KEY POINTS:
New Zealand's services sector constitutes close to 70 per cent of GDP and almost 30 per cent of exports.
And the biggest single export earner is a services activity: tourism.
However, the importance of the sector to our economy has not always been reflected in the trade deals
that New Zealand has negotiated.
Indeed, in recent years the services sector has had a bit of a bum rap from New Zealand trade policy. There is no doubt that it has been the poor cousin of agriculture and non-agricultural goods trade.
The New Zealand-Thailand FTA left the sector out completely and the current World Trade Organisation round which has been going now for so long that people have forgotten when it was launched has still to see one item of commercial importance put on the liberalisation agenda. Likewise, we are being told to expect not much from services in the Asean/Australia/New Zealand FTA.
So it was good to see that the China-NZ FTA achieve a positive outcome for services and investment.
China goes beyond its WTO commitments in a number of areas - education and environmental services, for example. We have access to more Chinese employees in several areas, which is very positive given our people and skills shortages. What's more, it is an outcome that is going to keep getting better. New Zealand has been guaranteed concessions that China grants to other countries in future FTA negotiations in a number of sectors:
* Construction services (for buildings, assembly and erection of prefabricated constructions, installation work and building completion and finishing work).
* Environmental services.
* Services incidental to agriculture and forestry (but limited to China's commitments made to the OECD member countries).
* Engineering services.
* Integrated engineering services.
* Computer and related services.
* Tourism services.
China has granted New Zealand Most Favoured Nation (MFN) status for these sectors. If any other country is granted preferential access to them, we will get it too. And in investment this MFN commitment is across the board. I am told that Australian trade negotiators are gobsmacked that we were able to achieve this result.
The outcome could have been better. It would have been great to see a broader coverage of sectors that would be liberalised from the time that the agreement comes into force. The areas of actual liberalisation are quite small. The range of services covered by the MFN commitment could also have been broader - financial services and services such as accounting, engineering and architecture would have been helpful.
Australia is talking about financial services as being a bottom-line issue for its negotiation with China. We might have been expecting too much to have China agree to liberalise financial services for New Zealand given that so few financial services are New Zealand-owned, but had we achieved preferential access to China at the same time as Australia, there was the hope that some companies might use New Zealand as their platform to enter or service the Chinese market.
Likewise, we have a fledgling emissions trading sector developing in New Zealand. Having open access for this type of service for China would have been potentially interesting.
But we should be pleased with what we have got from China. New Zealand itself has been less than open on services in its trade policy negotiations. Since about 2003 it has had a formal policy of not changing any policy settings in such negotiations. Whatever decision is ultimately made as to the coverage of New Zealand's 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. If this is our position, how can we expect others to dig too deep? Fortunately China forced us to make some policy changes and we will benefit as a result.
* Charles Finny is chief executive of the Wellington Regional Chamber of Commerce.
