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How can we have free trade and protect New Zealand?
Care is taken to ensure trade deals are drafted so as not to impair the ability of governments to adopt measures which have legitimate policy objectives.
The paragraphs below describe just some of the ways we do this.
General exceptions are provisions in trade agreements which list circumstances in which a government can adopt measures that would otherwise be prohibited by other terms of the agreement. General exceptions are based on the exceptions established in the General Agreement on Tariffs and Trade (GATT) 1947 and carried over into the World Trade Organization (WTO) Agreements. These include exceptions related to human, animal and plant health, the environment, national treasures of artistic, historic or archaeological value, national security, taxation and situations involving serious problems like food shortages or balance of payments difficulties (i.e. when a country can’t pay its debts).
Read more about the general exceptions in the WTO(external link)
Services and investment commitments
Services and investment are a key part of New Zealand’s free trade agreements. There are different ways to make commitments on services and investment – these are known as a positive list or negative list. In either case, there are conditions or exceptions on the commitments we make. In a positive list, New Zealand explicitly lists the sectors where commitments are being taken and any exceptions to those commitments. In a negative list, New Zealand makes commitments in all sectors, subject to the exceptions listed. These lists of commitments and exceptions can be found in the Annexes to the services and investment chapters in the relevant trade agreement.
When making services and investment commitments, we make sure that we retain policy space in sectors that are particularly important or sensitive for the New Zealand economy. For example, New Zealand’s commitments preserve policy space for the overseas investment screening regime and other important areas including health, public education, public housing and public transport. Furthermore, even where a commitment is made through a positive or negative list, New Zealand generally retains the ability to maintain or introduce legislation that does not treat foreign service suppliers or investors less favourably than New Zealand ones.
Treaty of Waitangi Exception clause
New Zealand’s free trade agreements contain a Treaty of Waitangi exception clause which, combined with other provisions, protects the government’s ability to adopt policies that fulfil its obligations to Māori, including under the Treaty of Waitangi, without being obliged to offer equivalent treatment to our trading partners.
Safeguards to mitigate the risks of ISDS
As part of free trade agreement negotiations, New Zealand opposes the inclusion of Investor-State Dispute Settlement (ISDS) – a dispute resolution mechanism that allows foreign investors to claim directly against a government in relation to breaches of investment provisions agreed to as part of a free trade agreement.
ISDS is part of New Zealand’s existing free trade agreements with around 14 economies. While the risk of a claim being taken against New Zealand remains a possibility, our agreements contain safeguards to mitigate this risk and ensure the government preserves its ability to regulate in the public interest. Safeguards can include substantive provisions, for example limiting the scope of the Government’s obligations or procedural provisions, for example requiring transparency in the process of an ISDS claim.
Read more about investment in the CPTPP.