Leaked draft of trade deal exposes risks — professor

Original NZ Herald article of 14 June 2012 print edition.  Subsequent online update here.

The Trans Pacific Partnership trade deal being negotiated would expose New Zealand Governments to litigation for tightening regulations in such areas as gas and oil exploration or even introducing a capital gains tax, according to Professor Jane Kelsey of Auckland University.

She was commenting last night after seeing a chapter on investment, which was leaked to the Washingtonbased organisation Public Citizen.

She and the group are strong critics of the trade deal being negotiated by nine countries, including the United States, New Zealand and Australia.

Professor Kelsey said the leaked chapter had been authenticated as a recent draft. It contained a section on investor-state disputes which would allow investors to claim damages against Governments via special tribunals if their investments are impaired by government action.

The leak showed Australia was the only country of the nine — the others involved are Singapore, Chile, Brunei, Malaysia, Peru and Vietnam — objecting to the investor-state dispute proposals.

Dr Kelsey said the NZ Government last week opened tenders for oil and gas exploration in 23 onshore and offshore sites at a time when it had weak regulation on such exploration. ‘‘You can guarantee those oil firms would threaten to sue if new regulations hit their share value or profitability.’’

Whether they had a good legal case would be beside the point.

‘‘They can tie up Governments for years in massively expensive legal battles. Just that threat can ‘chill’ the regulatory decisions,’’ she said.

The draft text should ‘‘worry the heck out of Labour’’ if it was serious about introducing taxes on capital gains or speculative financial flows.

Professor Kelsey believed a section protecting investors against ‘‘expropriate or indirect expropriation’’ could apply to a government reregulating the broadcasting market, for example, or cutting the number of poker machines allowed in a casino.

Dr Kelsey also said the draft would limit what a government could do in a financial crisis because it would not be able to impose controls on the transfers of money in or out of the country.

She called on negotiators to release the current texts at their next meeting on July 2 in San Diego so the deal could be subject to informed scrutiny.

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