TPP: Notes for comments at Institute of International Affairs forum on the Trans-Pacific Partnership

1. The big context is the globalisation of information and connection, finance, production, consumption and people, accelerate by the coming of age of digital technology. This is pulling down borders of many sorts; but also putting borders up of many sorts as people get more fearful because of the globalisation of war, which now takes new forms, cf ISIS.

1a. This intensified form of globalisation is raising sovereignty issues in many people’s minds. These are born of fears for one’s job, economic future and culture (immigrant influences). There is a belief the elites – politicians, corporations, media, (economists?) – are in cahoots against decent folk trying to get on in life. Facts generating these fears include widening wealth/income inequalities, stagnant real wages, transfer of jobs to other countries and the global financial crisis and subsequent bail-out of miscreant banks.

1b. So there is a search for new borders/defences. Hence Trump/Sanders/Corbyn/
Le Pen/Tsipras/UKIP/Law and Justice/Podemos etc. How are folk to defend themselves if regular politicians can’t or won’t defend them? The resultant populism now rampant in Europe and the United States is inward- not outward-looking, local not global.

2. The TPP sovereignty argument is real to many in New Zealand in that it is born of real experience in the open economy since 1984. That doesn’t mean it is a compelling argument against TPP. Not least, it is based on an out-of-date notion of sovereignty, based on a twentieth-century “golden age” of the Westphalian nationstate when national mixed-economies were fashionable and worked – but turned out eventually to be factories of inflation (then stagflation). Note: manufacturing employment in this country began to fall under Muldoon’s highly protectionist regime.

3. There is a parallel to this modern globalisation: the merging of local economies into national economies, driven by industrialisation. Since the 1980s national economies have been merging into a global economy (connection and consumption as well as production). In the local to-national move there were national governments which learned to regulate; for the national-to-global move there is no global government. As everyday folk see that, that is fine for the elites, but not for everyday folk.

4. As a result of this intensified globalisation, trade agreements these days are increasingly not just about trade but about regulatory convergence. In Brussels a couple of years back I was told that if the Trans-Atlantic Trade and Investment Partnership between Europe and the United States comes off, that will “set the regulatory standards for the world”. We have a tiny version in the Trans-Tasman single economic market. Regulatory convergence raises global governance issues.

5. In that context note that for the United States the top priority was intellectual property (IP). The New York Times made this point forcibly last year. This might well come back on to the agenda in the United States if TPP is not ratified in the coming lame duck session after the November elections, notably if a new president (even if it is Hillary Clinton) and a restructured Congress need a rationalisation.
5a. IP protects the strong against the upstart. That was Susy Frankel’s analysis at a Centre of International Economic Law forum last week. Apple’s behaviour and that of pharmaceutical companies underline her assessment. IP is a particular, and important, issue for New Zealand, especially vis-à-vis our small high-tech companies. Other speakers at the forum said the labour and environmental clauses are weak and the Treaty of Waitangi clause not an absolute guarantee against deep-pocketed global firms.

5b. Overall, the investor-state dispute mechanism is probably less an issue than many think. Gary Born was useful on this point last year and at a roundtable last evening.

5c. Another issue which could come on the table for New Zealand is China, where complex internal troubles are intensifying. Much United States commentary focuses on the United States’ presentation of TPP as excluding China (likely to be a selling point to Congress to get ratification). Could that United States stance generate issues between us and China, for example, in officials’ willingness to sort out issues for us (viz melamine)? What alternative to TPP will China and India be pushing in 2026?

6. As to the economics, the government has relied on and is trumpeting NZIER’s econometric general-equilibrium-model projection. But GE models are (a) a choice of algorithms, (b) a choice of inputs, (c) estimates of the absolute and relative size of the inputs and (d) a choice of outputs to measure. That explains why all GE models predicted the GFC. Two other models for TPP gave wildly different answers. So none are “correct”. Can the models capture the impact of new production methods and products? “Things” now incorporate much “services” in the form of software and what that software enables and increasingly transactions are of services. Can the models capture regulatory convergence and populist political reactions to real and imagined results of TPP? An aside: Tim Groser ascribed a high correlation between the 2008 China FTA and the rise in our exports there; so presumably that FTA is also responsible for the subsequent slowing.

6a. Put all that together: Does the TPP yes/no come down to a calculation or to a a guess as to whether it will cost more to be out of the “club” than in? (What constitutes “cost” will differ depending on perspective.) See

7. As to the local political impact, the government’s excessive secrecy made it look arrogant, dismissive and ideological. It didn’t fit a twenty-first-century growing expectation of actual democracy in addition to “mandates” in triennial elections.

7a The Labour party has been criticised by the elites for breaking ranks. It certainly could have managed its positioning intelligently instead of messily. But I suspect a majority of those it is trying to win over approved its “againstism”. Cf Sanders/Corbyn/Tsipras etc.

Colin James 1 March 2016