BNZ head wants services in C.E.R.

Press, 2 December 1987, Page 43

BNZ head wants services in C.E.R.

Closer Economic Relations (C.E.R.) must be extended to sen-ices otherwise Australia and New Zealand would be bypassed by the employment and profits opportunities created by global trade in services, said the Bank of New Zealand’s chief executive Bob McCay in Melbourne.

Mr McCay told the Sendee Industries trade and growth conference that because of the rise in the export of modem services. New Zealand's over-all trade deficit in senices had fallen from 5NZ937 million in 1982 to 5NZ767 million in 1987. "When a multinational services company starts thinking about Asian or Pacific markets, in areas like overseas banking or global electronic mail, we need to ensure that Australia and New Zealand are at least as competitive a base as countries like Singapore, Hong Kong or Japan,” Mr McCay said.

“We should all encourage our governments to adopt, as a matter of policy, the development of the services sector."

Through deregulation, tax policies, and education programmes geared to the needs of the services sector. New Zealand could position itself to reap the maximum benefit from the growth services industries, he said. “Taking the initiative in deregulation, as New Zealand has, is not always easy. "Benefits can flow if other

countries take the same path or react positively to unilateral initiative.”

He gave, as an example of reciprocity, the granting of full banking licences in Japan and Hong Kong to the Bank of New Zealand.

Mr McCay noted that New Zealand fully supported the inclusion of services within the G.A.T.T. round of multilateral trade negotiations. New Zealand was not particularly worried by competition from countries like the U.S., as it believed it could find profitable opportunities in its own domestic markets and in some "niche” markets overseas.

The C.E.R. agreement provided a framework for liberalisation of transtasman trade in merchandise goods.

One of the reasons for its success had been the over-all approach to trade liberalisation.

It had made Australia and New Zealand more internationally competitive and outward looking and contributed to a more productive rationalisation of trade and industry and an efficient deployment of resources, he said.

"It is eminently reasonable to expect the C.E.R. review to extend its range to services and to lay the groundwork for a single transtasman market in the 19905,” he said.

In the past decade, world trade in services has grown sevenfold to SUS62O billion according to the Organisation for Economic Co-operation and Development (0.E.C.D.). Services were now by far the biggest sector of most countries’ economies. In the

O.E.C.D. area they account for almost 60 per cent of employment — 70 per cent in the U.S. and 58 per cent in New Zealand, Mr McCay said.

"The New Zealand economy as a whole, and the services sector in particular, have been dramatically transformed. And, with the Government newly re-elected for another three year term, there is every prospect that their liberalisation and deregulation of recent years will continue — and arguably will be intensified — over the next three years.

“The overwhelming evidence from the deregulatory experience is that it has been of great benefit to everyone involved.”

Progress in deregulation is most obvious in the financial area, but there had been real progress in other services such as air transport and broadcasting. Reforms to the public sector were important for the service industries especially, as many of the most promising service industries in the private sector required efficient public sector services if they were to thrive. Mr McCay pointed out that the boom in New Zealand’s trade in services was hidden by the limited statistics available. But even these figures showed a “remarkably vigorous” growth in the country’s exports of services from SNZIO3S million in 1980 to $NZ3357 million in 1987, an average annual growth rate of just under 19 per cent. Exports of more modern services had risen more than 30 per cent a year in the last seven years, from SNZII6M to SNZ66SM.