WORLD TRADE WT/TPR/M/20
2December 1996
ORGANIZATION(96-5069)
Trade Policy Review Body
21-22 October 1996
TRADE POLICY REVIEW
NEW ZEALAND
MINUTES OFMEETING
Chairperson: H.E. Ms.Anne Anderson (Ireland)
Page
I. INTRODUCTORY REMARKS BYTHE CHAIRPERSON 2
II. OPENING STATEMENT BYTHE REPRESENTATIVE OF
NEW ZEALAND 3
III. STATEMENT BYTHE FIRST DISCUSSANT 5
IV. STATEMENT BYTHE SECOND DISCUSSANT 9
V. STATEMENTS BYMEMBERS OFTHE TRADE POLICY REVIEW BODY 11
VI. REPLIES BYTHE NEW ZEALAND REPRESENTATIVE AND
ADDITIONAL COMMENTS 15
VII. CONCLUDING REMARKS BYTHE CHAIRPERSON 33WT/TPR/M/20 Trade Policy Review
Page 2
I. INTRODUCTORY REMARKS BYTHE CHAIRPERSON
1. TheTrade Policy Review ofNew Zealand washeldon21and22October 1996. The
Chairperson welcomed thedelegation ofNewZealand, headed byAmbassador Wade Armstrong, and
thediscussants, Ambassador Nestor Osorio (Colombia) andMr.JanMichalek (Poland).
2. TheChairperson recalled thepurpose oftheTrade Policy Reviews andthemain elements of
theprocedures forthemeeting. Thereport bytheGovernment ofNewZealand wascontained in
document WT/TPR/G/20 andthatoftheWTO Secretariat indocument WT/TPR/S/20. Copies of
written questions submitted byAustralia, Canada andHong Kong intheweek prior tothemeeting
hadbeentransmitted tothedelegation ofNewZealand; Switzerland andJapan hadsubmitted written
questions shortly before themeeting.
3. Recalling thatintergovernmental organizations would attend meetings oftheGeneral Council
through decisions taken onthebasis oftheadhocarrangements, theChairperson proposed thatthe
Trade Policy Review Body invite theFAO, EFTA, IMF, OECD, UNCTAD andtheWorld Bank,
which hadrequested observer status, toitsnextmeeting.New Zealand WT/TPR/M/20
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II. OPENING STATEMENT BYTHE REPRESENTATIVE OFNEW ZEALAND
4. Onbehalfofhisdelegation,therepresentativeofNewZealandexpressedpleasureinparticipating
intheTrade Policy Review process. TheTPRM provided important transparency withrespect tothe
evolution ofMembers 'traderegimes toward theWTO idealoffreeandopentradeingoods andservices.
Since itsfirsttradepolicy review in1990, NewZealand hadcontinued tomake considerable progress
towards thisideal, which itadvocated foralleconomies. TheNewZealand economic reform process
overthepasttwelve years hadbeendescribed asthemostcomprehensive economic reform programme
undertaken byanyOECD country inrecent decades.
5. Reform inNewZealand hadaimed atremoving inefficiencies andimproving competition.
Acrucial reason fortheeffectiveness ofthereform programme hadbeenitsextensive andcoordinated
nature. Theexchange ratehadbeenfloated andmarket liberalisation hadbeenachieved through tariff
reduction andsimplification programmes andtheremoval ofimport licensing andsubsidies. Broad
government assistance toindustry andagriculture wasnowneither given norexpected. Thepublic
sector hadundergone massive change, withtheintroduction ofnewfinancial management systems
aimed atimproving efficiency andaccountability andthecommercialisation orprivatisation ofmost
State-Owned Enterprises. Monetary andfiscal policy hadbeenaimed atreducing uncertainty inthe
business environment through thegoalofgeneral price stability. Thelabour market hadbeen
deregulated, facilitating resource mobility.
6. These reforms hadledtoeconomic growth, inrealterms, ofabout 15percentinthefiveyears
since March 1991. Underlying inflation hadgenerally remained below 2percentayearandcurrently
wasatanannual rateof2.3percent. NewZealand sexport earnings overthepastfiveyears had
increased by33percent,withsignificant growth inexports ofnon-commodity manufactures. Similarly,
unemployment hadfallen from 10.3percentin1991 to6.1percentin1996. Netpublic debthad
fallen from50.5percentofGDP in1991to32.4percentofGDP in1996. Overall, these trade and
other structural reforms wereestimated tohaveincreased NewZealand seconomic growth byabout
1percentayear, withimportant benefits forthenation seconomic well-being.
7. Trade liberalisation wasanimportant element oftheeconomic reforms. NewZealand had
followed acomprehensive, consistent andcertain programme ofliberalisation toincrease theexposure
ofdomesticconsumersandproducerstointernationalpricesignals.Unilateralreformsaimedatachieving
growth through trade hadbeencomplemented bymarket-opening initiatives inthebilateral, regional
andmultilateral context.
8. Bilaterally, theGovernment worked closely withindividual trading partners tosolve problems
andtoseekmoreopentradeandinvestment relationships; theAustralia-New Zealand Closer Economic
Relations Trade Agreement (CER) constituted oneofthemost far-reaching bilateral freetrade
arrangementsintheworld.CERwasalsocomplementedbyotherareasofeconomiccooperationbetween
NewZealandandAustralia,includingthefreemovementoflabour,theharmonisationoffoodstandards,
national treatment forgovernment procurement, andmutual recognition ofqualifications andproduct
standards.
9. Regional economic groupings were ofgrowing importance inNewZealand strade policy.
Within theoverall goalofmultilateral freetrade, NewZealand looked topromote andbuild liberalised
tradearrangements intheAsia-Pacific region. Asia-Pacific Economic Cooperation, orAPEC, provided
themost comprehensive forum fortrade liberalisation intheregion. NewZealand hadalsostated
thatitwould bewilling toenterintodiscussions withanyinterested trading partners onthepossibility
ofnewWTO-consistent preferential bilateral orregional freetrade agreements.WT/TPR/M/20 Trade Policy Review
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10. Forasmall country withglobal trading interests, astrong multilateral trading system wasvital.
NewZealand viewed complete multilateral freetrade asthe“firstbest”outcome. Thesuccessful
conclusion oftheUruguay Round hadmarked asolidstepinthatdirection. Inparticular, theinclusion
ofagriculture under WTO rules hadbeenakeyresult forNewZealand, which faced distortionary
trade practices thatcountries withacomparative advantage inmanufactures hadnothadtocontend
with. Thelast18months hadseenapositive startinterms offullandeffective implementation of
Uruguay Round commitments. Thatprocess hadtobecompleted.
11. Butwhile fullimplementation remained essential, onealsoneeded tolookforward. Trade
liberalisation, tomeetthechallenges andtakeadvantage oftheopportunities ofaglobalising economy,
hadtobeanongoing process. Aware ofthis,andasonecomponent ofitsapproach, NewZealand
haditself already embarked onafurther unilateral tariff reduction programme. Bytheyear2000,
notariff would behigher than15percentandthesimple average m.f.n. tariff ratewould havefallen
toaround 3percent. Inannouncing thepost-1996 tariff regime inDecember 1994, theGovernment
hadsaidthatthere would beafurther tariff review in1998todetermine howtomove towards azero
endpoint under aunilateral domestic tariff reduction programme.
12. NewZealand strade policy strategy recognised thatforNewZealand tofullyrealise itsgoal
ofsustainable economic growth through trade, international markets hadtobecontestable, through
theachievement offreeandopentrade atthemultilateral level.
13. Theupcoming Singapore Ministerial Meeting, inNewZealand 'sview, gaveWTO Members
theopportunity toconstruct awork programme thatwould enable themtore-enter negotiations atthe
turnofthecentury fullyequipped tobuild ontheopportunities arising fromglobalization anddynamic
regionalism. NewZealand hadweathered thefullforce ofacross theboard fundamental reform. In
themultilateral context, itwelcomed information exchange andanalysis thatwould ensure, when the
agreed timecomes, thatitwasprepared todothejobproperly. TheWTO should alsowelcome this.
14. Consistent withitsoutward-looking approach, NewZealand looked forward todiscussing its
tradepoliciesandpractices,andwelcomedtheopportunitytorespondtoquestionsfromfellowMembers.
Memberswould,however,beawarethatatpresentNewZealandhadacaretakerGovernment.Questions
thatraised substantive issues onfuture policy would necessarily beforthenewGovernment, when
itwasformed, toconsider attheappropriate time.New Zealand WT/TPR/M/20
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III. STATEMENT BYTHE FIRST DISCUSSANT
15. Thefirstdiscussant, Ambassador Nestor Osorio, separated hiscomments intoeight sections:
thereform process; NewZealand andtheinternational economy; macroeconomic aspects; government
participation intheeconomy; foreign direct investment; agriculture; regional agreements; and
concluding comments.
(1) TheReform Process inNewZealand
16. Inonly10years, NewZealand hadundergone profound change, withasubstantial impact on
itspolitical, economic andsocial life.Upuntilthemid-1980s, theeconomy washighly protected and
regulated, withprice, interest rateandwage controls inthedomestic economy andstrict exchange
andimport controls fortheexternal sector. GDP growth hadoften beennegative andinflation rates
sometimes rosetonearly 15percent.
17. Thesituation changed when thereforms started totakeeffect, andthiswasreflected invarious
indicators. Duetothepurposeful andpersistent application ofthenewmodel, New Zealand 's
macroeconomic setting could nowbedescribed ashealthy, withinflation near2percentayear,
unemployment at6percent, andannual GDP growth averaging more than3percentoverthepast
fiveyears.
18. Thetradeliberalization process hadbeeninitiated unilaterally andwithaclearinsight intothe
benefits itwould bring. Most quantitative restrictions hadbeeneliminated intheearly 1990s, when
thetariff structure wassimplified andaprocess ofsteady tariff reductions wasintroduced, although
protection ofsome significance wasstillfound insome sectors. Agricultural andindustrial subsidies,
bothonexports andonproduction, hadpractically beeneliminated earlyinthereforms, andtheattitude
oftheactors inthese sectors hadhelped tospeed uptariffliberalization. Inthisrespect, thediscussant
requested therepresentatives ofNewZealand toindicate whether, atthepresent time,therewaspressure
formore liberalization or,onthecontrary, acallformoderation inreform.
19. Thefinancial sector hadbeenoneoftheforerunners ofliberalization. In1984, ithadbeen
opened tocompetition, andexisting wage, price, credit, dividend, exchange andforeign investment
controls wereeliminated. Recently, theregulatory framework forthissector hadbeeneased further.
Taxsimplification hadmanaged tobroaden thetaxbaseandbring greater transparency tothetaxsystem.
Labour market regulations hadbeenrelaxed byallowing forgreater flexibility andindependence in
concluding labour contracts andbydoing away withcompulsory trade unionism, while guaranteeing
certain basic rights suchasaminimum wage.
20. Thisreform hadseemed tohelpreduce unemployment, which hadpreviously approached 10
percent, andtoincrease productivity. Thiswassuggested bytheSecretariat Report when itstated
thattheproductivity increases hadpartly beenduetothisreform. TheNewZealand delegation was
requested tocomment onthelinkbetween thisriseinproductivity andlabour reform.
(2) NewZealand andtheInternational Economy
21. InviewofthesizeoftheNewZealand economy anditsgreat exposure toexternal influence,
implementation ofprotectionist-type policies, andevenadegree ofisolation, would nothavebeen
surprising. However, NewZealand haddecided tosetasidethisviewofitsrelationship withtheoutside
world andhadshifted toanactive policy. So,from arigid economic structure ithadturned toa
dynamic, highly responsive model capable ofadapting tochanges ininternational markets. ItwasWT/TPR/M/20 Trade Policy Review
Page 6
clearfrom NewZealand 'strade policy thatthecountry intended tobeafullpartner inglobalization
andtomaximize thepossibility ofusing newtrade opportunities.
(3) Macroeconomic Aspects
22. Management oftheeconomy hadbeenmarked inrecent years bycontinuity, discipline and
orthodoxy, which wasillustrated bythepolicy ofusing revenue from privatization topaydown the
external debt; byachieving a3.9percentfiscal surplus in1995 aftera5percentdeficit in1991;
andbythesuccessful control ofinflation.
23. Nevertheless,thereweresomedisturbingfactors.NewZealandfacedagrowingcurrentaccount
deficit. In1995there hadbeenanadverse trade balance andadecline inGDP growth. Furthermore,
theappreciation ofthecurrency hadaffected exporters 'competitiveness. Although investment was
higher thansavings, thepublic sector hadshown surpluses since1993, which wereasource ofdomestic
savings. Ataxcutwasplanned, above allatthelower-income levels. Nevertheless, atfirstsightthe
reduction would havenogreateffect onthesavings shortfall andmight instead leadtoincreased demand,
because lower-income households werelikely tohavelower saving rates. Inthiscontext, thediscussant
asked theNewZealand delegation about theGovernment 'sintentions regarding policies fordomestic
savings incentives.
(4) Government Participation intheEconomy
24. Anareainwhich governments traditionally metstrong resistance wasreform ofthepublic
sector, andtheNewZealand authorities hadunquestionably managed toovercome thisobstacle, not
onlysuccessfully, butinanovel fashion. Themechanisms introduced toguarantee efficient public
sector management were based ontheconcepts oftransparency andaccountability ofthetasks and
obligations incumbent onpublic servants. TheGovernment nolonger engaged inactivities thatcould
becarried outmore efficiently bythepublic sector; ithadclearly separated itscommercial fromits
regulatoryfunctionsandmadeStatebodiesandtheirofficialsresponsibleforlabourandfinancialmatters,
inthesame wayasintheprivate sector. Inquantitative terms, thesuccess wasreflected intheState's
financial position, which hadshifted from anegative networth ofNZ$8 billion in1993 topositive
figures in1995.
25. Reforms inpublic finance, thecentral bank, andfiscal responsibility hadguaranteed private
individuals access toinformation onthepublic sector balance sheet, monetary policy andfiscal policy,
andthiswasfundamental tothemedium- andlong-term planning ofproduction activities. Inthisway,
theState supported theeconomy 'sproductive activity, leaving entrepreneurship andthecreation of
wealth inthehands oftheprivate sector.
(i) Corporatization andprivatization
26. Atthetimethatreformswereintroduced,theStatehadbeeninvolvedinawiderangeofactivities
asasupplier ofgoods andservices thatinmarket economies werenormally provided bytheprivate
sector. Inmostoftheseactivities, thefinancial performance hadshown repeated losses. Thissituation
hadledtoaprocess ofprivatization andanother complementary process inwhich theStatekeptcontrol
butintroduced private sector practices andmechanisms. This"corporatization" wasthesubject of
theState-Owned Enterprises Act1986. Corporatization hadbeen used insuch fields as
telecommunications, ports andrailways. Inthesame way,27Stateentities hadbeenprivatized from
1987 to1995.New Zealand WT/TPR/M/20
Page 7
27. Inthisconnection, theGovernor oftheReserve Bank ofNewZealand, inhisrecent address
totheInstitute ofEconomic Affairs inLondon, hadmentioned some matters ofnote. Governor Brash
hadsaidthelogic behind corporatization would suggest thatstillbetter results could beobtained by
privatization, which removed theresidue ofpolitical interference towhich State-owned enterprises
werestillexposed. Twofeatures distinguished NewZealand 'sexperience ofprivatization from that
ofothercountries. First, theGovernment hadmanaged toresist lobbying either tofavour special groups
ortoexclude foreign bidders. Thepolicy tookaccount ofthefactthattheassets tobesoldwerethe
property ofthepeople, inwhose name action wasbeing taken, andforthatreason ithadbeenimportant
tosellthem atthebestpossible price. Second, noenterprise wasprivatized without aguarantee of
theexistence ofmarkets withsome degree ofcompetition, thereby preventing Statemonopolies from
moving intothehands ofprivate monopolies. Inthelightofthesuccess oftheprivatization process,
andnotdiscounting theachievements ofcorporatization, thediscussant thought itworth investigating
whether thisStatecontrol should bemaintained orwhether itwould bepreferable toencourage even
more privatization andrequested therepresentatives ofNewZealand tocomment onthecriteria for
keeping thisdichotomy.
(ii) Privatization intheservices sector
28. Asinother sectors, theservices sector hadbeenthesubject ofaprocess ofgradual liberalization
andderegulation, particularly inthesectors ofair,landandseatransport services, electricity and
telecommunications. Theauthorities viewed competition asthebestmarket regulator andtheguarantor
ofthemost efficient resource allocation. Consequently, theproduction sector inNewZealand had
enjoyed reduced prices forservices andincreased efficiency, afactor thathadfostered competitiveness.
Forexample, theliberalization andderegulation ofthefinancial sector hadspurred competition by
leading toreduced intermediation margins andproducing agreater supply offinancial instruments for
managing interest rateandexchange raterisk.
(5) Foreign Direct Investment
29. Foreign direct investment (FDI) hadplayed amajor rôlesince theclose ofthe1980s andthe
stock ofFDIhadincreased from1989 to1995 by4.5times, while FDIflows reached 6percentof
GDPbetween 1993and1995. TheGovernment Report forthepresent Trade Policy Review highlighted
theimportance andbenefits ofFDIbystating thatitisavitalcontributor tothecountry 'seconomic
development andakeyelement inpromoting international economic linkages. Personally, thediscussant
shared theviewthatforeign investment effectively spurs trade, inasmuch asithelps tobroaden exports,
create jobsandincrease productivity. Hence, heheldaverypositive viewofNewZealand 'sliberal
regime inthisregard.
(6) Agricultural Sector
30. Noeconomic analysis ofNewZealand wascomplete without areference totheagricultural
sector, which wascrucial tothecountry 'seconomic growth andsocial well-being. Theagro-industrial
sector employed 17percentofthelabour force, andcontributed 15percentofGDP and54percent
ofexports. Thesector wasnostranger totheliberalization policies; rightfromthestartofthereforms,
subsidies hadbeeneliminated. However, asfarasmarketing systems were concerned, ithadbeen
decided tomaintain those thatweresuccessful andeffective. Forexample, suchcommodities asdairy
products andsome fruitsuchaspears, apples, strawberries and,most popular ofall,kiwis, where
themarketing andpromotion successes werewellknown, werestillmanaged bythemarketing boards
inorder toguarantee, bymeans ofaprivate sector-type operation, better results interms ofproductivity
andincome forproducers.WT/TPR/M/20 Trade Policy Review
Page 8
31. Thiswasarelatively successful model thathadbeenusedinvarious countries totrytocounteract
price fluctuations andvolatility ofcommodities oninternational markets.
32. Asfortheimpact oftheUruguay Round ontheagricultural sector, theresults hadindeed been
beneficial toNewZealand, sinceithadgained substantially better product access totheEuropean Union
(EU) andUnited States markets. Tocitebutoneexample, thediscussant pointed tothecaseofdairy
products. Thecountry-specific tariffquota onbutter intotheEUhadrisenfrom51,000 tonnes in1994
to76,000 tonnes in1996, although thein-quota tariff hadrisenfromECU 408.6 to868.8 pertonne.
Theprogressive liberalization ofthemarket inagricultural products wasoneoftheobjectives ofNew
Zealand 'sinternational policy and,inthissense, hadinfluenced itsactive participation inthework
oftheCairns Group.
(7) Participation byNewZealand inRegional Agreements
33. InboththeGovernmentReportandtheSecretariatReport,referencewasmadetoNewZealand's
participation inregional agreements anditwasclearthattheagreement withAustralia wasofsignificant
importance tothedevelopment ofNewZealand 'sexternal sector. NewZealand wasalsoafounding
member ofAsia-Pacific Economic Cooperation (APEC). Thegoals ofNewZealand andtheother
member countries inregard totrade liberalization andinvestment wereambitious. Other Members
would wanttomonitor theprogress anddevelopments inthisinteresting model, which wasbased on
aimsdesigned tostrengthen theopenmultilateral trading system.
(8) Conclusion
34. Many lessons could bedrawn fromthisreview ofNewZealand andtheimpact ofitsreforms.
Itwasacountry thathaddecisively andsteadfastly engaged inaunilateral process ofliberalization.
Theresults hadshown thattheapproach followed wasthebestwaytodevelop andmodernize thecountry
anditseconomy.
35. When theUruguay Round hadbeencompleted, NewZealand wasinaprivileged position to
operate intheneweconomic environment andtakeadvantage oftheopportunities itafforded. New
Zealand wasaforerunner infundamental reforms inthestructure ofthepublic sector, improvement
ofthemacroeconomic environment, fiscal discipline andentrepreneurial culture. Theprocess of
liberalization andopenness hadmade thecountry 'seconomy oneofthemostcompetitive intheworld,
andNew Zealand hadplaced itself inaprivileged position todraw benefit from theMarrakesh
Agreement.
36. When, attheclose ofthiscentury, writers ontheworld economy tookstock ofthemost
outstanding events, theywould havetopoint outthatthemost notable andextraordinary economic
liberalization ofmodern times tookplace inasmall country onthefarconfines ofOceania. They
would bespeaking ofNewZealand.New Zealand WT/TPR/M/20
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IV. STATEMENT BYTHE SECOND DISCUSSANT
37. Thesecond discussant, Mr.JanMichalek, noted thatoverthelastdecade NewZealand had
transformed itseconomy intooneofthemostmarket oriented andopenintheworld. Hiscomments
andquestions would reflect adesire tounderstand themotivation behind theevolution oftradepolicy,
andtheresulting economic effects, andwould notraiseanymajor criticisms ofNewZealand.
38. NewZealand, inswitching fromprotectionist toliberal tradepolicy, could beseenasamodel
forother WTO Members. Itsunderlying trade policy objective wasto"promote economic growth
through tradeandthusimprove living standards ofNewZealanders onasustainable basis" (Secretariat
Report, page20),andsuccessive NewZealand governments since 1984hadrecognized thatunilateral
tradeliberalization wasinNewZealand bestinterests, despite restrictions faced inexport markets and
theeffectsofsubsidizedexportsinthirdmarkets.Thedesirabilityofsuchliberalizationwasdemonstrated
ininternational economics textbooks; yet,forreasons ofpolitical economy, theyrarely happened in
therealworld.
39. Tobetter understand howtheusual political economy constraints hadbeenovercome, several
questions could beraised regarding thepolitical arguments favouring aradical change ineconomic
policy, theexistence ofexanteestimates ofthebenefits ofunilateral trade liberalization, andwhether
suchanalyses described theimpact oftrade liberalization onmacroeconomic performance andthe
competitive environment. Estimates oftheimpact oftheUruguay Round ontheNewZealand economy
were alsoofinterest, including theimpact onprices ofdomestic factors ofproduction, suchas
agricultural land.
40. Themaininstrument ofNewZealand trade policy wastheimport tariff. Incomparison with
other developed countries, thecurrent simple average m.f.n. rateof6.2percentwasstillrelatively
high; andthetradeweighted average wasestimated at5.7percent.Ontheother hand, theauthorities
estimated thatsome 90percentofimports, byvalue, entered NewZealand dutyfree. Noadvalorem
tariffexceeded 30percent,butthereweresome products likecertain textiles andclothing orfootwear
forwhich thesimple average exceeded 20percent. Tariff escalation could alsobeobserved.
NewZealand ’stariffs onfullyprocessed goods, averaging 8.4percent, were higher thanthose on
semi-processed (3.6percent)orprimary products (1.2percent). These differences would bereduced
under unilateral tariff reforms bytheyear2000. Thegeographic pattern ofimports inthese protected
sectors wasofinterest, andthediscussant asked whether thesectors protected byhighlevel tariffs
werethreatened bycompetition fromsomeparticular countries. The"nominal" tariffapplied toimports
ofacommodity didnotindicate theprotection provided thedomestic industry ifthatindustry utilized
imported inputs thatwere subject toduty. Thesituation could onlybeassessed byconsidering the
effective rateofprotection (ERP), which accounted forthehigher costofinputs resulting fromsuch
duties. Heasked whether anyestimates ofeffective ratesofprotection wereavailable forNewZealand.
41. NewZealand wasunusual among developed countries inthatitdidnotapply export subsidies.
Ontheother hand, ithadseveral export monopolies, which marketed certain agricultural products
onacommercial basis without financial support andinfluenced orcontrolled some 80percentof
agricultural product exports, which comprised halfofmerchandise exports. These boards hadbeen
criticized domestically andbysome WTO members. Despite deregulation ofsome marketing boards
in1994 (apples andpears), theystillplayed asignificant roleinagricultural exports andseemed at
oddswiththeliberal spirit pervading therestofNewZealand trade policy. Heraised questions as
tothemain economic arguments favouring export marketing boards andwhether there wereplans to
reduce theroleofmarketing boards inthenearfuture.
42. Australia wasNewZealand ’smost important bilateral trading partner, accounting forsome
20percentoftrade. TheCloser Economic Relations Trade Agreement (CER), which hadentered into
force in1983, hadbeendescribed as,nexttotheEuropean Community, themost comprehensive
agreement intheworld. In1990, thetwocountries hadextended theirrespective competition lawsWT/TPR/M/20 Trade Policy Review
Page 10
tobilateral trade, foregoing anti-dumping actions against oneanother. Prior tothis,Australian firms
hadbeenthemostcommon target ofNewZealand anti-dumping actions. TheCERalsoprovided for
substantial liberalization ofservices trade. Empirical studies hadsuggested annual economic welfare
gains accruing toNewZealand asaresult oftheCERequivalent tosome 1percentofGDP. Heasked
whether some sectors hadencountered economic difficulties fromcloser relations withalarger trading
partner. Ifso,howdidNewZealand dealwiththesedifficulties? Were thereplans toextend thescope
oftheCER?
43. New Zealand wasnotasignatory totheplurilateral WTO Agreement onGovernment
Procurement. Itspublic service wasconsidered among theleastcorrupt intheworld. NewZealand 's
authorities believed thattheprocurement regime wasmore liberal thanthatrequired bytheAgreement
andthatcomplying withadministrative rules oftheAgreement would require ittore-regulate its
decentralized policy andpractices, andthusthatthecompliance costwould besubstantial. Heasked
NewZealand toelaborate onitsdecision nottojointheAgreement and,inparticular, whether itcould
notexpect tobenefit fromimproved market access togovernment procurement ofother Members by
joining theAgreement.
44. NewZealand ’sreforms hadtouched allareas oftheeconomy, withtheprimary andservices
sectors being opened along withtheindustrial sector. Thisliberalization musthaveaffected theallocation
ofresources across thesectors. Theservices sector accounted for62percentofGDP and65percent
oftotalemployment; NewZealand hadactively participated intheUruguay Round andmade many
commitments inabroad range ofservice industries. Substantial liberalization andderegulation had
createdaliberalregimeintelecommunicationservices.Significantderegulationhasalsobeenundertaken
infinancial services (banking, insurance) andintransport services (maritime andairtransport). This
liberal approach would helptomake markets “contestable ”.Insome other developed countries,
elaborate competition legislation hadbeendeveloped, reflecting abelief thatactivist competition policy
might remedy certain market failures, particularly thoseassociated withmonopolistic market structures.
Ithadalsobeenargued thatthemosteffective competition policy inasmall country wasthepursuit
ofliberal trade policy. Heasked NewZealand toexplain itsexperience onthistopic.New Zealand WT/TPR/M/20
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V. STATEMENT BYMEMBERS OFTHE TRADE POLICY REVIEW BODY
45. TherepresentativeofAustraliacommendedNewZealandforitsprogrammeoftradeliberalization
andderegulation, including theprivatization ofState-owned enterprises, theelimination ofimport
licensingandsubsidies,andsignificantreductionsintariffs.Whiletheeconomicreformswereobviously
inNewZealand 'sownbestinterests, theirimplementation inthefaceofcontinuing restrictions inmany
export markets wasnoteworthy. NewZealand 'sstrong commitment tothemultilateral trading system
anditsmembership andcontribution totheCairns Group andAPEC werealsorecognized. Heasked
howNewZealand proposed toaddress theissueofcompetition policy intheWTO andenquired whether
theGovernment would amend legislation thatallowed exclusive dealerships, which Australia felthad
effectively restricted foreign access toNewZealand 'shousehold appliances market. Theissue of
NewZealand 'sinvestment rules regarding optometrists wasalsoraised.
46. TheAustralia-NewZealandCloserEconomicRelationsTradeAgreement(CER)hadcontributed
toincreased bilateral trade without interfering witheither country 'strade liberalization programmes
orraising tradebarriers against othercountries. TheCERprovided asuccessful model forotherregional
trade agreements. Besides thefreetrade areaingoods, reached ahead ofschedule in1990, other
significant initiatives hadbeentaken, including: anagreement onasingle aviation market arrangement,
tocome intoeffect inNovember 1996; thetrans-Tasman mutual recognition arrangement, which
addressed goods andoccupational standards andwasexpected tocome intoeffect inJuly1997; the
establishment ofatrans-Tasman foodstandards bodyinJuly1996; andtheliberalization ofmosttrade
inservices. Australia andNewZealand, asactive tradepartners withopeneconomies andglobal trade
interests, alsoshared interests attheregional andmultilateral level, including theirdependence onan
open world trading system andtheirinterest intheopen regionalism ofAPEC. Inparticular, the
Uruguay Round outcome, theestablishment oftheWTO andtheprospect offurther liberalization under
WTO rules andagreements underpinned NewZealand 'sunilateral reforms.
47. Theimportance ofinternational trade toNewZealand 'seconomic prosperity wasnoted by
therepresentative ofJapan. Hepointed outthedistortions resulting fromtheTariff Concession Scheme
andfromthebilateral agreement withCanada andhoped that,through further m.f.n. tariffreductions,
suchdistortions would beeliminated. NewZealand 'sbound tariffratesforindustrial products in1999
would beover11percent,considerably higher thanthatofother industrialized countries, anditwas
hoped thatNewZealand would seefittofurther reduce these rates.
48. Heasked several specific questions. Standards fortelecommunications operating equipment
were determined bythenetwork operator; wasTelecom 'sPermit toConnect system considered a
conformity assessment procedure? Could products conforming toTelecom 'sstandards beimported
without theTelepermit label? Were anyforeign laboratories accredited toassess theconformity of
products withTelecom standards, andwaslaboratory accreditation conducted onanon-discriminatory
basis? Noting thatsanitary-phytosanitary measures regarding fresh chicken resulted inincidental
protection ofthedomestic industry, didNewZealand believe these measures were consistent with
Article 5.4oftheAgreement ontheApplication ofSanitary andPhytosanitary Measures? Henoted
thatJapan recognized thatNewZealand ensured theeffective useofthebudget withrespect to
government procurement; butwith nouniform procurement procedure andnocompilation of
procurement data, however, howwould NewZealand ensure thetransparency ofitsprocurement
practices, which wasacommitment made under theAPEC? Howwould NewZealand respect itsAPEC
commitment toensure thenational treatment offoreign suppliers andgoods, given NewZealand 's
requirements thatprocurement procedures provide fullandfairopportunity forlocal suppliers and
obtain origin andlocal-content information onalloffers? Howwould theAPEC commitment regarding
non-discriminatory treatment offoreign suppliers andgoods berespected, given thatnational treatment
wasextended byNewZealand toAustralia? There wassome difference withrespect todefense-relatedWT/TPR/M/20 Trade Policy Review
Page 12
procurement policy andheasked NewZealand toaddress theconsistency ofthisdifference withGATT
Article XXI. Regarding anti-dumping, heasked howelements suchas"national interest," "injury to
thecompeting domestic industry ordomestic consumers," "certain conditions intheexporting country,"
and"import regime andtheeffectiveness ofcompetition policy" might bereflected intheinitiation
ofactions;healsoaskedwhetherNewZealand'snon-applicationofanti-dumpingmeasurestoAustralian
companies andgoods wasconsistent withGATT Article XXIV. Reasons formaintaining export
monopolies forimportant agricultural products werequeried. Theability offoreign companies tohold
fishing quota wasrestricted; therepresentative asked whythiswasso,whether foreign companies
faced restrictions inholding shares ofNewZealand fishing companies, andwhether thecontrol of
fishing resources byprivate owners hadbeen effective. Regulations forcertain international
telecommunications services considered theregulatory conditions inforeign countries andfavourably
considered certain countries; under whatconditions, heasked, would suchconsideration beextended
toallcountries? Didthepending resolution oflocalinterconnection agreements restrict NewZealand 's
ability toofferGATS commitments inthisarea? Finally, heasked whether NewZealand, given its
already liberal policies, might offerfurther GATS commitments intheareas ofdistribution services
andfinancial services.
49. NewZealand 'strade andeconomic policies were considered tobe,ingeneral, veryliberal
andfullymarket-oriented bytherepresentative ofSwitzerland, whostated thatNewZealand 'sresulting
economic success made itanexcellent example forother countries. Hecommented thatfurther changes
totheDairy Board Acttoaddress theBoard 'sexclusive export control would seem appropriate. He
encouraged NewZealand togivegreater consideration tojoining thePlurilateral Agreement on
Government Procurement. Regarding imports ofunpasteurized hardcheeses, which seemed topresent
nodanger, heasked whether theSPSmeasures thatcurrently restricted imports would beremoved.
Regarding intellectual property, Switzerland wasconcerned thatnoforeign geographic indications as
yetseemed tobeprotected under theGeographical Indications Act.While thePatent Acthadextended
thepatent termfrom 16to20years, thepossibility ofextending patents anadditional tenyears, as
under theprevious law,hadbeeneliminated, andSwitzerland sawthisasastepbackwards. Regarding
pharmaceuticals, NewZealand hadparticipated intheUruguay Round "zero forzero" arrangement
toeliminate tariffs onanm.f.n. basisby1997. Heasked whether NewZealand would takesubsequent
reviews oftheproduct coverage ofthisarrangement intoconsideration when implementing it.
Switzerland felttheoutpatient pharmaceuticals subsidy scheme ofthePharmaceutical Management
Agency (PHARMAC) effectively denied market access tonewmedicines atanypricehigher thanthat
ofnon-brand medicines orgenerics, contradicting NewZealand 'sgeneral commitment toopenmarket
access andcompetition.
50. TherepresentativeofCanadacongratulatedNewZealandforitsprogrammeoftradeliberalization
andoverall policy direction. Theresults could beseeninthereduction ofunemployment andinflation,
andtheincreased share ofmanufactured goods inNewZealand 'sexport composition. Canada 'strade
andinvestment relationship with NewZealand wassignificant andfundamentally sound. The
representative sought clarification onthecriteria usedbytheOverseas Investment Commission in
approving certain types offoreign investment, andinparticular withrespect tohowapotential investor
could demonstrate afinancial commitment; andexpressed concern overtheextent oftariffescalation,
indicated byrelatively hightariffs onfullyprocessed goods ascompared toprimary products. Canada
encouraged NewZealand togivefurther consideration tobecoming asignatory tothePlurilateral
Agreement onGovernment Procurement.
51. NewZealand'sexpansionoftariffbindingsundertheUruguayRound,tocoverover99percent
oftariff lines, wascommended bytherepresentative ofHong Kong, aswerethereductions inbound
tariff ratesandthesteady decline ofapplied tariff ratesoverthepastseveral years. Theelimination
ofimport licensing andtheabsence oftariff quotas andother nontariff measures were seenasveryNew Zealand WT/TPR/M/20
Page 13
positive, andthewillingness toeliminate suchpolicies inthetextiles andclothing sector -andtoforego
thepossible useofspecial safeguards inthissector -were particularly noteworthy. Noting thatno
sector oftheeconomy wasentirely exempt from theCommerce Act,therepresentative asked how
theAct'scompetition principles andruleshadbeenconsidered when NewZealand formulated itstrade
andeconomic policies. Heasked whatbenefits NewZealand hadfound fromextending itscompetition
policy tocover trade withAustralia, whether NewZealand might forego allanti-dumping measures
andextend itscompetition policy tocover alltrade, andwhether thestandard ofanti-dumping measures
might beraised tothatofcompetition investigations. Healsosought more information onthepossible
initiative togivegreater weight tothenational interest inanti-dumping proceedings. Regarding
translation services, heasked whether thefavourable treatment given Japanese nationals might be
extended toother countries.
52. Therepresentative ofNorway believed NewZealand hadprovided amodel forothereconomies
through itsreform programme andfeltthatmany other countries would liketocopythesuccessful
results thatthese reforms were producing. Sheasked whether thecurrent account deficit wasseen
asproblematic, andinvited theauthorities tocomment onthedisadvantages ofagricultural marketing
boards citedintheSecretariat report. Inlightofanagreement between themaritime unions ofAustralia
andNewZealand, sheasked whether anymeasures were envisaged tofacilitate third-country ships
visiting bothAustralia andNewZealand touplift cargo enroute.
53. NewZealand 'sspecial roleintheWTO anditsstrong commitment tothemultilateral system
werenotedbytherepresentativeoftheCzechRepublic.TheNewZealandexperienceprovidedinspiring
evidence thatmicroeconomic reform andmacroeconomic stability werethekeystoimproved living
standards. Heasked about future intentions regarding theexpansion offreetrade agreements.
54. TherepresentativeofIndiacommendedNewZealandforitsautonomousapproachtoliberalizing
trade andother economic policies, which provided averyuseful rolemodel forother developed
economies. These reforms hadledtoimproved resource allocation, higher investment andsustainable
andhigher economic growth. Labour market reforms were particularly noteworthy. Tariffs were
virtually theonlymeans ofimport protection, butprotection forthedomestic textiles, clothing and
footwear industries remained high,andsheappreciated thatthe1997-2000 tariffreductions would reduce
theunevenness oftariffs. NewZealand 'stradewasheavily concentrated withitsAPEC partners, only
some 1percentoftrade being withSouth Asia; shehoped thatwithfurther tariff reductions,
NewZealand 'simports oftextiles, clothing andfootwear from South Asiawould increase.
55. Thesentiment ofmany participants thatNewZealand served asanexample forallWTO
Members wasshared bytherepresentative ofChile, whocongratulated NewZealand foritsopentrade
environment. Noting thatNewZealand approached itstradepolicy fromfourperspectives (multilateral,
regional,bilateralandunilateral),heaskedwhetheranyprioritywasattachedtothemultilateralapproach.
Questions were alsoraised regarding investment measures inthefishing industry andthedomestic
legalapplication oftheWTO Agreements.
56. Therepresentative oftheUnited States commended NewZealand foritsremarkable paceof
unilateral andmultilateral reform, results ofwhich haddemonstrated thatopenness wasbeneficial to
small andlarge economies alike. Hesought NewZealand 'scomments onthetrade andinvestment
impact ofthePHARMAC, enquired astothestatus ofnewlegislation ontheagricultural marketing
boards, andasked about intentions withregard tojoining thePlurilateral Agreement onGovernment
Procurement, given thatsome aspects oftheNewZealand system seemed tofavour domestic suppliers.
57. NewZealand wascongratulated foritssuccessful reforms bytherepresentative ofHungary,
whonoted thesubstantial reduction ofsubsidies andtariffs andtheelimination ofimport licensing.WT/TPR/M/20 Trade Policy Review
Page 14
ThegapinNew Zealand between bound tariff rates andapplied rates leftsome room forfurther
reductions inbound rates. Reforms appeared toberesulting inamovement ofresources toward
NewZealand'scomparativeadvantage,andthisresourcereallocationunderpinnedsustainable,export-led
economic growth. Asarepresentative ofafellow Cairns Group country, heappreciated NewZealand 's
strong support foragricultural trade liberalization.
58. Therepresentative oftheEuropean Community joined others inciting NewZealand asatext-
bookexample ofthesuccessful liberalization ofaneconomy. Henoted thatabilateral mutual recognition
agreement withNewZealand onstandards andcertification hadbeen concluded, thefirstforthe
Community, andthatnegotiations onsanitary questions andtradeinanimals andanimal products were
nearcompletion, anagreement concerning winewasbeing negotiated, andnegotiations foranagreement
onfisheries would soon beinitiated. NewZealand 'smarketing boards contradicted itsgeneral
liberalization policy, andheasked about possible subsidies forthealuminium andsteelindustries, the
PHARMAC scheme forout-patient pharmaceuticals, andtheprocedures NewZealand hadfollowed
inimposing countervailing duties onItalian canned spaghetti.
59. TherepresentativeofSlovakianotedthatNewZealand'sreformsweregeneratingcleareconomic
benefits andthattheopenness ofservices markets inparticular could serve asanexample toother
countries. Heappreciated theopenregionalism being followed inAPEC andnoted thatprivatization
hadeffectively separated commercial andgovernment functions. Agricultural marketing boards and
tariff escalation remained ofsome concern.
60. ASEAN countries, represented byThailand, shared NewZealand 'sviewthatAPEC wasan
appropriate forum forfurther trade liberalization.
61. TherepresentativeofArgentinasharedtheviewthatNewZealandservedasamodelofeconomic
liberalization. Heasked theNewZealand delegation toelaborate further onNewZealand 'sreasons
fornotjoining thePlurilateral Agreement onGovernment Procurement andasked whether NewZealand
could foresee further reforms withrespect tothemovement ofnatural persons under theGATS.New Zealand WT/TPR/M/20
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VI. REPLIESBYTHENEWZEALANDREPRESENTATIVEANDADDITIONALCOMME NTS
62. RepliesbytherepresentativeofNewZealandweredividedintofourthemes:themacroeconomic
andstructural environment, multilateral andregional issues, specific trade-related issues, andsectoral
issues. Following thereplies oneachtheme, theChairperson opened thefloortothediscussants and
Members forfurther comments andquestions, which arereflected below.
(1) TheMacroeconomic andStructural Environment
(i) General reform
63. Prior to1984 there hadbeen awidespread awareness oftheshortcomings ineconomic
performance since, astheSecretariat report noted, in1983 NewZealand sGDP wasbelow itsreal
levelof1975, andthishadbeenaccompanied byrising unemployment, growing debtandahighlevel
offrontier protection anddomestic regulation. There hadbeen acertain level ofdebate within
NewZealand onthemerits ofalternative approaches, butitwasnotuntiltheelection of1984 and
theconcurrent foreign exchange crisis anddevaluation thatcircumstances coincided toproduce reform -
theincoming Minister ofFinance having beenamong those whowereadvocating aprogramme offar-
reaching macroeconomic andstructural reform. TheNewZealand representative wasnotaware of
specific exanteestimates ofthebenefits ofunilateral tradeliberalisation, although considerable research
hadbeendoneonthecostsofprotection invarious industries; theobjective ofamore openandhence
competitive economy naturally hadmeant thatattention would begiven toNewZealand 'sborder
constraints, which imposed unnecessary domestic costs. Withrespect tofurther pressure fordomestic
liberalization, ithadtobeconsidered thatNewZealand sreform process hadbegun overtenyears
agoand,astheSecretariat report noted, thelastfewyears hadseentheresults ofthose reforms working
theirwaythrough intheeconomy. AsNewZealand hadjustbeenthrough anelection campaign, and
hadacaretaker Government, therepresentative feltitwasnotappropriate tocomment further onthe
domestic pressures forliberalization.
64. Concerning thepossible relationship between labour reform andincreased productivity, he
noted thattheeconomic recovery hadbeenassociated withhighemployment growth andrelatively
slowlabour productivity growth. Total factor productivity wasestimated tohavegrown atanannual
rateofaround 1.25percentoverthelastfiveyears, compared withanaverage of0.88percentover
theprevious fourdecades. Itwasdifficult, however, toseparate thedirect effects oflabour market
reforms onproductivity from thewider range ofreforms undertaken overthepastdecade: these
productivity gains could notbeattributed tolabour market reforms alone. Labour market reforms
weregenerally credited withimproving thespeed ofadjustment inthelabour market, andincreasing
theability oftheeconomy toguide resources totheir highest-value usesinresponse tochanging
conditions -bothdomestically andinternationally. Therapid growth inexports intheearly 1990s,
forexample,hadbeenattributedbysomecommentatorstoimprovedproductivityfromthelabourmarket
reforms. Surveys undertaken bytheNewZealand Institute ofEconomic Research suggested thatin
theinitial years following thereforms, firms hadfocused oncost-cutting andimproving overall
productivity. Firms werenowincreasingly focusing onlonger terminvestments intheiremployees,
through training andmulti-skilling, which should leadtolonger- termgrowth inproductivity.
65. With respect tocorporatization andprivatization, since 1987 theNewZealand Government
hadprivatized 11State-Owned Enterprises andretained ownership of15.Thedecision onwhether
toprivatise aparticular State-Owned Enterprise wasmade onacase-by-case basis.WT/TPR/M/20 Trade Policy Review
Page 16
(ii) Current account deficit
66. Onthistopic, therepresentative ofNewZealand noted thefollowing relevant factors:
simplification ofthetaxsystem andremoval ofother distortions (eg.,taxexemptions andsubsidies)
toinvestment andconsumption decisions, sothatdecision makers sawchoices more clearly; theswitch
from direct taxation ofincome toabroad-based consumption tax(theGST); achievement and
maintenance ofpricestability (inflation being abigdisincentive tosaving); thepositive fiscal situation,
which hadeased pressure ontaxrates andthusincreased household funds forsavings aswellas
consumption; andaneducation programme, which hadhelped publicize theneed tomake
personal/private provision forretirement income. Thecurrent account deficit wasnotseenasaconcern.
TheGovernment wasrunning alargefiscal surplus andthissurplus wasseenassustainable. ThePre-
Election Economic andFiscal Update published inOctober 1996 under theFiscal Responsibility Act
foresaw theGovernment soperating surplus remaining ataround 3percentofGDP in1996/97 and
1997/98 andrising from 1997/98, reflecting growth inrevenue andflatexpenditure, withincreases
ineducation, health andsocial welfare spending were offset byreduced finance costs. Thecurrent
account deficit wastherefore theresult ofprivate sector decisions. Much ofitresulted fromthefinancing
offixed capital investment, asinvestment hadgrown quickly inrecent years (Secretariat Report,
Table 1.1). Thefinancing ofthecurrent account wasprimarily bydirect investment inprojects or
inlonger-term debtinstruments. Aswellasproviding capital, NewZealand sopenness hadledto
improved knowledge transfer andagreater ability toenter newmarkets.
67. Export growth hadbeenrobust inrecent years, withNewZealand diversifying bothitsrange
ofexport products (inparticular withgrowth innon-commodity manufacturing andtourism) andexport
markets (with agrowing share ofexports going tothefaster-growing Asian markets). Import growth
hadbeenstrong asaresult ofaverystrong domestic growth inrecent years. TheGovernment 'sgeneral
approach wastoletexporters manage thefactors within theircontrol, including theirexposure tovolatile
factors suchasworld prices ortheexchange rate. TheGovernment srolewasseenasproviding a
stable business environment, including price stability, from which exporters andfarmers greatly
benefitted. More generally, thereform programme asawhole hadbeendirected towards increasing
international linkages andpermanently enhancing thecompetitiveness oftheNewZealand economy,
including theexport sector.
(iii) Foreign direct investment policy
68. Concerning thecircumstances under which Overseas Investment Commission (OIC) approval
wasrequired forforeign direct investments, theNewZealand representative referred toChapter Iof
theSecretariat report, which provided adefinition ofwhatconstituted significant assets forthispurpose
andoutlined thebasis onwhich applications were assessed. TheOICtookabroad brush approach
totheOICs“investor ”testcriteria setoutinsection 14A(1)(a)-(c) ofitslegislation. Thenature of
theOIC'senquiry wastoascertain whether theapplicant wasgenuinely behind theapplication and
notafrontforsomeotherparty.Financialcommitmentwouldnormallybedemonstratedbytheapplicant
having committed orborrowed funds foritsproject. Astatement tothiseffect inthewritten application
wasusually sufficient. TheNewZealand delegation could provide copies oftheOICsOverview of
theOverseas Investment legislation tointerested delegations.
69. TheNewZealand Optometrists andDispensing Opticians Act1976didnotdiscriminate against
foreign investment inoptometry businesses: Section 43oftheActrestricted theability ofcompanies,
NewZealand orforeign owned, topurchase more than45percentofanyoptometry business. The
legislation required thatatleast55percentoftheshare capital beheldby‘approved persons including
registered optometrists anddispensing opticians. These restrictions werecurrently being reconsidered
bytheMinistry ofHealth aspartofalarger review ofoccupational legislation. Apreliminary discussionNew Zealand WT/TPR/M/20
Page 17
paper ontheActhadbeenprepared aspartofthefirststage ofthereview process. There would be
aconsultation round in1997 which would enable interested parties tomake submissions onadraft
report. Thefinalreport ontheoccupational legislation review wasexpected tobecompleted bymid-
1997. Anydecisions ontheissue would beamatter forthenewGovernment toconsider.
70. There wereminimal restrictions onforeign investment intheNewZealand fishing industry,
which related tothecontrol andownership ofIndividual Transferable Quota (ITQ) andwerespecified
intheFisheries Act1983. ITQhadtobeowned orcontrolled byaNewZealand company nota
subsidiary ofanoverseas company. Further, acompany thatowned andcontrolled ITQcould not
have25percentormore ofitsshares owned by,or25percentofthevoting power atameeting
controlledby,overseaspersons.TheseprovisionsensuredconsistencywiththeprovisionoftheOverseas
InvestmentAct1973.Theprovisionscouldberelaxedto40percentoverseasownershipand/orcontrol,
provided certain criteria were metthatindicated thattheadditional ownership and/or control would
provide certain benefits toNewZealand. Asthisrestriction applied toITQ,itdidnotaffect overseas
persons orcompanies engaged inaquaculture orfishprocessing.
71. TherewassubstantialforeigninvestmentandinvolvementinNewZealandfisheries;thecontrols
thatexisted onlyrelated totheownership andcontrol ofITQ. There wasfreetradeinfisheries services
andsubstantialinvolvementwithoverseasfishingfleetsoperatingintheNewZealandexclusiveeconomic
zone. Itwascommon practice forNewZealand fishing companies toenter intojoint venture
arrangementswithvesselownersfromothercountriestoharvestthesefishspecies.Thisusuallyinvolved
theforeign fishing vessels fishing under theauthority ofITQheldbytheNewZealand company. This
point could beillustrated bylooking attwoofNewZealand smore important fishspecies. Inthe
yeartoDecember 1995, 99,299 tonnes ofarrow squid (Notodarus gouldi) hadbeenharvested from
theNewZealand exclusive economic zone. Ofthis,91,431 tonnes (approximately 92percentofthe
catch) hadbeenharvested byforeign chartered vessels injointventure arrangements withNewZealand
companies. IntheyeartoDecember 1995, 180,660 tonnes ofhoki(Macruronus novazelandiae) had
beenharvested fromtheNewZealand exclusive economic zone. Ofthis,97,739 tonnes (approximately
54percentofthecatch) hadbeenharvested byforeign chartered vessels injointventure arrangements
withNewZealand companies.
72. Withrespect totheeffectiveness oftheprivate control offishing resources andcharges tothe
industry forfishery resources studies andcontrols, therepresentative explained thattheprocess for
setting management controls likeTotal Allowable Catches (TAC) were fullyseparate from thecost
recovery processes. Management controls weresetbytheMinister ofFisheries. TheFisheries Act
1996provided strong guidance astothesustainability principles theMinister hadregard forinmaking
decisions onmanagement controls suchasTACs. These decisions werebased on,among other criteria
required bythelegislation, ascientific assessment ofthefishstocks. Fisheries research wascarried
out,under contract, byaCrown Research Institute (theNational Institute ofWater andAtmospheric
Research). Inthiscontract, theMinister specified thetypeofresearch heorshewished toseeconducted;
thecommercial fishing industry wasconsulted, andtheMinister considered theadvice oftheMinistry
ofFisheries. TheGovernment thenappropriated funds forfisheries research activities. Following
consultation ontherecovery ofthese costs from theindustry, theGovernment began recovering the
costs ofresearch services relating tocommercial fisheries from thefishing industry.
73. NewZealand welcomed investment from allcountries, without discrimination. Itsforeign
investment regime wasliberal andtransparent, andallrelevant information waswidely publicised.
Overall, astheSecretariat report noted, inthepastsixyears 1,866 consents hadbeengranted bythe
OICandonlytwoapplications hadbeenrefused. Future government policy could notbeaddressed
atthistime.WT/TPR/M/20 Trade Policy Review
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(2) Multilateral andRegional Issues
(i) Impact oftheUruguay Round
74. Astudy commissioned bytheMinistry ofForeign Affairs andTrade hadconcluded that,
depending ontheexact assumptions used, NewZealand sGDP wasforecast toincrease, asaresult
oftheUruguay Round, by2.3percentoverthenextdecade, compared towhatwould havebeenthe
casewithout aGATT Agreement. In1994dollar terms, thiswould mean thatin2005, NewZealand s
GDP would beNZ$1.5-2.3 billion higher thanotherwise, assuming constant exchange rates. This
implied thattheUruguay Round Agreement waslikely toresult inapermanent incremental gainof
NZ$150-230 million toNewZealand sGDP foreachofthenext10years. Thetiming ofthese gains
within the10-year period maynotbeeven; nonetheless, theforecast GDP increase would leave
NewZealand permanently better offafterimplementation oftheUruguay Round wascompleted in
2005. These gains included: a3percentincrease intheterms oftrade; a4percentincrease in
agricultural production; and20,000-30,000 newjobs.
75. Anumber ofcountries hadcommented thatNewZealand gained themostoutoftheUruguay
Round because ofthereforms ithadundertaken. Thiswastrue,butwasonlypartoftheanswer.
TheSecretariat sreport (Chapter II)noted thatNewZealand sexpected largegains fromtheUruguay
Round reflected thecostsithadbeensuffering fromdistortive trademeasures ofother countries. This
particularly related toagriculture, andwithhighlevels ofassistance remaining, NewZealand hadmuch
togainfrom further liberalisation.
76. With respect towhether theimproved agricultural prices thatcould result fromtheUruguay
Round would bereflected inhigher agricultural landprices, there weremany factors thatinfluenced
landvalues anditwasverydifficult tosingle outtheinfluence ofanyonefactor. However, the
NewZealand delegation agreed thatimproved product prices would leadtoincreased landprices, other
things being equal. Thepriceindex forallrurallandhadincreased by22percentin1994andafurther
11percentin1995; themainfactors contributing tothiswere: better current returns andafavourable
outlook fordairying; demand forlandforforestry; andstable interest rates. TheUruguay Round
could havebeenhaving aninfluence onthefavourable outlook fordairying, although other current
market variables largely hadcontributed totheriseindairy product prices in1995.
(ii) Australia-New Zealand Closer Economic Relations Trade Agreement (CER)
77. When CER wasfirstnegotiated intheearly 1980s bothAustralia andNewZealand hadbeen
concerned about itspotential impact oncertain “sensitive ”sectors. Itwasagreed nevertheless that
nogoods would beexcluded fromtheAgreement andthatfullfreetradeinallgoods would beachieved
by30June1995. Slower tariffandquantitative restriction phase-down regimes wereagreed, however,
forsome “sensitive ”industries. Theregimes applying tothese sectors hadbeensetoutinaseries
ofannexes totheoriginal Agreement. When theAgreement wasreviewed in1988 itwasagreed to
bring forward thedateforfullfreetradefrom30June1995to1July1990. Alltariffs andquantitative
restrictions werethusremoved bythatdate,including those applying to“sensitive ”sectors. Likewise
disciplines ontheuseofsubsidies andother industry support measures wereagreed in1988, tocome
intoforce on1July1990. These disciplines applied toallsectors.
78. TheCERhadachieved fullfreetradeingoods. Fullnational treatment hadalsobeenachieved
forvirtually allservices sectors, including aviation. Remaining exclusions from theCER Services
Protocol wereverylimited andNewZealand washopeful thatthese would beincluded intheProtocol
overthenextfewyears. Capital flows remained outside thescope ofCER. NewZealand hadfor
some years sought toinclude capital flows within thescope oftheAgreement, andfollowing aseriesNew Zealand WT/TPR/M/20
Page 19
ofnegotiations thisyearithadbeenagreed inanexchange ofletters between theNewZealand Minister
ofFinance andtheAustralian Treasurer thatofficials should begin examination ofabilateral investment
agreement. Suchanagreement would obviously needtobeconsistent witheachcountry sobligations
relating toinvestment flows.
79. Themostrecent policy development withregard toCERRules ofOrigin (ROO) hadoccurred
during themeeting between NewZealand Minister forTrade Negotiations, Hon. Philip Burdon, and
Australian Trade Minister, Hon. TimFischer, inSeptember 1996. TheJoint Ministerial Statement
hadincluded thefollowing:
“Wesawmerit intheview thatinprinciple itwould belogical toalign CER ROO tothe
international harmonised ROO system, based onChange ofTariff Heading (CTH), being
developed intheWCO/WTO intheexpectation thatthissystem would beinbroad terms no
more restrictive thancurrent CER ROO.
"Australian andNew Zealand officials willstudy theimpact oftheCTH rules inlinewiththe
work programme agreed attheAugust technical working group meeting inWellington. The
study willfocus onaselect number oftariff headings including processed food, forest products,
steelandfootwear, andiswithout commitment totheapproach either Government might adopt.
"Any newsystem would notbeimplemented untiltheWTO/WCO process iscomplete. This
willnotbeforseveral years. ”
Thetechnical working group would report tobothGovernments early in1997.
80. TheCERhadrecently beencharacterized bytheAustralian andNewZealand Trade Ministers
as“theworld smost advanced FreeTrade association. Itisanexcellent trade template which has
placed usinaverystrong position toprovide further economic benefits toourtwopeoples, andto
takefulladvantage ofgrowing regional andinternational tradeopportunities. ”Article 24oftheoriginal
CERAgreement stated thatAustralia andNewZealand mayagree totheassociation ofanyother State
withCER. Theterms ofsuchanassociation would havetobenegotiated between Australia and
NewZealand andtheother State. Nofirmproposal forassociation withCER hadyetbeenreceived
bytheNewZealand Government, butallrequests would begiven careful consideration. Applications
from WTO Members forCER membership would beverywelcome.
(iii) Canada/New Zealand
81. TheTrade andEconomic Cooperation (TEC) bilateral agreement between Canada and
NewZealand hadentered intoeffect in1982 andformalized tariff preferences previously maintained
inaccordancewiththeBritishCommonwealthpreferencescheme,whichwasgrandfatheredinaccordance
withparagraph 2(a)ofArticle 1oftheGATT. TheTECprovided anumbrella fortradeandeconomic
cooperation between thetwocountries. TheAgreement aimed tolimitincreases intariffs andmaintain
minimum margins ofpreference. Under theTEC, Canada enjoyed concessions intheNewZealand
tariffforsome 3,000 tariffitems. During regular consultations heldunder theTECin1995, theParties
hadagreed tomaintain existing preference margins onapoint-for-point basisforatleastafurther three
years.WhencombinedwiththeNewZealandpolicyofunilateraltariffreductions,importsfromCanada
would besubstantially duty-free by1998. TheTEChadnotbeenamended andthere werenocurrent
plans torevise it.Anti-dumping provisions oftheTEC hadbeenovertaken bytheUruguay Round
outcome.WT/TPR/M/20 Trade Policy Review
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(iv) Expanding FTAs -multilateral priority
82. Asoutlined intheGovernment Report, thegoalofNewZealand stradepolicy wastoachieve
sustainable economic growth through trade. Forasmall country withglobal trading interests, astrong
multilateral trading system wasvital,andcomplete multilateral freetradewasrecognised asthefirst-best
outcome. Alltracks ofNewZealand stradepolicy weredirected atthisoutcome, anditsachievement
would ofcourse result inanFTAamongst allWTO Members. ThiswaswhyNewZealand considered
itimportant thattheWTO setitselfanambitious objective thatwould keepitabreast ofthedynamism
ofregional trade liberalisation.
(v) Domestic legalissues
83. NewZealand smethod offraming itsWTO obligations inlegislation, rather thanrepeating
thespecific wording oftheobligations ascontained intheWTO Agreements, wasintended toensure
theleastpossible chance ofnon-compliance withtheseobligations. Thewording oftheWTO, asagreed
betweentheMembers,hadnotbeendesignedfordirectapplicationtothejurisprudenceofeveryMember.
IfNewZealand hadadopted theexact wording oftheWTO itwould havebeenoffering theopportunity
totheNewZealand legalprofession toquestion thewording inisolation fromthebackground context
inwhich thewording hadbeenagreed. Accordingly, themethod NewZealand hadchosen togive
effect toitsWTO obligations inthisregard aimed toreduce thescope foranunintended meaning being
applied toparticular WTO wording. Should therebeapanel report adopted inrespect ofNewZealand
measures, theNewZealand Government would berequired totakeappropriate action inaccordance
withitsWTO obligations.
(3) Specific Trade Issues
(i) Tariffs: zero-for-zero andusedmotor vehicles, andfuture plans
84. NewZealand would conduct atariff review in1998 tocover tariff policy post-2000. Such
issues astariff levels, peaks, tariff escalation andrequests fordeeper reductions would betaken into
account atthattime. Onpharmaceuticals, NewZealand was,asSwitzerland noted, aparticipant in
theoriginal agreement; ithad,justtheprevious week, received details ofthenewproduct coverage
andwould begiving itcareful attention. Decisions onallthese issues would, ofcourse, beamatter
fortheincoming Government.
(ii) Tariffs: applied ratesandbindings
85. InregardtoconcernsraisedovertheuncertaintycreatedbythedifferencebetweenNewZealand's
applied duties anditsbound tariffrates, itwasworth noting that,leaving asidethequestion ofbindings,
thecourse ofNewZealand tariffreform programmes hadbeenveryrobust. Thepathhadbeenclearly
laidoutinadvance, withdeclining rates setoutintheNewZealand Tariff. Thecountry hadnot
backtracked onanyofthese programmes, norhaditresorted tosafeguard measures fortemporary
relief. Inreality, these programmes hadafforded ahighdegree ofcertainty. Thelevelofbindings,
too,hadtobeseenincontext. Theweighted average cutthatNewZealand hadundertaken inthe
Uruguay Round wasintheorder of50percent,farabove theone-third target level. Levels hadbeen
agreed inbilateral negotiations, often withpartners where NewZealand 'sproducts werestillsubject
tohigh-oftenprohibitively high-tariffs. While some countries preferred tocomment ontherelatively
highlevelofNewZealand stariff bindings onindustrial products, itseemed more valid toconsider
theaverageacrosstheentiretariff,since,forNewZealand,thelevelsofprotectionappliedtoagricultural
products inkeyexport markets would haveamuch greater impact onexport performance andliving
standards.New Zealand WT/TPR/M/20
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(iii) Tariff concessions
86. Tariff concessions (PartIIoftheNewZealand Tariff) wereonemeans bywhich tariffs were
reduced tozeroincases where NewZealand business didnotproduce specific goods. Theobjective
wastoensure thattariffs didnotimpose costsonbusiness using inputs notproduced inNewZealand.
Tariff concessions could besought inrespect toanyproduct imported intoNewZealand andwould
begranted inallcases where there wasnoNewZealand producer ofthespecific item. Aclear
description oftheconcession policy wasfound inChapter IIIoftheSecretariat report, which inter
alianoted thatthelistofconcessions wasupdated andpublished every twomonths.
87. NewZealand hadanadministrative rulethatconcessions inplace forfiveyears ormore would
generally notbewithdrawn. Themove towards tariff permanency wastomaintain theestablished
certainty ofduty-free entry, which importers andmanufacturers hadcome torelyoninsourcing their
goods. Concessions thathadbeeninplace forfiveyears ormore wereonlylikely tobewithdrawn
foradministrative reasons. Thisapplied incircumstances where:
- theindustry assistance purpose ofthetariffwasbeing circumvented (e.g., where Customs was
unable toadminister theconcession without compromising theprotection afforded togoods
notintended tobecovered bytheconcession, orwhere aconcession could notbeenforced
byCustoms);
- aconcession hadbeengranted onthebasis ofinaccurate information;
- aconcession hadbeengranted inerror; or
- theconcession wasnotcapable ofbeing confined tospecific types ofgoods sothatthetariff
protection waslostonother goods notintended tobewithin thescope oftheconcession.
Thetwoconcession withdrawals referred tointheSecretariat report hadbeenundertaken because the
wording oftheconcessions wasflawed totheextent thatgoods outside theintended scope ofthe
concessions hadbeenimportable duty-free.
(iv) Textiles, clothing andfootwear
88. NewZealand 'simports inthetextiles, clothing andfootwear sectors came fromabroad range
ofcountries andhadrisenbynearly 30percentoverthepastfiveyears, tomore thanNZ$1.2 billion.
CountriesthathadincreasedimportsmorerapidlythantheaverageincludedAustralia,China,Indonesia,
IndiaandItaly. Indiacould besatisfied thatitappeared tohavebeenparticularly successful, increasing
itsexports ofapparel, textiles andfootwear toNewZealand by460percentinfiveyears, toover
NZ$37 million. AsHong Kong hadnoted, protection forNewZealand producers inthese sectors
wassolely through tariffs; noquantitative restrictions were used. TheNewZealand industry had
faced considerable adjustment pressures asaresult oftheremoval ofprevious licensing measures and
tariffreductions. Despite this,theNewZealand industry hadincreased exports overthesamefive-year
period bysome 47percenttoaround NZ$270 million.
(v) Effective RateofProtection (ERP)
89. Themostrecent ERPestimates werefromthepost-1996 Tariff review, dated November 1994.
Thefollowing tableshowed theEffective RateofAssistance (ERA) onthemajor manufacturing sectors
inNewZealand. TheEffective RateofProtection (ERP) measure accounted forboththelevel of
protection oninputs thatafirmusedandthelevelofprotection thatfirmreceived onitsoutput. The
ERPtherefore indicated thedifference between value-added inthedomestic sector andthevalue-added
atworld prices. Anegative ERPwould result from afirmthatfaced higher input costs because of
protection, butfaced world prices foritsinputs. TheERA measure wasaslightly more complex,WT/TPR/M/20 Trade Policy Review
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butmorecomplete, measure ofprotection thanwastheERP. LiketheERP, itwasbased uponassistance
toinputs andoutput relative tovalue-added. However, itextended theERPanalysis byincorporating
anyindirect effects ofgovernment policies elsewhere intheeconomy ontheinputs intothatindustry.
Thislatter portion wasknown asthe“costexcess ”.Thedifference between theERPandtheERA
wastherefore the“costexcess ”effect ofprotection elsewhere intheeconomy ontheindustry under
examination. There wassome evidence oftariff escalation between thetextile andclothing sectors,
andbetween petroleum refining andpetroleum products. Datasuggested thatERAs in1993 ranged
between lessthan1percentforsome primary sectors toover400percentfortransport equipment.
However, theNewZealand delegation noted thattheseestimates weresomewhat dated andthatERAs
would befalling asaresult ofNewZealand sunilateral tariff reduction programme.
Estimates oftheEffective Rate ofAssistance inNewZealand
NZIC DescriptionAssisted value output
$m(est)ERA
(percent)
3111 Meat processing 4,526 0.6
3112 Dairy Products 2,004 3.0
3116 Grain Milling 211 10.3
3113-3122 Other Food 2,917 7.9
313-314 Beverage &Tobacco 1,054 -3.5
321 Textiles 2,115 24.3
322 Clothing 995 54.2
323-324 Leather &Footwear 569 31.9
33 Wood &Wood Products 2,131 6.1
34 Paper, Printing, Publishing 3,647 6.1
353-354 Petroleum &Coal 2,134 0.1
351-2, 355-6 Other Chemicals 3,245 16.8
36 Non-Metallic Mineral Industries 1,203 7.6
371 Iron&Steel Basic Industries 573 13.7
372 Non-Ferrous Metals 1,170 2.2
381 Fabricated Metal Products 2,404 18.2
384 Transport Equipment 2,467 428.5
382,383,385 Other Equipment 3,014 18.5
39 Other Manufacturing 328 15.9
Total Manufacturing: 36,708 15.4
Source: 1996 Tariff Review, BERL. 1993 estimates
(vi) “Intentional ”protection
90. With respect tothereference intheSecretariat Report thattariffs were theonlymeans of
intentional import protection forNewZealand agricultural products, NewZealand feltthatcomment
should besought from theSecretariat. From itsperspective, tariffs were theonlyform ofimport
protection forNewZealand sagricultural products.
(vii) NewZealand Trade Development Board
91. Theannual NewZealand Export Awards recognized outstanding foreign exchange earnings
achievements. Theaimoftheawards wastoreward themost outstanding overall performances by
applicants ondeveloping foreign exchange earnings. In1996 there would beeight awards intotal.
Each winner would receive aspecially designed trophy andacertificate. Inaddition, thewinner of
eachcategory would receive areturn business flight toaspecified destination. Anexport scholarship
(astudy grant ofuptoNZ$15,000 towards thecostsassociated withfurther training) would beawarded
toayoung person employed, andnominated, byanapplicant foroneoftheAwards.New Zealand WT/TPR/M/20
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(viii) Trade remedies under CER
92. Theremoval ofanti-dumping action fromtrans-Tasman tradereflected theremoval ofalltrade
barriers andtheharmonisation ofcompetition lawbetween Australia andNewZealand. Thehighdegree
ofprocedural harmonisation between theNewZealand andAustralian legal systems hadmade the
harmonisation ofcompetition lawsmuch easier. Intheabsence ofthecomplete removal oftradebarriers
onaglobal basis, andtheabsence ofasufficient degree ofharmonisation ofcompetition laws,
NewZealand hadnoplans toextend theremoval ofanti-dumping toallforeign firms andimports.
Inthiswider context, competition lawwasnotseenasasubstitute foranti-dumping investigations.
(ix) Anti-dumping andcountervailing measures
93. Concerning NewZealand 'sintention toinitiate public discussions ofproposals togivegreater
weight tothenational interest inanti-dumping proceedings, therepresentative explained thattheoriginal
intention, asindicated intheSecretariat report, hadbeentopublish adiscussion paper thatwould provide
abasisforpublic discussion ofanumber ofissues relating totheadministration ofanti-dumping laws.
Thecompletion ofsuchapaper andtheoutcome ofanysubsequent discussion would depend upon
thepolicies adopted bytheGovernment tobeformed following therecent election. Referring toconcern
expressed bytheEUabout acountervailing dutycaseoncanned spaghetti, henoted thattheEUhad
requested informal consultations onthismatter andthatNewZealand hadmade itself available for
these consultations andwould respond indetail totheEUsconcerns. TheNewZealand authorities
considered thattheirprocedure relating tothedisclosure ofessential factsandconclusions wasfully
consistent withtheprovisions oftheAgreement onSubsidies andCountervailing Measures.
(x) SPS-poultry
94. NewZealand 'seffective prohibition ontheimportation offresh poultry meatandfresh eggs
wastheresult ofstandard sanitary procedures, which werenodifferent from those behind anyother
sanitary orphytosanitary measure. NewZealand wasfreefrom three diseases found inbirdflocks
elsewhere intheworld -Newcastle disease, avian influenza andinfectious bursal disease. Inorder
toensure thatthisremained thecase,imports offreshpoultry andfresheggswerecurrently prohibited.
TheMinistry ofAgriculture would, however, beundertaking adisease riskanalysis onimporting fresh
poultry withthese diseases nextyear. Theanalysis wasexpected tobecompleted bytheendof1997,
afterwhich itwould bereleased forpublic consultation. There wasnogovernment policy ofproviding
assistance tothepoultry industry through SPSmeasures. Tothisend,imports ofcooked poultry meat
were allowed toenter NewZealand.
(xi) SPS-cheese
95. With respect tosanitary-phytosanitary measures forcheese, theNewZealand representative
clarified that: hiscountry hadnoanimal health concerns relating totheimportation ofcheese made
from rawmilkandthatitsconcerns related tohuman health andsafety; domestic lawrequired that
allcheeses consumed inNewZealand bemade from milkthatwassubject topasteurisation; the
authorities werewilling toconsider evidence ofalternative treatment thatprovided anequivalent level
ofhuman health protection; thatasfrom1July1996itwastheAustralia andNewZealand Food Safety
Authority (ANZFA) thatwasresponsible fordeveloping foodstandards forbothcountries; thatfrom
1July1996NewZealand andAustralia recognised eachother sfoodstandards asequivalent andthat
inthecaseofNewZealand, thismeant thatproducts complying withAustralian foodstandards could
besoldinthedomestic market inNewZealand; theNewZealand authorities hadbeenadvised by
theSwiss authorities thatvarieties ofhard/semi-hard cheeses made fromunpasteurised milkthatwere
entering Australia mettherelevant Australian domestic foodstandard, andthis,hefelt,could provideWT/TPR/M/20 Trade Policy Review
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abasis forfurther consideration ofthematter, withtheNewZealand officials attending theOctober
1996meeting oftheSPSCommittee conveying thisviewtotheSwiss authorities andencouraging them
tosupply anyrelevant additional information; intheevent thatachange totheNewZealand (or
Australian) standard wasrequired before thecheeses inquestion could gainentry intoNewZealand,
anapplication would needtobemade toANZFA forareview oftheexisting standards, andSwitzerland
could lodge suchanapplication directly, after which theANZFA hadtwelve months tomake a
recommendation.
(xii) Standards
96. Regardingstandardsfortheconnectionofequipmenttotelecommunicationsnetworks,operators
suchasTelecom established thestandards fortheirownnetworks. Todate,suchsystems asthePTC
system operated byTelecom hadworked well, without criticism. However, intheevent ofanetwork
operator attempting tousethestandards process asameans oflimiting competition, theprovisions
oftheCommerce Actwould apply. While itwaspossible toimport aforeign product without a
Telepermit label, inorder forsuchequipment tobelegally attached toanynetwork operated byTelecom
NewZealand Ltd,aproduct hadfirsttohaveaTelepermit, which indicated Telecom 'sapproval of
theproduct asmeeting thestandards forattachment toitsnetwork. ATelepermit wasnotnecessarily
thestandard forallnetworks operated inNewZealand. Under theTelecommunications Act1987,
asamended bytheTelecommunications Amendment Act1988, “noperson shall, without theagreement
ofthenetwork operator, connect anyadditional line,apparatus, orequipment toanypartofanetwork,
ortoanyline,apparatus, orequipment connected toanypartofanetwork owned bythatoperator ”.
Under theAct,therefore, network operators hadtherighttoapprove equipment forattachment totheir
ownnetworks. There were several network operators other thanTelecom; forexample, Clear
Communications Ltd.provided acompeting PSTN service andBellSouth NewZealand Ltd.provided
acellular network.
97. Therepresentative ofNewZealand confirmed thatlaboratory accreditation relating to
radiocommunications andelectromagnetic compatibility andelectrical safety issues wasconducted on
anon-discriminatory basis. Such accreditation required either that: evidence beprovided thatthe
laboratory wasformally registered withtheresident country slaboratory accreditation scheme, for
conducting testing relevant totheproducts required tobedeclared inNewZealand, provided the
accreditation scheme wasformally recognised byTELARC; oranassessment becarried outbythe
NewZealand Ministry ofCommerce, onthebasisofalternative criteria. Forelectrical safety matters,
laboratories were recognised where they were accredited byTELARC orbyanInternational
Electromechanical Commission Certification Body Scheme Laboratory. Alaboratory outside either
ofthese categories could stillberecognised under NZECP3 (acodeofpractice under theElectricity
Act).
98. TheregulationsdevelopmentprocessfortheHazardousSubstancesandNewOrganisms(HSNO)
Act1996hadbegunwiththepublicationforcommentof“ProposalsforRegulationsUndertheHazardous
Substances andNewOrganisms Act”inNovember 1994; written comments onthisdocument had
closed inMarch 1996. TheMinistry fortheEnvironment wasnowdeveloping detailed specifications
fortheregulations based onthese comments, andhadbeenseeking, overthepastyear, experts inthe
various aspects oftheregulations toactasexpert reviewers forthisprocess. Unfortunately, theMinistry
hadlimited response tothisrequest from some U.S.chemical companies. Itwasexpected thatthe
drafting oftechnical specifications would takeuntilapproximately theendof1997 tocomplete, and
theactual drafting oftheregulations aslegal entities would takesome timeafterthat. Members of
theU.S. Chemical Manufacturers Association hadbeen extensively briefed onthisprocess in
Washington inJuly1996bytheHSNO project manager. AtthistimestafffromtheInternational Trade
Administration oftheU.S.Department ofCommerce hadalsobeenbriefed. NewZealand could assureNew Zealand WT/TPR/M/20
Page 25
theUnited States thatimplementation oftheHSNO would notcompromise trade secrets. Relevant
provisionswerecontainedintheHSNOAct1996(andtheOfficialInformationAct1982),notinanything
tobewritten intoregulation. Thekeysections oftheActwereSections 55and57,along withrelevant
provisionsoftheOfficialInformationAct.TheHSNOlegislationexplicitlyrequiredthatNewZealands
international obligations betaken intoaccount inrelation to“allpersons exercising functions, powers
andduties under thisAct”.These international obligations, ofcourse, included NewZealand s
obligations under theTRIPS Agreement. Suchmatters hadalsobeendescribed totheU.S.Department
ofCommerce ataJuly1996meeting, andNewZealand felttheU.S.officials present hadbeensatisfied
withtheapproach being taken.
99. Therepresentative ofNewZealand clarified thathisGovernment hadnoplans toestablish
aproduct registration system, andthought thatperhaps therehadbeensome confusion overthecurrent
requirements under theToxic Substances Act1979thattoxicsubstances be“scheduled ”under relevant
regulations. Under theToxic Substances Act(Section 32),allimporters ormanufacturers oftoxic
substances notified theMinistry ofHealth, providing certain basicinformation about thetoxicsubstance.
Thisrequirement hadbeeninplace sincetheActcame intoforce. Thislegislation, including scheduled
products, waseventually tobeincorporated intotheHSNO Act.
(xii) Government procurement
100. NewZealand already hadinplace theopen, non-discriminatory procurement system thatwas
theintent oftheplurilateral Government Procurement Agreement (GPA). Indeed, ithadmoved well
beyond thesorts ofdisciplines setoutinthatAgreement, which wasviewed asflawed interms of
multilateral trade liberalisation because ofitsaccommodation ofbilateral andsectoral exemptions.
NewZealand hadnothing toofferGPAsignatories interms ofaccess toitsgovernment procurement
thatwasnotafeature ofitspresent system.
101. NewZealand sawgovernment purchasing decisions asessentially nodifferent fromanyother
corporateorprivatepurchasingdecisiontakingplaceinanopenderegulatedandcompetitivemarketplace.
InNewZealand sdecentralised State sector administrative andfinancial management environment,
individualgovernmententities,inmakingpurchasingdecisions,wereresponsiblefortheirownprocedures
andrequirements andoperated onanequal footing withtheprivate sector. Within theconstraints of
departmental budgets, individual departments hadauthority overallinput policies. Likeoperators
intheprivate sector, decentralised government purchasing decisions weresubject toindividual system
guidelines andaudit toensure decisions were based onvalue formoney. Central controls hadbeen
abolished. Insum,NewZealand sprocurement regime wasfullyopenandaccorded withthecentral
WTO principles ofnon-discrimination, national treatment andtransparency. Theonlyimpediment
toprocuring from foreign suppliers wasthegeneral customs tariff.
102. Fewothercountries haddevolved government procurement totheextent doneinNewZealand.
Forsome countries, theadministrative andreporting requirements under theGPA maywellbemet
atsmall cost,given thecentralised nature oftheirsystems. ThatwasnotthecaseforNewZealand,
which would havetoimplement newcentralised administrative systems tomeetsuchrequirements.
Furthermore, membership oftheAgreement would provide few,ifany,benefits interms ofenhanced
access forNewZealand exporters totheprocurement markets ofothersignatories. Thus, asasignatory
NewZealand would inevitably faceincreased costs forlittleornobenefit.
103. Therepresentative added thatthewhole emphasis ofpurchasing policy wasopenandeffective
competition: NewZealand sawnoneedtoprescribe procedures toensure thatthiswasdone. Agencies
werefreetopurchase fromthebestsource, andlogicsuggests theywould doso.They alsowerefree
todecide onthemosteffective ways topurchase particular products inparticular circumstances. ThisWT/TPR/M/20 Trade Policy Review
Page 26
leftthemfreetodecide themostcost-effective waysofmaking purchases, without unnecessary control
ordirection. Some general elements ofpurchasing policy andadministration didprovide checks that
policies werefollowed. These included: allpotential suppliers could contact individual organisations
directly forinformation, anddebriefing ofunsuccessful suppliers wasavailable; theGovernment s
purchasing policy guidelines explicitly stated thattherewastobenounfair discrimination against foreign
suppliers andtheMinistry ofCommerce conducted periodic surveys ofgovernment agencies tomonitor
howeffectively thepolicy hadbeenunderstood andimplemented; suppliers withgrievances could
contact anumber oforganisations including, inthefirstinstance, thepurchasing agency involved (and/or
theMinister responsible fortheagency), andtheMinistry ofCommerce, which hadresponsibility for
theGovernment spurchasing policy, could alsoinvestigate complaints ofunfair treatment ordenial
ofopportunity; theController andAuditor-General hadpowers toconduct anenquiry assetoutin
thePublic Finance Act1977 andcomplaints concerning bribery andcorruption could bedealtwith
under theCrimes Act1961, withinaddition, freedom ofthemedia topublish information about certain
contracts; akeyfeature ofthereformed public sector wastheincreased accountability ofChief
Executives toMinisters andParliament fortheefficient operation oftheir departments. Thus
Parliamentary reviews ofperformance could include queries relating tooverall efficiency andcosts,
andthefinancial statements ofthepublic sector were regularly audited bytheAudit Office.
104. Concerning questions about thepolicy offullandfairopportunity forlocal suppliers, the
representative explained thatNewZealand hadnopreferences ingovernment purchasing policy. The
policy wasnotoneof“localpurchasing, ”butinstead thepurchasing guidelines firstissued in1991
stated thatpurchasers should avoid unfair discrimination against foreign suppliers and“make thefinal
choice onthebasis ofvalue formoney afterconsidering allrelevant factors, including through life
costs”.Likeoperators intheprivate sector, decentralised government purchasing decisions weresubject
toindividual corporate system guidelines andaudit toensure thatdecisions werebased onvalue for
money.
105. NewZealandsmembershipoftheAustralia-NewZealandGovernmentProcurementAgreement
didnotconflict with NewZealand spolicy ofnon-discrimination ingovernment purchasing.
NewZealandjoinedtheNationalProcurementAgreement(theAustralianpredecessoroftheGovernment
Procurement Agreement) in1989inorder tosecure thenon-application oftheAustralian Statepurchase
preferences against NewZealand content. Inreturn, NewZealand hadmade acommitment tocontinue
itsexisting policy ofnotapplying apreference margin topurchases from anysource. Thus, there
wasnoconflict withtheAPEC commitment onnon-discriminatory treatment.
106. Withrespect todefence-related purchasing, special strategic considerations could apply, e.g.,
NewZealand industry involvement inorder todevelop domestic logistic support capability. Ifextra
expense wasinvolved thenthiswaspartoftheoverall purchasing decision. General purchasing policies
applied alsotodefence purchasing andthere were nospecial rules orrestrictions thatdiscriminated
against foreign suppliers orsetlevels ofNewZealand content.
(xiii) Trade andcompetition
107. Therepresentative ofNewZealand explained thatcompetition rules andpolicy were taken
intoaccount intheformulation ofNewZealand strade andeconomic policies. NewZealand did
notregard trade policy asexisting inoneconceptual boxanddomestic economic policy inanother,
butregarded thelinksbetween anoutward-looking tradepolicy andgeneral economic policies designed
topromote efficiency asclose andinteractive. Bothsetsofpolicies weredesigned toencourage the
search formore productive ways ofdoing things intheeconomy atlarge. NewZealand spolicy of
lowering barriers attheborder wasconsistent with, andcomplementary to,sector-specific deregulation
toencourage competition throughout theeconomy, notjustintheexport sector. Iffrontier protectionNew Zealand WT/TPR/M/20
Page 27
waslowered, thisspurred thesearch formore productive waysofdoing things, bothinareas thatwere
directly opentoimport competition and,bywayofchain reaction, inother areas too. Inturn, the
enhancement ofcompetition inthedomestic economy influenced trade policy asawhole. Itenabled
NewZealand tosupport further measures toachieve global andregional liberalisation.
108. Inresponse toaquestion about exclusive dealerships inwhite goods (home appliances), the
representative ofNewZealand answered thattheCommerce Act1986didnotprohibit particular conduct
inrelation toexclusive dealing, butallowed thecompetition authority andthecourts todecide ona
case-by-casebasiswhethercertainbehaviourwasharmfultothecompetitiveprocess.Thiswasconsistent
withrecent international thinking onvertical restraints, andNewZealand sapproach protected the
competitive process rather thanindividual competitors. Thewhite goods casehadbeentested inthe
NewZealand courts, andsince thatcasethemarket share oftheprincipal distributor haddeclined and
competitors fromoverseas hadgreatly increased theirmarket share inNewZealand; thusthere were
noplans tochange theapproach. Should anycompany believe anexclusive dealership arrangement
wasinbreach ofNewZealand scompetition law(theCommerce Act), thecompany should raisethe
matter immediately withtheCommerce Commission.
(xiv) Trade-Related Intellectual Property Rights
109. NewZealand didnotconsider theelimination ofitssystem ofpatent extensions, which had
existed prior to1January 1995, asastepbackwards, oradisincentive toattracting investment, for
thefollowing reasons: (i)anextension hadnotbeenautomatic; toobtain anextension, anapplication
hadhadtobemade totheCommissioner ofPatents ortheHigh Court, andtheapplicant hadhadto
show thattherehadbeen“inadequate remuneration ”oraninability toexploit theinvention duetowar;
(ii)theduration ofextension could beforanyperiod uptoamaximum oftenyears; inmany cases
theextensions granted were significantly below themaximum 10-year period; (iii)thesystem had
created uncertainty forthepatentee (aswellasthepotential competitor); asithadnotbeeneasyto
determine whatconstituted “inadequate remuneration ”,patentees (andpotential competitors) hadhad
difficulty indetermining whether anextension waslikely tobegranted inaparticular instance; this
hadaffected theirability toplantheircommercial activities; (iv)thesystem hadimposed significant
costs andprocedural difficulties onparties, forexample, asaresult oftheneedtogiveparties an
opportunity tomake written submissions, respond towritten submissions, andpresent theircaseat
ahearing ifthiswasrequired. Ontheother hand, the20yearpatent term: hadprovided anautomatic
increase offouryears tothepatent term; could, inthecaseofnewpharmaceuticals, animal remedies
andagriculturalchemicals,becombinedwithadditionalprotectionavailableunderthelegislationbrought
inon1January 1995 fortheprotection ofconfidential information (interms ofArticle 39.3ofthe
TRIPs Agreement); andwasnotlikely tobeadisincentive forinvestment because ifthepatent term
wasrelevant toaninvestment decision, practice hadshown thatitwasonlyoneofanumber offactors
thatwould beconsidered, including exchange rates, labour market conditions, andtaxrates.
110. TheGeographicIndicationsActhadbeenpassedin1994toimplementtheresultsoftheUruguay
Round. TheAct,together withtheFairTrading Act1986 andtheTrademarks Act1953, provided
theprotection forgeographical indications required under theTRIPs Agreement. Itprovided protection
forforeign geographical indications inrelation toanybilateral ormultilateral agreement towhich
NewZealand maybecome aparty. Todate, nosuchprotectable geographical indications hadbeen
agreed.
111. Inrespect ofbilateral agreements, NewZealand hadbeennegotiating withtheEUonwine.
Thisnegotiation ranged more broadly thangeographical indications, covering issues suchaslabelling
andoenological practices. Themost recent negotiating session hadbeenheldinWellington earlier
in1996. Progress hadbeenmade onsome aspects ofapossible agreement, andcontinuing differencesWT/TPR/M/20 Trade Policy Review
Page 28
hadbeenidentified. Bothsides hadsince beenreflecting internally ontheoutcome ofthemeeting,
withacontinuing process ofdialogue between NewZealand, theEUCommission andMember States.
112. NewZealand hadnotbeennegotiating withtheEUontheprotection ofgeographical indications
foranyproduct other thanwine, norhadNewZealand sought negotiations ongeographical indications
withanyother country orbeenformally approached byanyother country. Such matters would be
leftforthenewGovernment toconsider attheappropriate time.
(4) Sectoral Issues
(i) Agricultural marketing boards
113. NewZealand maintained thattheactivities ofitsexport marketing boards werefullyconsistent
withtheprovisions oftheWTO, which inessence required thattheyoperated fullyinaccordance with
commercial criteria. Themarketing boards were distinct from Government. Although theirexport
powers were derived from legislation, theGovernment hadnoownership stake inthem andhadno
involvement intheirbusiness operations. TheGovernment provided nosubsidies, market pricesupport,
export credits oranyother support, other thangreen boxsupport, toproducers ofproducts covered
bytheboards. NewZealand scurrent AMS under theAgriculture Agreement waszero. Border
protection fortheproducts consisted ofzeroorverylowduties, andsince theboards didnotcontrol
imports ordomestic distribution, prices inthedomestic market reflected international prices.
114. Withrespect toarequest foritscomments onthedisadvantages ofsuchboards thathadbeen
identified intheSecretariat report, therepresentative noted thatthefactthattheSecretariat drew in
partonNewZealand sources, including agovernment department, showed thatissues suchasthese
were kept“under constant review ”.
115. TheProducer Board ActsReform Billhadbeenintroduced inParliament prior totherecent
parliamentary elections. TheSecretariat sreport noted inanumber ofplaces (Chapters IIIandIV)
some oftheproposed legislative changes, andthese proposals were consistent withNewZealand s
WTO commitments. TheBillwould notbeconsidered byParliament untilanewGovernment was
formed.
116. With respect totheDairy Board, itwasworth noting thatthecommercial situation stood in
starkcontrastwithmanyofitscompetitors,whooperatedinhighlyprotectedhomemarketsandcompeted
onworldmarketswiththeaidofsubstantialexportsubsidies.Furthermore,thelabel“exportmonopoly”
hadlittlemeaning intrade terms when oneconsidered theDairy Board spurely export focus. While
NewZealand exported 90percentofitsdairy production, thisstillrepresented lessthan2percent
ofworld production. Even withanexport monopoly, theDairy Board wasonlytheninth largest dairy
company intheworld; itwasone-third thesizeofthelargest, Nestlé ofSwitzerland. Inaccess terms,
some figures were worth noting too.NewZealand scheese access intotheUnited States wasonly
0.7percentofU.S.consumption. NewZealand wasallowed tosupply only151tonnes outofthe
500,000 tonnes ofbutter consumed intheUnited States in1994. Even thesupposedly sizeable butter
tariffquota thatNewZealand heldintheEUmarket constituted lessthan4percentofEUconsumption,
while cheese access stood atatiny0.17percentofthatmarket.
117. TheRaspberry Marketing Council hadbeenestablished in1979 toadminister theorderly
marketing ofraspberries, bothlocally andoverseas. Itsprincipal functions weretoregulate andcontrol
themarketing, inNewZealand andforexport, ofraspberries; topromote thesaleandconsumption
ofraspberries; topromote andorganise theorderly development oftheraspberry industry; andto
carry outandpromote research inrelation tothegrowing andmarketing ofraspberries.New Zealand WT/TPR/M/20
Page 29
118. TheHorticulture Export Authority (HEA) wasanindependent administrative andlicensing
body thatdidnotundertake trade intheproducts under itsambit, incontrast totheother marketing
boards mentioned. TheHEA hadnopowers orcontrol overanyoftheproducts thatwere subject
totheother marketing boards. Itspurpose wastoenable organised export marketing ofvarious
horticultural products bylicensing exporters andestablishing export marketing strategies foreach
horticultural product. Currently, theprescribed products wereavocados, blackcurrants, blueberries,
boysenberries, citrus, feijoas, garlic, myoga, nashi (Asian pears), persimmons, squash, summerfruit,
tablegrapes, tamarillos andwasabi. TheHEAoperated without government assistance anditsactivities
were fullyfunded bytheindustry product groups thatbenefitted from itsactivities. Itacted under
theauthority oftheNewZealand Horticulture Export Authority Act1987, andcontrolled itsown
activities andbudget, thesetting ofwhich usually involved consultation withtheindustry product groups
thatfundit.However, newproducts could onlybebrought under theHEA sambit byregulation,
which hadfirsttobeapproved bytheMinister ofAgriculture andtheMinister ofForeign Affairs and
Trade. TheHEA wasalsorequired tosupply acopyofitsannual report totheabove Ministers, and
suchreports were required tobetabled inParliament.
(ii) Telecommunications
119. TheTelecommunications (International Services) Regulations 1994provided fortheregistration
ofanyperson providing public switched telecommunications services orleased circuits (i.e.international
simple resale) between NewZealand andanyoverseas operator inaterritory outside NewZealand.
Persons registered under theregulations werefreetonegotiate arrangements withoverseas operators
inaccordance withtheirowncommercial interests. However, theSecretary ofCommerce could, in
certain cases, require theadoption ofcertain conditions incontracts withoverseas operators where
itwasconsidered thatthiswould promote acompetitive market ininternational telecommunications
services inNewZealand andserve theinterests oftheusers ofsuchservices inNewZealand. This
provision recognised thatNewZealand 'scompetitive suppliers oftelecommunications services could
bevulnerable totheactions ofoverseas operators who, onaccount ofbarriers tomarket access intheir
ownmarkets, might beinaposition toplayonesupplier offagainst another, tothedetriment of
NewZealand users oftelecommunications services. IntheviewoftheNewZealand authorities, the
regulations were m.f.n.-consistent. They imposed thesame treatment onservices suppliers onany
given route without discrimination astonationality. Allsuppliers weretreated inthesame waywith
regard totheroute inquestion; allsuppliers hadanequal opportunity togainaccess tothesystem
ofregistering services suppliers.
120. Regardingtheissueoflocalinterconnections,theNewZealandcompetitiveenvironmentallowed
forthefreenegotiation ofanagreement forinterconnection, backed bycompetition lawandbyaccess
tothecourts; there wasnogovernment monopoly. Service providers hadopen access to
telecommunications markets onanon-discriminatory basisandwerefreetonegotiate theirownterms.
Thisapproach wascommon withregard totheprovision ofinfrastructure services inallkeysectors,
andcompetition lawwastheprimary means ofbolstering theapproach. TheCommerce Act1986,
interalia,prohibited theuseofadominant position inthemarket torestrict theentry ofothers; as
withanycommercial action, enforcement waspossible byprivate action through thecourts. The
CommerceCommission,anindependentbody,hadextensiveinvestigativepowersandcoulditselfpursue
action through thecourts where itconsidered suchaction warranted, forexample, where private action
wasunlikely tobetaken inaparticular case. TheGovernment hadreaffirmed inJune1996 thatit
would beveryconcerned toseeanyfirmdelaying negotiations, offering restricted terms andconditions
orcharging highaccess prices toitscompetitors forthepurpose ofrestricting competition.
121. OfparticularrelevancetointerconnectionweretheTelecommunications(Disclosure)Regulations
1989andanumber ofinformal measures. TheRegulations ensured transparency andtheavailabilityWT/TPR/M/20 Trade Policy Review
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tocompetitors ofcommercially relevant information. Theyrequired thedominant operator todisclose,
onaquarterly basis, prices, terms andconditions foralllocalaccess-related services, including the
fulltextofanyinterconnection agreement. InJune1996, following anexclusive review oftheregulatory
system, theMinisters ofCommunications, Commerce andEnergy hadissued apolicy statement which,
among other things, hadreiterated thattheGovernment would continue torelyoncompetition and
theCommerce Actforthetelecommunications sector, aswellasforthegasandelectrical networks.
Where theGovernment wasnotsatisfied thatbothparties were negotiating ingood faithwithin the
framework, itwould takeadditional regulatory action, suchasinitiating aCommerce Commission
price control enquiry or,ifcircumstances warranted, directly imposing price control.
122. Ontheissueofphoneallocations,NewZealandhadestablishedaTelecommunicationsNumbering
Advisory Group, chaired bytheMinistry ofCommerce andwith membership open toall
telecommunications network operators. TheGroup provided aneutral consultative forum todealwith
numbering issues. TheGroup hadbeenlooking attheissue ofnumber portability, focusing firston
0800 numbers, andwasbeginning towork onlocalnumber portability.
(iii) Translation services
123. NewZealandmaintainedfivenarrowlyandpreciselydefinedm.f.n.exemptionsundertheGATS.
Ithadconsidered removing oneoftheseexemptions inthecontext oftherecent negotiations onmaritime
transport services. Atthispoint, NewZealand nextexpected toconsider theissueofm.f.n. exemptions
atthereview ofm.f.n. exemptions scheduled totakeplace nolaterthanfiveyears aftertheentry into
forceoftheWTO Agreement. Inrespect ofinterpretation services, NewZealand wasnotgiving active
consideration atthisstage toextending themeasure, which granted more favourable entry toJapanese
nationals. However, where ademand existed forinterpreters fromanyother country, theywereable
toenter under normal entry policy.
(iv) Distribution andinsurance
124. Concerning questions about whether NewZealand might present further GATS commitments
onfranchising orother distribution services, oroninsurance, therepresentative noted thathiscountry 's
Uruguay Round services commitments were among themost comprehensive made. They reflected
NewZealand 'sassessment ofthebalance ofnegotiated outcomes inbothservices andother areas of
theRound, andthenegotiating processes continued under theGATS. Further commitments would
beamatter forthenewGovernment toconsider.
(v) Trans-Tasman shipping
125. TheNewZealand Government sapproach toshipping services ontheTasman wasclear -
shippers hadtherighttocontract withthecarrier oftheirchoice, andanycarrier wasabletooperate
ontheTasman,subjecttotheappropriateinternationalsafetyandmarinepollutionprotectionregulations.
Theunion agreement wasnotillegal ineither NewZealand orAustralia. However, NewZealand
hadinplace legislation thatwould provide effective remedies toanyperson frustrated byaction taken
insupport oftheunion agreement. Over thelastfewyears, anumber ofinternational carriers and
internationally crewed ships hadelected tocarry trans-Tasman cargo. None ofthemhadsuffered from
anysubstantive trade union action, andasignificant portion ofthetrade wasnowcarried byforeign
ships. Finally, NewZealand wasunaware ofanyempirical studies thatcompared theTasman route
withsimilar shipping trades. Thelastempirical study onthetrade carried outin1992 showed that
linerfreight rateshaddeclined byaround 25percentbetween 1989 and1991. With theadditional
competition inthetrade, theNewZealand representative expected thatrateshaddeclined further.New Zealand WT/TPR/M/20
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(vi) Pharmac
126. PharmacwasajointventurecompanyownedbythefourNewZealandregionalhealthauthorities
(RHAs). Itsmaintaskwastomanage thePharmaceutical Schedule, alistofdrugs (listed intherapeutic
groups) subsidised bythese RHAs. Pharmac, withitsbudget, setthesubsidy forthese drugs, butit
hadnoauthority tocontrol theirprices. Thedrugcompanies themselves settheirprices andcharged
thepatient thedifference between theirpriceandthesubsidy -therewasnorestriction onthemaximum
price.
127. Pharmac operated within abudget, andsohadtoensure thattherange ofdrugs itsubsidised
gavethebestvalue formoney. Reference pricing involved setting asubsidy levelforeachtherapeutic
sub-group sothateachdruginthatgroup received thesame subsidy: thissubsidy wascalled the
reference priceandwassetinrelation tothelowest costdrug-consumers werefreetouseother drugs
buthadtomeettheadditional costs, above thesubsidy, thatasupplier might charge foritsownproduct.
Pharmac didnotcontrol whatprescription drugs were sold, nortoanylarge extent theirprice. Of
course, thesubsidised costtothepatient would beimportant when choosing between similar drugs -
butthetotalpricewasdeterminedbythepharmaceuticalcompaniesvolumeandmarketshareobjectives.
NewZealand didnotagree thatthisreference price approach wasundesirable fortheconsumer: in
1995, Pharmac hadconsidered 79applications foradditions tothePharmaceutical schedule, ofwhich
54werelisted. While thepharmaceutical industries argue thatmany newlistings wereoflittlevalue,
theNewZealand authorities considered thatthelistings ofnewdrugs were ofsignificant benefit to
health care. Inshort, Pharmac spurchasing policies werenotanti-competitive. Itsimply aimed to
dowhatanybuyer does-namely togetthebestdealitcould -anditpurchased onanon-discriminatory
basis.
128. Pharmac expenditure accounted forabout 72percentofthevalue ofprescription medicines
soldinNewZealand. Thus Pharmac wasthelargest, butbynomeans theonly, purchaser ofdrugs
intheNewZealand market. Theexemption from NewZealand competition law,intheform ofthe
1986 Commerce Act,wassimply toallow theRHAs tomaintain theprevious policy fornational
negotiation ofpharmaceutical subsidies -anapproach notunique among WTO Members.
(vii) Steel
129. TheNewZealand Government 'sinvolvement withthesteelindustry hadbeensolely through
itsroleasaninvestor inNewZealand Steel. Asashareholder, theGovernment hadtwice beenrequired,
during the1980s, tocontribute significant taxpayers funds under capital restructurings. In1985,
theGovernment participated inafinancial restructuring thatresulted intheGovernment taking over
orwriting offNZ$1.138 billion ofdebt. In1986 theGovernment hadtaken overapproximately a
further NZ$600 million ofNewZealand Steel debt. Therepresentative recalled theargument that
anarms-length privatisation process extinguishes anyprevious subsidisation. TheGovernment sdirect
involvement withNewZealand Steel, andwiththesteelindustry asawhole, ended withthesaleof
itsshareholding inNewZealand Steel toEquitycorp on19October 1987. NewZealand Steel had
subsequently beensoldbyitsnewowner toBHPandhadthusbeensoldtwice over.
(viii) Aluminium
130. Withrespect toaquery fromtheEUastowhether somealuminium smelters received subsidized
electricity, theNewZealand representative noted thatthere wasonlyonealuminium smelter in
NewZealand andthatthepriceofelectricity paidbythiscompany, NewZealand Aluminium Smelters
(NZAS), involved noelement ofsubsidy arising fromthe1993contract renegotiation. Thecontracts
weretheoutcome ofafullycommercial negotiation between apurchaser ofelectricity andageneratorWT/TPR/M/20 Trade Policy Review
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withcommercial objectives. Thenegotiations tookaccount ofpre-existing rights andobligations of
theparties arising fromcontracts negotiated in1963. NewZealand considered itwasincorrect toallege
thatapricedetermined in1963wasasubsidy merely because pricemovements intheintervening years
meant thatthecontact price wasnowfavourable tothebuyer. Forsuchacomparison tobevalid it
needed tobemade between the1963 contract price andalternative prices available in1963, rather
thanbetween thecontract price andcurrent prices. Theanalysis should alsotakeintoaccount thefact
thatbulkpurchases were usually atadiscount toprevailing prices.
131. In1963, electricity generation andtransmission were partoftheNewZealand Electricity
Department, agovernment department. Thismeant thatthecontract negotiation wasnecessarily with
theGovernment. The1963 contracts hadbeenentered intoatatimewhen NewZealand hadsurplus
electricity capacity, relatively undeveloped industry andarelatively lowlevelofinflation. Thecontracts
enabled theGovernment toobtain asource ofrevenue overthelifeofthecontracts inexchange for
aresource thatmaynothaveotherwise beenused.
132. The1993 contract re-negotiations hadinvolved anextension ofthetermofthepre-existing
contracts, negotiated in1963, andaprogressive increase intheprice profile thatapplied during the
period ofthose pre-existing contracts. Thehigher priceprofile reflected thechanges incircumstances
intheelectricity sector. Prices could nothavemoved uptothislevel immediately because NZAS
hadexisting contractual rights tolower-priced electricity. Inlongtermcontracts itwasnotunusual
forprices tochange significantly attheexpiry ofcontracts andasbuyers andsellers re-appraise market
conditions. Therepresentative ofNewZealand noted theclaim oftheEUthatthetotalamount of
subsidy hadbeenaround NZ$500 million perannum; however, therepresentative hadnoknowledge
howthisfigure wasarrived at,andheexpressed hiswillingness todiscuss itwithEUrepresentatives.New Zealand WT/TPR/M/20
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VII. CONCLUDING REMARKS BYTHE CHAIRPERSON
133. 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.
134. Thediscussion developed under fourmain themes: (i)themacroeconomic andstructural
environment; (ii)multilateral andregional issues; (iii)specific trade-related issues; and(iv)sectoral
questions.
(1) TheMacroeconomic andStructural Environment
135. 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, andother areaswere
alsoseenasimportant.
136. Therôleoflabour 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.
137. 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.
138. 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
increased thespeed ofeconomic adjustment. Henoted thatthecurrent account deficit wasnotnow
seen asaproblem, given thecontext ofhigh levels ofprivate investment, export growth and
diversification, andafiscal surplus. Moreover, thesimplification ofNewZealand 'sfiscal structure,
combined withprice stability, wasencouraging higher domestic savings.WT/TPR/M/20 Trade Policy Review
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139. 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.
(2) Multilateral andRegional Issues
140. 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.
141. MembersnotedthatimplementationoftheWTOAgreementswasexpectedtohaveasubstantial,
positive effect ontheNewZealand economy, which wasexpected tobeamong thegreatest beneficiaries
ofmultilateral tradereform. Themechanism forimplementing multilateral commitments, suchasthe
results ofaWTO dispute settlement panel, indomestic lawwasqueried.
142. 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.
143. Anumber ofparticipants, noting NewZealand 'sactive membership ofAPEC andthegrowing
share ofitstrade within theregion, asked about itsplans inthisregard.
144. 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.
145. 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
andapplications from WTO members werewelcomed. Thetwoparties hadagreed thatitwould be
logical toalign CER rules oforigin toachange oftariff heading criterion, andhadagreed tostudy
theimpact ofsuchachange, inparticular withregard toprocessed food, forest products, steeland
footwear. Anychanges would, however, beimplemented onlyaftertheWCO/WTO process hadbeen
completed. Thebilateral agreement withCanada formalized tariff preferences originating from the
Commonwealthpreferencescheme.In1995,CanadaandNewZealandhadagreedtomaintainpreferenceNew Zealand WT/TPR/M/20
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margins, solongasthesedidnotinterfere withunilateral tariffliberalization. NewZealand continued
toviewcomplete multilateral freetrade asthefirstbestoutcome, andtheoutcome towhich allfour
tracks were targeted. NewZealand believed thattheWTO should setanambitious agenda inthis
regard.
(3) Specific Trade-Related Issues
146. 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.
147. 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, onSPSmeasures inregard tocheese imports, andonthestatus of
mutual recognition agreements withcertain other Members.
148. 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.
149. 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.
150. 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.
151. Ongovernment procurement, therepresentative stated thatNewZealand 'sprocurement regime
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.WT/TPR/M/20 Trade Policy Review
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152. 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.
153. Theelimination ofNewZealand 'ssystem ofpatent extensions fromJanuary 1995wasnotseen
asastepbackwards. TheGeographical Indications Actsafeguarded foreign geographical indications
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.
(4) Sectoral Issues
154. NewZealand waspraised forhaving eliminated agricultural export subsidies. However, the
continuing roleofmarketing boards incontrolling agricultural exports stood outinanotherwise open
tradeenvironment, andwasofconcern. Participants asked about theparticular effects oftheUruguay
Round onNewZealand 'saccess toagricultural markets.
155. Members noted thatcompetition policy hadsuccessfully worked withliberal tradeandeconomic
policy inmany services industries, andsought New Zealand 'scomments onthisexperience.
NewZealand wasasked whether itcould consolidate itsliberal policies through further GATS
commitments.Inaddition,participantswereinterestedinwhetherNewZealandwouldconsiderallowing
easier orgreater entryofforeign service suppliers andinthefuture make GATS commitments regarding
themovement ofnatural persons.
156. 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.
157. 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.
158. NewZealand 'sprovisions regarding international telecommunications services wereapplied
onanm.f.n. basis, butrecognized thatdomestic suppliers maybevulnerable totheactions ofoverseas
operators who, under some conditions, could playonesupplier offagainst another, tothedetriment
ofNewZealand 'stelecommunications users. Thecompetitive environment inNewZealand allowed
forthefreenegotiation oflocalinterconnection agreements, backed bycompetition law. NewZealand
maintained fivem.f.n. exemptions inservices; ithadrecently considered theremoval ofoneexemption
inthemaritime transport negotiations andexpected toagain consider theissue ofm.f.n. exemptions
atthescheduled review ofm.f.n. exemptions tobeheldby2000. NewZealand 'sUruguay Round
servicecommitmentswereamongthemostcomprehensivemadeintheRoundandreflecteditsassessment
ofthebalance ofnegotiated outcomes inservices andother areas.New Zealand WT/TPR/M/20
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159. 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.
*******
160. Overall, Members commented inveryfavourable terms ontheextent ofliberalisation and
openness intheNewZealand economy. Themixofmultilateral, regional andunilateral approaches
wasparticularly noted. Afewquestions remained inspecific areas, including thecontinuing rôle
ofMarketing Boards intheagricultural sector andNewZealand 'sposition vis-à-vis theAgreement
onGovernment Procurement. Overall, however, thedepth andradicalism ofthereform process was
positively assessed andwasseenasoffering useful lessons fortheeconomies ofother WTO members.