The Trans Pacific Strategic Economic Partnership Agreement
March 21st, 2011 at 9:00 am by David FarrarFew people are more enthusiastic advocates of free trade than me. I basically want to see a world without trade barriers.
The path to free trade is difficult due to entrenched interests. The best path is a multi-lateral agreement such as the GATT agreement which set up the WTO. Failing that, bilateral trade deals are worth pursuing. The China-NZ FTA, for example, has already led to a huge increase in exports to China. And CER with Australia is part of our economic DNA.
Personally I think bilateral free trade agreements are far too complex. My ideal FTA would be as follows:
- Country A agrees that the businesses and residents of Country B can sell any goods or services they like to the business and residents of Country A, so long as they are legal in Country A.
- Country B agrees that the businesses and residents of Country A can sell any goods or services they like to the business and residents of Country B, so long as they are legal in Country B.
- There shall be no duties, tariffs or other barriers on exports or imports between Country An and Country B
- ENDS
NZ is currently negotiating a free trade agreement, called the Trans-Pacific Strategic Economic Partnership Agreement, or TPP.
The TPP is now a brand new agreement. It is an extension to an existing agreement between Brunei, Chile, Singapore and NZ called the P4. Five additional countries are seeking to join it – Australia, Malaysia, Peru, Vietnam and the US.
Now New Zealand would gain immensely from free trade with the United States. One study estimated our exports to the US would increase by 51%. That’s an extra $2b a year approx.
So free trade with the USA would be great. But sadly free trade agreements are not as simple as the one I wrote above. They include areas which are not about reducing tarrifs, such as intellectual property laws. The United States wants New Zealand to agree to change our intellectual property laws, as part of any TPP agreement.
Top IT lawyer Rick Shera, has done a guest post at Public Address on what the US is asking for. I highly recommend you read his post in full. A summary is:
- Rights holders would be allowed to prevent parallel imports
- Massive extension of copyright terms, from life of author plus 50 years, to 70 years
- Circumventing a Technological Protection Measure (TPM) will to be a criminal offence even if the work it protects is in the public domain or you want to exercise fair dealing rights like educational use or current affairs reporting
- The return of guilt upon accusation three strikes Internet termination laws
- Forcing us to reverse the decision recently taken to exclude software from being patentable
- Introducing statutory damages (which give rights holders windfall damages up to 3 times their actual losses)
- ISP policing of IP rights including a requirement for ISPs to give up their customers’ identities when they receive a mere allegation from a rights holder
- Criminal liability even where the infringement has no commercial value at all
- Pushing Courts to impose imprisonment as the default sentence for infringement even where no monetary benefit is obtained
Bloody nasty isn’t it. And it is not as if NZ is a country with weak copyright laws. The Property Rights Alliance do an annual index of property rights. Their 2010 report for New Zealand ranked NZ the 4th best country (out of 125) in the world for (lack of) copyright piracy.
The New Zealand Government position has been to reject these provisions, which is good. But at some stage, there will be some calls to be made and compromises to occur to get an agreement.
This will pose a challenge for free trade advocates such as myself. Is allowing the United States to rewrite our copyright laws, a price worth paying?
Well if it was a true free trade deal, where the United States agreed to phase out all (or at least the vast majority) of its tariffs, then yeah it might be. An extra $2b a year of exports would create a lot of extra jobs, extra investment, extra wealth and extra tax revenue.
But what if we don’t get the US to agree to let in our lamb, our beef, our wool, our milk, our fruit without restrictions? What if the lowering of trade barriers is modest at best? This can not be ruled out – the US/Australia free trade agreement was very modest in terms of lowering trade barriers.
Eric Crampton has blogged on the TPP agreement. I know Eric well enough to confidently say that he is probably just as big a fan of free trade as I am. However he is pessimistic about the TPP:
I suggested New Zealand might do best by sidelining the US for now. The biggest potential gains to New Zealand from a free trade deal with the States would be an opening of American dairy markets to New Zealand dairy products. But that won’t happen – a trade deal that would actually open up American dairy markets to New Zealand product would never make it through the Senate.
The actual economic impact on the US of allowing dairy competition would be minor overall. But it would create a political fuss in certain states which would make it very difficult for Obama to ignore.
Eric continues:
I’d put decent money that, if America signs onto the deal, there’d be years of costly arbitration before New Zealand had any kind of increased access to American dairy markets. For starters, American dairy farmers would argue that failure of the New Zealand competition authorities to prosecute New Zealand dairy cooperative Fonterra as a monopoly constituted a subsidy under US law and justified counterveiling duties. …
I don’t think the United States has any credibility on free trade when it comes to agricultural products. They can’t make time-consistent pledges. At point of signing it’s all friendly, then you’re straight into arbitration over whether you’re hurting US domestic competitors – never mind the benefits to American consumers who are paying double what Kiwis are paying for baby formula.
His solution:
And so it’s better that New Zealand sidelines America in the Trans Pacific Partnership negotiations so the rest of us can have a serious free trade zone. Get a serious free trade zone, then look to widen it by inviting China. The threat of a Pan-Asian free trade zone that includes China is about the only thing I can imagine that would bring the States around on agriculture. Since New Zealand already has a free trade deal with China, it’s not implausible that China could someday join the TPP.
The idea of a TPP without the US may sound implausible, but I think it is more important to have a high quality agreement that actually reduces trade barriers and doesn’t force IP law changes on us, then a free trade agreement that is more symbol than substance. John Key I believe wants this too – he basically told Japan to stuff off from the TPP negotiations, unless they were seriously willing to commit to a “high quality” agreement.
The same attitude should apply to the US. If at the end of the day we can’t get decent lowering of trade barriers, and they insist in trying to force draconian IP laws on us, then we should be willing to say that we’ll go ahead with Australia, Malaysia, Peru, and Vietnam joining the P4 – and leave the US for another day.
Tags: copyright, Free Trade, TPP, United States
March 21st, 2011 at 9:29 am
I know that almost everything I post on here is critical – because you guys are insistent on supporting a govt. of muppets mainly – but I agree entirely. The content lobby have realised that ACTA isn’t going to work post EU modifications so now they’ve jumped onto the TPP. If we were to shut the US out we wouldn’t lose anything, but we would gain a whole bunch of new markets without having to deal with the American’s bullshit. It’s not that easy, obviously, but DPF raises a good point and I hope that our negotiators are of similar mind.
Vote:March 21st, 2011 at 9:29 am
Forget all these trade agreements, New Zealand should unilaterally abandon all artificial restrictions. End of story.
If other governments continue to hold their citizens hostage to special-interest groups there is absolutely no reason for NZ to do the same.
Vote:March 21st, 2011 at 9:40 am
The most touted free trade agreement we have is with China.
The people of China are not free ,nor is their economy.
Vote:March 21st, 2011 at 9:41 am
So no more Downloading / Streaming last week’s episode of Fringe?
Vote:March 21st, 2011 at 9:42 am
The problem we have trading with the US isn’t just tariffs, but their agricultural subsidies. If they want to re-write our copyright laws, they should compensate our exporters so they can compete on even terms with subsidised local products. That should be our starting position, in any case, and as they give up demands regarding copyright we can relax demands for subsidy compensation.
Vote:March 21st, 2011 at 9:43 am
kowtow: the freer the market, the freer the people
Vote:March 21st, 2011 at 9:44 am
wat dabney: the problem is that companies can sell below cost to put local competitors out of business, and then jack the prices. I’m all for capitalism, but not for capitalists. So would like to see some controls there. But otherwise agree, even if companies dump their products here, it’s great for a while for consumers, so if we can handle the fall-out, yes.
But on a trade agreement with the US: never. That country is the most protectionist of the free countries in the world, while believing it’s the most open. That kind of schizophrenic thinking doesn’t lead to anything that would help us. Their crony capitalist system is dominated by bribed senators, and the amount of money at stake simply means it will overwhelm every little country that tries to deal with them.
Vote:March 21st, 2011 at 9:55 am
Agree with free trade. But not at the cost of our ip rules. Parallel importing rules are a double standard from the us – they don’t have parallel importing rules between states in the us. It increases profits of us companies at the expense of nz consumers. And presumably also increases the sales of us based online retailers. The other bits of ip law are at least arguable, parallel importing laws are just bad.
Vote:March 21st, 2011 at 10:04 am
Many thanks David for your refs to the excellent articles by Rick Shera and Eric Crampton – and for opening up the debate here. I’m pleased to see a consensus of “all in favour of free trade but let’s keep our current good IP laws, even if it means excluding the US from our trade agreement”. I too am a strong advocate of free trade but have been having misgivings about the American pressure on our IP laws, so it’s good to see a useful debate with many like-minded folk. Let’s spread the idea further!
Vote:March 21st, 2011 at 10:12 am
“The problem we have trading with the US isn’t just tariffs, but their agricultural subsidies. ”
This is a problem only for US taxpayers. I would welcome some of their subsidised food, thank you.
“wat dabney: the problem is that companies can sell below cost to put local competitors out of business, and then jack the prices.”
In a competitive market this simply could not happen, and the more open the market the more competition there is.
Vote:March 21st, 2011 at 10:16 am
Yeah it is nasty .
I wonder, if there would be pressure on NZ consumer laws too, such as the CGA. The CGA gives kiwis some of the strongest consumer rights in the world, something that would grate with US companies who like to push extended warranties.
Vote:March 21st, 2011 at 10:20 am
That is some fine turd polishing you’ve done there, David. We only found out about the IP details from overseas leaks:
http://gonzofreakpower.blogspot.com/2011/03/son-of-acta-is-complete-bastard.html
I’m not so sure NZ would gain in any FTA with the US. Oz hasn’t come out of their last one with the Yanks too well, despite playing Deputy Dawg during the Bush Administration. For example, their sugar and banana crops are locked out due to US interests. As Eric Crampton notes, US farming will not take an FTA lying down. Look how long it took to get NZ apples to Oz, so imagine how much paperwork would go into protecting US pork in dairy interests.
I agree with Bernard Hickey, in that the long run prospects for the US are not good and that NZ should politely distance itself before the mess hits the fan. Politely tell the US to P off out of the talks.
Vote:March 21st, 2011 at 10:26 am
The US didn’t always take a hard line on copyright issues. My understanding is that until the late 19th century the US was a net importer of copyright, and coincidentally was among the slackest nations on intellectual property rights.
Vote:March 21st, 2011 at 10:30 am
The other real danger with FTA agreements with the US is that one of their goals is getting rid of Pharmac. This would really hike the cost of medical care and be a boost for big pharma. When New Zealand has nothing to offer in terms of opening our borders to trade, it always pays to see where we give away sovereignty for access to protected markets — it’s not something we usually hear about amidst the promises of new prosperity.
Vote:March 21st, 2011 at 10:30 am
“Oz hasn’t come out of their last one with the Yanks too well, despite playing Deputy Dawg during the Bush Administration. For example, their sugar and banana crops are locked out due to US interests.”
You wrongly identify the victims here. The victims are American consumers, forced to pay high prices for sugar and bananas.
It would be quite wrong to retaliate by inflicting similar damage on Australian consumers, yet that is what is proposed and practised.
Vote:March 21st, 2011 at 10:41 am
Why is anyone worrying about the absurd demands of a soon-to-be bankrupt vassal state of China?
Vote:March 21st, 2011 at 11:30 am
I wouldn’t write the USA off so glibly. The Russians thought they would bury the USA in the 1960s, because they had a faster growth rate. Rapid growth is easy when you are underdeveloped. But then you hit problems – environmental, economic, legal, you name it. The Chinese leadership know this and are doing their best to help their economy evolve, but it is a tough ask. Meanwhile GDP per capita in the USA remains six times higher than it is in China.
And if you think a huge trade surplus and massive wealth is all you need to guarantee the future – tell it to the Spainish, who went from obscene wealth extracted from the New Word to being one of the poorer countries in Europe.
Vote:March 21st, 2011 at 11:44 am
“And CER with Australia is part of our economic DNA.”
Awww yea DPF? One may equally see it as part of a cancer growth, which gives ever increasing power to the Trans Atlantic bankers, who want to be able to print a global currency, and lend it to governments at no cost to themselves.
The US dollar is no longer the world’s reserve currency, and their monopoly over the printing of US currency is not as lucrative as it once was.
GATT, WTO, IMF, CFR – were all established at the behest of the worlds largest banks. Follow the money.
Vote:March 21st, 2011 at 11:48 am
“the problem is that companies can sell below cost to put local competitors out of business, and then jack the prices.”
Anti dumping rules already deal with this.
Vote:March 21st, 2011 at 12:25 pm
Opening more markets to our dairy is not the be-all either. We can’t jack up the volumes much more so all we could do is seek better returns which in turn will flow through to domestic prices. Now I’m all for increasing our export returns but would prefer to see it happen because of an increase in production rather than just an increase in prices.
Vote:March 21st, 2011 at 12:39 pm
“This is a problem only for US taxpayers. I would welcome some of their subsidised food, thank you.”
Problem is, if NZ farmers go out of business due to unfair competition, we may not be able to afford even subsidised food. Haiti had its farmers crushed by subsidised imports from the States and they aren’t exactly wallowing in luxury.
The US – particularly the Republican – traditional opposition to free trade seems to have increased lately. They’ve let two trade agreements lapse lately and attempts to reduce agricultural subsidies look likely to fail.
I reckon an effective free trade agreement in the present climate is unlikely. The danger is that the ideologues in MFAT will push ahead with getting the TPP signed regardless of the lack of benefits for NZ.
Vote:March 21st, 2011 at 3:53 pm
“Problem is, if NZ farmers go out of business due to unfair competition, we may not be able to afford even subsidised food. Haiti had its farmers crushed by subsidised imports from the States and they aren’t exactly wallowing in luxury.”
I’d love to be a farmer, but I can’t afford to be. You’re suggesting that I be forced to subsidise those lucky land owners out of my modest income, however.
No thank you. I don’t expect my job to be subsidised, and I don’t expect to subsidise others’. You’ll end up with the economic madness of Europe’s Common Agricultural Policy, where consumers are forced to pay vastly inflated prices for their basic needs. It’s political corruption, nothing else. Why should relatively poor city dwellers be forced to pay inflated prices to country land owners? In the past the poor rioted for the right to be able to buy cheap imported food (Britain’s notorious Corn Laws), but you’re telling us they should have just sucked it up.
Besides, how realistic are your fears? With food prices at recent highs and a growing global middle class there is absolutely no reason why any reasonably efficient NZ farmer shouldn’t continue to rake it in.
Vote:March 21st, 2011 at 4:40 pm
The US now has a government of the lawyers, by the lawyers, and for the lawyers. Unfortunately for them the whole edifice is beginning to crumble as one layer of rent seeking is added to the next.
Vote:March 21st, 2011 at 7:38 pm
Imagine a world with free trade between all nations, except the US.
And Australia. Our apples never had fire blight you dicks!
Vote:March 23rd, 2011 at 1:27 pm
“You’re suggesting that I be forced to subsidise those lucky land owners out of my modest income, however.”
No I wasn’t, nor did I ever say anything that implied it. Try reading the posts.
I was suggesting that if NZ farmers have to compete with subsidised farmers in the US, they might go out of business, and the NZ economy would be screwed.
Vote:February 8th, 2012 at 6:59 pm
Controversy over Intellectual Property (IP) provisions
There has been criticism[30][31][32] of some provisions relating to the enforcement of patents and copyrights alleged to be present in leaked copies of the US proposal for the agreement:
Overall, the USTR proposal for the TPP intellectual property chapter would:
include a number of features that would lock-in as a global norm many controversial features of U.S. law, such as endless copyright terms.
create new global norms that are contrary to U.S. legal traditions, such as those proposed to damages for infringement, the enforcement of patents against surgeons and other medical professional, rules concerning patents on biologic medicines, disclosure of information from ISPs, etc. (We will work on a detailed list).
undermine many proposed reforms of the patent and copyright system, such as, for example, proposed legislation to increase access to orphaned copyrighted works by limiting damages for infringement, or statutory exclusions of “non-industrial” patents such as those issued for business methods.
The proposals have been accused of being excessively restrictive, providing intellectual property restraints beyond those in the Korea-U.S. Free Trade Agreement and Anti-Counterfeiting Trade Agreement.[2]
A number of U.S. Congresspeople,[3] including Senator Bernard Sanders[33] and Representatives Henry Waxman, Sander M. Levin, John Conyers, Jim McDermott,[34] John Lewis, Pete Stark, Charles B. Rangel, Earl Blumenauer, and Lloyd Doggett,[35] have expressed concerns about the effect the TPP requirements would have on access to medicine. In particular, they are concerned that the TPP focuses on protecting intellectual property to the detriment of efforts to provide access to affordable medicine in the developing world, going against the foreign policy goals of the Obama administration and previous administrations.[3] Additionally, they worry that the TPP would not be flexible enough to accommodate existing non-discriminatory drug reimbursement programs and the diverse health systems of member countries.[35]
At a public forum on 6 July 2011, legal experts in New Zealand presented their concerns that the agreement could undermine law regarding Māori culture, genetic modification, copyright, and remove the subsidised medicine New Zealanders have access to through Pharmac.[36]
Ken Akamatsu, creator of Love Hina and Mahou Sensei Negima!, expressed concern the agreement could decimate the derivative dōjinshi (self-published) works prevalent in Japan. Akamatsu argues that the TPP “would destroy derivative dōjinshi. And as a result, the power of the entire manga industry would also diminish.” Kensaku Fukui, a lawyer and a Nihon University professor, expressed concerns that the TPP could allow companies to restrict or stop imports and exports of intellectual property, such as licensed merchandise. For example, IP holders could restrict or stop importers from shipping merchandise such as DVDs and other related goods related to an anime or manga property into one country to protect local distribution of licensed merchandise already in the country via local licensors.[37] At a NicoNico live seminar titled How Would TPP Change the Net and Copyrights? An In-Depth Examination: From Extending Copyright Terms to Changing the Law to Allow Unilateral Enforcement and Statutory Damages, artist Kazuhiko Hachiya warned that cosplay could also fall under the TPP, and such an agreement could give law enforcement officials broad interpretive authority in dictating how people could dress up. Critics also have derided the agreement could also harm Japanese culture, where some segments have developed through parody works.[38]
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