Chris Trotter on Rio Tinto

Published in the Dominion Post

Time to call Rio Tinto's bluff

Once again the masks have slipped. Once again we have caught a glimpse of the true faces of our masters. Once again, New Zealand's acute vulnerability to the power of vast transnational corporations has been brutally revealed.

As an exercise in raw economic coercion, Rio Tinto's submission to the parliamentary select committee scrutinising our Government's proposed emissions trading scheme (ETS) was chilling.
Ranged before the elected representatives of the New Zealand people were the appointed representatives of one of the world's largest and most profitable corporations.

Including its joint ventures, Rio Tinto employs 73,000 people in 61 countries. It is the global leader in smelting aluminium, with annual revenues of US$49 billion (NZ$65 billion), a sum roughly equivalent to 30 per cent of New Zealand's entire gross domestic product.

As living proof that neither race nor gender counts for very much in this new age of equal- opportunity capitalism, Rio Tinto's Asia/Pacific president is a woman of Chinese descent, Ms Xiaoling Liu. It was from her that the select committee received the bad news.

In its current form, she explained, the ETS posed a threat to the economic competitiveness of the Bluff aluminium smelter's production. Rio Tinto could not, therefore, guarantee the smelter's long-term future if the Government's scheme (in its current form) was permitted to proceed.

And that was that.

Her judgment, as cold and bleak as a Southland winter, was left to slowly defrost on the committee-room table. And now, while Invercargill shivers, and its voluble mayor, Tim Shadbolt, shakes his fist, our government must determine its response.

Thirty years ago, faced with such a flagrant challenge to its sovereignty, a Labour government might have countered Rio Tinto's presentation by threatening to nationalise its New Zealand operation. Today, quite apart from exposing the nation to all manner of WTO penalties, such a threat would be laughed out of court.

Rio Tinto, "whose business is finding, mining and processing the Earth's mineral resources", not only dominates the world's aluminium smelting industry, but also controls the lion's share of the planet's bauxite deposits. Without bauxite, of course, an aluminium smelter is useless.

So, should the Government call her and Rio Tinto's bluff?

By forcing Rio Tinto's departure, and the shutting down of the Tiwai Pt smelter, Labour would be free to divert 15 per cent of New Zealand's total electrical energy production (the amount consumed by the smelter) to other uses.

The period in which new generation facilities need to be commissioned could be dramatically extended, and electricity price rises smoothed considerably, by such a massive energy windfall.

Unfortunately, calling Rio Tinto's bluff would also entail ripping the heart (and, according to Mayor Shadbolt, the soul) out of Southland's economy. By local estimates, at least 3000 jobs – many of them extremely well- paid – would be lost, with devastating social and economic consequences for the entire Southland region.

While the fourth Labour government was only too willing to consign thousands of workers to the human scrap-heap in the name of economic rationalisation, I'm not so sure that this Government is ready to follow suit, at least, not in an election year.

Murray Horton, from the Campaign Against Foreign Control in Aotearoa, thinks they should: "Go ahead and close the smelter and bugger off", he thunders. "See if we care, the country will be much better off without you.

The smelter is the single biggest user of electricity, consuming one-sixth of the total. It pays a top-secret, super-cheap price that is not available to any other user and all it does is export electricity from New Zealand in the form of alumina, while being subsidised by all other electricity users."

Way back at the beginning of this latest period of globalisation, Jack Welch, the CEO of General Electric, notoriously remarked: "Ideally you'd have every plant you own on a barge." The theory was, big business could hold unions and governments to ransom by threatening to go offshore if the cost of labour, or environmental regulation, became too expensive.

What Mr Welch and his ilk failed to foresee was that a time would come when the greenhouse gas emissions from every plant they owned represented so great a threat to the planet that the location of their barges no longer really mattered.

I'd invite Rio Tinto to do their worst but I suspect they already are.