- Bill Rosenberg
It is positive and significant to see the beginnings of a national consensus forming around the protection of strategic assets from overseas control. The Government is to be congratulated on its recent change to the Overseas Investment Regulations, even if it is late in the day. We have yet to see what National means when it says it favours 51% New Zealand ownership, but that is a big change in their previous attitudes. The question for all parties is what can they do to make this policy a reality?
If the Government’s way of doing it – an amendment to the regulations controlling overseas ownership of sensitive land – seemed Mickey Mouse, it is because that is just about the only loophole it has left for anything approaching economy-wide protection of our assets. Commitments made by the National government in 1994 to the World Trade Organisation under the General Agreement on Trade in Services (GATS) left following governments with limited options. There were exceptions in the commitments for some sectors, but swathes of the economy were bound into a promise not to tighten the 1994 level of protection – even then very fragile.
Subsequent trade and investment agreements which National and Labour have signed with Australia, Singapore, Chile and others have widened those commitments even further. The 2001 agreement with Singapore for example both broadened the list of sectors affected and significantly reduced the options available to this and future governments. The laws screening overseas investment where no land or fishing quota is involved are totally ineffectual: no application has been turned down for decades because there is no real power to do so. But at least governments had the right to tighten them before these international agreements were signed. The main useful exception governments have retained has been where land is involved. Hence this strange piece of machinery.
New US Agreement Will Wipe Any Remaining Rules On Foreign Investment
But while one arm of Government is trying to repair the damage, however awkwardly, another appears to be preparing to exacerbate the problem. The Ministry of Foreign Affairs and Trade recently announced the opening of negotiations with Singapore, Chile and Brunei to extend a two year old trade and investment agreement (the grandly named Trans-Pacific Strategic Economic Partnership – often known as the P4) into investment and financial services. Any extension into investment would certainly limit the Government’s right to regulate overseas ownership of New Zealand assets.
What makes these negotiations especially significant is the announcement that the US is joining in. The US signals its interests well in advance. The Office of the United States Trade Representative, which is responsible for negotiating such agreements, publishes an annual assessment of what US companies regard as “trade barriers”[i]. The latest one is for 2007. Its assessment of New Zealand included a description of the current overseas investment legislative rules and the statement: “The United States has raised concerns about the continued use of this screening mechanism”.
It can therefore be taken as a certainty that the US will be trying to remove these protections, feeble though many of them are. One of the prices of an agreement with the US will be to back down on our control of our own strategic assets. The US already has some draconian investment rules with both Chile and Singapore that can be enforced by US companies, not just the US government. They will insist that these be made more extensive and accepted by New Zealand.
Governments in the past have tried to justify sacrificing our sovereign rights in this way by pointing to gains bought in agricultural market access. This time however, where only investment and financial services are up for negotiation, anything given away won’t be available for any future negotiations on agriculture. It doesn’t even make sense in tactical terms.
We have been warned. One of the world’s best known economists, Nobel Prize winner Joseph Stiglitz, recently warned New Zealand off even a full trade deal. He told the Sunday Star-Times that “most of these free trade agreements are not good deals… they’re managed trade agreements and they’re mostly managed for the advantage of the United States, which has the bulk of the negotiating power”.
He said there was no real negotiation and “one can’t think that New Zealand would ever get anything that it cares about”. New Zealand’s agriculture interests are head to head against those of the powerful American agricultural lobby. Stiglitz warned: “you’ll lose”.[ii] It’s choice time for the Government, and for whoever wins in the election later this year. Protect strategic assets or negotiate a deal with the US. It can’t have both, and New Zealand will probably lose even if it gets a deal.
This article was published in the Independent 26/3/08. Ed.
[i] See http://www.ustr.gov/Document_Library/Reports_Publications/2007/2007_NTE_Report/Section_Index.html
[ii] “Clinton’s economist warns NZ off US trade deal”, by Anthony Hubbard, Sunday Star-Times, 9/3/08, pA13.