, 124, 125–7, 131, 133, 134, 135; see also
Agreement on the Application of Sanitary
and Phytosanitary Measures; Codex
Alimentarius Commission; Food Standards

Australia and New Zealand; technical
barriers to trade
Saunders, Caroline M., 144
Schwab, Susan, 17
Section 301 Watch List (USTR), 149, 152–8, 161
Securities Commission (NZ), 235, 237–8
security, 21–22, 31, 82–97, 191; arms trade, 82–83,
85, 89–90, 91–93; Cold War, 83, 84, 85, 86, 91;
issue linkage, 83–86, 90–91, 93, 97; terrorism,
77, 82, 84, 92, 94
Serious Fraud Office (NZ), 237
service sector, 22, 23, 24, 25, 47, 52, 59, 62, 64,
101–2, 214–30
Singapore, 17, 35, 50, 59, 70, 88, 89, 91, 92, 112, 158,
167, 168, 180, 186, 187, 194, 195, 234, 231, 235;
and FTAs, 15–16, 22, 24, 98, 102, 113, 121,
133, 190, 191, 204, 220, 234, 240; and P-4,
14, 23, 29, 30, 66, 72, 111, 165, 195, 196, 218,
231; and TPPA, 9, 40, 67, 70, 82, 84, 87, 98,
112–13, 114, 115, 183, 187, 218, 219, 222; and
US, 24, 48, 65, 91, 133, 158, 183, 194; see also
Peru–Singapore Free Trade Agreement; US–
Singapore Free Trade Agreement
Singapore–Australia Free Trade Agreement
(SAFTA), 22, 47, 180, 190, 220
Singapore New Zealand Closer Economic
Partnership Agreement (SNZCEPA), 15, 30,
204, 240
Snowy Mountains Hydro-electric Scheme
(Australia), 25, 47, 106–7, 194, 219
Soprole, 109, 116–17
South America, 85, 145
South Korea, 9, 12, 15, 16, 21, 30, 38, 60, 61, 72, 105,
119, 151, 182, 209, 238
Soviet bloc, 83, 84, 85
Special Multiparty Commission (Peru), 79
SPS Agreement, see Agreement on the Application
of Sanitary and Phytosanitary Measures
Stiglitz, Joseph, 13, 20, 143, 208, 232
Stiglitz Report, 232, 244–5
Stockholm International Peace Research Institute
(SIPRI), 89
Strategic Forecasting (Stratfor), 88–89
Summit of the Americas, 71, 72
Taiwan, 87, 128
Takeovers Code (NZ), 242
tariff-rate quotas (TRQs), 19, 67, 119, 120
taxation issues, 26, 28, 35, 76, 93, 140, 181–2, 185,
200, 209, 234
‘Tea Party’ movement (US), 54
technical barriers to trade, 23, 126, 133–4; see also
Agreement on the Application of Sanitary
and Phytosanitary Measures
Telecom New Zealand, 26, 200, 205, 217, 225–6
telecommunications, 215, 216, 217, 218, 221, 222,
223, 224–7, 230; see also Kiwishare; Telecom
New Zealand
Telstra, 218
INDEX 287
Temasek, 234
terrorism, see security
Thailand, 9, 15, 30, 65, 92, 113, 190, 206
Tiffen, Rodney, 105
TRADE Act (US), 12, 27, 61–62, 63, 160
Trade and Investment Framework Agreement
(US–ASEAN), 113
trade marks, see intellectual property rights
trade unions, 12, 26, 27, 33, 47, 48, 50, 51, 52, 59,
65, 74, 109, 189–98; American Federation
of Labor and Congress of Industrial
Organizations (AFL–CIO), 27, 194, 195,
196; Australian Council of Trade Unions
(ACTU), 50, 189–90, 192, 193, 194–5;
Australian Manufacturing Alliance, 193;
Australian Manufacturing Workers’ Union
(AMWU), 193; Australian Workers Union
(AWU), 192–3; Engineering, Printing
and Manufacturing Union (NZ), 33;
International Trade Union Confederation
(ITUC), 65, 196; Maritime Union (NZ),
33; National Trade Union Congress of
Singapore, 194; New Zealand Council of
Trade Unions (NZCTU), 33, 194; Teamsters
Union (US), 12; see also Australia; United
States
Trans-Pacific Strategic Economic Partnership
Agreement (P-4), 14, 15, 16–17, 21, 22, 23–24,
29, 30, 59–60, 61, 66, 67, 72, 82, 111, 112, 113,
133, 135, 180, 196, 197, 215, 216, 218, 219, 220,
223, 226, 229, 231, 235, 238; and intellectual
property rights, 165–6, 167, 168, 169, 175
Tranzrail (NZ), 230
TRIMS, see Agreement on Trade-Related
Investment Measures
TRIPS, see Agreement on Trade-Related Aspects
of Intellectual Property Rights
Turkey, 181–2
UN Commission of Experts on Reforms of the
International Monetary and Financial
System, 232
UN Commission on International Trade Law
(UNCITRAL), 81
UN Committee Against Torture, 77
UN Committee for the Elimination of Racial
Discrimination, 77
UN Conference on Trade and Development
(UNCTAD), 203
UN Declaration on the Rights of Indigenous
Peoples, 79
UN Development Programme (UNDP), 114
UN Environment Programme (UNEP), 141
UN Framework Convention on Climate Change,
145
UN Human Rights Declaration, 79
UN Security Council, 90
UNESCO Convention (on cultural diversity),
178–9, 224
288 NO ORDINARY DEAL
UNITAS, 85, 91
United Kingdom, 44, 83, 91, 144
United Nations (UN), 81, 142, 150
United States, 9, 10–11, 12–13, 15, 16–18, 21, 22–24,
29, 34, 38, 40, 42–43, 46, 47, 48, 50, 60–62,
66, 75, 83, 94, 99, 109, 129, 136, 150, 158–9,
167, 177, 179, 181, 182–5, 196, 207, 217, 221,
222–4, 246; and agriculture, 20–21, 24, 53,
55, 60, 62, 64, 74, 99, 101, 109, 111–14, 115,
118–20, 122–3, 128, 129, 130, 131, 134, 135; and
anti-terrorism laws, 77; and Asia, 21–22, 90,
113; and Australia, 9, 14, 98–108, 191; and
China, 21–22, 82, 84, 87–89, 91, 107; and
climate change issues, 136–48; and FTAs,
9, 13–14, 15–16, 18, 22–23, 24–26, 41, 42–43,
52–53, 58–60, 62–66, 67, 68, 70–81, 98–108,
111, 112, 113, 133, 150, 164, 168, 171, 173, 176,
181, 182, 183–6, 194, 196–7, 204–6, 210, 215,
217, 218, 220, 222, 226–7, 231, 232–3, 238,
242–3; and intellectual property rights, 167,
168, 169, 170, 171, 172, 173, 174, 175, 176,
187; and Japan, 131; and New Zealand, 9,
14, 19–20, 30, 34–36, 37, 39, 90–91, 118–20,
122–3, 137, 199–200, 217, 221, 232; and P-4,
14, 17, 29, 66–67; and public health, 17, 58,
62, 161–2; and TPPA, 9, 10–11, 12–13, 16–18,
19–21, 27–28, 36, 38, 40, 48–49, 53–69, 70,
82, 89, 90, 113, 115, 121–2, 133–5, 137–8, 149,
151–2, 160–2, 171–2, 184, 185–6, 188, 200, 206,
207, 233; and WTO, 134, 138; economy of,
165, 217; employment in, 65; imports into,
77; industry in, 188; unions in, 12, 59, 61;
military in, 87, 90–92
United States New Zealand Council, 15, 19; see also
New Zealand United States Council
United States Trade Representative (USTR), 11,
13, 17–18, 20, 23–24, 26, 27, 41, 42–43, 48–49,
57, 59, 65–67, 68, 118, 120, 133, 149, 150, 151–2,
153, 156, 157, 158, 160, 161–2, 184, 186, 188,
199, 217, 218, 220, 221, 223, 225, 232; USTR
National Trade Estimate Report on Foreign
Trade Barriers, 49; see also Kirk, Ron;
Schwab, Susan; Section 301 Watch List
Universal Declaration of Human Rights 1948, 86
Uruguay, 51, 206
Uruguay round, see WTO Uruguay round
US Business Coalition for TPP, 13, 27, 221
US Chamber of Commerce, 13, 61, 223
US–Chile Free Trade Agreement, 16, 22, 72–74, 76,
90, 116, 121, 155, 164, 168, 171, 173, 195, 209,
219, 235, 238, 242, 243
US Dairy Export Council (USDEC), 20, 120
US International Trade Commission, 67
US–Japan Regulatory Reform and Competition
Policy Initiative, 233
US–Peru Trade Promotion Agreement (TPA), 22,
58–59, 71, 74–75, 81, 90, 92, 157, 196, 197, 219,
223, 235, 238, see also Peru and FTAs
US Shrimp/Turtle case, 140
US–Singapore Free Trade Agreement, 22, 48, 65,
102, 132, 133, 173, 195
US Trade Act 1974, 152
US–Vietnam Bilateral Trade Agreement, 22, 133,
157
USSR, 21, 83, 145
Vaile, Mark, 154
value chains, 111
van der Hayden, Henry, 220
Venezuela, 72, 90
Vietnam, 9, 13, 17, 22, 23, 27, 29, 30, 40, 48, 62,
64, 65, 66, 67, 68, 70, 82, 116, 117, 152, 186,
196, 219, 222, 235; agriculture in, 117; and
FTAs, 98, 111, 218; and public health, 157;
and TPPA, 112–13, 114, 115, 122; and US,
112, 133; see also US–Vietnam Bilateral Trade
Agreement
Voon, Tania, 179, 183
Wal-Mart, 223–4
Washington Consensus, 40, 188
water, 40, 47–48, 75, 76–77, 102, 110, 158, 216, 220,
229
Waxman-Markey Bill (US), 142, 138–40, 142, 143
Weiss, Linda, 105
Wellington Chamber of Commerce (NZ), 33–34,
207, 222
Whalley, John, 137
World Health Organization, 51, 173
World Organisation for Animal Health (OIE),
126, 131
World Intellectual Property Organization, 107
World Trade Organization (WTO), 13, 15, 16, 22,
33–34, 52, 53, 54, 72, 101, 104, 107, 120, 126,
132, 136, 138, 140–1, 143, 147, 164, 170, 176,
179, 181, 182, 183, 186, 192, 197, 203–4, 209,
217, 219, 221, 231, 235, 243, 246; WTO dispute
process and settlement, 126–7, 134, 140, 175,
181–2, 183, 225; see also Agreement on the
Application of Sanitary and Phytosanitary
Measures; Agreement on Trade-Related
Aspects of Intellectual Property Rights;
Agreement on Trade-Related Investment
Measures; General Agreement on Tariffs
and Trade; General Agreement on Trade in
Services
WTO Doha round, 16, 21, 28, 64, 98, 104, 160, 221,
232, 246
WTO Trade in Services Council, 182
WTO Uruguay round, 179, 187, 215, 216, 232
Yahoo, 177
Zapatista Army of National Liberation, 71
Zespri, 36
Zoellick, Robert, 188