Protected: Power Relations in the Trans-Pacific Partnership Agreement

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Chinese Firm’s Investment Challenged – Crafar Farm Deal on Hold

Recently, the High Court of New Zealand overturned a decision by the Overseas Investment Office to allow Chinese company Shanghai Pengxin to purchase the Crafar Farms, sparking worries about the ability to attract future FDI, maintaining positive trade relations with China, and the situation’s implications for future partial sales of state owned assets. A new decision should be reached within days, with some foreseeing the inevitability of the sale due to the potential increased export business driven by Shanghai Pengxin’s connections. The court ruling in NZ and the frenzies surrounding the potential farm sale demonstrate our simultaneous fascination for and wariness of China. With significant experience in FDI and trade agreements, China can easily perceive the public relations issues and react with public diplomacy and economic incentives. This brief post is the first of a series examining the Crafar Farms case.

 China is NZ’s second-largest export market, and NZ is the only developed country with a free trade agreement with China. The Overseas Investment Office’s initial decision to approve Shanghai Pengxin’s purchase of Crafar Farms, then, according to some was swayed by Chinese lobbyists or an effort to keep trade relations blooming. In August 2011, Treasury and OIO officials met with the Chinese political consul to discuss foreign investment rules in NZ, but apparently did not discuss the Crafar Farms deal. In order for foreigners to gain ownership of ‘sensitive assets’, they must prove that their ownership will provide ‘substantial and identifiable benefits’ to NZ; Shanghai Pengxin attempted to display benefits, which were agreed to by locals and importantly, Fonterra. In the High Court ruling, however, Justice Miller stated that an overseas buyer not only has to prove such benefits to NZ, but they must “offer a deal more beneficial than any local sale”. In this case, he ruled that the OIO overstated the benefits which Shanghai Pengxin would offer to NZ. Tim Watkin illustrates:

“Like some robed bouncer, he’s told Shanghai Pengxin – and all potential foreign investors – that we have a dress code in this country and if they want to come in they’d better polish their shoes and put on their best suit. And given the value of productive farm land to our country’s wealth, our national identity and our great-grandchildren’s prosperity, that’s probably not a bad view to take.”

 In fact, the OIO decision originally established the following:

“The Chinese Government recently confirmed that it saw New Zealand as an attractive place for investment and was encouraging Chinese companies to invest in strategic assets such as dairy farms. If this Application is refused without convincing reasoning linked to non-compliance with the Act or the Regulations (which we submit is not the case), that decision will be widely reported both domestically and internationally and will be likely to send a negative message about New Zealand’s attitude towards Chinese investment and about whether the commitments made in the New Zealand-China FTA are being honoured.

“The transaction will also confirm New Zealand’s compliance with the New Zealand-China FTA and therefore enhance New Zealand’s strategic interests.”

 Strategic assets such as farm land will continue to be sold in NZ, and in fact much farm land has already been sold to foreigners as of late; over the past 18 months, 72 farms were sold to foreign buyers out of a total pool of 10,000 dairy farms and 35,000 sheep and beef farms. This statistic was noted by PM John Key in reaction to a new poll stating that 76 percent of voters want tougher restrictions on sales of land, including farms, to foreigners. With the media publicity, High Court ruling, trade relations with China being so critical and the significance of the dairy industry to the NZ economy, the Crafar Farm deal has struck a chord with New Zealanders that the Government is attempting to mask. Given that the potential New Zealand buyers are trying hard to win over the public and the courts, and that the Chinese government created a new fund to assist with financing international takeover bids, the public perception of the value of foreign direct investment will likely become a more consistent topic. The NZ Government, then should be transparent in its influence with foreign investors when they are in direct competition with locals for strategic assets.

Business and Labor Mobility in the Asia-Pacific

On November 12, 2011, US President Barack Obama signed a bill into law which enables US citizens to join the APEC Business Travel Card (ABTC) scheme. The US already provides a ‘fast lane’ for entry for ABTC members, and the timing of America’s entry into the system is fitting given progress toward the Trans-Pacific Partnership and the recent and upcoming multilateral meetings in the Asia-Pacific. This weekend, other complementary initiatives are being launched as part of the APEC Travel Facilitation Initiative. But what is behind these initiatives, and who will they benefit? Are they stepping stones toward greater regional integration or another advantage for businesses?

According to the Business Mobility Group, the ABTC was originally developed “in response to the need for business people to gain streamlined entry to the economies of the Asia-Pacific region,” and “enables business people to explore new business opportunities, attend meetings and conduct trade and investment activities”. The main benefits are:

• “Fast-track entry and exit through special APEC lanes at major airports, and multiple short term entries to these economies for a minimum of 59 days stay each visit (click for details).

• No need to individually apply for visas or entry permits each time you travel to any of the participating APEC economies as the card is your visa.”

After trials in the late 1990s, countries have continued to sign onto the scheme, and the group now includes the following: Australia, Brunei Darussalam, Canada (Transitional Member), Chile, China, Hong Kong (China), Indonesia, Japan, Korea, Malaysia, Mexico, New Zealand, PNG, Peru, the Philippines, Russia (Transitional Member) Singapore, Chinese Taipei, Thailand, the United States and Vietnam.

A study by the Policy Support Unit (“an independent research unit at APEC”) found that those who participated in the scheme cut down on their transaction costs and saved time and money in their visa process. The target audience of the Mobility Initiative is explicit in its title: business. By saving time and money during repeated business travel to and within the Asia-Pacific, participants may be encouraged to travel even more frequently and create more business opportunities in the region with greater ease.

However, there has been no significant effort for greater mobility of permanent workers. There are several successful guest worker programs in the Asia-Pacific (primarily in Australia and New Zealand with Pacific Island nations), but each state maintains their own labor and immigration standards which conflict with the idea of a more mobile Asia-Pacific workforce. Oceania has the highest share of migrants than any other region, with 15 percent of residents in 2005 followed by North American with 13 percent. More specifically, 24 percent of residents in Micronesia were migrants in 2005, followed by 20 percent of residents in Australia and New Zealand.*

Despite movements toward closer economic relations through the Trans-Pacific Partnership, bilateral trade deals, and easier travel and access for business people around the Asia-Pacific, migration policies are yet to be coordinated in a way mirroring the Schengen Zone in Europe. Rather, countries prefer to create a global supply chain that links labor within their own countries, enabling them to better control the workforce and allowing the more powerful economies to dictate what industries are affected by ‘free trade’. In 2007 ASEAN states signed the Declaration on the Protection and Promotion of the Rights of Migrant Workers, but the agreement is not legally binding.

The UN Human Development Research Paper “Migration in the Asia-Pacific Region: Trends, Factors, Impacts”, by Phillip Martin, contains key points about migration in the region:

• “Most Asian nations receiving migrants have policies that aim to prevent migrants from settling, most do not consider migration essential for economic growth, and most do not want immigrants to change their culture and identity.

• Migration policies in the major Asian receiving countries can be framed by a triangle, with countries such as Singapore welcoming foreign professionals to settle and rotating less-skilled foreign workers in and out of the country, Japan allowing the employment of foreign professionals but remaining largely closed to less-skilled foreign workers, and the Gulf countries dependent on migrants to fill most private sector jobs.

• With migration restricted and considered temporary, there are few institutions developing data and long-term migration options or promoting regional dialogues to improve migration management.” (15)

The report points to factors motivating out-migration as well as the migration policies of the major labor-sending countries of the Asia-Pacific region:

• “Many Asian nations want to send more workers abroad to reduce joblessness, generate remittances, and accelerate development. Many governments have created agencies to―market their workers to foreign employers.

• Migrant-sending governments are also concerned about the rights of migrants, and many have agencies to regulate recruiters, prepare workers for overseas jobs, and look after migrants while they are abroad.

• Most governments measure the benefits of migration by the number of migrants going abroad and the amount of remittances received. These measures may not reflect progress in human or economic development that will make migration unnecessary in the future.” (34)

“Most international labor migration in Asia involves workers moving from one Asian nation to another for temporary employment” and “a culture of migration reportedly prompts many children to plan to follow their parents abroad to work”.* Moreover, remittances are an essential part of some states’ economies and provide uneven social and economic benefits. In the same way that business travel has been critical to creating avenues for state relationships and closer economic ties, real labor mobility will become critical to citizens’ ability to be lifted out of poverty, to experience unique opportunities or to create a new life for their families.

If businesses can readily have access to new markets and laborers, there should be reciprocal opportunities for laborers at different levels to have less constrained access to new employers and industries. International labor migration has accumulated a lot of baggage over the years despite its typically short-term or short-distance travel (primarily due to guest worker programs). A new generation of workers believes they are entitled to greater mobility given the ability of multinational corporations to create a base for influencing the economic and political structure of their countries. The APEC Business Travel Card scheme and others incorporated into the Business Mobility Initiatives demonstrate forward-thinking programs that move in the right direction; however for real progress to be made corresponding steps should be taken to make mobility more equitable.