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Free trade deal highlights clash over service sector

New Zealand Herald

Free trade deal highlights clash over service sector

By Brian Fallow

10 March 2005

New Zealand’s free trade agreement with Thailand, which is due to come into effect on July 1, has no commitments to liberalize trade in services. It only requires the parties to begin negotiations within three years.

But Charles Finny, the chief executive of the Wellington Regional Chamber of Commerce whose former job was heading the free trade agreement (FTA) negotiations with China, hopes the Thai agreement does not set a precedent.

However, Rod Donald, co-leader of the Greens, believes it is vital that services are excluded from such deals to protect public sector provision.

Finny says services sectors make up more than two-thirds of the national economy and 90 per cent of Wellington’s. "We are looking to New Zealand’s free trade agreement agenda to create new opportunities for this important sector of our cities and our economy. And to make the export of services easier by removing unnecessary or protectionist barriers to trade and investment in key overseas markets," he said.

The anti-trade lobby was calling for the exclusion of education, creative industries and environmental services from the FTAs with China, Chile, Malaysia and the Association of South-East Asian Nations that are in the pipeline. "We would never accept FTAs that excluded dairy products," Finny said. "The same should apply to key services sectors."

Opponents of liberalizing trade in services say such agreements are not about making life easier for exporters of services, but about protecting the interests of multinational investors in services industries. They regard the multilateral General Agreement on Trade in Services and bilateral deals as restricting the ability of governments to regulate large swathes of their economies.

The principle that foreign firms operating in a services sector should not have to compete with subsidized local entities is seen as favouring large multinationals and even as potentially posing a threat to the public provision of health and education.

But Finny says such concerns can easily be accommodated in the drafting of an agreement. "New Zealand simply needs to refuse to enter into commitments on publicly provided services such as public education or health care."

Donald said the Greens did not support the inclusion of services in free trade agreements. "It is sensible on the part of the Government to recognize that there would not be a level playing field and it sounds like the Thais have come to the same conclusion. I suspect the Thais are shrewder than we are when it comes to playing strip poker, which is what this is."