Editorial: Gats offers too much to sideline

At a time when there is little apparent momentum in the Doha round of World Trade Organisation negotiations it is heartening to note progress in the General Agreement on Trade in Services (Gats). Yesterday was the deadline for the tabling of offers by member countries in response to requests for commitments to open more of their service industries to international competition. In responding to the request the Government had every right to exclude state services such as health and education from the range of services it is prepared to put on the table.

But is that wise? Health, education and local government services have been the focus of agitation against the Gats by public service employees and others who want to preserve an exclusive claim on public funds.

In principle they are fighting a battle that was lost long ago. Independent schools have been able to claim a share of the state education budget for at least 30 years and vast industries of independent health practitioners prosper on services financed from taxation. The Gats would simply require the Government not to favour state institutions or discriminate against foreign-based providers when it is buying those services.

It does not stop the Government setting the terms and standards of service it requires and it does not stop state-owned institutions from providing the services if their quality and cost are competitive. Quality in education obviously includes their ability to transmit the country's cultural heritage, which gives indigenous schools a natural advantage in any contest for state funds.

But natural advantage is not enough for the security of state servants, nor for the political sensitivity of the present Government. It came to power with a commitment to stop further private encroachment on state services and it dare not sign up to any deal that would allow the possibility. It can only be hoped that the country does not pay too high a price for that political commitment.

New Zealand has much more to gain than to lose from free trade in services. We are a well-educated, English-speaking country with professional firms that compete very well overseas in services such as architecture and civil engineering. If the rules of contracting can be made less discriminatory everywhere, and more services opened to international competition, New Zealanders stand a good chance of doing even better.

But every reservation declaring a particular service sacrosanct makes it a little harder to negotiate access to a foreign market in which New Zealanders might do well. The Government is also committed to raising the national living standard back into the top half of the developed nations' table. When that commitment comes into conflict with another, a quixotic attempt to keep the private sector out of state services, something has to give.

The exemptions the Government will reserve from Gats negotiations will be outlined today. After the Cabinet met yesterday the Prime Minister said: "We are adopting the belts-and-braces approach to ensuring we retain the right to control the way we run public health, education etcetera." Previously she has described the traditional state provision of those services as "fundamental" and "intrinsic to the New Zealand way of doing things".

In fact, universal access to education and a degree of health care are Government responsibilities in most developed countries. But those are also booming sectors of activity in modern economies and entrepreneurial initiatives are constantly finding new services to provide. The Gats will not sideline those services. Nor should New Zealand.