Graham Kennedy: Tariff (Malaysia Free Trade Agreement) Amendment Bill — First Reading 
Graham Kennedy: Tariff (Malaysia Free Trade Agreement) Amendment Bill — First Reading 
[Volume:662;Page:10276] 
Dr KENNEDY GRAHAM (Green) 
: 
 The New Zealand - Malaysia Free Trade Agreement is not the first of its kind to come before this House. It follows the China and ASEAN free-trade agreements and will be followed by the Gulf States some Pacific countries and India. The fundamentals of these agreements are all the same so the debates in the House have a certain quality of déjà vu. The debate over trade is simply part of the debate over the global economy. The difference between National and Labour orthodoxy on the one hand and the Green alternative on the other is in the most fundamental way a difference in economic philosophy. We have to revisit first principles as it were. Essentially National and Labour embrace traditional neoclassical economics. The Greens adopt ecological economics. The difference is qualitative. 
The Government’s case for free trade rests on two arguments: short-term morality and efficiency. The Green’s case for sustainable trade rests on two arguments: long-term morality and scale. The moral argument as propounded by the Minister of Trade Tim Groser is the following: the global population is set to grow from 6 billion to 8 billion by 2030 and food demand will increase by 50 percent. New Zealand has an obligation to feed that expanding and urbanising population. That moral obligation is accompanied by a financial interest in increasing our export income. So morality sanctions us to engage in production and trade and to do so at optimal efficiency. The global economy is to grow through productivity specialisation reflecting the theory of comparative trade advantage. The combined economic output is increased and all countries stand to gain to some extent even if some gain more than others. 
So we are all better off and New Zealand in particular combines economic wealth with moral satisfaction. With a population of 4 million we feed some 18 million people around the world already. With improved productivity we could feed more. However specialisation means that our land financial capital and labour force will be required to realign from the less to the more productive sectors. But this can be done through time-bound phased-out regimes. 
That world view was most recently expressed in Mr Groser’s foreword to the United Nations Conference on Trade and Development’s 2010 trade and environment review. Mr Groser wrote: “All countries have a common interest in food security removing impediments to trade and reducing global emissions of greenhouse gases. … Increased economic wealth would also improve the ability of countries over time to contribute to global action on climate change.” I note the phrase “over time”. The Minister believes that the world with New Zealand punching above its weight as a fast follower has the luxury of time as it slopes off into the 21st century; that it is not our problem to determine the pace of change. 
The Green world view is different. It has to do with sustainability and it has a different conception of both the magnitude of the problem and the urgency of its resolution. The carrying capacity of the planet based on current technology is less than 8 billion. In fact it is less than today’s 6 billion. Precisely what figure the optimal population is depends on the level of material consumption for humanity as a whole. If we all live Western lifestyles we need six planets. Even at the average global level of consumption today we have an ecological overshoot of some 30 percent. So with our current technology and our current lifestyle we are simply overpopulated on the planet. If we cannot bring ourselves to accept this unpalatable fact then alternatively we have to acknowledge that the global economy is breaching the planet’s ecological limits. 
In light of this New Zealand’s moral obligation is not so straightforward. The National-Labour position is not to query the greater human numbers but to simply feed them and make a dollar. The Green position is to search for optimality of scale. That is a long-term moral imperative rather than a short-term moral choice. Mr Key and Mr Goff toss the phrase “sustainable development” around through a vague intuition that it is a modern political good but they do not understand its true meaning and they do not comprehend its implications for macroeconomic management or trade policy. 
British scientist James Lovelock contends that the planet’s carrying capacity is closer to 1 billion that we may not reach 8 billion and that the population will probably decline towards that much lower figure. Whether or not he is accurate with the figure he is correct within an order of magnitude; National and Labour are not. Does the moral obligation for New Zealand exports hold for a global population of 20 billion? British governmental adviser John Beddington warns of a perfect storm around 2030 when resource depletion climate stress population numbers lifestyle aspirations and energy constraints roil the global economy and inflame the body politic. Whether or not he is accurate in his time prediction he is correct about the prognostication. 
So where does this leave global trade policy? Globalised free trade is the manifestation of the problem of the globalised economy. The case for free trade rests on the assumption that trade is voluntary. Both parties must be better off than before the voluntary act. When trade is based on the absolute advantage enjoyed by the countries for the commodities in question this is self-evident but the Ricardian theory of comparative advantage still justifies trade even when a country may have absolute advantage in all goods. The theory is that the combined production of all countries trading is greater than if they produced separately and that each country stands to gain individually even if not to the same extent. 
Only last week the World Trade Organization chief Pascal Lamy dismissed any challenge to the notion that open trade brings overall societal benefit. He said that contested policy provides a fertile field for the growth of urban legend and falsely premised ideas with popular appeal. He identified what he saw as six fallacies or economic myths and sought to refute them. Time does not permit me to examine each one here. Mr Lamy contended that the benefits of trade which he identified as economic well-being and political harmony will be realised only if the overall policy context is right. How right he was. Mr Lamy called for a public debate so the response of the Greens is to identify the mistakes in his thinking. 
There are six fallacies in the Ricardo-Lamy-Groser theory of free trade and they are as follows. First the extra combined production from free trade cannot in fact be achieved without extra resources. There is the increase in the rate of depletion in the natural resource base from which the product is made. What trade economists mean when they say “no extra resources” is simply no additional labour or financial capital because neoclassical economics omits natural capital in its theory. Second the extra transport costs associated with free trade are not included. International transport is energy intensive often subsidised and its external costs are omitted from its pricing. Sea trade emits 0.8 billion tonnes of carbon dioxide—3 percent of all anthropogenic emissions—and this is expected to triple by 2050. The same is expected of aviation and surface freight. 
Third free trade assumes the economic cost of specialisation to be negligible but it ignores the social cost it requires retraining and perhaps physical relocation. That is a loss in human welfare. The invisible hand has narrowed the freedom to choose. Fourth free-trade agreements have a withdrawal clause and if a trade becomes too disadvantageous New Zealand can theoretically opt out. But that assumes that specialisation is reversible. Is a furniture-maker to return to the Wairarapa after a brief stint as a sharemilker in Canterbury simply because things did not work out? 
Fifth the specialisation results in a narrow range of sectoral products country by country. That makes each country vulnerable to the vagaries of the global economy. When cute varieties of ice cream and salted crackers pass in the night across the Tasman in the name of choice and carbon emissions that is simply daft. Sixth Ricardo’s free-trade theory was confined to trade in goods alone. The two productive factors labour and capital remain confined within national boundaries. Only commodities crossed national frontiers. Today’s globalisation bequeaths far greater mobility in financial capital than in goods. The Minister glorifies our export growth to China since the free-trade agreement came into force but he ignores the land and other assets going to Chinese ownership as we speak. Far from freeing up a country to benefit from free trade New Zealand becomes a 21st century colony imprisoned through global free investment. 
This Malaysian free-trade agreement is simply more of the same. As such it spells disaster not because of nefarious intent; Mr Lamy and Mr Groser are honourable men but their economic thought needs reform. When this bill comes to the House for a second reading I shall explore the philosophical differences between the National and previous Labour Governments and Green alternatives and how they play out in the case of the Malaysia trade agreement.