a) The Council believes that it is inappropriate that local authorities be
constrained by an agreement to which local government is not a party.
In response to this MFAT referred Council
to a letter from Minster for Trade Negotiations to LGNZ which stated:
“the
GATS has applied to measures taken by local governments since it came into
force in January 1995” and that given
this situation, the Government cannot advocate against local regulation being
affected by international trade agreements such as the GATS.
However, this confirms that the Ministry
and Minister should have consulted, and explained the implications of what it
was committing local government to in GATS initially.
As the local government sector was not consulted in
1994, and now that it has become aware of the agreement it has serious concerns,
the government is obliged to take steps to ensure that the this omission is
remedies. Prof Kelsey and Dr Rosenberg
suggested three options
1.
amending the schedule e.g. entering a reservation in the
horizontal commitments to exclude local government.
2.
promoting a carve out for local government by amending the GATS
3.
seeking an interpretation or clarifying declaration by WTO Members that local governments are exempt from GATS
Amending the schedule is in New Zealand’s
hands and would create an extremely positive precedent. The other two would
require multilateral action and be much harder to secure.
The letter from the Minister which MFAT referred to
in its response also stated
the
requirement to comply with the obligations and commitments of the GATS rests
principally with central governments. The final paragraph of Article I: 3 (a) indicates that the obligation of
central government to ensure observance by local governments is, at most, one
of best endeavours. This is demonstrated through the use of language as “such reasonable
measures as may be available to it”.
This allows central government considerable flexibility in meeting this
requirement.
However, this is a matter that would be
interpreted by a Disputes Panel if a case was brought against the New Zealand
government. It is unclear the
interpretations of “reasonable measures”
expected of central government. For example
would these include making funding conditional on compliance with the GATS? Or
changing the law to ensure compliance?
Dr Rosenberg suggested that if meeting
this “requirement” is essentially voluntary, the Ministry and Minster should have no objections to either seeking
a clarifying declaration by WTO Members, or seeking a GATS amendment to that
effect.
The Minister’s letter also stated:
I
understand that local governments apply principles of objectivity, transparency
and impartiality to regulatory approaches and processes. As these are also core GATS principles, it
seems unlikely that conflicts of interest would arise.
The Council practices objectivity and transparency and impartiality. But MFAT is redefining “impartiality” to
mean treating local service suppliers the same as foreign service suppliers.
For sound reasons of economic development
and sustainability the Council does not always practice this. The Council does not show partiality to any
particular prospective supplier among those eligible to provide a service. For example, in applying its 5% local
supplier rule, it treats all local suppliers impartially, and all non-local
suppliers impartially. If Council wants
to limit the number of landfills in Canterbury it should select the one
permitted, and its operators, with objectivity, transparency and impartiality. However,
if environmental services or waste services were committed GATS does not
allow that limit in the first place
Therefore the GATS requirements do conflict with local government
interests. It limits Councils’ ability to consider alternative policies and
models, even if a Council is elected on such a platform.
The Minister’s letter also stated
…
these obligations have been in place for seven years. To my knowledge, they have not caused any actual problems for local
governments. I see no reason why this
state of affairs should not continue.
The MFAT responses follows this with
If
the Council is in fact able to point to specific instances since 1995 in which
New Zealand’s GATS membership has constrained its ability to regulate , MFAT
would be interested in a detailed account of these.
This is not a sensible way to proceed in
considering legal requirements. There
may be no current evidence of a complaint. But there is no guarantee that there
will not be a compliant in the future.
As Dr Rosenberg identified, GATS is
relatively untested internationally.
But the number of disputes taken to the WTO as a whole is growing
steadily. It is only a matter time before GATS provisions begin to be
tested. Professor Kelsey also argued
that once a few disputes have been lodged, it becomes a veritable flood as
smart lawyers launch into a quest for creative and ever-expansive interpretations
which even (some of) the original negotiators (or at least politicians) say
were unintended. Professor Kelsey also
identified that in addition to actual complaints, there is the risk that
foreign services providers will seek to influence policy by using such agreements
“to have a chilling effect”.
If
indeed GATS provision will not impact on local government regulation there should be no harm would be
done if local authorities were exempted from the agreement as requested.
b) The Council
believes public policy regarding the regulation, funding and provision of essential
services should be made democratically by governments at the national and local
level;
The Ministry argued that the Minister for
Trade Negotiations is responsible for the conduct of New Zealand’s trading relations. Trade policy is only one element of economic
policy as a whole. The nature of public
policy and the provision of “essential services” within New Zealand fall
outside the trade portfolio.
The Council has been a strong advocate of
principle of taking a “whole of government” or “joined-up government” approach. This principle should apply to these matters
as it does to others. The Minister for Trade Negotiations should take a
responsibility for ensuring that the agreements he negotiates have been agreed
democratically before he commits the country to them.
Dr Rosenberg and Professor Kelsey also
suggested that trade negotiations should not be entered into which have a whole
of government effect without adopting a whole of government process in the appropriate
domestic, as well as international forums, according to the rules which would
be appropriate to a democracy:
If
there was to be secret legislation, effectively entrenched against future
change, at the domestic level this would be intolerable, especially if it
sought to constrain local government
which is also democratically elected and has its own delegated legislative
authority. Why should it be acceptable at an international level if it wouldn’t
be domestically?
c) That Council requests
no restrictions be placed on local government’s rights regarding achieving
social and environment ends in procurement.
MFAT argued that the right of governments to regulate, and to introduce
new regulations on the supply of services within their territories in order to
meet national policy objectives, is enshrined in the Preamble to the GATS. Furthermore, Article XIII.1 on Government
Procurement states that “Articles II,
XVI and XVII shall not apply to laws, regulations or requirements governing the
procurement by governmental agencies of services purchase for governmental
purposes and not with a view to commercial resale or with a view to use in the
supply of services for commercial sale.
However, the preamble is not enforceable as such. GATS does not apply to government procurement
now, but as MFAT says, negotiations to include it are mandated: “There shall be multilateral negotiations on
government procurement in services…”. Rosenberg identified there
is also a plurilateral agreement on Government Procurement under the WTO (which
New Zealand is not a party to) and there is a proposal which will be decided at
the next meeting of Ministers (in September 2003) to begin negotiations on
“transparency” in government procurement which would apply to all WTO members.
This is one of the “new issues” in the WTO (opposed by developing
countries).
Government Procurement is likely also to come up in bilaterals, as it
did in the Singapore agreement. It is therefore sensible for the Council to
have a position on this matter, and to influence government negotiating policy.
d) The Council
requests that the Government fully consult with local government about the implications
of the GATS negotiations for local government services and regulation;
MFAT officials argued that they had had
regular contact with LGNZ on the New Zealand-Singapore CEP, and the WTO
services negotiations under the GATS.
LGNZ described the contact as limited and infrequent.
Professor Kelsey advocated disclosure,
opportunity for independent advice to make informed input, and an open process
of debate and decision making.
e) The Government
should make public the specific requests it made to other governments in the
GATS negotiations and make public its specific responses to requests from other
governments
MFAT stated that New Zealand does not
intend to make its own requests public, as these are negotiating
documents. But that Minister Sutton
released a comprehensive non-country specific summary of the coverage and content
of the requests in his press statement on the requests of 9 July 2002.
New Zealand is an anomaly certainly in
contrast to the UK and European Community.
Sutton’s release is very general and only
covered requests from New Zealand to other countries. Sutton indicated at the time of the requests that they would ask
other countries whether they would be prepared to release the information. He
has since said in response to a PQ that those countries weren’t.
While it is welcome news that a summary
of requests received will be place on the MFAT web site, the government should be advocating an end
to the secrecy surrounding this process. These matters are as important as any
legislation, for which secrecy would be regarded as absurd. Rosenberg also commented
that it is difficult to understand what is gained in a negotiating sense from
such secrecy, given the Most Favoured Nation principle – that once a request is
accepted and made into a commitment, it must apply to all members, not just the
one which made the request. The suspicion is that the secrecy is to prevent
public debate until it is effectively too late to change a commitment.
f) The Council
requests that the Government support the clear exclusion of public services at
central and local levels from the GATS, including local government community
services, environment and water services;
MFAT responded that Article 1.3 (b) of
the GATS already excludes from the coverage of the Agreement measures relating
to “…services supplied in the exercise of governmental authority”...
However, this is a very limited
definition: “A service supplied in the exercise of governmental authority means
any service which is supplied neither on a commercial basis, nor in competition
with one or more service suppliers.” (Article 1.3 (c)) Many, if not most,
public services are now supplied on a commercial basis (e.g. have aspects of
full cost recovery, user charges) or in competition with one or more service
suppliers (e.g. waste collection, housing, roading, public transport, education,
health …). They are therefore potentially not excluded from the coverage of the
GATS.
g) The Council
requests that the Government oppose any proposals which would reduce the right
of local government to regulate services, including the application of a
"least trade restrictive" test to regulation;
MFAT response did not address this recommendation as discussed in
the body of the report. MFAT did identify that New Zealand will
participate actively in the Working Group on Domestic Regulation to ensure that
the outcomes of the consideration of disciplines on domestic regulation are consistent
with national domestic policy objectives.
It is unclear what “national domestic policy
objectives” that they consider disciplines on domestic regulation should be
consistent with. Council could seek to
be engaged in setting these objectives.
h) The Council
requests that the Government seek to eliminate the ability of WTO trade rules
to overturn nation-state laws and practices that protect health, the environment,
development and human rights;
The first part of the MFAT response effectively concedes the basis of this recommendation.
MFAT cited the general exceptions listed
in Articles XIV and XIV. The general exceptions in Articles XIV and
XIV are interpreted narrowly by disputes panels and are
unlikely to provide substantial protection for the objectives of the Council in
the areas where its actions might be inconsistent with GATS.
MAFT also noted that GATS is regarded as
the most development friendly of the WTO Agreements. Its provisions relating to
special and differential treatment for developing members are the Preamble, Articles
III.3, IV, V.3, XII.1 XV.1, XIX.2, 3 and 4, and XXV.
The
protections for developing members do not apply to New Zealand. Rosenberg noted that few commitments were made by developing
countries under GATS, in part because most opposed and resented its
creation. Many are not in a position to
“export” services, but are being pressured to open their economies to “service
imports” with the problems the report has
outlined, but intensified.