Could the TPP become Key’s most embarrassing moment?

OPINION

Gareth Morgan

See also:  TPP and drugs: Douglas Pharmaceuticals lawyer sees fishhooks beyond patents

On Tuesday our Prime Minister admitted that the Trans Pacific Partnership (TPP) would raise the cost of medicines purchased through Pharmac.

The government has moved from saying Pharmac wouldn’t be compromised to saying it will but the taxpayer will fund the damage.

Mr Key is also asserting the trade benefits will make it all worthwhile – at the same time Tim Groser is saying that New Zealand has yet to secure any additional access for our agricultural exports. One of them is blowing smoke

Drug Money
Key has confirmed what many suspected all along – the price of any TPP deal would include longer and stronger patents around many of the drugs we use. This is the price of negotiating with the United States where the pharmaceutical lobby has a strong hold.

The PM has shifted to saying the TPP won’t impact on the money we hand over the counter at the pharmacy (the co-payment) but admits we may need to spend more of our taxes on drugs. His somersault could still mean a number of things:

  1. Pharmac faces higher drug costs with the same budget, so fewer drugs get subsidised. Ultimately this means that fewer Kiwis get treated with the money, so ultimately the ones that ‘miss out’ are the ones that are paying.
  2. Pharmac gets more money to fund the higher costs from elsewhere in government, possibly from the health budget. Again, someone loses out but it is less clear who that is.
  3. Pharmac gets new money. This would come through higher tax revenue, which might (if we are lucky) result from the extra trade we get through the TPP. This would be a true win/win.

Don’t worry – Government can pay
Let’s assume the last point is what the PM has in mind – the TPP generates more trade, which means farmers earn more, which means more tax gets paid. There are a number of assumptions that this rests on. Firstly, that the extra trade will materialise. We have no idea if this is the case, and listening to Mr Groser in the weekend there’s very good reason to doubt that – more on this below.

Secondly, will more trade result in increased tax revenue? That is not as simple as it sounds. Fonterra doesn’t pay much tax. For farmers the whole dairy industry is designed around chasing tax-free capital gain. Sure the industries that supply farmers pay tax, but will that be enough?

There is a need for some serious modelling on both the costs of the TPP to Pharmac and the likely trade and tax benefits to the country. The modelling needs to be arms length and independent to avoid a repeat of the farce that occurred with the recent climate change consultation – even the Cabinet paper acknowledged the numbers released publicly were wrong. These numbers are needed before any deal is signed, otherwise the public don’t know what they are signing up to.

The public also has to consider other potential downsides of the deal – such as the Investor State Dispute procedure. As we have discussed before, no trade deal is worth giving up our sovereignty for.

Will extra trade materialize?
The billion dollar question is whether the extra trade that is promised will even materialise. Murmurs coming out of negotiations suggest that the Japanese, Canadians and Americans are not budging on the key issue that matters to us – access for our agricultural products. These markets have traditionally been tough nuts to crack, particularly Japan which has had very high tariffs on food.

So why we are even bothering with this process – to be discussing such fundamental issues for our economy at the eleventh hour? It raises the question whether our interest in the TPP is really just part of a desire to be part of a club regardless or whether we actually win anything from this round. We’ve talked before about the geopolitical clash that TPP actually represents and New Zealand is trying to stay in the good books of both China and the US. If that’s all we are to get from this TPP affair, then the government’s acceptance of an agreement that Mr Groser has procured nothing from, could well be National’s most embarrassing moment. That’s how threatened New Zealanders feel by the ISDS aspects of this deal.

Gareth Morgan is a New Zealand economist and commentator who in previous lives has been business as an investment manager. He is also a motor cycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment. This post first appeared on Gareth's World.


17 · Got a question about this story? Leave it in Comments & Questions below.

This article is tagged with the following keywords. Find out more about MyNBR Tags

Post Comment

17 Comments & Questions

Commenter icon key: Subscriber Verified

You make some very good point Gareth. I don't believe that Key and Groser have NZ's interest at heart and they have been exposed as being more than economical with the truth over the past few days. I'm not convinced that NZ will really benefit from joining this club, when the true cost of the potential downsides are taken into account. It would also appear that Labour's conditional support is waning.

Reply
Share
  • 3
  • 0

I think it's all spin and stage managed to get kiwis to support it. Drip feed the bad news then in the next day or two Groser comes out with a story on hard fought "major concessions" and we will all roll over and sign away our sovereignty and ability to control our destiny to corporate lawyers in US. Well done lads. True patriots.

Reply
Share
  • 1
  • 0

Having voted for Key and National twice I've been feeling more and more disillusioned and betrayed by them. Why?

1. Key's 2007 promise of concrete action on the Auckland housing crisis has never materialised. Instead, he has resisted action (or even acknowledging the crisis) at every turn. What an about face.

2. He's persisted in kicking the superannuation can down the road for someone else to pick up. We know action is needed sooner rather than later. His inaction is costing the country in the future.

3. His dishonesty toward NZ around the TPP, and his seeming indifference to the powerful negatives that have been leaked consistently, and now seem to be materialising. Now Key is foisting the fanciful notion on us that erosion of Pharmac's power and increasing the amount we will pay for medicine is no big deal. What a crock.

4. Disregard of the important entitlement everyone has to privacy, and erosion of the separation of branches of state (and our sovereignty), as evidenced by the whole Kim Dotcom debacle. KDC is an idiot and a thoroughly undesirable person, but this is no basis for Key & Co undermining our democratic institutions, rule of law, and independence in the world - or citizens' right to privacy.

From being a long-time supporter of National I have found myself turning into someone who can no longer stomach them.

The often trotted out "Well, who else?" is no good reason for continuing to support these dishonest, unpatriotic clowns.

Reply
Share
  • 4
  • 0

Excellent post The Horse.
Not dealing with Superannuation is indeed pathetic, and for me is John Keys most embarrassing moment although it will not be noticed today.
Putting it off for the next generation to deal with (sound like Greece?), when a "pragmatist" would make a start now while there is time to deal with it in a more even keeled measured approach.
Housing has been a dogs breakfast exacerbated by both parties over many years not willing to properly deal with housing investor friendly tax rules, while at the same time using immigration to prop up the NZ economy.

Reply
Share
  • 0
  • 0

TPP is a bad bad deal and why we are so blind to see that i can not understand.

Reply
Share
  • 1
  • 0

Sounds a bit like it is going to end up like the Australian - USA Free Trade Agreement where once the spin and political expediency had died down everyone ended up worse off:

http://insidestory.org.au/the-costs-of-australias-free-trade-agreement-w...

Reply
Share
  • 2
  • 0

nice article from the link.

Sure hope NZ doesn't become like that too, although must admit all evidence so far seem to point towards us heading in the same direction if not worse.

Reply
Share
  • 0
  • 0

Correction to "everyone ended up worse off"... I beg to differ. US big pharma, big agribiz, big banks, big multinational and the deep pocket lobby will always win. As to "no trade deal is worth giving up our sovereignty for", it's a done deal, we have all been sold out and sold out in secret. It is ironic, perhaps intentionally so, that China and Russia are excluded and coincidentally they are the only ones strong enough to thwart the corporate takeover, which is why the whole TPP front is geared toward isolating the Chinese/Russian block. This is just another phase of the the new cold war. TPP is also not about "free trade", Key should be aware that by signing the deal he is leading and sell us into a disadvantageous unholy alliance, to the detriment of our sovereignty. TPP will wipe out what's left of any vestiges of our national independence. We really need God to defend us, if she exists.

Reply
Share
  • 2
  • 0

All treaties should be subject to an independent audit before ratification by Parliament. That would be an excellent constitutional reform.

Reply
Share
  • 1
  • 0

There's no way US and Co will open their Ag markets to anywhere near what we might wish. So, just what are we getting to offset the higher costs for Pharmac? Why isn't Obama telling his farmers they should accept more agricultural imports as the extra trade benefits for US pharma, for instance, will make up for it?

Reply
Share
  • 0
  • 0

Basically, essential points are; 1) Who believes John Key any more?
2) What is he personally up to?
3) Has he become a liability to New Zealand - as far as our interests are concerned - not just in this field?

All these are questions with replies which should give us considerable concern.

Reply
Share
  • 1
  • 0

Gareth's comment a "TPP deal would include longer and stronger patents around many of the drugs we use" is quite wrong. The TPP will have no impact on the price Pharmac must pay for existing drugs. The impact is only on drugs that haven't been invented yet. For them, the parents will last a couple of years or so more.

Reply
Share
  • 1
  • 0

John Key is a shareholder in the Bank of America.

In whose 'national interest' is John Key working?

For US or the 'U$'?

Penny Bright

Reply
Share
  • 0
  • 0

Penny....What worries me that NZ and some of its Political parties have been severely manipulated and compromised , it's called product placement in the movies.

I am sure an astute dude like Gareth is well aware .... I wish he would form a new political party and leave his mark for INTEGRITY on the Nation. C'mon Mr Morgan perhaps it would be the ultimate legacy!

Reply
Share
  • 0
  • 0

I don't think an international trade agreement which puts NZ sovereignty and our Laws second after unelected international courts, can be called 'embarrassing'. It's Treason. Plain and simple.

Reply
Share
  • 0
  • 0

Gareth Morgan answers the question himself, in a limited way when he points out the win/win impact of TPP: increased overall trade will enable us to pay higher prices for a better range of effective pharmaceutical products.
TPP is unlikely to have an unbalancing impact on the NZ economy. It is much more likely to create waves of opportunity as a result of increased breadth and depth of trade volumes across the Pacific.
New Zealand is unique in so many ways that it is difficult for people to look beyond the traditional "big bad Uncle Sam" worldview that prevailed in the late 20th century.

Reply
Share
  • 0
  • 0

We need every export earning dollar we can get to pay off debt. To earn more just to hand it over to the Pharmaceutical industry is just plain dumb. And Key and Croser call themselves leaders - "Yea Right" comes to mind.

Reply
Share
  • 0
  • 0

Post New comment or question

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.

NZ Market Snapshot

Forex

Sym Price Change
USD 0.7025 -0.0133 -1.86%
AUD 0.8915 -0.0210 -2.30%
EUR 0.5929 -0.0139 -2.29%
GBP 0.5340 -0.0079 -1.46%
HKD 5.4795 -0.1098 -1.96%
JPY 79.0870 -1.8550 -2.29%

Commods

Commodity Price Change Time
Gold Index 1288.1 7.380 2017-10-19T00:
Oil Brent 57.0 -1.160 2017-10-19T00:
Oil Nymex 51.5 -0.530 2017-10-19T00:
Silver Index 17.2 0.223 2017-10-19T00:

Indices

Symbol Open High Last %
NZX 50 8124.1 8124.1 8124.1 -0.57%
NASDAQ 6583.7 6605.3 6624.2 -0.29%
DAX 13036.3 13042.6 13043.0 -0.41%
DJI 23107.5 23167.2 23157.6 0.02%
FTSE 7542.9 7542.9 7542.9 -0.26%
HKSE 28783.8 28798.8 28711.8 -1.92%
NI225 21363.0 21448.5 21363.0 0.40%
ASX 5896.1 5896.1 5896.1 -0.22%