Policy and constitutional implications of the Singapore agreement

By Bill Rosenberg


There are vital constitutional and policy implications in the controversy over the Singapore free trade agreement (officially called a “Closer Economic Partnership” because the words “free trade” have had a bad press lately).


Yet the public is being given only nine days by the Select Committee hearing submissions, to obtain, read, understand, analyse and make submissions on the complex 192 page document, which was secret until 11 September.


There has been much comment on the agreement’s Treaty of Waitangi provision.


Article 74 of the agreement allows “more favourable treatment to Maori”, including measures “in fulfilment of [New Zealand’s] obligations under the Treaty of Waitangi”.


There have been vehement arguments for and against the Article. Labour says it is necessary to allow for social policy to “close the gaps”. The opposition say it is divisive.


What is important is that both sides of the argument acknowledge that the agreement will have long term effects that bind future governments. That is why the debate is taking place.


Whatever your views of the agreement itself, this constitutional aspect sounds loud warning sirens. How can today’s government bind future governments?


Actually it is worse than that. Currently, Cabinet has the power to ratify international agreements, with only token reference to Parliament. Cabinets can bind future Parliaments.


Surely Cabinet is accountable to Parliament and shouldn’t be able to tell the current Parliament what to do, let alone Parliaments yet to be elected? That is a basic constitutional convention.


Admittedly in this case, Helen Clark has magnanimously assured us that Cabinet will abide by Parliament’s vote – though uninformed by a proper Select Committee process. But if things don’t go her way, and the Singapore agreement does not get approved by Parliamentary vote, she can still go back and get Cabinet to ratify it.


Future, less charitable, governments can, without a word to the public, return to giving Parliament only a token role by exercising Cabinet’s extraordinary power.


Ratification would force changes in a number of pieces of legislation. The most important is one which reverses Labour/Alliance policy on freezing tariffs with respect to trade with Singapore.


More importantly, it would prevent future Parliaments from changing many current policies without first getting the agreement of Singapore. For example, we must


       Accept tariff-free imports designed, checked and packed in Singapore with 60% of the value potentially created in appalling, low wage conditions, in an Indonesian free trade zone, perhaps putting people here out of work

       Accept tariff-free seafood caught anywhere in the world by vessels “registered or recorded” (not necessarily owned) in Singapore

       Retain the higher threshold of $50 million for proposals from Singapore-based investors which require approval by the Overseas Investment Commission, rather than the previous $10 million

       Leave the fast money from Singapore’s financial dealing rooms, which may destabilise our currency or balance of payments, uncontrolled except after a crisis has hit

       Avoid favouring local over Singaporean suppliers in local and central government contracts worth more than $125,000.


Yet Singapore retains the right to considerably stronger measures, such as controls on foreign investment, various types of incentive payments, and a very powerful collection of government-controlled companies, which own some of the $1.2 billion of Singaporean investment in New Zealand.


This agreement is designed to be a precedent-setter for New Zealand and the rest of APEC – a “Trojan Horse”[1] in the words of Asia 2000’s head, Tim Groser. If this one is ratified, the government hopes to apply it to a more ambitious programme of negotiations with the rest of Southeast Asia, South Korea, Chile, Canada and the United States.


That means these issues will only grow in importance. They will remove further options that this and future governments have for managing our economy, our social divides, and our relationship with the rest of the world.


At a time when the wisdom of purist free trade and investment policies is being questioned in the streets, in United Nations human rights reports, by World Bank economists, and in many developing countries, the fervour with which these agreements are being pushed seems strange.


It is particularly strange for a government elected to turn around the excesses of the free market and favour local development.


More appropriate would be a thoughtful review of the economic and social effects of such policies, and development of a proper constitutional process.


That process should acknowledge that international agreements are like entrenched legislation. Almost constitution-like, they are difficult to change and bind future Parliaments.


The process must be based on careful scrutiny in open and consultative procedures like those used for often less important legislation.


The Singapore agreement must be subject to such a process too.


Bill Rosenberg researches and writes on foreign investment and New Zealand’s economic relationship with the world.


[1] “Beyond CER: new trade options for NZ”, address by Tim Groser to the New Zealand Institute for Policy Studies, 15/3/00.