Alliance stance on the proposed Singapore-NZ Closer Economic Partnership

September 2000

Spokesperson
Jim Anderton

The Singapore-NZ Closer Economic Partnership

The Alliance response to the proposed Singapore-NZ CEP focuses on two broad issues.
First, the contribution the proposed agreement would make to ensuring that trading arrangements contribute to improved standards of living and improved standards of environmental protection.
Second, the extent to which the sovereign ability of New Zealand is retained, enabling New Zealanders to make laws in its own economic, social, cultural and environmental interest.

Fair Trade

"We cannot reduce tariffs only for the benefits to accrue to the stronger partner. Integration that causes destructive movements of capital, skills or labour defeats our purposes. Balanced development and equitable trade relationships must be our watchwords."

- Nelson Mandela, speech to the World Economic Forum, Harare, 21 May 1997.

The Alliance supports fair trade.
The Alliance recognises that New Zealand is a trading nation, and that the exchange of goods and services with other nations helps to create jobs, rising income levels and development we need.
The Alliance fully supports, and believes the Government should facilitate however it can, trade and investment that increases employment, raises incomes and boosts development, provided arrangements are not environmentally destructive.
Trade with other nations will not necessarily bring unequivocal benefits, however, where other nations have a competitive advantage based on exploitation of workers or the environment.
For example, New Zealanders support a free trade agreement with Australia because we recognise that Australia has a very similar economy and social structure to ours. In particular, Australia features a similar minimum wage, social security services, democratic government, rule of law and environmental protections.
Free trade with a country such as Australia needs to be contrasted with free trade with the hypothetical example of a country that has no minimum wage or social security; that exploits workers in the tradeables sector; or that exploits the environment destructively. Singapore is not in the latter category. However, the contrast between a near-optimal trade opportunity, such as CER, and a negative hypothetical example provides a template for analysing proposed trade agreements, including the proposed Singapore-NZ CEP.
International trade arrangements should be based on trade advantages in areas other than labour costs, social security or the environment.
If the only way a nation can gain an advantage is by imposing exploitative wages and employment conditions, or by destroying the natural environment, then the gains of trade can be more than wiped out.
The Alliance believes trade arrangements should be organised to lift trading nations and their citizens up, rather than to impose a ‘race to the bottom.’
The Alliance supports trade policies that make the strongest possible contribution to New Zealand's development. Agreements that can contribute to a reduced standard of living for many New Zealanders, or to destruction of the environment, undermine, rather than contribute to, New Zealand's economic development.
Positive outcomes are usually claimed by the supporters of free trade. The Alliance believes that positive outcomes can be ensured by stipulating them as conditions of agreements, rather than leaving them to chance, or the market, lest they become merely the results of failed experiments.
In practice this would mean building in to both bilateral and multilateral agreements provision for improvement in minimum standards – for example, the development of a minimum wage standard and its steady improvement; or the use of environmental measurements and a commitment to improve environmental outcomes.
If trade and investment agreements deliver the gains that are claimed, then such conditions would impose no more than very low monitoring costs.
The Alliance believes it is particularly important to include minimum employment and environmental standards in the Singapore agreement when it is being regarded by many of its proponents as a model to be applied to other countries.

Sovereignty

The Alliance believes that as a sovereign country New Zealand should retain as much control as possible over its own economic, social, environmental and cultural destiny.
The proposed agreement restricts the ability of a future government of New Zealand to make laws protecting New Zealand’s economic sovereignty.
Alliance policy on overseas investment supports investment that is in the national interest, for example, because it helps to create jobs, introduce new technology or boost exports without negative environmental effects. However, the Alliance does not support investment that is simply the purchase of existing assets where that entails the loss of jobs, the withdrawal of technology of the destruction of the environment.
It is possible that at some time a Government of New Zealand may wish to introduce laws enacting protections to sovereignty, such as national interest criteria. For example, pose the question, how much of New Zealand would we think it was too much to sell? We have been relatively relaxed about the sale of the first few thousand hectares and the first 60% of all publicly-listed companies. However it is possible to imagine that New Zealanders may be more protective of the sale of the last square inch of New Zealand to an overseas owner, or the last share in the last public company. In that case, it may be that a future government may wish to restrict, rather than to maintain or liberalise further overseas investment rules.
The proposed CEP with Singapore makes it virtually impossible to lower investment thresholds from current levels for Singaporean investors. Another example is that it is unlikely to be possible to introduce local broadcast content quotas, for example, that favour New Zealand content, New Zealand producers or New Zealand artists over Singaporean content, producers and artists.
The heavily reduced ability to regulate investment flows in the national interest is particularly important because of the strategic position that Singapore occupies. Singapore is an internationally renowned transit point for international investment. Under the proposed CEP, it will be relatively easy for investment to be directed via a Singaporean base.
Many proponents of the proposed agreement see its main feature as being tactical: The agreement is a device to kick-start a regional free trade and investment process.
The use of bilateral agreements designed to expand into regional agreements has gathered pace since the collapse of the Multilateral Agreement on Investment. One of the main reasons that the MAI foundered was that it threatened to reduce the ability of sovereign nations to regulate for their own economic, social, cultural and environmental protection. The expanded use of agreements such as the proposed Singapore-NZ CEP revives the same possibilities.
It is inevitable that there will always be some trade-off between the desire to protect our own sovereignty, and our desire to influence the conduct of other nations. For example, we sign international agreements renouncing torture in exchange for an undertaking from other countries similarly to restrain themselves from barbarism.
The Alliance believes, however, that there is a very important distinction to be made between participating in international agreements designed to improve the level of human rights across all countries on the one hand, and on the other hand granting foreign citizens the same rights as citizens of New Zealand to unlimited commerce on our own shores.

Constitutional position

It is unusual for members of a government to publicly oppose a trade agreement prior to signing. However, we are following historical precedent and the mechanisms specifically agreed to by the Labour-Alliance Coalition Government for dealing with coalition differences.
In 1932, the British National Government Cabinet ‘agreed to differ’ on the issue of tariffs, allowing Ministers of one party to speak and vote in the Commons against a tariffs bill proposed by a Minister from another party.
In 1975, Prime Minister Harold Wilson explicitly permitted opponents of the European Common Market to campaign against it from within the Cabinet.
New Zealand's procedures for dealing with such differences have been carefully developed since MMP was introduced, and the Alliance believes stable mechanisms are in place. Although in 1932 the ‘agreement to differ’ was viewed as constitutionally controversial, all modern constitutional scholars now accept it is permissible. See for example, Geoffrey Marshall (Constitutional Conventions: The Rules and Forms of Political Accountability, revised ed., Oxford University Press, 1986, page 57):
“Perhaps the principle (of Cabinet unanimity) in its entirety is a matter for the Cabinet and the Prime Minister between them to apply or not as they wish.”
For New Zealand, the Labour-Alliance Coalition Government put in place a mechanism for differentiation by agreement back in December 1999. Cabinet has since explicitly agreed on a process for dealing with the proposed Treaty.
Coalition partners will follow carefully agreed processes. The proposed agreement will be put to a Select Committee for public discussion and comment. Following that, it will be brought to the House for full debate. There will be a vote in the House on the matter.
Once the vote is taken, the Alliance will accept the decision of the House. This means that if the House votes in favour of the treaty, the Alliance will not use its special position to frustrate the decision of the majority of Parliament.
In formal terms, it is the Cabinet, and not the House, which accepts international obligations and treaties. However, the Alliance has long campaigned that Parliament's views should be predominant in the acceptance of international treaties, because of the enormous significance of such treaties on New Zealand domestic law.
Although not formally binding, therefore, in practical terms for this proposed agreement, the House's vote will settle the issue. The Alliance believes it is inconceivable that the Cabinet would ratify the Treaty against the wishes of the House.

Conclusion

Cabinet has agreed that the proposed Singapore-NZ CEP agreement will be referred to a parliamentary select committee and public submissions on it will be invited. The agreement will then be the subject of a vote in the House.
The Alliance will be voting against the agreement when it comes before Parliament because the Alliance believes the agreement should incorporate measures to improve the standard of living of New Zealanders and to protect the environment, as well as making provision for the protection of New Zealand's economic sovereignty.
The Alliance will respect the outcome of the Parliamentary vote.

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