Monday, April 28, 2008

A big fishhook in the FTA

In a major scoop for Scoop, Election08 blogger Gordon Campbell has discovered a major fishhook in the government's free trade agreement with China. When the government signed the FTA, it mentioned that it included protection for New Zealand investors from arbitrary expropriation or nationalisation by the Chinese regime. Investors whose property is expropriated (taken by the government) have a right to compensation. Naturally, this agreement cuts both ways, and it would be grossly unfair if it didn't. But the problem is that it includes an extraordinarily wide interpretation of "expropriation" which covers not just cases of nationalisation or outright seizure, but also cases where the government "deprives the investor in substance of the use of the investor's property" in a fashion which is either "severe" or "disproportionate to the public purpose". And the latter covers many routine operations of government, such as zoning regulations, environmental standards, or health and safety requirements.

The North American Free Trade Agreement between the US, Canada and Mexico includes a similar clause, which has seen companies suing governments for denying planning permission for a landfill because it would contaminate the local water table (Metalclad), and for environmental regulations banning various toxic petrol additives (Ethyl Corp, Methanex). One group of US investors are even suing Canada over a change in tax laws. The NAFTA clause is considered one of the broadest in the world. But the clause in the NZ-China FTA is even broader - and the upshot will be that the government will now face claims for compensation every time it moves to protect the environment, improve public health, defend worker's rights, or prevent tax rorts (it could even face one over its price control of gas distribution networks, given who has just bought Vector's Wellington network).

The irony in all this is that Parliament resoundingly defeated an amendment to the BORA which would have imposed such a regime throughout New Zealand last year. But now we're getting it through the back door, without any public discussion or debate. Except it will only apply to Chinese investors. Given how awful the prospect is, that's better than if it applied to everyone - but I expect foreign investors receiving not just equal, but special treatment under the law might upset a few people, and dispel any notions of a "level playing field".

I don't regard trade as a threat to sovereignty. But these sorts of expropriation clauses certainly are. They limit the fundamental right of a democracy to decide its own laws and its own environmental, health, safety and labour standards. While a democracy can choose to limit its ability to pass laws (and I certainly advocate that where such laws might infringe on human rights), that should be done upfront and publicly, with a suitable period of debate - not in a backroom in another country. The government has not just sold our ethics with this deal - they have signed away a very important part of our sovereignty as well, without consulting us. That is undemocratic, and it is wrong. Unfortunately, having signed the deal, Parliament will rubberstamp it. And so the will of the New Zealand people will be held hostage to greedy foreign capitalists forever.