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Op-Ed Comment: The Good in GATS

The Good in GATS
by Suse Reynolds
Executive Director of the Trade Liberalisation Network

The Trade Liberalisation Network is right behind Government moves to free up trade in services. Those who are concerned about the General Agreement on Trade in Services are raising issues which, as far as we can see, are purely hypothetical.

There are no monsters in the dark. Liberalising trade in services is about benefits – not bogeymen.

The benefits of foreign competition in the services sector are real. Compare how quickly a cheque is cleared in our banking system to how long it took fifteen years ago, look at how cheap it is to talk to your sister in the UK for an hour and think about how little of your pay packet it now takes to fly between Wellington and Christchurch. Freeing up services trade is all about more choice, better quality and better value.

Three out of four New Zealanders have jobs in the services sector. Services trade accounts for three quarters of our national wealth, and a quarter of our export earnings ($10 billion). Those earnings have more than doubled in the last five years.

The GATS, in setting out general obligations and by allowing WTO members to make specific commitments, provides exporting services industries with certainty, clarity and transparency about their markets. This is just the sort of environment needed for growth. GATS commitments also provide assurances about the openness of markets and thereby protect thousands of New Zealand jobs.

Anti-GATS campaigners’ fundamental criticism is that GATS will allow open slather on New Zealand service industries. They maintain there will be no restraint on the number of providers and that deregulation and privatisation will be rife. That’s wrong.

The GATS is an incredibly flexible agreement. It contains two general obligations – that Governments treat foreigners and their own traders alike (national treatment) and that they treat all foreigners, no matter what their country of origin, the same (most favoured nation status).

However, such is the degree of flexibility under the agreement, that Governments are free to attach conditions to these obligations. Furthermore, these obligations do not apply to services supplied in the exercise of governmental authority and they only apply to those sectors specifically identified by Governments. New Zealand, for example, has not made any commitments in the health and environmental services sectors.

Where New Zealand has made specific commitments in sectors such as tourism, business, communications, transport, construction and engineering, our commitments do no more than reflect our general regulatory environment. We are not bound to do anything we don’t already do - and haven’t been doing for years. Simply put, the GATS is about “letting more people do stuff – much less about how they do it”.

Critics argue that by making commitments under GATS we lock ourselves into a regulatory framework. What if we change our minds or decide current policy is wrong? The answer is that the GATS specifically provides a mechanism to withdraw or amend commitments. The anti-GATS comeback is that the relevant provision is so complex, amendment is virtually impossible. There is little basis for this statement because no one has even tried to use it yet.

Some of the most strident anti-GATS rhetoric has been directed at the threat to New Zealand’s education system. For a start our GATS commitments only cover private education – not public education. Allowing foreign education providers into New Zealand has not meant education standards have gone into an exorable decline.

Surely to attract students, foreign providers not only have to meet, but provide higher standards, than the already high standards of our public education system. Are anti-GATS campaigners really saying that they want to deny our children the ability to choose the best quality education available? Taken to their logical extension anti-GATS arguments would, for example, deny foreign students access to Harvard and Oxford.

“The GATS will allow foreign multi-nationals to control New Zealand”. This is another catch cry of the critics. But it completely overlooks the fact that any foreign national or corporation has to comply with New Zealand laws, licensing requirements, quality standards and, if resident here, pay New Zealand taxes.

Allowing greater market access under GATS does not mean a hundred hotels could be built on the Heaphy track or that a foreign waste disposal company could demand the expansion of an Auckland landfill. Those are questions of domestic regulation. The existence of the GATS does not confer any right on foreigners to be exempt from planning and zoning rules or any other obligation required of New Zealanders.

GATS principles are about promoting and encouraging conditions for growth under a framework of rules. These rules ensure rich and poor nations alike are subject to the same disciplines. They make sure everyone operates fairly and transparently.

If you are involved in international services trade and value your livelihood, stand up for GATS. Don’t let it be hijacked by anti-GATS campaigners. Demonstrate to New Zealanders that they benefit from freeing up trade because the reality is they do.


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