Submission on GATS Consultation Document

February 2003

Recommendations

That New Zealand insist that a thorough review be conducted of the impact of GATS on development, democracy, environmental sustainability, health and human rights in member states.

That New Zealand work to ensure that no further negotiations take place until such a review has been conducted and the GATS Agreement amended in recognition of its findings.

That full public consultation with adequate timelines and clear explanatory material take place around any proposed expansion of New Zealand’s existing commitments under GATS.

That democratic processes be adopted for making trade agreements, with debate and ratification by Parliament including Select Committee referral.

That New Zealand work in this round to secure a clear exclusion of all public services, cultural services and infrastructure services from the ambit of the GATS agreement.

That New Zealand make no commitments which would reduce the ability of central or local government to regulate services in the interests of ensuring quality and safety for its citizens.

That in this round, New Zealand make no further commitments in the education sector.

That New Zealand work in this round to withdraw its current commitment of “Primary, Secondary, and Tertiary education in private institutions”.

Introduction

NZPPTA represents approximately 14,500 teachers who are members of the union, working in secondary, area and composite schools throughout New Zealand.

NZPPTA welcomes the opportunity to make a submission on the public consultation on New Zealand’s approach to the next stage of the WTO Services Negotiations. At the same time, we do not see this exercise as a genuine public consultation. The time available to prepare submissions (28 days) is totally inadequate for most people to respond to such complex material. Secondly, very little effort has been made to make the material understandable to ordinary New Zealanders so that they can respond to the issues involved. The language of all of the documents, apart perhaps from the Ten Guiding Principles, is what we would call ‘trade speak’, a language which is thoroughly foreign to most people. Even those of us who have been researching the issues for some time found the language impenetrable in places.

Ten Guiding Principles

We are pleased to see the government setting out guiding principles for New Zealand’s initial service offer in this round of negotiations, and comment further on them below, however we wonder what the strength of them will be in the light of the requests made by New Zealand at an earlier stage, and to what extent they will prevail as the negotiating round gathers momentum. The grossly summarised and vague nature of the sections in the consultation document on requests made by and to New Zealand in this current round makes it very difficult to comment or to identify the real negotiating approach. It appears to us that the Ten Guiding Principles which commence the document are a late addition to the negotiating framework, and that the requests made to and by New Zealand, which would have been lodged by the end of June 2002, reflect MFAT’s earlier highly pro-liberalisation position. Unfortunately the general and weak wording of the Principles does not reassure us that this position has changed, when we look at the Education Services sector requests section as an example.

We are concerned that no principles guiding New Zealand’s requests of other WTO members have been published. These requests were made many months prior to the publication of these principles and we would have hoped that New Zealand would not ask other countries to offer a greater degree of trade liberalisation than we ourselves are willing to offer. For example, we would hope that New Zealand’s requests respected the sovereignty of indigenous peoples in other countries in the same way that Principle Five attempts to preserve aspects of sovereignty of Maori, and that New Zealand’s requests did not seek to intrude on the public services of other members (Principles Six and Seven).

Yet, while it is difficult to interpret the very general information provided about Education Services requests made by New Zealand, our reading of them is that they do go well beyond the principles set by New Zealand for its own initial offer. (See Education Sector Requests section below for detailed comment.) Furthermore, we have received information from a source other than the consultation document that in fact New Zealand made a request to the European Commission that it abandon its cross-sectoral reservation of the right in all its member states to maintain public monopolies or grant exclusive rights to private operators in Mode 3. This is an extraordinary attack on the public services of European nations, and yet it is not disclosed in this consultation document. We regard this as a breach of faith in the consultation process, and cannot help but wonder what else has been carefully omitted from the consultation documents.

We are therefore not clear whether the significant difference in tone between the requests made by last June and the Principles established more recently reflects a genuine shift in negotiating intentions or if the Principles are simply ‘flannel’ to try to reassure a suspicious public while negotiations proceed behind the scene with the same intention of offering up any or all of our services to gain freer access to the world’s markets for our agricultural products. However we will comment on them on the assumption that they are presented in good faith.

We are pleased to see in Principle One that the government appears not to be planning to leap ahead of other countries in the offers it makes in this round and to be adopting a “hard-nosed negotiating approach”. We believe that the National Government in 1994 leapt ahead of other countries in its commitments and placed New Zealand’s public education system and other public services at considerable risk, and that the goal in this set of negotiations should be to pull back from that position as far as possible. It is our view, shared by our partner education unions which make up Education International, that all education and other core public services should be excluded from GATS and other trade agreements: “Education, health care and other basic social services should be excluded from agreements between national governments in the framework of GATS, or bilateral or regional trade agreements.” We are suspicious about words such as ‘tangible overall benefit’ and ‘reciprocal benefit’ in this Principle. The covert nature of trade negotiations means that we can have no faith that public services will not be sacrificed in the interests of perceived gains in other areas.

We are concerned about the possible implications for education of Principle Two. The importation of foreign students into New Zealand, and the supply of education services by New Zealand providers in other countries, come under the heading of ‘export education’ and are perceived to be areas of strong growth, hence they are likely to be one of the sectors to which the government intends to “… accord priority to achieving advances …”. But the promotion of ‘export education’ in New Zealand has been at a cost to domestic education. In the secondary school sector, uncontrolled importation of foreign students has exacerbated an already severe staffing crisis. The implications for teachers of dramatically increased numbers of foreign students in many New Zealand classrooms have not been recognised through appropriate professional development or improved staffing ratios. There is little monitoring of the quality of individual schools’ educational provision for foreign students and serious concerns have been expressed by placement agents about the quality of service being provided. The government has had to move to publish Guidelines about the pastoral care of foreign students. We do not believe that this trade should be expanded at this time.

We support Principle Three, that initial offers be conditional and revocable, however the concerns we expressed above about the apparently broad scope of the requests we have made in education, for example, suggest to us that in negotiations it might be difficult for us to withdraw overly generous offers if our requests were being received positively by trading partners. Furthermore the word ‘modify’ concerns us because it could allow our negotiators to decide to offer more than the initial offer rather than less and we believe that further public and sector consultation would be required before that occurred.

Principle Four sounds important and probably positive, but the wording is extremely general. The words “… settings that reflect our settled policy in certain areas” read like code, and we wonder how the public can be expected to respond to such a statement. Furthermore, current policy settings, many of which are a continuation of the extreme neoliberal policies of the late 1980’s and the 1990’s, are thoroughly ripe for change. We would be very angry if GATS negotiators locked in, perhaps for infinity, these kind of failed free market and deregulatory policies.

Principle Five refers to preserving the current reservation with regard to Maori, however this begs the question of whether the current position is adequate. We contend that it is not adequate and that in the history of trade negotiations Maori rights to partnership in decision-making have been totally ignored. The wording of the current reservation, to enable New Zealand to use measures that give more favourable treatment “to a Maori person or organisation engaged in a commercial or industrial undertaking”, is grossly inadequate. It is not clear that the word ‘organisation’ covers iwi or hapu. The wording used in the agreement with Singapore goes a lot further in that it specifically mentions the Treaty of Waitangi and is more encompassing, but there are still risks of challenges that measures favourable to Maori constitute a ‘disguised trade barrier’. When the interpretation of trade agreements is in the hands of free trade lawyers who have no interest in indigenous people’s rights, New Zealanders have reason to be afraid that our commitment to partnership with Maori is at risk.

Principles Six and Seven seem to be an attempt to reassure New Zealanders that core public services like education and health are not at risk from the GATS. We applaud the government for establishing these Principles, but we doubt that they are achievable given commitments already made.

We believe that far too much reliance is being placed by MFAT negotiators on Article 1.3 of the Agreement serving to protect our public services, and that the commitment in education made in 1994 exposes New Zealand’s public education system dangerously. (See below.) We believe that every effort must be made in this current set of negotiations to claw back what we can to preserve our sovereignty over public services.

Principle Eight sets a laudable goal, but Article VI of the current Agreement already limits countries’ ability to set domestic regulations to preserve quality standards. Clause 4 of Article VI appears to apply to all trade in services, not just to those sectors where specific commitments have been undertaken, and the decisions of the WTO Working Party on Domestic Regulation whose task is to ‘refine’ Article VI.4 may have very significant impacts on New Zealand’s ability to regulate to set quality standards. For example, application of criterion (b), that ‘disciplines’ shall aim to be “not more burdensome than necessary to ensure the quality of the service” would be open to a wide variety of interpretations.

Article Nine is another laudable goal, but one which could be threatened by the existing Agreement as it becomes interpreted through case law over the years. New Zealand has set out as a horizontal commitment certain categories of workers who under Mode 4 will have rights to work permits for particular periods of time. Beyond that, its current level of commitment in this area is unbound across all sectors. This current position is probably satisfactory, but any extension could involve a threat to jobs for New Zealanders. A further concern is that even our current position could be challenged in future years as involving unacceptable barriers to trade.

Article Ten is pure ‘flannel’. While attempting to reassure us that New Zealand’s interests will be pre-eminent, the secretive nature of trade negotiations means that the definition of where New Zealand’s interests lie will be in the hands of MFAT negotiators and Cabinet, and not exposed to the scrutiny of the general public or even Parliament. This Article encapsulates much that is intensely disturbing about international trade negotiations.

GATS and Public Services

We contend that this section grossly overstates the protection of public services offered by Clause 1.3. We are angry that MFAT has failed to deliver on a promise made by Minister Jim Sutton that “… the development of the draft offer will provide an opportunity for my officials to research services that could be considered to be supplied in the exercise of governmental authority, as defined in Article 1.3(c) of the GATS.”

We believe that the requirement in 1.3(c) that services supplied in the exercise of governmental authority be “supplied neither on a commercial basis, nor in competition with one or more service suppliers” means that the New Zealand public schooling system, which has extensive commercial and competitive elements, will not easily be protected by this clause. In fact, minutes of a WTO Council for Trade in Services meeting dated 14 October 1998 record an intention to interpret Article 1.3 narrowly as follows: “Members drew attention to the variety of policy objectives governing the provision of health and social services, including basic welfare and equity considerations. Such considerations had led to a very substantial degree of government involvement, both as a direct provider of such services and as a regulator.

However, this did not mean that the whole sector was outside the remit of the GATS; the exception provided for in Article 1.3 of the agreement needed to be interpreted narrowly.” Yet no WTO member is known to have raised objections to this.

We also note that some governments (but not New Zealand’s, unfortunately) have specifically registered limitations to ensure that public services such as public education are not included. This suggests that they were not convinced that Article 1.3 would automatically protect public education. In the event that a member country, under pressure from transnational corporations within its borders, were to challenge the meaning of this rule through a complaint to the WTO, a Dispute Panel would have to rule on it. We have no faith that the free trade lawyers who would guide such proceedings would come up with an interpretation which recognised the sanctity of public services.

The clause is certainly not as clear as this consultation document implies it is. The Financial Times has described Article 1.3(b) as “a piece of clumsy drafting” and reported that WTO staff “concede a clarifying declaration by members would be helpful.” The UK Government has also accepted that it “is not clear” and that they would like to see further clarity”. A Disputes Panel would be likely to use as a precedent the ‘clarification’ provided in relation to financial services in Article 1(c) of the Financial Services Annex. This Article says “For the purposes of subparagraph 3(b) of Article I of the Agreement, if a Member allows any of the activities referred to in subparagraphs (b)(ii) or (b)(iii) of this paragraph to be conducted by its financial service suppliers in competition with a public entity or a financial service supplier, “services” shall include such activities.” There can be no sense of confidence that any ‘clarification’ that might be provided in the future would go the way New Zealand supporters of public education would want it to go.

Education Sector Requests

Our fundamental position is that education is not a tradeable commodity. We support the Education International position that inclusion of education in GATS will undermine public systems of education and reinforce trends towards privatisation. Commercialisation and privatisation of education carries huge risks of inequity and discrimination, and conflicts with the goal of quality education for every student.

We contend that the National government in 1994, in committing “Primary, Secondary, and Tertiary education in private institutions”, has already placed the whole New Zealand education system at considerable and possibly irrevocable risk. The wording used is far too broad given the substantial blurring of the boundaries between private and public that took place under the National government between 1990 and 1999. Private schools in New Zealand receive substantial public funding. Public schools in New Zealand generate substantial private funding through commercial ventures such as recruiting foreign fee-paying students and other fundraising. Public and private schools compete with each other for students. We believe that the word ‘private’ needs refinement in the negotiations which will be taking place over the next few months.

If transnational corporations were able to set up private schools in New Zealand and claim under the GATS ‘national treatment’ rule the same level of subsidy as New Zealand’s independent schools receive, a dangerous situation could develop. Such private schools, with the resources of large corporations behind them, could compete for students and staff with our public schools and other private schools, while receiving taxpayer-funded subsidies. The impact could be a severe reduction in the rolls and financial resources of public schools. New Zealand has a high proportion of students in public schools compared for example with Australia, and we believe that this is a strength of our education system. The GATS must not be allowed to change this.

The summary of education sector requests made by New Zealand to trading partners appears to us to be an attempt to encourage other countries to commit themselves to further trade liberalisation in education. For example, New Zealand has asked that where a WTO member has no existing commitment on education, they make commitments with no limitations on market access and national treatment in Modes 1, 2 and 3. This is a sweeping request, and is asking other members to commit even more than New Zealand committed in the first round. (New Zealand is notable for being among the countries which committed the most in the education area.) The only other example provided of a request is one to members whose commitment in education did not cover all subsectors, and asks that it be extended in this round to all subsectors for the purposes of market access and national treatment. Again, this is asking other members to commit even more than New Zealand did in the first round.

We read these two sample requests to other trading partners as a signal that the government intends to extend its own commitments further in this round, if its trading partners show a willingness to further extend their own. This is absolutely the opposite of what we would like to see happen in this round. We would like to see our government trying to limit the potential negative impacts of the current commitment, not extending it in any way.

Given the requests that New Zealand has made, it is not surprising that requests to us are also sweeping and dangerous, such as that New Zealand commit the full range of higher education services including Adult and Other services. We acknowledge that New Zealand is under no obligation to accede to any of these requests, but we would be on weak negotiating round to refuse to all of them if partners acceded to the requests we have already made of them.

We are, however, in no real position to comment because so little detail is provided, which demonstrates one of the things that is most objectionable to us about trade negotiations, the secret and fundamentally undemocratic nature of the process. What kind of consultation document is one which includes a statement as vague as ‘Other requests (not related to market access and national treatment)’?

Conclusions

The Association’s policy position on GATS and other free trade agreements is that education is not a tradeable commodity. Trade negotiations and quality education are fundamentally incompatible, and we wish to see the New Zealand government making every effort in this current round to extricate education from the reach of GATS. Furthermore, we believe that this should extend to a clear exclusion of all public services, cultural services and infrastructure services from the GATS agreement.

On the more general issue of whether there should be international trade rules about products and services other than core public services, we do recognise that there is a valid role for international trade negotiations but the goal should be establishing fair rather than free trade. We are concerned that international trade negotiations have not tended to work for the benefit of poorer countries in particular. We understand that in the original GATS negotiations there was an undertaking to hold a review of the impact on development, democracy, environmental sustainability, health and human rights in member states from the existing GATS agreement. This has not taken place, and should before any further commitments are made.

A further concern is with the fundamentally undemocratic nature of trade negotiations. We contend that there must be full public consultation on any proposed changes to our existing commitments under GATS, and that the processes of making trade agreements must be democratic, and involve debate and ratification by Parliament including Select Committee processes. All GATS negotiating requests and responses should be made public and publicly debated before the government makes commitments, and no commitments should be made which would reduce the ability of central or local government to regulate services in the interests of ensuring quality and safety for New Zealanders. Governments must retain the right to legislate in the national interest.

Given all the above, we ask that the government abandon any intention to meet the March 31 2003 deadline as incompatible with the above position, and proceed to embark on an open, accessible and comprehensive consultation process about GATS before any more negotiations are conducted.

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