By Bill Rosenberg
Asia 2000 head, Tim Groser, described the Singapore free trade agreement as a Trojan Horse for what he called the real negotiating end-game: a possible new trade bloc encompassing all of South East Asia and Australia and NZ. The agreement is currently before a Parliamentary Select Committee, and will be debated by Parliament later this month.
But it is a Trojan Horse in other ways too. Aziz Choudry wrote (New Zealand Herald Dialogue, 6 September) about how the agreement could be used to import goods from low-wage Indonesian free trade zones.
In investment, its unprecedented provisions could form a back door entry to New Zealand for overseas investors wanting to avoid tighter controls. Given Singapores strategic position as a Southeast Asian commercial hub, the agreement will undermine the efforts of a New Zealand government trying to regain some control over hot capital or foreign investment in general.
For example, the financial crisis in Asia in 1997 was triggered by investors with hot money short-term investments panicking at the state of indebtedness and current account deficits in several countries. Huge inward capital flows of previous years were rapidly reversed, causing severe financial, economic and social problems. Millions were thrown into unemployment and poverty. Governments fell. Whole industrial sectors were sold to U.S. and European corporations.
Malaysia reacted by imposing capital controls to prevent further runs. China and India came through the crisis relatively unscathed because they already had controls in place, as had Chile. Consequently, many economists are favourably reconsidering such policies.
Do high indebtedness and danger-level current account deficits sound familiar? What if a New Zealand government decides it needs capital controls to prevent a similar crisis in New Zealand, or to reduce the dollars volatility?
We could do it right now, but if the Singapore agreement is ratified, we wont be able to do it for capital controlled by any investor with a legal presence in Singapore.
That could be almost any major company in the world: most corporations with any international ambitions have a presence in that commercial hub.
Now suppose, say, Bankers Trust (now part of Deutsche Bank) decided it wanted to protect its ability to pull money in and out at will. A Bankers Trust dealer speculated several hundred million dollars against the New Zealand dollar in 1987, crashing it by 10 percent, so its not an implausible scenario. All it needs to do is to make all its investments and do all its dealing through a Singapore subsidiary.
So the Singapore agreement effectively rules out an extremely important tool for managing our economy and protecting our currency. To use capital controls, a New Zealand government would have to either negotiate back the right to use them from Singapore, or leave the agreement.
If it broke the agreement, overseas investors (but not New Zealanders) could take action for compensation.
To take another example, until November 1999, all overseas investment proposals worth more than $10 million required the approval of the Overseas Investment Commission. Only weeks before the election, the National government made buying our assets easier by increasing that threshold to $50 million, except for buying land or fishing quota.
The higher threshold means that that even fewer overseas investors are scrutinised under our admittedly feeble criteria to filter out undesirables. For example, there is a requirement that individuals controlling investments be of good character.
Until the Singapore agreement is ratified, the government can return the threshold to $10 million. The right to tighten scrutiny further was given away in commitments to the WTOs Services agreement (GATS) in 1995.
Now the $50 million threshold will be formally sealed into the Singapore agreement.
Suppose after the Singapore agreement has been ratified, a New Zealand government decides it wants more control of overseas investment and pulls back the threshold to $10 million. It could do that for all but investors from Singapore.
Is it really filtering out those undesirables? All a company controlled by people of bad character has to do is make the New Zealand investment through its Singapore branch. If the takeover is worth less than $50 million, then they will still face no scrutiny at all, unless rural land or fishing quota is involved.
Tommy Suharto, son of ex-President Suharto of Indonesia, was sentenced to 18 months jail last week for massive corruption. He sold his Canterbury high country station, Lilybank, to business associate L.Y.A. Poh of Singapore for $1 in 1999. This agreement will make it harder for us to stop the likes of the Suharto retinue hiding its wealth here.
Again, an important policy option for New Zealand is undermined.
In the investment area alone, the Singapore agreement freezes or weakens our laws that control overseas investment. Furthermore, there is a commitment to progressively lessen even the limited controls that remain.
This is no level playing field. Singapores investment rules are more stringent than New Zealands. Its investment in New Zealand, which, at $1.023 billion is over five times New Zealand investment in Singapore, is largely in the service industries, where New Zealand has made many new commitments in the agreement. It looks like a sad but familiar story.
New Zealand has also made significant commitments in government procurement, tariffs, and other areas which reduce even further the options that future governments have to manage and develop the economy, close the gaps, and achieve other social goals.
Despite these far-reaching implications, the public submission process and parliamentary debate have been cut short, to merely 15 sitting days of Parliament, on the justification that few legislative changes are required.
The agreements real significance is in what future governments are prevented from doing, and in its wider significance as a Trojan Horse in more ways than one.
Bill Rosenberg researches and writes on foreign investment and New Zealand's economic relationship with the world for Christchurch-based GATT Watchdog and the Campaign Against Foreign Control of Aotearoa.
 Beyond CER: new trade options for NZ, address by Tim Groser to the New Zealand Institute for Policy Studies, 15/3/00.
 See Articles 27 and 31 of the Agreement.
 A U.S. Bankers Trust dealer, Andrew Krieger, has recorded that in late 1987 he played (bet) several hundred million possibly as much as a billion New Zealand dollars against New Zealands currency, leading to a crash by 10% of the value of the New Zealand dollar (The Money Bazaar - inside the Trillion-dollar world of Currency Trading, Andrew J. Krieger with Edward Claflin, Times Books N.Y., 1992, p.93ff).
 Statistics New Zealand, International Investment Position at 31 March 2000.