RESTRICTED
WORLD TRADE WT/TPR/S/20
20September 1996
ORGANIZATION(96-3746)
TRADE POLICY REVIEW
NEW ZEALAND
Report bytheSecretariat
Thisreport, prepared forthesecond Trade Policy Review ofNewZealand, hasbeendrawn
upbytheWTO Secretariat onitsownresponsibility. TheSecretariat has,asrequired
bytheAgreement establishing theTrade Policy Review Mechanism (Annex 3ofthe
Marrakesh Agreement Establishing theWorld Trade Organization), sought clarification
from theGovernment ofNewZealand onitstrade policies andpractices.
Document WT/TPR/G/20 contains thepolicy statement submitted bytheGovernment of
NewZealand.
Note: Thisreport issubject torestricted circulation andpress embargo untiltheendofthemeeting oftheTrade
Policy Review Body onNew Zealand.New Zealand WT/TPR/S/20
Page iii
CONTENTS
Page
SUMMARY OBSERVATIONS ix
(1) TheNew Zealand Economy ix
(2) Trade Policy Framework x
(3) Trade Policy Features andTrends xi
(i) Policy instruments xi
(ii) Sectoral policy patterns xii
(4) Trade Policies andTrading Partners xiii
I. THE ECONOMIC ENVIRONMENT 1
(1) Recent Economic Performance 3
(2) New Zealand 'sEconomic Reforms 5
(i) Monetary policy 5
(ii) Fiscal policy 5
(iii) Labour markets 6
(3) Trade Performance 7
(i) Commodity pattern oftrade 7
(ii) Regional pattern oftrade 8
(iii) Intra-industry trade 10
(4) Foreign Direct Investment 11
(i) Investment approvals 11
(ii) Sectoral restrictions 12
(iii) Foreign direct investment promotion 13
(iv) Taxtreatment anddividend repatriation 13
(v) Thepattern ofinward foreign direct investment 14
(5) Outlook 14
Annex I.1 Chronology ofSelected Events Related toNew Zealand 'sEconomic
Reforms, 1984-1996 15
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Page
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES 18
(1) General Framework 18
(i) Legal structure andtrade laws 19
(2) Trade Policy Objectives 20
(i) Theunilateral track 20
(ii) Themultilateral track: New Zealand andtheWTO 22
(a) Implementation oftheUruguay Round results 23
(iii) Theregional track 24
(iv) Thebilateral track 25
(v) Nonreciprocal trade preferences 26
(3) Notification Obligations Under theWTO 27
(4) Disputes Under theGATT andWTO 27
III. TRADE POLICIES AND PRACTICES BYMEASURE 29
(1) Overview 29
(2) Measures Directly Affecting Imports 30
(i) Tariffs andother price-based policies 31
(a) General features 31
(b) Tariff escalation 32
(c) Tariff bindings 35
(d) Duty concessions, drawbacks andexemptions 36
(e) Customs valuation andclearance 40
(f) Tariff quotas 41
(g) Variable andother import levies 41
(h) Levies andother charges 41
(i) Minimum import prices 41
(j) Seasonal tariffs 41
(k) Tariff preferences 41
TheGeneralized System ofPreferences 42
SPARTECA 44
Preferential rules oforigin 44
(ii) Regional trade agreements 45
(iii) Import licensing andpermit requirements 48
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Page
(iv) State trading 50
(v) Standards andtechnical regulations 50
(vi) Sanitary andphytosanitary measures 52
(vii) Government procurement 55
(viii) Local-content requirements 56
(ix) Anti-dumping andcountervailing dutyactions 56
(x) Safeguard actions 60
(3) Measures Directly Affecting Exports 60
(i) Export taxes andsubsidies 60
(ii) Export licensing andexport permit requirements 60
(iii) Export monopolies andexport marketing restrictions 63
(iv) Export incentives andfinance 65
(v) Export promotion andmarketing assistance 65
(vi) Policies implemented inother countries 65
(4) Intellectual Property Protection 66
(5) Measures Affecting Trade andPromotion 70
(i) Corporatization andPrivatization 72
(ii) Competition lawandpractice 75
(iii) Labour market 75
(iv) Forms ofdomestic support 75
(v) Direct andindirect taxation 75
IV. TRADE POLICIES AND PRACTICES BYSECTOR 77
(1) Overview 77
(2) Primary Industries 78
(i) Farming 78
(ii) Forestry 85
(iii) Fishing 86
(iv) Mining 87
(3) Manufacturing 88
(i) Food, beverages andtobacco manufacturing 91
(ii) Textiles, clothing andfootwear 92
(iii) Wood andpaper products 93
(iv) Motor vehicle manufacturing 93
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Page
(4) Services 94
(i) Commitments under theGeneral Agreement onTrade inServices (GATS) 95
(ii) Agreement withAustralia 95
(iii) Telecommunications 96
(iv) Financial services 102
(v) Transport 106
(vi) Tourism 112
Annex IV.1 New Zealand 'sSpecific Commitments under theGATS 114
REFERENCES 118
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CHARTS
Page
III. TRADE POLICIES AND PRACTICES BYMEASURE
III.1 General procedure forthedevelopment andimplementation ofaNew Zealand
plant import health standard 54
TABLES
I. THE ECONOMIC ENVIRONMENT
I.1 New Zealand 'seconomic performance, 1990-96 2
I.2 Major features oftheNew Zealand economy, 1990-96 4
I.3 Composition ofexports, 1990/91-1994/95 7
I.4 Composition ofimports, 1990/91-1994/95 8
I.5 Exports byregion, 1985-95 9
I.6 Imports byregion, 1985-95 10
I.7 New Zealand 'sintra-industry trade withtheWorld, 1985-95 bythe
GATT Tariff Study Categories 11
II. TRADE AND POLICY REGIME: FRAMEWORK AND OBJECTIVES
II.1 Status ofselected notification requirements totheWTO, asatMay 1996 28
III. TRADE POLICIES AND PRACTICES BYMEASURE
III.1 Summary ofNew Zealand tariffs andtariff preferences, 1995-2000 32
III.2 Simple andweighted average m.f.n. andpreferential tariffs byHSChapter,
1995-1996 33
III.3 Simple average m.f.n. tariffs bystage ofprocessing, 1996 and2000 35
III.4 Uruguay Round tariff bindings andprogrammed tariff rates for2000 37
III.5 Countries granted GSPtreatment, January 1996 43
III.6 Anti-dumping andcountervailing dutyactions, 1982-1996 57
III.7 Export prohibitions andrestrictions asatMarch 1995 62
III.8 Anti-dumping andcountervailing dutymeasures onNew Zealand exports 66
III.9 Summary ofintellectual property protection inNew Zealand corresponding
toTRIPS obligations 67
III.10 Applications forpatents, trademarks anddesigns, 1989-1995 70
IV. TRADE POLICIES AND PRACTICES BYSECTOR
IV.1 Agricultural production andexports, 1990-96 79
IV.2 Share ofmanufacturing value added, wages andtrade, byproduction
group andindustry 89
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APPENDIX TABLES
Page
AI.1 New Zealand 'sintra-industry trade withAustralia, 1985-95 bytheGATT
Tariff Study Categories 127
AI.2 New Zealand 'sintra-industry trade withASEAN, 1985-95 bytheGATT
Tariff Study Categories 128
AI.3 New Zealand 'sintra-industry trade withJapan, 1985-95 bytheGATT
Tariff Study Categories 129
AI.4 New Zealand 'sintra-industry trade withKorea, 1985-95 bytheGATT
Tariff Study Categories 130
AIV.1 Trade measures applied inNew Zealand byISIC category, 1996 132
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SUMMARY OBSERVATIONS
1. Inaneffort tobreak fromahistory of
pooreconomic performance, NewZealand has
transformed itseconomy fromamong themost
heavily protected andregulated tooneofthe
most market-oriented andopen intheworld.
Theinstruments ofreform applied since 1984
haveincluded tradeandfinancial liberalization,
privatization, andlabour market andother
domestic deregulation. Structural measures
havebeensupportedbydisciplined
macroeconomic policies.
2. Anoteworthy aspect ofNewZealand 's
reform process isthatithasbeen largely
unilateral; NewZealand hastaken theclear
viewthatlowering barriers isprimarily forits
ownbenefit. Reform hasaimed atimproving
competition andthusmoving resources towards
their most efficient uses. Inthisspirit, New
Zealand hasalready implemented twotariff
reduction andsimplification programmes, and
further unilateral reductions aretofollow.
Import licensing hasbeeneliminated, ashave
subsidies and most forms ofgovernment
assistance toindustry andagriculture. Most
State-ownedenterpriseshavebeen
commercialized orprivatized; commercial
functions ofgovernment departments have
generally beenseparated fromregulatory and
advisory ones; product andservice markets
have been deregulated andmost cabotage
restrictions oncoastal shipping eliminated; the
exchange ratehasbeenfloated andallforeign
exchange restrictions removed; andthelabour
market hasbeen reformed, facilitating the
resource mobility thathasproven vital to
success.
3. These reforms have brought about a
dramatic turnaround intheNew Zealand
economy. Inthemid-1980s, growth waslow
andsluggish, thefiscal deficit approached
9percent ofGDP, inflation was nearly
15percentayear, unemployment wasrising
toward itspeakof11percentandthebalance
ofpayments wasindifficulty. Since 1993, realannual growth hasaveraged near4percent,
inflation hasgenerally beenbelow 2percent,
thebudget isinsurplus andtaxesarebeing cut,
unemployment hasfallen to6percentand
external debtisbeing reduced. Trade andother
structural reforms areestimated tohave
increased NewZealand 'srealeconomic growth
potential byabout 1percentage point ayear,
withimportantbenefitsforthenation'seconomic
well-being.
(1) TheNewZealand Economy
4. Theimprovedpolicyenvironmentcreated
theopportunity forasharp recovery, ledby
exports. Merchandise exports rosebysome
18percentinvolume between 1990 and1992
andexports ofgoods andnon-factor services
increased from theequivalent of27to
32percentofGDP. Growth then quickly
became morebroadly based. Producers moved
toaugment capacity; investment wasupsharply
in1992-94. Subsequently, asemployment and
confidence grew, consumer demand increased.
Growth nowappears sustainable, marking a
distinctchangefromtheearlierexperiencewhen
theimpetusforgrowthcametypicallyfromfiscal
expansion orapositive terms-of-trade shock.
5. Therapidincreaseininvestmentrelative
tosavings hashaditscounterpart inawidening
current account deficit, which moved from1.6
to4.5percentofGDP from 1993 to1995.
Concurrently, partly reflecting renewed
confidence, theNewZealand dollar has
appreciated inrealterms, cutting intothe
competitiveness ofsome industries. This
situation mayactually becreating additional
supportforreform.Recognizingthattheorigins
oftheexternal imbalance lieinashortfall of
domestic savings relative toinvestment, export
industries support maintaining substantial
government budget surpluses asasource of
domestic savings. Keygroups representing
export industries andunprotected import-
competing industries, both ofwhich are
disadvantaged bytheremaining import
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protection given some industries, advocate the
needtoeliminate thisprotection, andpoint out
thatthisneedismagnified atatimewhen some
exporters maybeunder stress.
6. Services account forabout 62percent
ofNew Zealand 'sGDP, manufacturing for
21percent,primary industries for11percent
andother branches for6percent. Driven by
export growth, sectors such asdairy
manufacturing,forestryandforestproducts,and
non-commodity-based manufactures have
expanded rapidly inrecent years. Primary
products account directly forabout 13percent
ofgoods andservices exports; butifthe
primary products embodied inmanufactures are
included, thentheyaccount foroveronequarter
ofexports. Over halftheproduction of
manufactured food products isexported,
including 90percentofdairy products. The
principal imports include transport equipment,
non-electrical machinery, electrical machinery,
andnon-fuel crude materials.
7. Asaresult ofclose economic ties
(including atrade agreement), geographic
proximity andhistorical links, trade with
Australia comprises some 20percent of
NewZealand 'stotalmerchandise trade. Other
APEC members account for half of
NewZealand 'strade, andtheEuropean Union
accounts forsome 17percent. Growth in
exports toeastAsiaaccounted fornearly three
fifths oftotalmerchandise export growth from
1990 to1995.
(2) Trade Policy Framework
8. Trade policy, aspartofNewZealand 's
broader external strategy, attempts toexpand
onandcomplement theoutward orientation of
domestic economic policies, andispursued on
fourtracks: unilateral, multilateral, regional
andbilateral. Trade liberalization hasbeen
undertaken primarily ontheunilateral track, in
therecognition thatliberal trade policies are
inNewZealand 'sbestinterest whatever the
policies ofother countries. ButNewZealandviews multilateral freetrade asthebestpossible
policy setting, andworks tothisendinthe
WTO.
9. New Zealand isanoriginal WTO
Member, having ratified theMarrakesh
Agreement on7December 1994. ItsWTO
obligationsaregivenforcedomesticallythrough
legislation,regulations,administrative
provisionsanddepartmentalpolicies.
Substantial changes were made tolegislation
inareas suchasintellectual property andanti-
dumping inorder tomeetobligations resulting
fromtheUruguay Round. NewZealand grants
atleastm.f.n. treatment toalltrading partners.
10. TheUruguayRoundresultsareexpected
tobeofgreat benefit toNewZealand. Unlike
mostcountries, whose Uruguay Round benefits
stemprimarily fromtheirownreforms agreed
under theRound, most ofNewZealand 's
expected benefits result frompolicy changes in
other countries. First, because ofunilateral
reform,changesrequiredofNewZealandbythe
Uruguay Round arerelatively minor. Second,
domesticadjustmenthasmadetheeconomymore
flexible andbetter abletotakeadvantage ofnew
trading opportunities. Finally, theUruguay
Round ledtosubstantial market-opening for
products ofexport interest toNewZealand,
products that have long been subject to
significant import restrictions and export
subsidies byother countries. Inthisrespect,
NewZealand 'sexpected significant Uruguay
Round gains reflect theeconomic costs ithas
beensuffering fromdistortive trade measures
ofother countries.
11. TheAustralia-New Zealand Closer
Economic Relations Trade Agreement (CER) is
among themost comprehensive trading
agreements intheworld. Itextends free
bilateral trade toallgoods andmostservices.
Witheffect fromJuly1990, thetwocountries
agreed nottoapply anti-dumping measures to
their bilateral trade, noting thattheywere
moving from a"managed trade environment,
including anti-dumping policy, tofreetrade"
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andreasoning thatanti-dumping actions were
ananomaly inthenewenvironment. The
extension ofeachcountry 'scompetition lawto
cover trans-Tasman trade wasanimportant
political-economy consideration thatfacilitated
theelimination oftrans-Tasman anti-dumping.
Standards arebeing harmonized andtheTrans-
Tasman Mutual Recognition Agreement,
expected toenter intoforce inmid-1997, will
allow imported goods soldinonecountry tobe
soldintheother without having tocomply with
additional requirements; itwillalsoallow
persons registered topractice anoccupation in
onecountry tocarry outthesame occupation
intheother. TheCERiscomplemented byother
areas ofeconomic co-operation between thetwo
countries, including thefreemovement of
labour,thedevelopmentofjointfoodstandards,
and national treatment forgovernment
procurement.
12. NewZealand grants tariff preferences
toCanada onabroad range ofimports under
their1982 Agreement onTrade andEconomic
Co-operation. NewZealand extends unilateral
preferences todeveloping countries under its
Generalized System ofPreferences (GSP)
programme andtoForum Island Countries
under theSouth Pacific Regional Trade and
Economic Agreement (SPARTECA).
13. Amember oftheAsia-Pacific Economic
Co-operation (APEC), New Zealand fully
supportsAPEC's"openregionalism"approach,
which NewZealand interprets tomean that
measures agreed inAPEC willbeimplemented
onanm.f.n. basis andthatAPEC membership
willbeopentoexpansion.
14. New Zealand encourages foreign
investment andmaintains aliberal foreign
investment régime, withnational treatment the
general rule. Approval requirements existonly
under certain well-specified conditions, and
sectoral restrictions areuncommon. Inward
foreign direct investment hasrisenrapidly since
thelate1980s.(3) Trade Policy Features andTrends
(i) Policy instruments
15. Tariffs areNewZealand 'smain trade
policy instrument. Thisreliance ontariffs isan
important, positive aspect ofNewZealand 's
trade régime: notonly aretariffs more
transparent than other types ofimport
protection, theyarealsoquantifiable andmore
amenabletoreductionandeventualelimination.
NewZealand 'sapplied tariffratesaremoderate
anddeclining. NewZealand applies noexport
subsidiesortaxesandusesfewexportmeasures;
agricultural marketing boards arethemain
exception.
16. Substantial tariff reductions havebeen
implementedoverthepastdecade,includingthat
inJuly1996, which resulted ina1percentage
point dropintheaverage rate. Thestatutory
m.f.n. tariff today averages 6percent,though
rates forsome products, suchastextiles and
clothing, footwear, andmotor vehicles, remain
relatively high. Thetariffaverage iseffectively
much lower because 40percentormore of
merchandise imports enterdutyfreeunder tariff
concessions, which apply toimports ofsome
23,000 narrowly defined products notproduced
inNewZealand andwhich would otherwise be
subject toimport duty. These concessions,
however, increase theunevenness ofthetariff
andresult ingreater effective protection for
those sectors thatproduce protected goods.
17. NewZealand 'splanned programme of
further tariff reductions for1997-2000 is
expected toreduce suchunevenness. By2000,
tariffs areprogrammed toaverage 3percent
andtariffunevenness (measured bythestandard
deviation) willalsobehalved. Rates ontextiles,
clothing, footwear, motor vehicles andother
sensitive products, cutsinwhich haveinthepast
lagged behind those ofother rates, aretobe
reduced fromashighas30percentto15per
centorless. Duties areagain tobereviewed
in1998 to"determine howtomove toward a
zeroend-point under aunilateral domestic tariff
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reduction programme." Intheframework of
APEC, theGovernment intends toeliminate all
tariffs onanm.f.n. basis by2010.
18. IntheUruguay Round, NewZealand
increasedthecoverageofitstariffbindingsfrom
55toover 99percentoftariff lines and
committed tosubstantial reductions forthose
linesalready covered bybindings prior tothe
Round. When most ofNewZealand 'stariff
commitments havebeenimplemented, in2000,
theaverage bound ratewillbenear12percent;
applied tariffs atthattimearetoaverage one
quarter ofthatlevel. Broad scope thusexists
forNewZealand toreduce itsbound tariffrates
andprovide traders withgreater assurance
about future applied tariffs.
(ii) Sectoral policy patterns
19. Theagriculturalsectorishighlymarket-
oriented, withveryliberal domestic andimport
régimes. Agricultural subsidies asashare of
GDP werereduced from3.8percentofGDP
in1983to0.9percentin1987and0.1percent
in1994. Similarly, theproducer subsidy
equivalent, ameasure ofsupport tofarmers, fell
during thisperiod fromitspeakof33percent
to3percent,afigure much lower thanthatfor
anyother OECD country.
20. Much ofNewZealand 'sagricultural
exports aresubject tolicensing controls -
amountinginsomecasestoexportmonopolies-
operated bystatutory marketing boards, which
aredirectly orindirectly producer controlled.
New Zealand haspromoted competition in
virtually allother areas ofitseconomy, with
remarkable results. However, theexceptional
character oftheboards isindicated bythe
exemption ofsome oftheir activities from
competition legislation; throughout therestof
theeconomy suchexemptions arerare. The
effect ofcompetition inother sectors hasbeen
topromote innovation andefficiency; the
authoritiesthuskeepthemarketingboardsunder
review withthese endsinmind. Agricultural -andeconomy wide-resource allocation could
stillbenefit from aneasing, even eventual
elimination, ofsuchmarketing restrictions.
21. ForestryisamongNewZealand'sfastest
growing industries; itsshare ofGDPhasmore
than doubled, to2.5percent, inthepast
decade. Production increased byover50per
centfrom1989 to1995; itisexpected torise
byafurther 70percent,andexport volume to
perhaps double, by2005. Theownership and
control oftheindustry ischanging, withmuch
privatization offorestry assets inrecent years.
Tariffsonforestryandloggingproductsarevery
low; duties onwood products andpaper,
however, arerelatively high, ranging to
25percent.
22. Thecomposition ofNew Zealand 's
manufacturing sector anditsinternational trade
inmanufactures reflects theeconomy 'sstrength
inprimary production. One third of
manufacturingactivityisinfoodprocessing,and
manufactured foodproducts comprise twofifths
ofmanufacturing exports. Inrecent years non-
commodity-basedmanufacturingoutput,
stimulatedbyexportdemand,hasgrownrapidly.
23. Themanufacturing sector washeavily
protected byimport licensing andhightariffs
untilthemid-1980s. With theelimination of
licensing andthelarge reductions intariffs,
protectionhasbeengreatlyreduced.Production
patterns have come more into line with
NewZealand'sapparentcomparativeadvantage,
contractinginareassuchastextilesandclothing
andbasic chemicals, andexpanding insectors
suchasfoodmanufacturing. Tariff reductions
inareas suchastextiles andclothing, footwear,
andmotor vehicles andcomponents havelagged
those inother areas. Theeffective protection
accorded these industries maywellbeatthe
expense ofactivities suchasfoodprocessing,
printing andpublishing, petroleum refining,
basic metals, andprofessional equipment. The
1997-2000 tariff reduction programme should
substantially reduce thisprotection.
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24. NewZealand 'sservices sector hasakey
rôleintheeconomy. Thesector accounts for
sometwothirds ofeconomic activity; hence its
efficiency andproductivity impact greatly on
economic well-being. Trade inservices hasa
share ofnearly onequarter oftotal trade.
Moreover, services areimportant inputs into
other parts oftheeconomy, accounting, for
example, for40percentofdirect input costs
infood manufacturing. Totheextent that
service costs arebeing reduced, through open
international competition and increased
productivity, thecompetitiveness ofindustries
suchasfoodmanufactures isenhanced.
25. Given theircritical rôle,services were
putinthevanguard ofNewZealand 'sstructural
reform effort. Competition isnowtherulefor
thesector, anddirect regulation islargely
absent;thereis,forexample,no
telecommunications regulatory body. Virtually
allkeyState-ownedenterpriseshavebeenplaced
onacommercial footing, andmany havebeen
privatized. Withtherelatively small sizeofthe
NewZealand market, theopenness ofservices
markets tointernational competition hasbeen
vital toestablishing thedesired levels of
competition.
(4) Trade Policies andTrading Partners
26. TheNewZealand economy washighly
regulated andprotected until themid-1980s.
Theweak performance oftheeconomy shows
theshortcomings ofsuchanapproach. New
Zealand nowprovides aclear, positive example
ofliberalization. Itspersistence incarrying
through boldreforms invirtually every aspect
ofitseconomy hasbegun topaysubstantial
dividends, withanincrease intheeconomy 's
sustainable growth potential. Trade
liberalization hasbeenvitaltothisachievement.27. Theauthoritiesareawarethatremaining
import tariffs impose acostontheNewZealand
economy andthattheirremoval could provide
asustained increase inwelfare equivalent to
over1percentofGDP. Some other aspects
ofthetrade régime, including theexport
monopolies heldbymarketing boards, mayalso
place certain costs ontheeconomy. Thus,
continuing trade reforms through totheir
conclusion remains acritical element ofthe
policy agenda.
28. NewZealand alsohasavitalinterest
inthemultilateral system. Markets inother
countries weresufficiently opentoallow arapid
expansion ofNewZealand 'sexports intheearly
1990s,whichsparkedrenewedeconomicgrowth.
Subsequently, through theUruguay Round, with
New Zealand asanactive participant, the
multilateral system hasdelivered newmarket
opening, which isexpected tobeofgreat value
toNewZealand. Substantial restrictions still
remain onsome products ofexport interest to
NewZealand, however, lowering both its
welfare andthatofitspartners. Itistherefore
important thatNewZealand continues towork
through themultilateral system tofurther open
international trade andthatitbrings itsspecial
perspective and experience tobear on
multilateral issues.
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