PRESS/TPRB/44
23October 1996
TRADE POLICY REVIEW BODY
Review ofNewZealand
TPRB 'sEvaluation
TheTrade Policy Review Body oftheWorld Trade Organization (WTO) conducted itssecond
review ofNew Zealand 'strade policies on21and22October 1996. ThetextoftheChairman 's
concluding remarks isattached asasummary ofthesalient points which emerged during thetwo-day
discussion.
Thereview enables theTPRB toconduct acollective examination ofthefullrange oftrade
policies andpractices ofeachWTO member country atregular periodic intervals tomonitor significant
trends anddevelopments which mayhaveanimpact ontheglobal trading system.
Thereview isbased ontworeports which areprepared respectively bytheWTO Secretariat
andthegovernment under review andwhich cover allaspects ofthecountry 'stradepolicies, including:
itsdomestic lawsandregulations; theinstitutional framework; bilateral, regional andother preferential
agreements; thewider economic needs andtheexternal environment.
Arecord ofthediscussions andtheChairperson 'ssumming-up, together withthesetworeports,
willbepublished induecourse asthecomplete tradepolicy review ofNewZealand andwillbeavailable
from theWTO Secretariat, Centre William Rappard, 154ruedeLausanne, 1211 Geneva 21.
Since December 1989, thefollowing reports havebeencompleted: Argentina (1992), Australia
(1989 &1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992), Cameroon (1995),
Canada (1990, 1992 &1994), theCzech Republic (1996), Chile (1991), Colombia (1990 &1996),
Costa Rica(1995), Côted'Ivoire (1995), theDominican Republic (1996), Egypt (1992), theEuropean
Communities(1991,1993&1995),Finland(1992),Ghana(1992),HongKong(1990&1994),Hungary
(1991), Iceland (1994), India (1993), Indonesia (1991 and1994), Israel (1994), Japan (1990, 1992
&1995), Kenya (1993), Korea, Rep.of(1992 &1996), Macau (1994), Malaysia (1993), Mauritius
(1995), Mexico (1993), Morocco (1989 &1996), NewZealand (1990 &1996), Nigeria (1991), Norway
(1991 &1996), Pakistan (1995), Peru(1994), thePhilippines (1993), Poland (1993), Romania (1992),
Senegal (1994), Singapore (1992 &1996), Slovak Republic (1995), South Africa (1993), SriLanka
(1995), Sweden (1990 &1994), Switzerland (1991 &1996), Thailand (1991 &1995), Tunisia (1994),
Turkey (1994), theUnited States (1989, 1992 &1994), Uganda (1995), Uruguay (1992), Venezuela
(1996), Zambia (1996) andZimbabwe (1994).
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TRADE POLICY REVIEW BODY
Review ofNewZealand
CONCLUDING REMARKS BYTHE CHAIRPERSON
TheTrade Policy Review Body hasnowcompleted thesecond review ofNewZealand 'strade
policies andpractices. These remarks, made onmyownresponsibility, summarize themain points
ofthediscussion. They arenotintended tosubstitute forthecollective evaluation andappreciation
ofNewZealand 'stradepolicies andpractices. Details ofthediscussion willbereflected intheminutes
ofthemeeting.
Thediscussion developed under fourmain themes: (i)themacroeconomic andstructural
environment; (ii)multilateral andregional issues; (iii)specific trade-related issues; and(iv)sectoral
questions.
Themacroeconomic andstructural environment
Participants praised NewZealand foritsboldeconomic transformation, which hadlargely been
undertaken unilaterally andhadmade theeconomy among themostopenintheworld. Microeconomic
reforms combined withmacro stability hadunderpinned NewZealand 'sstrong economic performance
ofrecent years andprovided abasisforsustained higher economic growth inthefuture. Trade policy
reforms were recognized ascentral totheoverall liberalization effort, butprivatization and
corporatization, along withfinancial policy, taxpolicy, foreign investment policy, andotherareaswere
alsoseenasimportant.
Theroleoflabour market reform inraising productivity wasofinterest toMembers.
Productivity growth wasallowing NewZealand exporters tomaintain export volumes inthefaceof
anappreciating currency. Investment, including foreign direct investment, hadrisenrapidly and,despite
substantial government surpluses, wasoutstripping savings, withthisimbalance reflected inacurrent
account deficit. Recognition ofthisrelationship gaverisetoquestions regarding thetiming oftaxcuts
andefforts topromote savings. Participants, noting thatthesuccess ofthereforms hadreinforced
pressure fortrade liberalization, asked inwhich sectors thispressure wasstrongest. NewZealand
wasasked tocomment ontheexpected evolution ofpolicy inthefewareas where sectoral restrictions
onforeign direct investment remained.
Membersaskedwhetherthebenefitsofreformhadbeenstudiedexanteandwhethersuchstudies
hadaroleinprompting theeconomic reform, andasked forobservations ontheimpact orexpected
impact ofUruguay Round reforms ontheprices paidtoNewZealand 'sfactors ofproduction, such
asagricultural land. Finally, participants were interested intheexpected future evolution of
NewZealand 'seconomic policies.
Inresponse, therepresentative ofNewZealand noted thatthelinkbetween NewZealand 's
pooreconomic performance before 1984 andtheclosed economy policies followed atthetimehad
beenclearly recognized ;many studies hadalsoshown thehighcosts ofprotection. Theresults of
liberalization hadbeenclearly seenintheeconomy inthelastfewyears. Total factor productivity
hadgrown more rapidly thanbefore; following aperiod ofcost-cutting, investments werenowbeing
madeinincreasinglabourproductivitythroughgreatertrainingandmulti-skilling.Productivityincreases
could notbeattributed solely tolabour reforms, butthese reforms hadplayed amajor roleandhad
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increased thespeed ofeconomic adjustment. Henoted thatthecurrent account deficit wasnotnow
seenasaproblem, given thecontext ofhigh levels ofprivate investment, export growth and
diversification, andafiscal surplus. Moreover, thesimplification ofNewZealand 'sfiscal structure,
combined withprice stability, wasencouraging higher domestic savings.
Decisions onprivatization andcorporatization weremade onacasebycasebasis. Withrespect
toforeign direct investment, indetermining applicants 'financial commitments theauthorities sought
toascertain whether theapplicant wasgenuinely behind theproposed investment andwhether the
applicant committed itsownfinances. Investment restrictions onfishing referred onlytotheownership
offishing quota, while those concerning optometry, which applied equally todomestic andforeign
owned businesses, restricted theability ofanycompany toownmore than45percentofanyoptometry
business: thelatter restrictions were currently under review.
Multilateral andregional issues
ItwasnotedthatNewZealand'stradepolicyoperatedunderfourtracks:multilateral,unilateral,
bilateral andregional. Participants were interested intherelationship among these andwhether
NewZealand gavepriority tothemultilateral track. TheNewZealand delegation wasasked tocomment
ontheroleofthemultilateral system insustaining itsowntrade anddomestic reforms.
MembersnotedthatimplementationoftheWTOAgreementswasexpectedtohaveasubstantial,
positive effect ontheNewZealand economy; itwasexpected tobeamong thegreatest beneficiaries
ofmultilateral tradereform. Themechanism forimplementing multilateral commitments, suchasthe
results ofaWTO dispute settlement panel, indomestic lawwasqueried.
NewZealand 'sCloser Economic Relations (CER) Agreement withAustralia wasoneofthe
world 'smost comprehensive trading arrangements. Participants were interested inNewZealand 's
experience witheliminating anti-dumping actions ontrans-Tasman tradeandtheextension ofdomestic
competition lawtocover thistrade; NewZealand wasasked tocomment ontheimplications ofGATT
Article XXIV forsuchanarrangement. Thepossibility ofexpanded membership intheCER was
queried. Unrelated totheCER, itwasasked whether anymeasures were envisaged withrespect to
anagreement between maritime labour unions ofthetwocountries, which appeared toeffectively
preclude third-country competition inTrans-Tasman shipping.
Anumber ofparticipants, noting NewZealand 'sactive membership ofAPEC andthegrowing
share ofitstrade within theregion, asked about itsplans inthisconnection.
Therepresentative ofNewZealand replied thatastudy commissioned bythegovernment had
estimated thattheUruguay Round would leadtogains forNewZealand equivalent to2.3percent
ofitsGDP bytheyear2005, andcreate some 20,000 to30,000 newjobs. Increases inagricultural
product prices resulting fromtheUruguay Round would tendtocause increases inrurallandprices.
These hadincreased byonethirdoverthetwoyears 1994-95; however, heemphasised thattheUruguay
Round wasonlyoneofseveral factors inthisrespect.
While certain sectors wereinitially expected tobesensitive toliberalization under theCER,
ithadalready proven possible in1988 tomove forward thedateforthecomplete bilateral freetrade
ingoods from 1995 to1990. TheCER hadrecently beenexpanded tocover aviation services and
NewZealand hoped thatremaining services sector exclusions could beeliminated inthenextfewyears;
thetwoparties hadrecently agreed tobegin examination ofaCERprotocol forinvestment. TheCER
leftopenthepossibility ofexpanded membership; allrequests would begiven careful consideration
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andapplications fromWTO members werewelcomed. Thetwoparties hadagreed thatitwould be
logical toalign CER rules oforigin toachange oftariff heading criterion, andtostudy theimpact
ofsuchachange, inparticular withregard toprocessed food, forest products, steelandfootwear:
anychanges would, however, beimplemented onlyaftertheWCO/WTO process hadbeencompleted.
Thebilateral agreement withCanada formalized tariffpreferences originating fromtheCommonwealth
preference scheme. In1995, Canada andNewZealand hadagreed tomaintain preference margins,
solongasthese didnotinterfere withunilateral tariff liberalization. NewZealand continued toview
complete multilateral freetrade asthefirstbestoutcome, andtheoutcome towhich allfourtracks
were targeted. New Zealand believed thattheWTO should setanambitious agenda inthis
regard.
Specific trade-related issues
ParticipantsappreciatedthatNewZealand'sremainingtradeprotectionwasintheformofimport
tariffs, virtually allnon-tariff measures having beenabolished. Tariffs hadbeengreatly reduced over
theprevious decade andfurther reductions were tobeimplemented during theperiod 1997-2000.
Participants hoped thatfuture reductions would substantially reduce theprotection thatremained for
certainsectors,suchastextilesandclothing,andreducetariffescalationandregionalpreferencemargins.
Reductions could alsoreduce theimpact ofNewZealand 'stariffconcession scheme ontheunevenness
oftariffs. Asaresult oftheUruguay Round, NewZealand hadgreatly increased theproportion of
itstariff linesbound intheWTO; however, some delegations noted thatapplied ratesweregenerally
wellbelow bound levels andthatsubstantial scope existed forbound ratestobereduced.
Theinterface between trade remedy andcompetition policies wasofinterest toparticipants.
Aspecific question wasraised about theprocedure followed inanti-dumping cases anditwasasked
whetherstandardsusedinthisfieldmightbeequatedwiththoseappliedunderNewZealand'scompetition
policy. NewZealand wasasked foradditional information onstandards, particularly withreference
toaccess fortelecommunications, SPSmeasures particularly inregard tocheese imports, andonthe
status ofmutual recognition agreements withcertain other Members.
Someparticipantsviewedcertainrequirementsregardinglocalsupplypossibilitiesforgovernment
procurement asproviding anadvantage todomestic producers andasked NewZealand togivefurther
consideration tojoining thePlurilateral Agreement onGovernment Procurement. Clarification was
sought ontheoperation ofcertain intellectual property provisions, including theduration ofpatents
andtheapplication oftheGeographical Indications Acttoforeign suppliers.
NewZealand believed thatthelevelofbindings hadtobeseenincontext. Theweighted average
tariff cutmade intheUruguay Round wasapproximately 50percent, farabove theone-third target
level; NewZealand 'scurrent bindings provided substantial security. Tariff concessions ensured that
tariffs didnotimpose costsonbusinesses using inputs notproduced inNewZealand. Theconcession
scheme wastransparent andwelldocumented; concessions, oncegranted, were rarely withdrawn.
Substantial liberalization hadbeenundertaken withrespect totextiles andclothing andNewZealand 's
imports hadincreased bynearly 30percentoverthepastfiveyears.
Therepresentative indicated thatcompetition lawwasnotseenasageneral substitute for
anti-dumping investigations. Specific circumstances hadmade itpossible toeliminate anti-dumping
actions intrans-Tasman trade. Theauthorities wereconsidering initiating public discussion ofgiving
greater weight tonational interest inanti-dumping measures. NewZealand hadmade itselfavailable
forinformal consultations withtheEuropean Union concerning therecent imposition ofcountervailing
duties oncanned spaghetti from Italy.
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OnGovernmentProcurement,therepresentativestatedthatNewZealand'sprocurementregime
fullyaccorded withtheWTO principles ofnondiscrimination, national treatment andtransparency.
Ithadmoved wellbeyond thedisciplines setoutintheWTO Government Procurement Agreement,
anagreement viewed asflawed because ofitsaccommodation ofbilateral andsectoral exemptions.
Membership intheagreement would provide fewbenefits forNewZealand exporters andNewZealand
would faceincreased regulatory costs forlittleornobenefit.
NewZealand viewed trade policy asclosely linked withgeneral economic policies designed
topromote efficiency, including competition policy. Thelowering oftrade barriers complemented
sector-specific deregulation andencouraged competition throughout theeconomy. Inturn,enhanced
competitioninthedomesticeconomyinfluencedtradepolicybyenablingNewZealandtosupportfurther
global andregional trade liberalization.
Theelimination ofNewZealand 'ssystem ofpatent extensions from January 1995, wasnot
seenasastepbackwards.TheGeographicalIndicationsActsafeguardedforeigngeographicalindications
inrelation toanybilateral ormultilateral agreement towhich NewZealand maybecome aparty. To
date,nosuchagreements hadbeenreached. NewZealand 'sCommerce Actdidnotprohibit particular
conduct inrelation toexclusive dealing, butallowed thecompetition authority andcourts todetermine
whether certain behaviour washarmful tocompetition.
Sectoral issues
NewZealand waspraised forhaving eliminated agricultural export subsidies. However, the
continuing roleofmarketing boards incontrolling agricultural exports stood outinanotherwise open
trade environment andwasofconcern. Participants asked about theparticular effects oftheUruguay
Round onNewZealand 'saccess toagricultural markets.
Members noted thatcompetition policy hadworked together successfully withliberal trade
andeconomicpolicyinmanyservicesindustriesandsoughtNewZealand'scommentsonthisexperience.
New Zealand wasasked whether itcould consolidate itsliberal policies through further GATS
commitments.Inaddition,participantswereinterestedinwhetherNewZealandwouldconsiderallowing
easier orgreater entry offoreign service suppliers andmaking GATS commitments regarding the
movement ofnatural persons inthefuture.
Discussion ofother sectors included textiles andclothing, where NewZealand waspraised
fornotusing import quotas andforforegoing thepossible useofspecial safeguards; aluminium and
steel; andpharmaceuticals, where some participants feltthatthescheme usedforthereimbursement
ofout-patient costs formedicines effectively restricted market access.
Therepresentative ofNewZealand maintained thattheactivities oftheexport marketing boards
werefullyconsistent withWTO provisions, which essentially provided thattheyoperate inaccordance
withcommercial criteria. NewZealand 'sdairy output represented lessthan2percentofinternational
production; itsshare ofdairy product consumption inmajor markets wassmall, andreflected the
substantial market access limitations persisting inmany markets. Nomarketing boards inNewZealand
heldimport monopolies; thegovernment provided nosupport totheBoards, butthere wasgreen box
support tothecovered products. NewZealand 'scurrent AMS under theAgriculture Agreement was
zero.
NewZealand 'sprovisions regarding international telecommunications services wereapplied
onanm.f.n. basis, butrecognized thatNewZealand 'scompetitive suppliers maybevulnerable to
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theactionsofoverseasoperatorswho,undersomeconditions,couldplayonesupplieroffagainstanother,
tothedetriment ofNewZealand 'stelecommunications users. Thecompetitive environment inNew
Zealand allowed forthefreenegotiation oflocalinterconnection agreements, backed bycompetition
law. NewZealand maintained fivem.f.n. exemptions inservices ;ithadrecently considered the
removal ofoneexemption inthemaritime transport negotiations andexpected toagain consider the
issue ofm.f.n. exemptions atthescheduled review ofm.f.n. exemptions tobeheldby2000. New
Zealand'sUruguayRoundservicecommitmentswereamongthemostcomprehensivemadeintheRound
andreflected NewZealand 'sassessment ofthebalance ofnegotiated outcomes inbothservices and
other areas.
Therepresentative outlined thestructure andpricing policies ofPharmac, emphasizing that
itdidnotcontrol what prescription drugs might besoldnor,toanylarge extent, theirprice. The
exemptionfromcompetitionlawaimedtoallowregionalhealthauthoritiestocontinuenationalnegotiation
ofpharmaceutical subsidies. Further answers were given regarding steelandaluminium.
*******
Overall, Members commented inveryfavourable terms ontheextent ofliberalisation and
openness intheNewZealand economy. Themixofmultilateral, regional andunilateral approaches
wasparticularly noted. Afewquestions remained inspecific areas: including, forexample the
continuing rôleofMarketing Boards intheagricultural sector andNewZealand 'sposition vis-à-vis
theGovernment Procurement Agreement. Overall, however, thedepth andradicalism ofthereform
process waspositively assessed andwasseenasoffering useful lessons fortheeconomies ofother
WTO members.
END