Re-think trade deals for a fair and clean economy

Donald Trump didn’t kill the Trans-Pacific Partnership Agreement (TPPA), popular opinion did. Trump – and Hillary Clinton for that matter – wouldn’t have campaigned against the TPPA if they didn’t think that would align them with public opinion.

In New Zealand, opinion polls consistently showed that a majority of people opposed the TPPA. In Europe, public opinion forced back-downs on TPPA-style trade agreements like the Transatlantic Trade and Investment Partnership (TTIP).

This must be a shock for our MFAT diplomats and their Beehive bosses. The key goal of New Zealand’s foreign policy in recent years has been to get as many trade deals as possible. The question that isn’t asked enough is whether our government has been pursuing the right strategy.

But for New Zealand, market access only goes so far when our competitors are artificially buoyed by agricultural subsidies.

Typically, the benefits of trade deals are over-hyped and the costs are ignored. A retrospective analysis of Australia’s trade agreements by the Australian Productivity Commission concluded there was no evidence of substantial commercial gains for Australia and that the benefits had been oversold.

Other strategies to boost our exports are more important than chasing trade deals. Our challenges are shifting to a knowledge-based sustainable economy and adding more value to the things we produce, not exporting more raw commodities.

There are broader issues for the future. The opportunities highlighted by business leaders at the World Economic Forum in Davos are about using the power of innovation and trade to tackle inequality and climate change.

What this all means is that it’s time to rethink trade agreements. Trade has powered global economic development for centuries, and now it’s time to use it to power the development of a fair and sustainable economy in the era of climate change.

Photo: brianscantlebury.com on Flickr | CC BY-SA 2.0

The USA’s Sierra Club recently published a discussion document that lays out three principles for “how to move from polluter-friendly [trade] deals to ones that support the critical challenge of tackling climate change.”

First, change trade rules to support governments to take action on climate change. Leaked documents from the Trade in Services Agreement (TiSA) negotiations show some countries are pushing for rules that prevent governments from favouring clean energy over fossil fuels. Trade deals need to allow governments to regulate to reduce greenhouse gas emissions.

Second, use trade agreements to explicitly promote trade in clean energy technologies.

Third, make sure trade agreements account for the emissions caused by the cross-border trade they facilitate. Trade agreements should support a price on greenhouse gas emissions and ensure that economies taking climate action are not undermined by free riders.

Underlying these changes must be a far more open and transparent process for negotiations.

New Zealand has an opportunity to put this into action when we begin negotiating a trade agreement with the EU. The EU has started a process of trade reform, including around consultation and transparency, climate change, and dispute settlement.

For example, the EU-Peru-Colombia trade agreement contains commitments to facilitate trade in clean energy and energy-efficient technologies, as well as other goods and services that assist with climate change mitigation and adaption. And with Canada, the EU has committed to develop an alternative to controversial investor-state dispute settlement regimes.

Big ship

Trade agreements should promote fair trade

So where does this leave us?

Rather than desperate attempts to get a bilateral deal with the USA, the Government should focus on supporting our industries to innovate and add value to their exports.

We should use the possibility of a trade deal with the EU to advance a new vision for trade agreements that are fair and integrated with global initiatives to combat inequality and climate change.

Procurement rules, patents and copyright, and dispute resolution all need a rethink to be fairer for local SMEs. Governments need to uphold their rights to regulate in the public interest on issues like public health, labour rights, te Tiriti o Waitangi, food standards, and environmental protection.

We should seek new opportunities. The International Energy Agency estimates that clean energy will generate around US $8 trillion of investment in the next few years. If New Zealand can be at the front of the pack in the transition to an inclusive and clean global economy, you can bet that we’ll have trading partners lining up at our door.

This blog was first published on the National Business Review website on 29 January 2017.