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TPPA leak: sweeping restrictions on SOEs, more worries for Labour

Published By   /   July 30, 2015  /   Comments Off on TPPA leak: sweeping restrictions on SOEs, more worries for Labour

MIL Analysis+Reportage – EveningReport.NZ

Source: Professor Jane Kelsey.

Professor Jane Kelsey.

Professor Jane Kelsey.

‘The Trans-Pacific Partnership Agreement (TPPA) has given up another secret – unprecedented new restrictions on state-owned enterprises (SOEs)’, says University of Auckland law professor Jane Kelsey who has monitored the SOE negotiations intensively. ‘Labour needs to add this chapter to its “red lines”.’

The SOE chapter is new. No other agreement, including US FTAs, has such sweeping restrictions on the right of governments to support their SOEs.

Wikileaks has just posted a ‘guidance’ document for TPPA ministers on SOE-related issues (https://wikileaks.org/tpp-soe-minister/). Although dated December 2013, Professor Kelsey, who wrote the analysis for Wikileaks, believes it reflects the content of the current text.

The rules seem to prevent SOEs from having hybrid public good and commercial roles, as TVNZ did under the Clark Labour government. The TPPA could make it impossible to re-establish a genuine public interest broadcaster that also receives revenue from advertising.

Nor could SOEs receive government support, such as subsidies or guarantees, if that adversely affects ‘another country’s interests’. That may spell trouble for KiwiRail, which competes with road operators like Toll Holdings, now owned by Japan Post.

It could also prevent the government from providing guarantees for KiwiBank or KiwiSaver that were not also provided to foreign firms, or taking less or no dividends from an SOE, because that would give it an unfair commercial advantage.

Creating a new SOE, such as Labour’s proposed KiwiAssure, would require initial injections of capital and support while it became established. Again, that seems to breach the rules.

‘The TPPA will make SOEs prime targets for privatization on the familiar argument that if they are purely commercial the state should no longer own them’. Professor Kelsey observed that Bill English’s attack on public ownership of remaining SOEs may not have been a coincidence. 

‘National should remember its disastrous experiments of turning public hospitals into Crown Health Enterprises, and the fully commercial Crown Research Institutes’, Kelsey recalls. ‘Now it wants to lock that model in for the indefinite future and tie the hands of future governments who believe state enterprises have a public good role.’

 ‘John Key needs to continue his newfound openness and tell us what handcuffs the TPPA will place on future governments when it comes to existing and future SOEs and show us what protections theyhave negotiated’,  said Professor Kelsey.

Technical notes:

SOEs would be subject to the entire TPPA agreement, such as the intellectual property, government procurement and investment chapters, where they exercised authority delegated by the government. That could expose them to investor-state disputes where foreign competitors consider an SOE’s actions have breached the special rights of foreign firms under the investment chapter, including investor-state dispute settlement. 

The document shows at least some governments are nervous about the chapter. Questions posed for ministers included: 

How should an SOE be defined? 

Would there be exceptions to protect sensitive SOEs? 

Should the rules apply to state, provincial and local government enterprises?

Most importantly, how can countries protect their pursuit of public policy goals and their autonomy to make future decisions on existing or newSOEs?

The US clearly wants the rules to be fully enforceable by the state parties, backed by sanctions. Other countries want more emphasis on dialogue and reviews. Ongoing monitoring and review will put SOEs and governments under constant scrutiny anyway.

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