Easton on TPP and sovereignity

Brian Easton writes at Pundit:

Allow that we had to give away something, such as increased copyright extensions, for better access for our exports; the real issue for us in the TPPA is that it reduces ‘sovereignty’. To report my conclusion at the beginning: all trade and all trade deals reduce sovereignty to some extent. This has been going on in New Zealand since its first European economic engagement. The Investor State Dispute System (ISDS) is another step. As far as I can judge, the ISDS provisions in the TPPA do not represent a great loss of sovereignty – but then the TPPA benefits from increased market access are not huge either.

I’d say the biggest sovereignity losses have been the Kyoto and Paris agreements on climate change. We are obliged to make dramatic changes to our industry to meet our global commitment. It is not just all trade agreements that reduce sovereignity to some degree – every international agreement does from the Antarctic Treaty to the Convention against Torture.

Modern trade increasingly requires a formal framework between the participants. To take a simple illustration: transaction costs between traders are reduced by common standards for weights and measures and the like. New Zealand is a signatory to various international agreements It did not have to adopt them but it would be troublesome for our exporters and importers if they had to keep converting local measures into international ones.

Because it is a small country New Zealand has been very keen that there be an international framework based on a rule of law so that, typically, there are enforcement provisions in each agreement to make them work. On occasions they have definitely worked in our favour. For instance, we have had favourable WTO rulings in regard to apple access to Australia and lamb access to the US – in each case a larger power was pushing us around but they had to give up some sovereignty and do what the WTO tribunal decided.

They is a key point – NZ has won cases against other countries using dispute mechanisms. If you are the good guy, you will probably win.

When we are on the wrong end of a decision, we will also have to agree to something we do not want to do too.

As far as I know we have never lost (a case against us) or even had one.

No investor will absolutely trust the state legal processes since the law may be changed, the courts stacked. Thus investors seek a dispute resolution procedure outside the state even though New Zealand probably has a better reputation than most states.

My ideal, would be a world court for investor state dispute resolutions, something like that proposed by the EU. But the US Congress will not countenance such a court system, and its fallback is an arbitration system between the state and investor.

It is not be the first time we have agreed to an ISDS process in a free trade deal; it wont be the last. (Instructively, some who oppose the ISDS provisions in the TPPA are willing to take human rights issues to the international tribunals – even though that represents a potential loss of sovereignty too.)

I like the idea of a world centre or court for investor state disputes. And a good point that those against TPPA are often the same demanding some UN committee force NZ to behave differently.

It is argued by some proponents of the ISDS in the TPP, that they already exist in other FTAs and that New Zealand has never had to a claim under one. I say, ‘thus far’. And it is also a matter of concern that the few cases involving other jurisdictions mean there is not a lot of case law.

One can’t rule out no claims ever but NZ generally behaves in a good way and doesn’t nationalise foreign companies without compensation etc. The lack of case law is both a strength and a weakness – the lack of cases means the threshold is high.

So the ISDS in the TPPA reduces our sovereignty, or rather it reinforces the reduced sovereignty that foreign direct investment is already causing. In my judgement the reduction is not great compared to all the many international concessions New Zealand has already made. But the benefits from improved market access (offset by the copyright extension) are not huge either even though they are there.

A very balanced view, and no one could ever accuse Brian Easton as being a neo-liberal economist!