TPP agreement will undermine NZ state-owned enterprises, critic warns

US senators Barbara Boxer (left) and Jeff Session (right) arrive at the US senate for a procedural vote on the ...

US senators Barbara Boxer (left) and Jeff Session (right) arrive at the US senate for a procedural vote on the Trans-Pacific Partnership agreement.

The Trans Pacific Partnership (TPP) agreement could stop New Zealand setting up new state-owned enterprises for sectors such as public broadcasting or insurance, an academic says.

Auckland University professor Jane Kelsey said a proposed chapter in the controversial trade agreement could also ban special financial or regulatory assistance to existing state-owned enterprises (SOEs) or Air New Zealand-style bailouts.

The chapter would not ban SOEs outright, but aimed "to constrain governments giving any preferential treatment to state enterprises that private enterprises might see as damaging to their competitive position", she said.

The prospects of a TPP agreement being reached jumped this week after just enough Republicans in the United States senate voted to give President Barack Obama the power to "fast track" the negotiations.

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Kelsey, a vocal critic of the trade agreement, said her knowledge of the SOE chapter was based on meetings she had with negotiators over the past five years.

A report by the Washington-based Wilson Center think tank said US businesses wanted rules in the agreement that would ensure they were not disadvantaged by support for state enterprises in other countries.

It forecast Vietnam, with about 1000 SOEs, would be most affected.

US negotiators had to develop rules "that limited the potential for trade distortions by other country's SOEs" while protecting its own state-backed firms such as mortgage giants Freddie Mac and Fannie Mae", the think tank said.

Kelsey said the exact rules would not be clear until the wording of the chapter was made public "but there is no question that this chapter is part of the final deal".

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Trade Minister Tim Groser was preparing a response on Thursday afternoon.

The Treasury said that as of June last year, 18,979 people were employed by state-owned enterprises which contributed 2.1 per cent of the country's gross domestic product (GDP).

The Government spent $1.4 billion "supporting troubled SOEs in the past seven years", the Treasury said.

Concerns surrounding the impact of the TPP agreement on New Zealand have centred on the extra rights the agreement is expected to give to multinational pharmaceutical companies and the tightening of other intellectual property rights.

But Kelsey said the possible impact on SOEs was "a very big issue for New Zealand".

It appeared at least some existing SOEs would be excluded from the provisions, Kelsey said.

"There will be a list of SOEs that won't be subject to some of them, which is what is currently under negotiation.

"But the problem is, if you don't have an SOE in existence at the moment, how do you future-proof it?"

Prior to the election, Labour promised more support for public broadcasting and a "Kiwibank-style" insurer to provide an alternative to commercial insurers, both ideas which Kelsey believed could be impacted by the TPP agreement.  

The chapter dealing with SOEs was "unprecedented" and a "must have" for United States trade negotiators and was written with an eye to preventing unfair competition from China, she said, though China is not a party to the current negotiations.

Any objections about how a country was supporting SOEs would need to be raised by another country that was party to the agreement, not a corporation, and would be sent to an international tribunal of trade lawyers for binding arbitration, she said.  

Kelsey has forecast Republic politicians will want "their pound of flesh" for supporting Obama on the fast-tracking bill, but said US political support for the TPP agreement itself was still not guaranteed and would depend on the final shape of the agreement.

"If you see the level of unhappiness on the Democrat side … there is real anger in Washington.

"They are not going to be forced into accepting a deal that they believe is damaging to Democrat constituencies."

 - Stuff


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