Consultation process on New Zealand's services position

Trade Negotiations Minister Jim Sutton today invited further submissions on New Zealand's approach to the World Trade Organisation services negotiations, which could add significantly to our export earnings.

Services generate about 75% of GDP and employ around three-quarters of the New Zealand workforce.

Mr Sutton said a quarter of New Zealand's total export income was generated by trade in services, by sectors such as tourism, transport, education, consulting and computing.

"The outcome of these negotiations is immensely important to us, and we are seeking feedback from interested persons on our approach."

Initial offers by WTO members are expected to be tabled in Geneva on March 31. Mr Sutton said that this did not mean that New Zealand would have to do what other countries asked for.

"New Zealand will make it's own sovereign decision on what to include in any initial offer. An initial offer is an early step in the negotiation process."

Mr Sutton said the discussion document, published on the Foreign Affairs and Trade ministry website today, emphasizes ten guiding priniciples to be used in preparing New Zealand's offer which ensure that areas such as New Zealand's public servicesincluding at the local government level, are safeguarded.

"For example, New Zealand will not make any commitments in such an area as water privatisation. Nor do we have any intention of weakening in any way our traditional commitment to public health and education.

The WTO services negotiations under the General Agreement on Trade in Services (GATS) began in January 2000. Mr Sutton said the government's consultations on the negotiations with industry and interest groups to date had indicated that New Zealand service exporters still faced major barriers in international markets.

"We want better access for New Zealand service exports into other countries' markets, and better treatment within those markets.

"Last July, I announced that the Government had responded to exporters' goals for their key markets by requesting better access for our exports to New Zealand's 20 or so most important WTO trading partners. We've received 18 requests in return, half from developing countries.

"It was agreed at Doha that WTO members will table their initial 'offers' by the end of March this year."

Mr Sutton said consultations with industry and other groups so far gave him confidence that the Government was on the right track in its participation in the GATS negotiations.

"But we want to use the next month to make sure everyone has the opportunity to have their say. I am inviting New Zealand service exporters and other stakeholders to make sure they register any views which are relevant to this next stage of negotiations. In particular, let us know if you are encountering barriers in exporting your services. The MFAT website (www.mfat.govt.nz) provides information on how to make your views known."

The Ministry of Foreign Affairs and Trade (MFAT) website sets out information on the progress of the negotiation, a summary of requests made to WTO members and their requests to New Zealand, and information on how to contact the Ministry with your views, at:

http://www.mfat.govt.nz/foreign/tnd/wtonegotiations/topics/services_prop3.html.

Attached: 10 guiding principles.

Ten Guiding Principles for preparing New Zealand's Initial Service Offer:

The Government will, first, adopt the same overall approach to the initial offer that guides New Zealand throughout all aspects of the WTO negotiations, that of advancing the national interest. This means that New Zealand will be guided by the overriding objective of securing tangible overall benefit. As such we will adopt a hard-nose negotiating approach. We will not be pursuing any unilateralist negotiating agenda but seeking reciprocal benefit.

Second, New Zealand is strongly committed to advancing improved terms and conditions for our services exporters. We will accord priority to achieving advances in sectors where our export interests are strongest and where we can enhance the services sectors contribution to growth and innovation. New Zealand's approach to its initial offer will take into account the need to advance those particular interests effectively.

Third, the initial offer will be essentially conditional and revocable. That is to say, where the government may decide to propose commitments, these will be "initial" not only in the sense of their timing in the process, but also in terms of substance. New Zealand will reserve the right to modify or withdraw them in light of the subsequent developments in negotiations, particularly in light of the responsiveness of our trading partners to our requests both in the services sector itself and in light of the overall development of negotiations.

Fourth, the government does not intend to make any initial offers to change actual current policy settings (including for local government) and would be well within them. In other words, whatever decision is ultimately made as to the coverage of New Zealand's initial offer, at most we would be offering to commit to, on a conditional basis, settings that reflect our settled policy in certain areas. There is sufficient negotiating coin in this respect.

Fifth, the government will continue to ensure that the initial offer will in no way override our present GATS reservation regarding the treatment of Maori persons or organisations.

Sixth, the government will make no initial offer that would limit the government's right to provide, fund or regulate public services, such as health or education.

Seventh, the government will make no initial offer involving privatisation of public services or of public entities, or which would affect Kiwi Share arrangements.

Eighth, New Zealand's initial offer will not require a lowering of any of New Zealand's quality standards in any area.

Ninth, an initial offer will not involve any change to New Zealand's immigration regime.

Tenth, New Zealand's initial offer will take full account of the actual state of negotiations, particularly in light of the responsiveness of our trading partners to New Zealand's own interests. This will, among other things, mean that we take into account the fact that this will be the first step in a process that is set to run until 2005. It will also mean that the government will judge where to pitch New Zealand's offer taking into account what others are doing overall in the negotiations.

WTO SERVICES NEGOTIATIONS: What does the General Agreement on Trade in Services do?

Services exports are important to New Zealand (services are 75% of our GDP and make up about 25% of our exports). So it's in our interests to have access to other countries' markets improved through a more open, predictable and transparent rules-based system ? one New Zealand's had a hand in shaping. That's why New Zealand took part in developing the General Agreement on Trade in Services (GATS) in the Uruguay Round and that's why we're taking part in this current round of services negotiations.

Talk to New Zealand services exporters in, for example, the tourism, education, transport, computing and consulting sectors. They'll tell you about the importance of improving access conditions to overseas services markets. The GATS covers practical things like: the ability of New Zealand service providers to open offices off-shore and send consultants to undertake projects in other countries; recognition of New Zealand specialist professional qualifications; the ability to sell services to oversees customers by email; and tourists and others coming to New Zealand to buy our services here.

Beyond the importance to our exporters, an efficient and competitive service sector has flow-on benefits for other sectors of the economy. They're able to compete better if they can access competitively priced service inputs. Moreover, our crucial goods exports depend on efficient, competitively priced infrastructural services such as communications and transport. To lift the economic and social well being of New Zealanders to the levels we want we need to grow New Zealand's innovative sectors. Many of these, involving IT, design and consultancy are covered by the GATS. As with trade in goods, trade in services also improves consumer choice and value.

So what does the GATS do?

- Does the GATS undermine government services? - Does the GATS force New Zealand to open service sectors to foreign providers? - Does the GATS force the privatisation of government services ? such as health and education? - Does the GATS prevent the Government from regulating the supply of services? - Did the negotiation of New Zealand's existing GATS commitments require massive change to our regulatory framework? - Does the GATS undermine the Treaty of Waitangi? - Does the GATS ignore the needs of developing countries? - Are New Zealand's preparations for the GATS negotiations conducted in secrecy or without adequate domestic consultation?

The answer to all eight questions is "No".

New Zealand's current GATS commitments have been tailored to fit our domestically defined regulatory framework ? and not the other way around. They amount to an agreement with our trading partners to "bind" what we have already been doing. Indeed in many cases our commitments are actually less ? or far less ? than the degree of openness New Zealand has unilaterally decided to adopt.

The nature and extent of the GATS commitments New Zealand has been complying with for the past eight years - without disruption to the delivery of government or other services ? have been a matter of choice. Obligations were not and are not imposed on New Zealand by the WTO or other WTO members. New Zealand entered into existing obligations on a fully informed basis and because it was in New Zealand's interests to do so. The same would apply to any future commitments.

Services supplied in the exercise of governmental authority are explicitly excluded from the GATS. And public services can and do coexist with private suppliers, for example education and health services in New Zealand. This is completely consistent with the GATS. It goes without saying that it remains the right of governments to maintain publicly funded governmental services.

On the issue of privatisation and domestic regulation:

· The GATS is designed to liberalise trade in service, not the services themselves. · The GATS doesn't require members to privatise or deregulate service sectors traditionally provided by governments. If any government takes a decision to do so, the pace and scope of such liberalisation rests with the government concerned. · "There has never been any proposal, or even debate, in the WTO services context concerning the abolition of public funding" of government services. "WTO members could certainly never agree to that." (from "GATS ? Fact or Fiction" published by the WTO Secretariat). · The GATS clearly affirms members' "right to regulate". Where New Zealand has made specific commitments under the GATS, these were designed to be consistent with and allow suitable flexibility for pursuit of governmental domestic regulatory objectives. The same will apply to whatever comes out of the current GATS negotiations. For example:

New Zealand currently has no specific commitments on health services. No new commitments on health have been asked of us in the requests made by other WTO members. Similarly we've not asked - and have no intention of asking - any other WTO members for anything in this sector.

On education, in the Uruguay Round New Zealand made narrow commitments - covering education in private institutions only. These don't limit the government's right to provide, fund or regulate public education - or to ensure the quality and distinct characteristics of our education system. Requests received in the current negotiations mostly focus on areas where there is already private sector participation in New Zealand's education system, such as higher, adult and other education.

On drinking water, the GATS does not require the privatisation of water services (or any other service). Currently New Zealand has no commitment of such a kind on drinking water and has no intention to make one. In fact (according to the WTO Secretariat), no other WTO member currently has any such commitment (from "GATS - Fact or Fiction" published by the WTO Secretariat). Moreover, the GATS doesn't limit Governments' ability to regulate drinking water services; there's no question of any government abdicating its right to regulate its citizens' water supplies because of the GATS.

With regard to Treaty of Waitangi issues, the wording of New Zealand's GATS commitments is clear. New Zealand has excluded from GATS coverage "current and future measures at the central and sub-central levels [of government] according more favourable treatment to any Maori person or organisation in relation to the acquisition, establishment or operation of any commercial or industrial undertaking". GATS won't get in the way of pursuing Treaty objectives.

The GATS is acknowledged by developing countries as the most development friendly of the WTO agreements. Special and differential treatment provisions are built into the agreement to allow developing countries to set their own pace in integrating themselves into world services trade. They are certainly engaging in the GATS negotiations; for example, a half of the requests received by New Zealand so far are from developing countries.

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