Doubts over TPP deal
A new study has cast doubt on the likely benefits of a Pacific-wide free trade deal, suggesting it could deliver less than a quarter of the gains cited by the Government.
Ministers in the past have highlighted estimates the 12-country Trans-Pacific Partnership, which includes New Zealand and the United States, could deliver annual gains of $5.5 billion by 2025.
But the new analysis by green lobby group the Sustainability Council sets the figure at about $1b and says it is doubtful if there would be any net benefit at all.
The review led by Victoria University academic Geoff Bertram argued about a third of the $5.5b in benefits identified by the US-based pro-free trade Peterson Institute, and repeated by ministers, should not be included ‘‘as they are outside established economic theory’’.
They did not take into account the full costs of TPP, including clauses that could sideline local courts, reduce national sovereignty and weaken regulatory autonomy.
‘‘Because these costs are not included ... the published results have a one-sided focus that means they do not provide a cost-benefit assessment of the TPP,’’ the council’s report found.
It questioned the Peterson study’s assumption of a big increase in new exporters – about half the estimated impact of the TPP – and claimed gains worth $1.4b from foreign direct investment.
The latter assumed every dollar transferred between countries generated a net gain of 33c.
‘‘We are not aware of any economic theory or modelling practice that supports this claim; in effect the authors are saying that simply transferring a dollar of capital from one country to another doubles its productivity,’’ the review said.
It argued the foreign investment gains should be discounted entirely.
The council’s executive director Simon Terry said that in exchange for a small trade gain New Zealand was being asked to sign away ‘‘large slabs of its sovereignty’’.
Through investor-state disputes settlement (ISDS) measures in the TPP, overseas investors could sue the Government in foreign tribunals if they believed new regulations would harm future profits.
Such provisions curbed governments’ ability to regulate in the public interest and should be separated from measures that would secure gains from trade, Terry said.
But Prime Minister John Key said the council was making ‘‘some big, bold assumptions’’ it could not justify or back up.
‘‘Even we don’t know what a final deal would look like.’’
He said ISDS measures were included in most of this country’s free trade pacts.
‘‘We have provisions to ensure New Zealand’s sovereignty is always paramount,’’ he said.
Trade Negotiations Minister Tim Groser said he was not familiar with the council’s report but it was an estimate based on assumptions – as was the much higher figure from the Peterson Institute.
‘‘Provided ... it was done professionally well, and there is not some political agenda behind it from the Sustainability Council, they will reflect the assumptions that they have inputted into it.’’
He had cited the $5.5b figure in the past because it came from a professional study.’’
He said he had always been sceptical about predictions of the numbers around trade deals.
An estimate of the value of the free trade deal with China, even after the deal was done, was vastly understated.
"This agreement could be worth ... anything from nought onwards. It could be worth nothing if we don’t do a deal.’’