Stuff.co.nz, New Zealand
Green party voices concerns over FTA
15 May 2008
NZPA. Bilateral agreements such as New Zealand’s free trade agreement with China threaten the right of democratically-elected governments to regulate to protect the environment or people’s safety, Green Party co-leader Russel Norman told a parliamentary select committee today.
The first round of submissions on the proposed agreement were heard today by the foreign affairs, defence and trade committee.
Dr Norman said there were a raft of concerns around the FTA with China, about human rights issues, labour conditions and environmental protection.
However, he focused the party’s submission on the issue of indirect expropriation.
He said if the New Zealand Government introduced a law designed to protect the environment, or human safety, and the ruling reduced the value of an asset owned by a Chinese investor, under the FTA, the investor would automatically be able to sue the Government.
The case would be heard by an international tribunal, which would be able to order the Government to pay compensation.
The only defence would be to argue the law was proportionate or reasonably justified.
New Zealand would be particularly vulnerable if it positioned itself as a "leader of the pack" in an area such as environmental protection, as the tribunal would base its decision on global norms.
Dr Norman said there were numerous examples where international governments had been forced to compensate companies after changes in law.
He cited the Metalclad case, where the Mexican government prevented the company putting a toxic waste plant on a water source, and Metalclad sued the government successfully for $20 million, Dr Norman said.
In Canada, the government tried to ban a fuel additive because it thought it was dangerous to human health, and the producer, Ethyl Corp, sued the government.
The government backed down and was forced to compensate Ethyl Corporation. It did not ban the fuel additive under pressure from the case.
Dr Norman said both cases came under the North American Free Trade Agreement (Nafta), which included similar clauses to the FTA with China.
He said globally, the response to the Nafta cases had been surprise that indirect expropriation would apply to the kind of cases it had applied to.
"So the Norwegian government for example have put up a model bilateral treaty to try and get around the problem that these treaties are placing restrictions on governments to try and regulate to protect the environment and to protect human health."
Dr Norman said he thought the select committee should recommend against voting for the treaty on the basis that it "fundamentally undermines the right to regulate".
The executive director of the New Zealand Business Roundtable, Roger Kerr, said the agreement was a very good one, and that he thought all major business groups would be saying the same thing.
The agreement offered "major benefits" to consumers and exporters.
Mr Kerr said there were quite legitimate concerns about human rights but the Roundtable argued they should be pursued separately from trade matters.
Encouraging China to become an open and engaged member of the international community would help improve rights within the country.
"Engagement is much better than isolation," he said.
In response to Dr Norman’s comments, he said New Zealand was a rule of law country and it was less likely to need protection against being sued for expropriation than China was.
The balance of the agreement was likely to be in New Zealand’s favour.
Mr Kerr said if property or assets were taken inappropriately then a government should face the challenge of compensation for that.