At its first reading in Parliament on 31 January 2024, this Bill was supported by all parties except Te Pāti Māori. It has been forwarded for consideration by the Foreign Affairs, Defence & Trade Committee, which was due to report back by early April. Public submissions closed in mid-March.The European Union (EU) has already had the EU-NZ Free Trade Agreement (FTA) ratified by the European Parliament (EP) and wants to have everything done and dusted before EP elections begin in June. In case Members of the European Parliamant (MEPs) change their mind, I guess. Hence the current tight timeframe for this Bill, although negotiations under National and Labour Trade Ministers took eight years.

This Bill¹ is not a ratification of the signed FTA by the representatives of the people. It's an omnibus Bill that amends other legislation so as to make us compliant with the terms of the FTA. I suppose if it isn't passed and New Zealand remains uncompliant with important provisions, all those negotiators named and thanked in Hansard will have to go back to the table. Seems unlikely, eh.

At the first reading of the Bill, speakers for Labour and the Troika parties waxed lyrical about global trade and our economic dependence on it. The Greens support the Bill at this stage, since some of the usual bad FTA bits have been omitted - no Investor-State Dispute Settlement (ISDS), better on intellectual property rights - and some good bits included - enforceable clauses to protect climate and environment policies, protection of labour standards, animal welfare, women's rights under the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW) and our unique Pharmac.

The Greens will raise other concerns in select committee.Te Pāti Māori (TPM) raised theirs at once. Tākuta Ferris (TPM) described the FTA as "a form of soft colonisation": the Government negotiated Treaty bits without Māori, sidelining them. The Treaty clauses had not been improved in 20 years, despite the growing importance of the Māori economy, to protect wider Māori rights, interests and mātauranga. She pointed out that in 1835 Māori signed their own trade agreement, Te Whakaputanga (the Whakaputanga flag was the recognised ensign for Māori trade ships). The EU-NZ FTA was "yet another failed opportunity to re-imagine trade policy".

David Parker (Labour) responded that the Treaty provisions were "hard, hard fought... as good as they have been in any other agreement" and only defensible if in identical form in every trade agreement. Which seems to confirm Ferris's point. Both James Shaw (Greens) and Phil Twyford (Labour) slagged previous FTAs, ISDSs and the "juggernaut of neoliberalism".

Parker, who had led work on the Trade for All principles on which the EU FTA is based, acknowledged that ISDSs were "becoming less popular in the world", and said the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) "went wrong" in closing off any new areas of investment to Overseas Investment Office screening.

What Will This FTA Do For Us?

It will mean immediate tariff elimination or duty-free quotas for 91% of our current trade with the EU - for exports such as kiwifruit, onions, apples, wine, mānuka honey, fish and seafood. The amount of tariffed quota for dairy and red meat "will not meet everybody's expectations", says Minister McClay. But our exporters will save $100 million in tariffs, he says and, once fully implemented, the FTA "has the potential" to boost our exports to the EU by up to $1.8 billion a year and gross domestic product (GDP) by up to $1.4 billion a year. Note the fudge words "up to... up to". Someone please save those stats and check in five years.

What will our law amendments do for the EU? They implement "rules of origin", including "made in the EU" labels (or EU member states) and geographic indicators (e.g. for wine). I'll probably be happy to buy "feta-style" or "soft-n-salty" NZ cheeses, but I'm unclear if we get reciprocal protection for the kupu "manuka" on our tariff-free honey exports to the EU. Within two years we'll implement a visual artists' royalty, and within four years we'll extend our copyright protections by 20 years and prohibit circumvention of digital locks (I wonder who got that in and why?).

The FTA includes Government commitments to "encourage increased trade and services, facilitate investment flows, increase access to Government procurement contracts across EU member states, and facilitate the movement of business people across borders" (only business people, note). Pre-pandemic, the EU was our fourth-largest market for services exports. This FTA reduces regulatory barriers faced by business and financial services exporters to the EU, equivalent to a 28% tariff reduction, McClay says.

The EU is our second-largest source of overseas investment. The FTA raises the threshold for requiring Overseas Investment Office (OIO) consent to acquire "significant business interests" from $100 million to $200 million invested. The threshold for requiring consent is also $200 million in the NZ-UK FTA and the CPTPP. This Amendment Bill adds the EU-NZ FTA to s.61A of the Overseas Investment Act (OIA), making it tenth in a list of FTAs since 2008 with "alternative monetary thresholds". The sub-clauses don't state the consent threshold for each FTA, and it looks like they can be changed by Order-in-Council.

The Overseas Investment Office's Website states: "For some Australian investors the threshold for 2023 is $586 million and for 2024 is $618 million (updated annually by Gazette), and for parties to certain other free trade agreements the threshold is $200 million". The Website for the law firm Bell Gully, which handles a lot of the OIA applications we see, states:

"The threshold for Australian non-Government investors is higher than the $NZ200 million threshold that applies to certain investors from the ten other Comprehensive and Progressive Agreement for Trans-Pacific Partnership member nations and from certain other nations with which New Zealand has 'most favoured nation' obligations under existing trade agreements, such as the People's Republic of China and Hong Kong".

OIO Threshold Well & Truly Eroded

So, the $100m threshold set by Parliament has been well eroded by flows of free trade capital in and out. CAFCA has always advocated reducing it to $50m. New Zealand is a small economy, and most New Zealand owned businesses are small. Of all businesses with six or more employees, only 4% have more than 100.² $200 million - let alone of $618 million - can buy a fairly "significant" chunk of a particular sector, without any need to seek consent or meet any criteria. Without public notice or scrutiny.

A monitoring of OIO consents shows that most overseas "investments" are about business acquisition, not business development. Overseas acquisition may indeed help a few good ideas rocket off to global success. Or enable a local business owner or farmer to retire. Or local products, jobs and businesses may be replaced by global brands, eliminating competition. Small pieces of history, and of community, disappearing. Either way, local profits are sucked overseas - "returns on investment" are returns on our labour, land and resources. Then we sell milk powder to balance the budget. That's free trade.

Endnotes:

1. The Bill in all its detail can be found here. Its' explanatory statement includes links to the Ministry of Foreign Affairs and Trade's (MFAT) disclosure and national interest statements. The FTA itself has been signed, but is not yet in force, as MFAT's ZIP file (2.8 MB) says on the tin: www.mfat.govt.nz/en/trade/free-trade-agreements/free-trade-agreements-concluded-but-not-in-force/new-zealand-european-union-free-trade-agreement/nz-eu-free-trade-agreement-by-chapter/ .
2. Statistics NZ, Infoshare, December 2022.

Watchdog - 165 April 2024