Fears raised over secret trade talks
Secret trade talks aimed at freezing financial services regulation could hamstring New Zealand's ability to respond to a crisis.
New Zealand is one of 23 parties to the Trade in Services Agreement (Tisa), a pact that wants to liberalise the global trade in services.
A document leaked from the talks reveals that the United States and the European Union, backed by big-business lobby groups, are attempting to impose drastic changes.
One of the proposals would effectively freeze existing levels of regulation in the financial services sector.
There is also the possibility of a "ratchet" clause, which would lock in any future deregulation as the new, untouchable baseline.
New Zealand's interest in the pact lies in lowering trade barriers in other areas, with total services exports worth $16 billion last year.
University of Auckland law professor Jane Kelsey said local negotiators would be focused on industries such as private education and consultancy.
"What they will have assumed is that there are tradeoffs that have to be made in financial services to get what they want in some other areas," she said.
"We are really bystanders [in financial services negotiations], but that doesn't mean we're not going to be quite dramatically affected by this."
Kelsey has been a vocal critic of the Trans-Pacific Partnership free-trade talks, which are also conducted in secret.
Trade Minister Tim Groser is overseas, but a spokeswoman from his office said the Tisa talks were at an early stage.
"The process of negotiation will inevitably mean changes are made to reflect the variety of interests a broad membership brings to the table," she said.
Groser's office recognised there were "particular sensitivities" in the financial sector.
The spokeswoman pointed to a clause in all New Zealand's trade agreements that carves out an exception for prudential regulation.
The "well-established safeguard" meant the government retained the right to regulate to protect investors and depositors or step in to ensure the stability of the financial system.
Kelsey said the crucial clause was controversial.
"No-one actually knows what it means, which means it's a risk," she said.
"Everyone at the moment is assuming that no-one would bring a dispute because it suits everybody to have it vague."
Countries that lose a dispute would have to set matters straight or face hefty economic sanctions from Tisa members.
The leaked document has created controversy in Australia with concerns it could undermine the Four Pillars policy that prevents the major Australian banks from merging.
Any changes would have a huge impact on New Zealand, as ASB, ANZ, Bank of New Zealand and Westpac are all subsidiaries of the four Australian banks.
Kelsey said that besides reducing competition, the general expectation was that profit margins, profit repatriation, leverage levels and risky financial products could all increase.
"If that happened in Australia and we had a standstill on our regulation here, our ability to respond to that would be constrained," she said.
Australian Trade Minister Andrew Robb has said Australia will not enter any agreement that undermines its banking and financial services sector.
However, he has dismissed concerns as part of a "reprehensible campaign" to subvert trade liberalisation.