Note [Newtype deriving]

Consider this:
    class C a b
    instance C [a] Char
    newtype T = T Char deriving( C [a] )

Notice the free 'a' in the deriving.  We have to fill this out to
    newtype T = T Char deriving( forall a. C [a] )

And then translate it to:
    instance C [a] Char => C [a] T where ...