Wednesday, 9 March 2016

My submission on the TPPA

New Zealanders have one day left, as I write, to enter submissions on the TPPA to the Ministry of Foreign Affairs and Trade. This is mine. As you’ll see, I have been very, very polite about some of the crazy ideas the TPPA contains. And I certainly haven’t covered everything. Go on, make a submission. Speak now or forever hold your peace.

I submit that the Government of New Zealand should reject the Trans-Pacific Partnership Agreement, hereinafter referred to as the TPPA.

I believe in international cooperation. I believe that all people have the same fundamental rights. I firmly oppose any suggestion that the rights or freedoms a person enjoys, including economic freedoms, should depend on that person’s nationality. I acknowledge that trade and international agreements have been major contributors to the historic decline of interstate war since 1945. The TPPA’s own Preamble affirms several laudable goals of just governance which I gladly endorse, as when the Parties resolve to

strengthen the bonds of friendship and cooperation between them and their peoples;
recognise their inherent right to regulate and resolve to preserve the flexibility of the Parties to set legislative and regulatory priorities, safeguard public welfare, and protect legitimate public welfare objectives, such as public health, safety, the environment, the conservation of... natural resources, [and] the integrity and stability of the financial system...;
recognise further their inherent right to adopt, maintain or modify health care systems;
affirm that state-owned enterprises can play a legitimate role in the diverse economies of the Parties;
promote high levels of environmental protection, including through effective enforcement of environmental laws, and further the aims of sustainable development, including through mutually supportive trade and environmental policies and practices;
protect and enforce labour rights, improve working conditions and living standards, strengthen cooperation and the Parties’ capacity on labour issues;
promote transparency, good governance and the rule of law, and eliminate bribery and corruption in trade and investment;


recognise the importance of cultural identity and diversity among and within the Parties.

I reject the TPPA as a whole because I believe its provisions undermine these goals.

I am conversant with the theories of Adam Smith and David Ricardo; I am not ignorant of the benefits of free trade. Without being a fan of self-interest as such, I can see the advantage of a system which harnesses it for mutual benefit rather than waiting for each participant in global society to care as much for every other participant as they do for their own family and friends. Like the TPPA’s signatories, I do not think that markets can perform their beneficial functions without the rule of law. However, I go further. I do not think that the role of the law is restricted to protecting markets and market participants from external threats. The market has inherent biases and instabilities which need to be systemically corrected, preferably pre-emptively rather than in crisis. And in my opinion the law cannot effectively perform either its protective or its corrective functions without a vibrant, engaged democracy.

The same studies that demonstrate the violence-reducing effects of trade and of international agreements also demonstrate a similar effect for democracy – at least, for the forms of democracy that have been progressively developed since about 1900. These studies confirm the predictions of theorists since Immanuel Kant. In a democracy, leaders are accountable to the people whose welfare their decisions impact upon. (In an ideal democracy, the leader is merely an executor of the decisions of the people; I do appreciate that achieving this ideal involves coordination problems which may become prohibitive as the ideal is approached.) Democratic states avoid war and advance human rights better than undemocratic states because the people have more staked on the outcomes of these policies than the leaders.

Free markets, according to their advocates, contain self-correcting mechanisms, preventing waste by lowering the prices of plentiful goods and preventing shortage by raising those of scarce ones. They rely on competition, which brings the best products to the fore. They impose no pointless restrictions on people’s freedom, but they do encourage empathy and respect, without which no sales pitch can succeed. My objection to the TPPA does not depend on disputing these arguments. I do assert, however, that democracy has all the same merits. Its corrective effect on the errors of the market I will expand upon below. It thrives on competition, which favours the best policies. And it liberates people by giving them real power to effect social change, while its dependence on the arts of persuasion and cooperation, by requiring people to engage with other people as thinking beings rather than as economic units, fosters humane values.

I allow that democracy achieves its results more slowly than market forces, and distributes goods and services with less fine-grained sensitivity to local needs. However, democracy also has a number of advantages over market forces, which outweigh the disadvantages for many of the problems one might set it to solve. In a market, each participant’s influence is weighted according to their wealth; the rich have more power than the poor. One might object that the poor have market power in the sense that sellers who over-price their goods will make no sales and lose money. This objection ignores the fact that many goods are necessities of life, which the poor cannot choose not to buy. Sellers in such markets have only other sellers’ power to contend with.

Many people argue privately, though few public figures are willing to do so explicitly, that the power of the wealthy is not a problem calling for a solution. Personal wealth in a market economy, they claim, is proportional both to one’s merits (such as one’s work ethic and competence) and to one’s contributions to the system. Therefore, they infer, to weight each participant’s influence according to personal wealth is the fair and prudent policy. Some even assert that this principle should be extended to democracy – that one’s vote should be weighted according to one’s tax payments. I strongly disagree. Apart from anything else, buying political influence by payments to the government is the very definition of bribery and corruption. But more to the point, the meritocratic arguments are flawed.

Succeeding in business takes more than hard work and skill. Every business venture also involves an irreducible element of risk; that is the single biggest reason why businesspeople are held up for us to admire. Taking a risk by definition means accepting the possibility of failure without fault. This necessarily implies that some people who fail are just as hard-working and skilled as those who succeed. The greater the risks, the higher that proportion must be. Hence, wealth correlates at best imperfectly with merit.

The argument from contribution to the economy is worse. Value is added to the economy when customers exchange money for products, and when workers exchange products for time. Most present-day business enterprises are structured around the assumption that management and direction – that is to say, coordinating workers with each other and with customers – are greater contributions, and more fundamental to the business process, than any of the production work. They are non-trivial tasks and create value like other labour, but I believe they are far over-valued in today’s corporate workplaces. And to concentrate wealth in the hands of a few depresses demand for goods and services, since the majority are unable to afford them, and thus slows rather than advances the economy.

It is not my purpose here to argue that the interaction between democracy and trade is zero-sum, that any gains for the private sector must of necessity be losses for civil society. But I do contend that agents in the private sector sometimes act in ways that harm civil society, and that some of these actions benefit their agents and will therefore not be weeded out by market forces. The rule of law must apply to all; it cannot be invoked only in response to a criminal act, since the concept of “criminal act” only makes sense if the rule of law is already in operation. Any trade agreement between civil societies must include safeguards against harmful behaviour by trading enterprises. The TPPA does not.

Some products are harmful to their consumers, or to other parties whom the consumers do not wish to harm. Of course if the consumers come to know of the potential for harm, the market will punish the producers. But for that very reason, the producers have no market incentive to inform the consumers. It is therefore troubling to see the following in the TPPA:

No Party shall require a supplier to disclose an oenological practice on a wine label or container except to meet a legitimate human health or safety objective with respect to that oenological practice.

It is good to see that human health and safety may be safeguarded, but what about environmental objectives, prevention of cruelty to animals, or fair-trade issues? What does the wine industry have to hide? Even if the practices as such are not regulated, surely it is only fair to let consumers decide for themselves? Economic models that demonstrate the benefits of free markets generally assume perfect market information, an assumption which is here being violated.

It does appear that the wine industry held an unexpected degree of influence in the wording of the TPPA; this is not the only section where wine production is singled out for special treatment. However, the dispute settlement provision is worded in a way that invites an extremely broad interpretation:

Unless otherwise provided in this Agreement, the dispute settlement provisions of this Chapter shall apply:
...(c) when a Party considers that a benefit it could reasonably have expected to accrue to it... is being nullified or impaired as a result of the application of a measure of another Party that is not inconsistent with this Agreement.

Since the TPPA explicitly provides that wine producers not be made to disclose their production practices, it would be entirely reasonable for another industry to expect not to be made to disclose their production practices. The TPPA, in effect, strips away the consumer’s right to be informed about the products they consume. This is one of the characteristic errors of markets which a democratic state has the responsibility to correct.

It is particularly troubling that the TPPA forbids member states from requiring producers to disclose environmental information about their production practices, because consumer choice has long been recommended by free-market advocates as the proper remedy for environmental malfeasance. The TPPA does allow for member states to pass environmental laws, that is

a statute or regulation of a Party, or provision thereof, including any that implements the Party’s obligations under a multilateral environmental agreement, the primary purpose of which is the protection of the environment, or the prevention of a danger to human life or health, through:
(a) the prevention, abatement or control of: the release, discharge or emission of pollutants or environmental contaminants;
(b) the control of environmentally hazardous or toxic chemicals, substances, materials or wastes, and the dissemination of information related thereto; or
(c) the protection or conservation of wild flora or fauna, including endangered species, their habitat, and specially protected natural areas.

but explicitly excludes the conservation of natural resources from the definition of “environmental laws”:

[“environmental law”] does not include a statute or regulation, or provision thereof, directly related to worker safety or health, nor any statute or regulation, or provision thereof, the primary purpose of which is managing the subsistence or aboriginal harvesting of natural resources.

I can only suppose that the authors of the TPPA believed that the free market’s ability to correct for shortages would suffice to conserve natural resources, if left without interference. If so, I disagree. Natural resources, by definition, don’t have to be produced by anybody, and they can’t raise their own asking price. I do not believe that private ownership will save them from what Garrett Hardin (following William Foster Lloyd) called the “tragedy of the commons”, where every user takes everything they can because they know someone else will if they don’t. Privately owned resources will be up for sale to the highest bidder. The higher bidders will tend to be those who have more cash in hand at the time of purchase. And although conserving natural resources is always wiser in the long term than squandering them, the squanderers tend to be those with the most cash in hand at a given point in time.

Perhaps that is why the TPPA does include a concession to laws designed to conserve natural resources. It has, alas, a gaping loophole.

Provided that such measures are not applied in an arbitrary or unjustifiable manner, or do not constitute a disguised restriction on international trade or investment, paragraphs 1(b), 1(c), 1(f), 2(a) and 2(b) shall not be construed to prevent a Party from adopting or maintaining measures, including environmental measures:
...(iii) related to the conservation of living or non-living exhaustible natural resources.

What environmental regulation could not, in the hands of a skilled corporate lawyer, “constitute a disguised restriction on international trade or investment”?

I think many people today, particularly in business and politics, tend to think of environmental values as “nice-to-haves”, which ought to be sacrificed if they conflict with human prosperity. Certainly I have heard people say in so many words that New Zealand ought to continue expanding dairy production, river and soil degradation be damned, so long as we have an advantage in it. As I said above, I am familiar with the theory of comparative advantage, and I don’t deny the mathematics behind it. I do claim, however, that in the real world it is subject to limits.

As with the theory itself, these are easiest to explain if we start with the individual scale. I type lecture notes for a wage, and pay other people for their goods and services with my wage, rather than (for instance) grow all my own food. But if I were to type notes throughout the University’s working day without a break, I would soon damage my arm nerves and muscles to the point where I could no longer work. Environmental issues are simply health issues scaled up to the national (or higher) level; New Zealand has already seen dairy exports turned back at the border due to environmental contamination. Further, since the demand for typed notes may some day decline, I keep other skills in practice by doing a few things for myself instead of paying others for them, such as baking, carpentry, and music. Analogously, I do not believe democratic governments step outside the bounds of their responsibilities by encouraging a degree of local production, something also threatened by the TPPA:

No Party shall, in connection with the establishment, acquisition, expansion, management, conduct, operation, or sale or other disposition of an investment of an investor of a Party or of a non-Party in its territory, impose or enforce any requirement, or enforce any commitment or undertaking:
(a) to export a given level or percentage of goods or services;
(b) to achieve a given level or percentage of domestic content;
(c) to purchase, use or accord a preference to goods produced in its territory, or to purchase goods from persons in its territory;
(d) to relate in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows associated with the investment...

It is also disappointing that the environmental law chapter fails to mention the greatest environmental crisis of our time, that being climate change. I suppose greenhouse gases such as carbon dioxide would fall under “pollutants or environmental contaminants” or “environmentally hazardous or toxic chemicals, substances, materials or wastes”. But climate change has already passed the point where it can be prevented by halting the emission of greenhouse gases. Much effort will be needed in coming decades to mitigate its effects. Such efforts might be hampered by some industrial or agricultural practices, and the TPPA ought to have included clauses allowing governments to intervene in such cases.

Finally, I turn to the intellectual property provisions of the TPPA. (I had expected to include a section on labour laws, but I am pleasantly surprised to find that the TPPA requires nothing more on that issue than a maintenance of the status quo.) Whereas in environmental matters the TPPA places excessive limits on government intervention, in the matter of copyrights I find it mandates excessively heavy government intervention. I have noted above that trade, international agreements, and democracy are all known to reduce violence and promote human rights. One underlying factor common to all three is the free dissemination of ideas. The TPPA will severely hamper this.

I grant that artists, writers, musicians, and other content creators have every right to be paid for their work. I grant that new information-sharing technologies have created a situation where creative work is frequently stolen. I grant that this is an especially pressing problem in industries, such as film, where each creative work involves a large investment of capital and labour. And I grant that when creators have no recompense for their creations, this is not conducive to the dissemination of ideas. However, the TPPA’s attempt to fix these problems is even less conducive to the dissemination of ideas.

Almost all new creative art works are derived to some extent from older ones. Shakespeare’s Hamlet was a remake. The New Zealand film industry’s flagship enterprise, the Lord of the Rings films, were derived from books written by J. R. R. Tolkien, who died in 1973. Under present international copyright treaties, Tolkien’s works enter the public domain in 2023, which would allow filmmakers, if they so choose, to produce interpretations of The Silmarillion – a work containing at least as much marketable material as the Lord of the Rings and Hobbit trilogies combined – without hindrance from copyright suits. Should the TPPA be enacted in its present form, filmmakers will have to wait until 2043.

Each Party shall provide that in cases in which the term of protection of a work, performance or phonogram is to be calculated:
(a) on the basis of the life of a natural person, the term shall be not less than the life of the author and 70 years after the author’s death;
(b) on a basis other than the life of a natural person, the term shall be:
         (i) not less than 70 years from the end of the calendar year of the first authorized publication of the work, performance or phonogram; or
         (ii) failing such authorized publication within 25 years from the creation of the work, performance or phonogram, not less than 70 years from the end of the calendar year of the creation of the work, performance or phonogram.

In their zeal for upholding copyright, the TPPA’s authors have, perhaps inadvertently, created a severe disincentive for creating works that are even partly derived from others. Imagine if the team behind the Lord of the Rings films had had this to contend with, had the Tolkien Estate filed a judicial complaint:

In civil judicial proceedings concerning copyright or related rights infringement and trademark counterfeiting, each Party shall provide that its judicial authorities have the authority to order the seizure or other taking into custody of suspected infringing goods, materials and implements relevant to the infringement, and, at least for trademark counterfeiting, documentary evidence relevant to the infringement.

I feel sure that the global community can come up with a solution to the problem of incentivizing creativity. I don’t know what that solution is, but I don’t believe it is to increase the severity of our copyright protections. We will not find the solution if we lock these or any other regulations away from the reach of democracy.

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