Making the trade-offs

A rally outside Hillside Engineering Workshops following KiwiRail's announcement it would be sold...
A rally outside Hillside Engineering Workshops following KiwiRail's announcement it would be sold. Photo by Gerard O'Brien.
Former Hillside Engineering Workshop employee John Gamble, of Dunedin, is learning to embrace a...
Former Hillside Engineering Workshop employee John Gamble, of Dunedin, is learning to embrace a free-market ethos.

The closure of Hillside workshops is just a foretaste of what awaits New Zealand in a hyperglobalised world, critics of the Trans-Pacific Partnership Agreement warn. But proponents argue the free trade deal is a massive potential windfall, made more urgent by this week's announcement of a Japan-Australia free trade agreement. Bruce Munro examines the battle lines and finds people and democratic ideals among the early casualties.

The echo of Tim Groser's declaration had barely died away when the call came to pull the trains from service.

On a Tuesday evening in late February, the New Zealand Trade Minister was reporting slow but steady progress by those negotiating the Trans-Pacific Partnership Agreement (TPPA).

Speaking from Singapore, he reaffirmed his belief it would be a ''very good quality trade agreement'' cutting barriers to trade across a dozen countries cumulatively worth 40% of the global economy.

Before the week was out, 40 KiwiRail locomotives were hastily removed from service after potentially deadly asbestos was found in soundproofing material in one of the vehicles.

The Auckland trains had been built in China after Dunedin's Hillside Engineering Workshops was overlooked for the $150 million contract and subsequently shut down with the loss of 130 jobs.

The two events are ''totally related'', Prof Jane Kelsey, a law lecturer at the University of Auckland, says.

The TPPA is one of three ground-breaking international trade deals presently being negotiated, she says. One of the chapters in the voluminous document will limit how participating governments can go about buying trains, planes and all other goods and services.

''We already have some of those agreements in some of our FTAs [free trade agreements]. But this agreement would take it further,'' she says.

The government procurement agreement (GPA) in the TPPA would probably make price and capacity the only allowable filters when comparing tenders.

Contract clauses that require, for instance, the use of local materials or local labour would be struck out. These restrictions might also apply to local government procurements.

Prof Kelsey's assessment of the TPPA? It would mark the politically facilitated ascendancy of corporates at the potential expense of New Zealand's economy, environment, health and sovereignty.

''It's all about NZ Inc,'' Prof Kelsey says.

''It's a hybridisation of the public and private domain where commercial interests take precedence, and other interests are accommodated within the framework that is developed by and for NZ Inc.''

Mr Groser sees it rather differently.

He has nurtured the deal, which grew from a newborn FTA between New Zealand and Singapore to, potentially, a strapping 12-country trading bloc with a combined GDP of $US27 trillion ($NZ31 trillion).

''Concluding the TPP will open goods markets, reduce regulatory barriers, and liberalise services and investment flows,'' Mr Groser says.

''This is crucial for New Zealand because international trade and investment underpin our economic performance.''

The TPPA has been four years in the making. The next round of negotiations is expected to take place this month.

The dozen countries negotiating the deal are the US, Canada, Mexico, Peru, Chile, Australia, New Zealand, Singapore, Malaysia, Brunei, Vietnam and Japan.

From the New Zealand negotiators' perspective, the news this week that Australia and Japan have concluded their own free trade agreement only adds impetus to the drive to deliver a strong TPPA.

If a comprehensive, high-quality agreement can be negotiated, the growth in jobs and the economy would be ''substantial'', Mr Groser says.

For John Gamble (46), a job would be a lifesaver, because his first encounter with free trade agreements has left him unemployed.

Mr Gamble worked at Hillside workshops for almost three decades before he was made redundant in December 2012.

Hillside workers, Dunedin business representatives and local and national politicians had joined forces to fight for the underutilised South Dunedin engineering workshop, but to no avail.

The closure came after KiwiRail opted instead to order 40 locomotives from New Zealand's FTA partner China.

''After 30 years' service, on your last day, as you walk out, they go through all your tool boxes to make sure you haven't stolen anything. It was like, really? I was so shocked. I just left,'' Mr Gamble recalls.

Sixteen months later, the husband and father of one still does not have permanent work.

Despite writing dozens of applications, ''temp work'' is still his, albeit irregular, mainstay. He has driven a forklift, worked in a store, done clean-up at a chicken factory, mixed fertiliser ... Some weeks he gets one day's work.

Others there is none. More than half his wife's minimum-wage pay packet goes on rent.

''By the time the bills have been paid, there's about $40 left for the week. And that is before we buy food.''

The redundancy payment he received has been all but spent on plugging weekly financial gaps in the family budget.

''I'm pretty easy-going,'' Mr Gamble says.

''But the last couple of weeks have been pretty tough, trying to make ends meet.''

It is little comfort to Mr Gamble that the Chinese locomotives have been plagued by a string of faults, including the recent discovery of asbestos.

Many aspects of the TPPA worry opponents. Key among them are the GPA, investor-state dispute settlements (ISDS), and the small matter of secrecy.

It is all for the good of New Zealand in the long term, free trade enthusiasts reply.

Bill Rosenberg, who is the New Zealand Council of Trade Unions economist, says a GPA in the deal would make it more difficult for the country to independently design its own domestic affairs.

''Government procurement is a very important part of potential government policies for economic development,'' Mr Rosenberg says.

''It's a big concern because we have relatively few ways to support local industry - to build up those skill levels, to give smaller companies the ability to grow their output so they can get efficiencies of scale that might allow them to start exporting.''

Mr Groser, however, while conceding the TPPA could require New Zealand to surrender some of its sovereign rights, has said that was normal for international trade deals.

''Of course trade agreements involve concessions of the sovereign rights of countries to do things. That's the point of international law,'' he reportedly said.

A spokeswoman for Mr Groser says trade barrier-busting measures such as a GPA are designed to maximise benefits while ensuring the Government can still ''regulate for legitimate public policy purposes''.

Which purposes are still considered the legitimate domain of government are not spelled out. BusinessNZ chief executive Phil O'Reilly supports the Government's stance.

GPA provisions would enable New Zealand businesses to bid for procurement contracts with governments of all nations party to the TPPA, Mr O'Reilly says.

A level playing field. All countries equally open, equally vulnerable. But vulnerable to whom? To big business, TPPA critics warn.

ISDS provisions in the TPPA threaten to fundamentally shift the balance of power from government towards corporates, they say.

They will do nothing of the sort, the agreement's advocates retort.

ISDS is a mechanism allowing foreign investors to sue governments they believe have violated their rights.

Mr Groser has said ISDS procedures protect New Zealand's investments overseas and give confidence to foreign investors considering putting money into this country.

His spokeswoman says the Government is aware of potential risks if it is ''not negotiated carefully''. All existing New Zealand trade deals with ISDS provisions have been ''appropriately designed'', the spokeswoman says.

Mr O'Reilly says ISDS provisions are included in many existing trade deals as a safeguard against extreme events such as military coup d'etats.

''They help protect the assets of businesses that could otherwise be seized by a rogue government,'' Mr O'Reilly says.

''Such protections are mainstream and not out of the ordinary. In most countries, companies already have the right to sue a government.''

Prof Kelsey has been watching the proliferation of ISDS cases since the new millennium.

''The investor-state dispute process in the investment chapter of the TPPA is enforceable by the companies themselves. That's the whole problem,'' she says.

''And that investment chapter is very broad in what it can capture in terms of government action.

''The number of cases has absolutely mushroomed ... because the international investors have grasped on to these with alacrity in the last few years.''

A United Nations report on the rise of ISDS says governments are concerned.

''Not just because of the implications for a country's right to regulate and follow what are perceived to be legitimate public policy objectives, but also because of the large sums claimed by investors, the sums that have been awarded to investors and the high cost of the arbitration process itself,'' the report states.

Arbitration awards against a state can amount to hundreds of millions of dollars.

''To expedite payment of the awards, funds may be diverted from important development objectives, such as investment in infrastructure, education, health or other public goods,'' the report's authors say.

Ongoing cases include a United States pharmaceutical company suing Canada because its supreme court refuses to recognise a drug patent; Germany being sued for phasing out nuclear energy; and Egypt for raising the public sector minimum wage.

Closer to home, Australia is being sued by tobacco giant Philip Morris under an investment agreement the country has with Hong Kong. WHEN, in late 2012, Australia became the first country to introduce plain packaging of cigarettes, Philip Morris responded with an ISDS, arguing the new packaging unfairly impacted on its investment.

The tobacco company has also partly financed a case being taken against Australia by five tobacco-producing states through the World Trade Organisation (WTO).

Prof Kelsey believes winning the cases may not be the only goal. Bogging Australia down in long expensive lawsuits could work well to scare other governments off following their lead, she says.

In 2012, Mr Groser was reported as saying he did not believe the investor-state dispute procedures being negotiated in the TPPA would limit the Government's ability to pass laws.

Two months ago, the New Zealand Government announced its Bill providing for mandatory plain packaging on cigarettes would be delayed until the WTO case against Australia's plain-packaging law had been concluded.

In Europe, the backlash against ISDS provisions in trade agreements is growing.

The European Union is in the middle of negotiating its own version of the TPPA with the United States. But things are coming unstuck for the Transatlantic Trade and Investment Partnership (TTIP) over the issue of investors suing governments.

The EU has pressed pause on negotiating the investment chapter of the agreement while it holds public consultation on the issue. France and Germany have declared they will not sign up to a deal that includes ISDS measures.

Of course, the exact detail of the proposed TTIP, TPPA and the other free trade deal ''biggie'', TISA (Trade In Services Agreement), are unknown because negotiations are held behind closed doors. Unknown, unless you are among the 600-odd US corporate advisers who have access to the text and provide input to it.

What is publicly known about the content of the TPPA comes largely from leaked draft chapters. Critics say this is not good enough; living in a democracy means citizens should have the right to know about, and have a say in, what is done in their name.

Calls for the TPPA text to be publicly released and debated have come from, among others, the US Congress, the vice-president of Peru and opposition politicians in Japan, Australia and New Zealand.

But Mr Groser says those calling for the text to be made public only want to destroy the deal.

''They want this to be done in the full glare of transparency to increase the controversy to the point where it's unmanageable and will destroy the agreement,'' he said before of a business leaders' meeting in Auckland in February.

Prof Kelsey responds with, ''If we have nothing to fear [from the agreement] then show us the text''.

''Here you've got a long-term treaty, that is enforceable not only by other states but by investors, which we don't get to see until it's signed,'' she adds.

It is unlikely to wash with Mr Groser, who believes keeping things close to his chest is best, a point about which he was surprisingly candid in a speech last year.

Addressing the US Chamber of Commerce during his bid to become director-general of the WTO, Mr Groser said the change required for, and resulting from, free trade deals necessitated discretion.

Evidence backed the benefits of free trade, he said. It facilitated higher productivity, higher wages and material progress. But ''this alone is too austere a message to sell to the general public'', he said.

''And frankly ... for precisely the point I have just made, in all the speeches, interviews and comments I have made on trade, I have never once said in New Zealand, `Vote for me: I'm in favour of free trade'.''

The bigger the trade deal, the more secretively it would have to be handled, he told his audience.

''I have said to trade journalists in Geneva and, let me admit to a certain degree of perverse pleasure, that if I were to become director-general [of the WTO], I would be a `trade journalists' nightmare','' he said.

''Actually, in public, the director-general needs to be a forceful public advocate of the system ... And we need the help of the world's media to achieve that. But when it comes to the sensitive negotiating issues, I believe the director-general must be completely silent in public and open to many different solutions.''

Mr Rosenberg calls it a ''trust me, I know what I'm doing'' attitude.

''Let those who know what is best get on with it unhindered, and in the end we will all benefit. That is just what he is saying. But it disregards what is in fact at stake,'' Mr Rosenberg says.

It is classic Milton Friedman.

''A free society releases the energies and abilities of people to pursue their own objectives,'' the 20th-century populariser of free-market ideology said.

''Freedom means diversity but also mobility. It preserves the opportunity for today's disadvantaged to become tomorrow's privileged and, in the process, enables everyone, from top to bottom, to enjoy a fuller and richer life.''

It is all about getting ahead.

Mr Friedman and his 21st-century successors would, no doubt, applaud the lesson Mr Gamble has taken from his scrape with the free market.

After Hillside closed, while plenty of former workmates were leaving town in search of work, Mr Gamble chose to stay in Dunedin.

He co-ordinates the crash rescue squad at the speedways in Dunedin and Invercargill. If he had left, it would have jeopardised that service.

''I always think of others before myself. That's probably my biggest downfall. It got our family in the [mire] more than anything else,'' he says.

He now regrets not leaving Dunedin when he had the buffer of a full redundancy. In the past few weeks, however, he has decided to ''up and leave'' come what may.

''It's come to the point where it's me, my wife and our daughter. We now come before anything else.''


Add a Comment

Our journalists are your neighbours

We are the South's eyes and ears in crucial council meetings, at court hearings, on the sidelines of sporting events and on the frontline of breaking news.

As our region faces uncharted waters in the wake of a global pandemic, Otago Daily Times continues to bring you local stories that matter.

We employ local journalists and photographers to tell your stories, as other outlets cut local coverage in favour of stories told out of Auckland, Wellington and Christchurch.

You can help us continue to bring you local news you can trust by becoming a supporter.

Become a Supporter