Key’s Use of CER to Bypass Opposition to Foreign Investment Laws a Foretaste of a TPPA

Media Release: Professor Jane Kelsey. Friday 18 February, 2011

Last year the National-led government backed off its intention to further weaken New Zealand’s foreign investment laws after it faced a groundswell of public opposition. Instead, it made some mild moves to tighten those controls.

On Wednesday, the government achieved its original goals through the backdoor when the Closer Economic Relations (CER) investment protocol with Australia was signed.

“This is another example of an international treaty that was negotiated behind closed doors. New Zealanders only got to see it when it was done and dusted and too late to change”, said University of Auckland academic, Professor Jane Kelsey,

“The government could not make changes to the foreign investment regime through normal democratic decision making processes, but then achieves the same result, in secret, through an international treaty and effectively put those rules beyond future amendment by the Parliament.”

According to Professor Kelsey, “this is a foretaste of what we can expect with the Trans-Pacific Partnership agreement (TPPA) across a vast raft of domestic policy and regulation.”

“It became clear in the preceding days that the protocol would significantly raise the threshold for requiring approval of foreign investments, putting Australian purchases of even more New Zealand assets beyond any review.

“The Whitcoulls crisis is a timely reminder of the risks arising from our massive exposure to Australian parent firms.”

The agreement also gives Australian investors additional legal protections, which only became clear once the signed text became available.

These provisions include a promise of “minimum standards of treatment” and to protect Australian investments against “indirect expropriation”. Both provisions will tie the hands of governments when introducing future legislation, for example to regulate mining, banks or the aged care industry, where Australian investors are already dominant.

The only saving grace is that the Australian government and its firms cannot enforce these investor rights under CER, which has no dispute mechanism.

There is a high risk, however, that both kinds of enforcement rights against New Zealand governments may in turn come through the backdoor of a TPPA, to which Australia and the US, the country’s largest foreign investors, are negotiating parties.

The CER agreement is exempted from the enforcement mechanisms under the Australia New Zealand ASEAN free trade agreement. But the US and other parties are expected to resist this strongly in any TPPA.

“The time has come to stop this backdoor route where governments can use obtuse and secretive “trade and investment” treaties to circumvent democratic processes and bypass popular opposition to unpopular policies”, Professor Kelsey said.

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