To get serious about climate change we must recognise the role trade plays in enabling & exacerbating it, says Ryan Greenaway-McGrevy

By Gareth Vaughan

If we’re to get serious about climate change we should recognise the role trade plays in it and the Trans-Pacific Partnership Agreement (TPPA) appears a lost opportunity to do this, says Ryan Greenaway-McGrevy, a senior lecturer in economics at the University of Auckland.

Greenaway-McGrevy has been writing a series of articles on the TPPA for interest.co.nz and sat down last week for a Double Shot interview to discuss issues covered to date, and those still to come.(All articles in the series can be seen here).

One of Greenaway-McGrevy’s articles covered the TPPA’s environment chapter, and he notes that no where in this chapter, or indeed in the entire agreement is “climate change” or “global warming” mentioned.

Greenaway-McGrevy points out surveys probing attitudes towards global warming and climate change in New Zealand and around the world show the vast majority of New Zealanders think man made climate change is a potential threat, with the implication that we should do something about it.

“So the remaining question is; Is a trade agreement the appropriate place to address climate change? I would argue that the answer is yes. What we want is to have economic incentives that actually support action on climate change and right now we don’t have that,” says Greenaway-McGrevy.

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“Now we live in a world in which a country loses money if it does something about climate change. What we’d rather have is a world in which a country loses money if it doesn’t do something about it.”

“So what happens when a country unilaterally addresses climate change? Usually this involves taxing fossil fuel, which pushes up the price of energy. The next thing that happens is a lot of manufacturers – energy intensive sectors of the economy – shut down. You lose jobs and that production moves overseas to other countries that aren’t cracking down on fossil fuel use. So in the end, you’ve shrunk your economy and you’re still consuming those goods that have a high carbon footprint. But the difference is you’re just importing them from overseas. And we’ve seen that happen,” Greenaway-McGrevy adds.

The European example

Europe, he points out, is one place where this has happened.

“Europe was one of the few signatories to the Kyoto Protocol that actually adhered to what they promised to do, [and] brought down carbon emissions domestically. But then they just began importing more and more products from the US, from China, from emerging economies that were heavily dependent on fossil fuels. And so if you look at the CO2 emissions that Europeans are responsible for, they actually far exceed the emissions that are happening in Europe itself,” Greenaway-mcGrevy says.

“So taking unilateral action on climate change, it’s the worst of both worlds. On the one hand you’re punishing your domestic industry, your domestic manufacturers, you’re losing jobs and it’s not clear that you’re actually solving the problem either. You end up in a world where CO2 emissions are still being produced.They’re just not being produced at home, they’re being produced overseas.”

“If we’re going to get serious about climate change we really have to recognise the role that trade plays in enabling it, and indeed in exacerbating it. And a trade agreement is the place to do it,” says Greenaway-McGrevy.

But will the US ratify it?

Once the TPPA was signed in Auckland in February questions turned to whether all the signatories would actually ratify it. Key question marks centre around the United States, especially in this election year. Greenaway-McGrevy points out in order for the agreement to go ahead, a minimum of six countries have to ratify it.

“And the countries that do ratify it, they have to comprise at least 85% of the total GDP of the trading block. So if the US doesn’t ratify it, it’s a massive economy, then it’s not going through.”

‘We shouldn’t see much of a restructuring of the economy because of the TPPA’

A key factor of the TPPA from a NZ perspective, is that our economy is well prepared for the “freer trade” promoted by the agreement because of the painful economic reforms undertaken here in the 1980s.

“Opening up to trade can be really painful for an economy,” Greenaway-McGrevy points out. “As soon as you open up to trade there are winners and losers in terms of the composition of the economy. Usually when a developed nation opens up to trade it’s the manufacturing sector that dies off and other sectors can grow.”

“So we’ve seen this in the US, for example, where manufacturing is still on the decline and has been for a very long time.”

“What’s unique about NZ is in the 1980s we unilaterally opened up to trade. At the time people said this was perhaps foolish, we’re giving up a few bargaining chips when it comes to trade negotiations, which is true to an extent. But what it has done is that it means we have gone through that structural pain already,” says Greenaway-McGrevy.

“Our manufacturing sector has already shrunk.The manufacturers that survived that upheaval have learnt to compete in the global marketplace and compete with cheap imports. So really we shouldn’t see too many job losses, We shouldn’t see much of a restructuring of the economy because of the TPPA.”

‘What does the TPPA means for foreign investment in property?

Meanwhile, issues still to be covered in Greenaway-McGrevy’s series include investment in general, and what the TPPA means for foreign investment in property. There’ll also be a look at the implications of the TPPA on the Treaty of Waitangi, and trade remedies.

As an over arching theme Greenaway-McGrevy says the central idea of the TPPA is to put firms that are domiciled or operating within the TPPA block of countries on a level footing, on a level playing field.

“So for example NZ laws and regulations would have to treat a US firm supplying goods to NZ the same as a NZ firm supplying those same goods and services to NZ. And the flip side of that quid pro quo is a NZ firm operating in the US would have to be treated the same as a US firm.”

“That concept of a level playing field is applied to a variety of economic activities, – trade in goods, trade in services and trade in investments. If we thought about trade in goods we could think about a NZ firm exporting fruits and vegetables to the US and in order for them to be on a level playing field with a US firm supplying fruits and vegetables, they would have not to be impeded by say, tariffs or other barriers to trade. And vice versa. A US manufacturer, say exporting building materials to NZ, they would not be impeded by tariffs and other barriers to trade in order to put them on a level playing field with our domestic manufacturers,” Greenaway-McGrevy says.