HK-CEP Consultation Report 10/15

The Royal Forest and Bird
Protection Society

The Royal Forest and Bird Protection Society of New Zealand is a large,
national environmental group with around 40,000 members.

Forest and Bird's overall position.
Forest and Bird will oppose the
signing of the Hong Kong-New Zealand Closer Economic Partnership (CEP) unless
local and central government environmental decision making is exempt from the
provisions of the agreement, environmental services are exempt from the
agreement and a not-lowering-standards clause is included.

Forest and Bird is sceptical of government assurances that the agreement will
not impact on the environment given that there is a pattern internationally of
such assurances proving false, but it will look to see real changes in the
manner in which the agreement develops.

Forest and Bird urges the government to renegotiate the present Hong Kong-NZ
and other Investment Promotion and Protection Agreements (IPPAs) in order to
exempt environmental decision making from any expropriation clause and remove
any opportunities for investor-state dispute resolution processes.

Importance of ensuring trade is consistent with environmental
goals.
Forest and Bird welcomes the intention of the government to
negotiate the proposed Hong Kong-New Zealand CEP in a manner that is consistent
with the government's environmental goals. This marks a clear change from
previous policy and it is important that this change is reflected in the wording
of any final agreement. This will require more active involvement from the
Department of Conservation, Ministry for the Environment and Local Government
New Zealand.

Forest and Bird welcomes the release of the discussion paper. It says,
however, the discussion document's coverage of issues relating to trade and the
environment is inadequate. This means that the public will have inadequate
information on which to provide meaningful comment to government.

A summary of submissions should be made available to submitters who wish it.
It is important that submitters are advised of the outcomes that result from
their submissions and that they receive feedback on how their concerns are being
addressed through the negotiations.

To be meaningful, submissions should result in the changes to the negotiating
brief of the New Zealand government's negotiators. Drafts of the agreement
should be made publicly available, including the initial draft that New Zealand
takes to the negotiating table.

Forest and Bird's recommendations.

• That submitters be provided with a copy of the summary of submissions prior
  to going to Cabinet.
• That the summary of submissions be made publicly available and on the MFAT
  website.
• That drafts of the text be made available during negotiations.

Overall impression of the discussion document.
Forest and Bird is
disappointed at the level of disclosure about environmental concerns relating to
trade. Forest and Bird is unclear whether this is the result of ignorance within
MFAT of the environmental consequences of trade and trade agreements or whether
this is the result of the withholding of information.

Information that Forest and Bird would liked to have seen in the public
discussion document includes:

• information on projected increases in trade flows and its implications for
  biosecurity.
• projections of increased costs of maintaining current or similar levels of
  biosecurity control and inspection in the face of increased trade flows.
• likely cost and impact of pest establishment.
• what constraints the agreement places on domestic environmental regulation
  and the kinds of regulation that would not be permitted under the agreement.
• disclosure of existing concerns relating to the implementation of GATT
  Article XX and its failure to protect environmental regulations.
• disclosure of existing concerns relating to the manner in which investment
  protection provisions have been used elsewhere to attack environmental
  regulation.
• disclosure of concerns relating to the difficulty of addressing production
  process-based environmental issues relating to trade and investment.
• disclosure of concerns relating to the primacy of trade agreements over
  environmental agreements.
• options for CEP provisions that would provide protection for the
  environment, the level of protection that these provisions would provide and
  what the limits would be of such provisions.

Forest and Bird seeks:

• That the government seek input from the Ministry for the Environment on the
  environmental effects of trade and the implications of trade and investment
  policy for domestic environmental regulation.
• That the government produce a discussion document on the environmental
  effects of trade and trade and investment agreements with options for inclusion
  in the Hong Kong CEP.
• That the above information be made publicly available on all future
  investment agreements being considered by MFAT and government.

Trade Issues
Non-Tariff Measures - Technical Barriers to Trade

• There is a potential conflict in seeking to reduce compliance costs for
  sanitary and phytosanitary requirements while on the other hand the government
  appears to want to maintain a 'robust biosecurity regime'.

Nothing in the agreement should prevent improvements in biosecurity controls
in the future.

Forest and Bird Seeks:

• Any changes to the biosecurity regime for New Zealand as a result of this
  agreement should improve and not weaken biosecurity in New Zealand and any
  harmonisation of standards should be towards the highest standards, not the
  lowest common denominator.
• Forest and Bird wishes to be consulted on any proposed changes to New
  Zealand's biosecurity regime, as should other stakeholders, including Federated
  Farmers, Forest Owners' Association, Greenpeace and the Regional Authorities and
  the Department of Conservation.

Non Tariff Measures - Intellectual Property.
Forest and Bird notes
that the WTO Agreement on Trade Related Intellectual Property Rights (TRIPS)
formed the basis of the regime in the Singapore-NZ CEP. Last year, TRIPS was
criticised by the United Nations Subcommission for the Promotion and Protection
of Human Rights for being in breach of human rights conventions. These concerns
have significant implications for intellectual property rights relating to
indigenous biodiversity.

Forest and Bird considers that it would be premature and inappropriate for
the government to include intellectual property rights to indigenous
biodiversity in the agreement, particularly given the outstanding WAI262 claim
before the Waitangi Tribunal. Indigenous biodiversity should not be able to be
owned by private firms and individuals particularly where such ownership
includes the ability to control the reproduction and distribution of indigenous
biodiversity.

Any intellectual property rights regime should also not impede in any way the
ability of central and local government to act for reasons of biosecurity even
when such actions result in the destruction of investments in genetic material.

Forest and Bird seeks:

• That the use and ownership of indigenous biodiversity be excluded from
  intellectual property rights under the CEP.
• That actions deemed necessary by either party to maintain biosecurity be
  excluded from the agreement and that such decisions not be subject to any form
  of dispute resolution process.

Services Trade - Tourism
MFAT should disclose the environmental
consequences of increased tourism as a result of the agreement. The Department
of Conservation, local authorities and the public should be consulted on the
impacts of this.

It is also unclear what this would mean in terms of market restrictions
applied by the Department of Conservation to manage tourism and its impacts on
conservation lands. It is unclear where government provided semi-commercial
services such as huts and tracks would fit within this agreement.

Forest and Bird seeks:

• That the impact of increased tourism and the risks to conservation
  legislation and concession processes under this agreement should be assessed and
  then released for public comment.
• That the public provision of recreation and tourism facilities should be
  exempt from this agreement.
• That Market restrictions for the purposes of managing the effects of tourism
  and recreation should be exempt from this agreement.

Services Trade - Environmental Services
Forest and Bird is
concerned that the agreement could:

• Open or create markets in essential environmental services such as water
  reticulation. Some environmental services such as the provision of ecological
  and landscape advice require good local and professional knowledge, including in
  some cases a high level of understanding of New Zealand cultural norms and the
  contribution of indigenous biodiversity to landscape values. Yet such
  requirements could be seen as a disguised restriction on trade. It would appear
  that there are few restrictions to the formation of mutual partnerships at
  present.
• That environmental services be excluded from the agreement.

Investment Issues
The experience of regulators under the North
American Free Trade Agreement, indicate New Zealand, under the 1995 Investment
Promotion and Protection Act, may be vulnerable to similar actions, where
investors can seek compensation by arguing that environmental regulation amounts
to expropriation.

As the table below shows, the problematic expropriation provision of NAFTA is
comparable to the expropriation provision of the Hong Kong-New Zealand IPPA.
These provisions appear to be largely standard in investment agreements.

Table 1: Comparison of NAFTA with the HK-NZ IPPA

Provision	NAFTA (Chapter 11)	HK-NZ IPPA (Article 6)
Expropriation	No Party may directly or indirectly expropriate an investment of an investor of another Party in its territory or take a measure tantamount to expropriation of such an investment	Investors of either Contracting Party shall not be deprived of their investments nor subjected to measures having effect equivalent to such deprivation.
Exceptions	a public purpose, on a non-discriminatory basis, in accordance with due process of law and Article 1105(1) and on payment of compensation.	for a public purpose related to the internal needs of that Party, on a non-discriminatory basis, and against compensation.

The clauses, although they use different language, have effectively the same
meaning.

The approach of the IPPA with respect to " indirect expropriation" is also
contrary to New Zealand law which generally excludes compensation for the
consequences of government decisions, except where this is outright taking of
property (as per the Public Works Act).

The approach of the Resource Management Act is essential to the proper
functioning of the New Zealand economy as it ensures that externalities are
addressed. If corporates are to be compensated by New Zealand decision makers
for addressing externalities, then there is no incentive on those corporates to
minimise the costs of activities on the environment. Indeed the reverse is the
case. As the experience under NAFTA demonstrates, the approach of the IPPA is
likely to lead to:

• A chilling effect on central government decisions when governments are faced
  with the possibility of having to compensate or face international litigation.
• A significant fiscal risk from local and central government decision-making
  on environmental matters leading to compensation claims against central
  government.
• Pressure from local investors for the same rights as foreign investors
  including a more compensatory regulatory environment, undermining the polluter
  pays principle.

A significant cause of added risk to New Zealand is the investor-state
dispute settlement procedures in Article 9 of the IPPA. This clause enables an
overseas investor to take action against the government, rather than leaving
dispute settlement as a matter between states.

Forest and Bird seeks:

• That the government renegotiate the Hong Kong-New Zealand IPPA to ensure
  that the agreement includes a clear and unambiguous provision to exempt all
  forms of environmental regulation from the provisions of Article 6(1) and
  removes any opportunity for investor-state dispute resolution.
• Proposed Exceptions to the CEP.

GATT is an inappropriate framework
Forest and Bird is concerned
that MFAT plans to model the exceptions in the CEP on the GATT Article XX
exceptions. Such an approach is unacceptable given the failure of the GATT
Article XX to provide protection for even GATT-compliant environmental
regulation. The Chapter XX exemptions are so conditional as to make them largely
irrelevant. The hurdles established by WTO decisions on environmental regulation
make it almost impossible to sustain environmental regulation in the face of
attack in the WTO.

GATT exceptions have proved incapable of protecting environmental regulation.
Better exceptions must be developed if trade agreements are to meet the
government's environmental goals.

Need for robust exceptions in bilateral agreements.
It is important
that the government looks to bilateral agreements to go further than the WTO in
meeting the New Zealand's environmental standards.

Forest and Bird argues that New Zealand should not risk its own environmental
decision making by relying on ineffective exemptions. A noteworthy comparison
can be made between military and environmental exceptions under the Singapore
Agreement. In this agreement the military exception is unconditional whereas the
environmental exceptions are highly conditional.

Environmental exemptions should be given the same standing as defence
exemptions.

Forest and Bird seeks:

• That environmental decision making be given an unconstrained exemption in
  the CEP.
• That a not-lowering-standards-clause also be inserted into the agreement to
  prevent race-to-the-bottom environmental decision making.
• Forest and Bird be consulted over appropriate wording for environmental
  exemptions in the agreement.