Dr Cullen advised yesterday that he had received advice from Treasury (well known international trade law experts) that suggested National Party policy of a 51% NZ ownership requirement from strategic assets could be a breach of the Singapore, Thailand and China FTAs and be a breach of New Zealand's WTO commitments.
This surprised us, and we will OIA this advice on Monday.
But before having a look at these agreements we should note that we have yet to see a detailed policy from National on this issue, and if this policy was written down we would expect Tim Groser to have a hand in the drafting of this policy. Should this happen we would expect the policy to state explicitly that it would be subject to international agreements to which New Zealand was a party ie if it was inconsistent with the WTO it would have to be rewritten and it would be overridden by any bilateral or regional commitments that might be on the books.
Singapore - Groser should know this well as he negotiated the first half of the agreement.
"Ministers, in determining whether to grant approval, act in accordance with a screening regime (a non-legally binding description of which is appended to this Annex) which may be adjusted or replaced from time to time by New Zealand Government legislation, regulation or policy setting."
Thailand - dreadful agreement. Hate reading it but it says
"The criteria applied to overseas investments that require approval under New Zealand overseas investment regulations may be adjusted or replaced from time to time by New Zealand Government legislation, regulation or policy settings"
We can't see a problem here - National could alter the criteria to impose a 51% threshold on strategic asset investment and not breach either agreement.
China - more complicated - different model.
"1. Article 138 [National Treatment commitment] does not apply to:
any existing non-conforming measures maintained within its territory;
the continuation of any non-conforming measure referred to in subparagraph (a);
an amendment to any non-conforming measure referred to in subparagraph (a) to the extent that the amendment does not increase the non-conformity of the measure, as it existed immediately before the amendment, with those obligations.
2. The Parties will endeavour to progressively remove the non-conforming measures."
Very interesting. NZ's OIO regime is a non-conforming measure. We have agreed with China to progressively liberalise the regime and, while we can change criteria, we can't increase the degree of non-conformity. Yes, we agree with Treasury here. National would not be able to impose the 51% idea to China. Thanks Treasury for making the select committee process much more interesting. Word of warning - Jane Kelsey has been reading The Hive from almost day one....
WTO
This would only be a problem for services commitments in mode 3 that are bound in New Zealand's services schedule. We can't find this schedule on the MFAT website. There is horizontal language (applying across all service sectors) about our overseas investment regime in this schedule also. We will post further on this when we can find the schedule.
