New Zealand WT/TPR/S/20
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IV. TRADE POLICIES AND PRACTICES BYSECTOR
(1) Overview
1. NewZealand 'strade andsectoral reforms havehelped make itoneoftheworld 'smostopen
anddynamic economies. Atthetimeofitsprevious Trade Policy Review in1990NewZealand was
inthemidst ofvigorous economic reform. Ithadremoved most import licensing requirements,
implemented initial tariffcuts,greatly reduced subsidies, andcommercialized orprivatized many State-
owned enterprises. Therapid paceofreform hassubsequently beenmaintained. Protective import
licensing andother quantitative trade measures havenowbeenabolished, whereas justoveradecade
agonearly allimports required licences. Substantial reductions havebrought tariffs toneartheOECD
average; previously, tariff levels weretriple those inmostother OECD countries. Direct production
ortrade-related assistance toagriculture andindustry hasbeeneliminated. Withfewexceptions, State-
owned commercial operations havebeenplaced onacommercial footing; many ofthese operations
havebeenprivatized, withrevenues applied tothepublic debt.1
2. Reforms havetouched allareas oftheeconomy, withtheprimary andservices sectors being
opened along with-andoften inadvance of-theindustrial sector. Thishaspositive implications
fortheefficient allocation ofresources across sectors, butisalsoimportant because ofintersectoral
linkages. Theincreased efficiency resulting fromreform inservices isimportant tothefarming industry,
forexample, because services suchastransport andfinance account forsubstantial shares offarmcosts.
3. Themostimportant remaining trade measures areoftwotypes: tariffs andthesingle-seller
export marketing boards inagriculture. Theaverage tariffof6.2percentismoderate, buttheaverage
forlineswithnon-zero ratesexceeds theOECD average, indicating agreater unevenness inthetariff.2
Theextensive protection provided ahandful ofindustries comes atacosttoothers, particularly those
withexport interests.3NewZealand hasaschedule inplace togreatly reduce remaining tariffs by
2000; areview in1998istodetermine howtomove towards theelimination oftariffs under afurther
unilateral tariff reduction programme.
4. NewZealand 'sstrategy foreconomic growth includes maintaining anopenandcompetitive
economy toincrease theflowofinformation andideas, toincrease efficiency andtostimulate innovation.
Itisnotclearthatthisstrategy hasbeenfullyfollowed withrespect totheexport marketing ofagricultural
products, however. Marketing boards influence orcontrol theexport ofsome 80percentoftheexports
ofagricultural products, which comprise halfofmerchandise exports. There arenoplans toeliminate
theexport monopolies thathavebeengranted toseveral ofthese boards.
1Important domestic reforms havealsobeenimplemented, suchasinthelabour market andthepublic service,
easing themove ofproductive resources tomore profitable usesorotherwise increasing economic efficiency.
2According totheMinistry ofCommere (1994a), in1993 New Zealand 'saverage tariff rateforthose lines
subjecttodutywas,at16.6percent,thesecondhighestamongOECDcountriesandwellabovetheOECDaverage
of10.6 percent. While New Zealand 'srates havebeencutmore rapidly thanthose inother countries, in1996
theaverage m.f.n. rateforlinessubject toduty, nowequal to14.6 percent, isstillprobably among thehighest
intheOECD.
3Estimates cited bytheauthorities suggest thatthe1996/97 tariff effectively imposes ataxofsome 5per
centonNew Zealand 'sexport sector (Ministry ofCommerce, 1994a).WT/TPR/S/20 Trade Policy Review
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(2) Primary Industries
5. NewZealand 'seconomy islargely resource-based. Primary industries, including farming,
fishing, forestry andmining, account forabout 11percentofGDP andsome 13percentof
NewZealand 'stotalexports ofgoods andservices. These numbers, however, tendtounderstate the
importance ofthesector; forexample, ifinputs intoprocessed goods aretaken intoconsideration,
thenprimary products comprise atleastaquarter ofexports.4
6. Farming, thelargest partofthesector, hascontracted slightly inrecent years, while theother
primary industries havegrown rapidly. From 1984 to1995 theGDP share offarming fellfrom
7.3percentto5.2percent; however, theshare offorestry andlogging increased from1.2percent
to3.9percent, thatofmining andquarrying increased from 0.8percentto1.1percent, andthat
offishing increased from 0.3percentto0.4percent. Theexpansion ofthese industries hasbeen
driven byexport demand. Theexport volume offorestry products, asmeasured bytheroundwood
equivalent, increased by22percentfrom 1991 to1995; astheavailable wood supply isanticipated
tonearly double by2005, thevolume ofexports isexpected tocontinue growing. Thefishsector
produces predominantly fortheexport market; some 80percentofproduction wasexported in1995,
accounting forabout 5.5percentofNewZealand 'smerchandise exports.
7. Market-oriented reforms intheprimary sector, particularly inagriculture, wereattheforefront
ofeconomywide reforms begun inthemid-1980s. TherôleoftheGovernment inthesector hasbeen
sharply curtailed. Theoutstanding exception isthecontinued useofmarketing boards fortheexport
ofanumber ofimportant agricultural items, including apples, pears, kiwifruit anddairy products.
(i) Farming
8. Farming contributed 5.0percentofGDP in1995/96, down from 6.1percentin1991/92,
andaccounts forsome 9percentofemployment (Table IV.1).5Farming isattheheart oftheagro-
industrial sector, which alsoencompasses farminputs andthetransport, processing, distribution and
retailing offarm products. Theagro-industrial sector employs 17percentofthelabour force; it
contributes 15percentofGDP and54percentofmerchandise exports.
9. NewZealand'sfarmingindustryisprimarilylivestock-oriented,withanimalproductsresponsible
forsome twothirds ofthevalue ofagricultural production. Within thelivestock industry, since 1991
theshare ofdairy hasincreased while thatofwool hasdeclined. Dairy production accounted for
31percentofthetotalvalue ofagricultural output in1995/96, while wool (8percent), sheep and
lambs (9percent)andbeef(12percent)alsoheldimportant shares. Vegetables, fruit, nutsandother
horticulture together added 13percentoftotalagricultural output.
4In1991, 14percentofexports were farm products embodied inprocessed food; processed foodproducts
comprised 35percentofexports andfarm-product content was40percentofthecostoftheproducts. Similarly,
about 2percent ofexports were primary products incorporated intextiles andclothing exports. Data based
onInter-industry accounts for1990/91 inStatistics New Zealand (1995b).
5Ministry ofAgriculture (1996).New Zealand WT/TPR/S/20
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Table IV.1
Agricultural production andexports, 1990-96a
($millions)
Product 1990 1991 1992 1993 1994 1995 1996c
Wool 1,252 832 793 737 724 933 864
Wool exports 1,424 1,044 1,173 985 1,134 1,322 1,099
Sheep andlambs 865 885 845 1,037 1,216 1,120 953
Lamb exports
Mutton exports958
136978
1721,177
1711,209
1801,085
1661,044d
1531,139d
198
Cattle 1,187 1,376 1,443 1,559 1,540 1,394 1,137
Beefandvealexports 1,092 1,284 1,451 1,419 1,384 1,161 1,054
Dairy products 2,166 1,641 2,235 2,536 2,569 2,585 3,270
Dairy exports 2,534 2,485 2,897 3,369 3,563 3,473 3,717
Fruits, vegetables, nutsandother
horticulture 1,201 1,257 1,402 1,374 1,269 1,337 1,351
Fresh kiwifruit exports
Apples andpears; nashi exports
Total fruitandvegetable exports539
218
999520
305
1,069506
335
1,167370
349
1,026381
320
1,076321
491
1,195263
534
1,291
Agricultural services 731 760 807 873 950 1,006 993
Otherb945 838 835 989 1,248 756 631
Total agricultural output 9,284 8,488 9,274 10,135 10,515 10,246 10,336
Total agricultural based exports 8,784 8,752 9,993 10,267 10,559 10,815 10,583
Agriculture 'sshare ofGDP (percent) 6.4 5.4 6.1 5.8 5.6 5.2 5.0
Agriculture-based exports, share of
totalmerchandise exports (percent) 60.5 58.1 58.2 56.3 55.2 53.5 52.6
a Forproduction, yearending 31March; forexports, yearending 30June.
b Includes change inthestock oflivestock, sales ofliveanimals andnon-farm income.
c Preliminary.
d Total sheepmeat.
Note: Production figures refer tofarmgate values while export figures refer toprocessed products.
Source: Ministry ofAgriculture (1996).
10. Thefarmingindustryhascloseeconomiclinkstootherindustries,particularlyfoodmanufacturing
andtransport. Also, asanexport dependent industry producing relatively undifferentiated products,
farming isinfluenced bythemacroeconomic situation, andparticularly exchange ratemovements.
Thus, farmers andfarmgroups takeanactive interest intradepolicy anditssectoral aspects, andhave
beenaforce behind theGovernment 'seconomic reforms. Prior tothe1984 elections theFederated
Farmers,themajorfarmlobbygroup,soughtmeasuresto"createanenvironmentconducivetoeconomic
growth andsustainable lowinflation withaminimum ofGovernment intervention intheeconomy",
including limits onexport incentives, theintroduction ofafloating exchange raterégime, labour market
reforms, theremoval ofallimport licence requirements, thereduction oftariffs, andliberalizationWT/TPR/S/20 Trade Policy Review
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ofthetransport sector.6During a1994 review oftariff policy, thegroup called forthecomplete
elimination oftariffs byJuly1997.
11. Another matter offundamental importance toNewZealand 'sfarming industry, given thehigh
share ofexports intotalproduction, isaccess toforeign markets andtheimpact ofother countries '
agricultural subsidies inthird markets. While theUruguay Round Agreement onAgriculture isof
great value toNewZealand, substantial market access restrictions andsubsidies stillremain, andare
likely todosoevenafterfullimplementation oftheUruguay Round. Based oneconomic studies,
theauthorities believe thatsuchremaining distortions willcostNewZealand theequivalent ofsome
2percentofGDP annually.
(a) Agricultural policies
12. NewZealand 'sagricultural industry ismarket driven, withveryliberal import anddomestic
policy régimes. Thisistheresult ofarapid dismantling ofagricultural support withthestartofreforms
inthemid-1980s. Agricultural subsidies asashare ofGDP werereduced from3.8percentin1983
to0.9percentin1987and0.1percentin1994. NewZealand 'sproducer subsidy equivalent (PSE),
ameasure ofassistance tofarmers, fellduring thisperiod fromitspeakof33percentto3percent,
afigure much lower thanthatofanyother OECD country.7However, theexport ofanumber of
products, including dairy products, continues tobecontrolled bymarketing boards.
Import policies
13. Tariffs aretheonlymeans ofintentional import protection forNewZealand 'sagricultural
products.8Noimport licensing isused, there arenotariff quotas orsimilar trade-restrictive devices,
andallimport-related powers onceheldbyproducer boards havebeeneliminated.9Tariffs aregenerally
low,withm.f.n. rates averaging 1.5percentandamaximum rateof10.5percentforfarm-level
agricultural andlivestock products (ISIC 11)(Appendix Table IV.1). Imports ofmost agricultural
products, including liveanimals, beef, sheepmeat, butter, cheese, fresh fruitandmostcereals, enter
dutyfree. Moderate tariff ratesremain onsome manufactured foodproducts (section 3),although
thesearescheduled tobereduced; by2000, allm.f.n. tariffs onprimary, semi-processed orprocessed
products ofagriculture, forestry orfisheries willbe5percentorless. Although mostNewZealand
agricultural industries areopentointernational price signals asaresult ofthisliberal import policy,
sanitary requirements, which according totheauthorities arejustified under theWTO Agreement on
Sanitary andPhytosanitary Measures, havetheeffect ofpartly isolating theNewZealand markets for
eggsandlive,fresh andfrozen poultry meatfrom theworld markets forthese products.10
6New Zealand Federated Farmers (1984).
7According totheauthorities, agricultural support wasgranted partly tocompensate farmers forprotection
inother sectors oftheNew Zealand economy.
8Sanitary andphytosanitary measures arediscussed inChapter III(2)(vi).
9Thelastsuch restriction, thecontrol oftheHopMarketing Board overimports ofhops, waseliminated
on1January 1995; theApple andPearMarketing Board 'scontrol overapple andpearimports hadbeenrevoked
ayearearlier.
10OECD (1995a).New Zealand WT/TPR/S/20
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Domestic policies
14. NewZealand doesnotprovide anyproduction-linked support tofarmers noranysubsidies
fortheuseofagriculturalinputs.TheGovernmenthasprogressivelyreduceditsinvolvementindomestic
support measures, andremaining public sector services aregenerally provided onauser-pays basis.
Virtually allirrigation schemes haverecently beenprivatized.11Meat inspection andcertification is
provided onafully user-pays basis bytheMinistry ofAgriculture. Government extension and
consultancy services tofarmers, andsome aspects ofthemonitoring offarmsector performance, have
beenprivatized.12Remaining support forpublic sector services islimited toanimal welfare andpest
anddisease control; Government expenditure inthese areas in1994/95 was$52million.
15. TheGovernment retains several agri-environmental policies andprogrammes withobjectives
thatinclude sustainable development, soilconservation andwater quality.13Theauthorities estimate
thetotalcostofagricultural environment-related programmes, including the$52million citedabove,
atsome $140 million, withabout 40percentofthisrelating purely toenvironmental protection and
therestattributable tosafeguarding agriculture against environmental forces, suchaspestsandfloods.
While thesepolicies andprogrammes remain important, theauthorities alsonotethattheenvironmental
benefits ofagricultural policy reform havebeensubstantial, andhaveincluded thereduced useof
fertilizer andpesticides; anincrease inafforestation, duelargely toplanting onformer farmland;
and,asaresult ofadecline insheep numbers, alessintensive useofhill-country pasture.
16. According totheauthorities, climatic disaster relief, which ispartly community-funded, is
theonlypotential source ofdirect payment tofarmers. Theauthorities areoftheviewthatdisaster
relief programmes canencourage unsustainable landuseandcontribute toenvironmental degradation,
andtheGovernment hastherefore reduced itsrôleinthisarea.14Ingeneral, farmers areexpected
touseprivate insurance ormanage theirownrisks, andtheGovernment hasreduced itscommitment
accordingly inrecent years.
17. Under theCommodity Levies Act1990, industry organizations may,following areferendum,
impose compulsory levies oncommodities inorder toundertake certain activities ortoprovide funds
fortheorganization. Eligible activities include research, market development, market promotion, and
health measures, butexclude trading orcommercial activities. AsatJuly1996, commodities andtheir
maximum levyratesincluded: asparagus (0.15 percent), avocados (3percent), eggs(5cents per
chick), export squash (0.15 percent), freshtomatoes (1percent), processing tomatoes (0.15 percent)
andwinemaking grapes (1.5percent).
18. Twomarketing boards retain active orlatent powers toregulate thedomestic marketing of
some products; these powers arecurrently under review. TheHopMarketing Board controls the
11Among the50irrigation schemes, oneremains under theownership oftheCrown. Negotiations onsales
oftheother schemes tookplace in1988-90, andpayments andother obligations were completed in1996.
12TheGovernment contracts fortheprovision ofmonitoring andpolicy-advice services withthefirmthat
itprivatized. Theprivatization ofservices in1996 waspreceded byauser-pays approach initiated in1988 and
thecommercialization ofabusiness unitwithin theMinistry ofAgriculture in1991. Government expenditure
inthisareahasfallen from $28million in1988 to$3million in1996.
13OECD (1995b).
14OECD (1995b).WT/TPR/S/20 Trade Policy Review
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domestic (andexport) marketing ofhops, while theRaspberry Marketing Council hastheauthority
to,butdoesnotcurrently, fixdomestic marketing quotas orotherwise control thedomestic market.
Noother marketing boards haveactive orlatent powers withrespect todomestic marketing.
Export policies
19. Most ofNewZealand 'sagricultural output isexported, either directly orindirectly, making
theexport marketing structure potentially important forthenational economy. Forsome products,
particularly dairy(25percent)andkiwifruit (27percent), NewZealand accounts forsubstantial shares
ofworld trade. Itsexport marketing structure maythusaffect parts oftheworld market forthese
products.
20. NewZealand hasneither agricultural export taxes orsubsidies.
21. Fiveentities exercise export market monopolies fortheirproducts (Chapter III(3)(iii)). These
aretheApple andPearMarketing Board, theDairy Board, theHopMarketing Board, theKiwifruit
Marketing Board (other thantoAustralia) andtheRaspberry Marketing Council.15TheHorticulture
ExportAuthoritylicensesexportersinaccordancewithexportmarketingstrategiesdevelopedbyproducer
andexporter groups. Inaddition, theGame Industry Board, theMeat Producers Board andtheWool
Board haveregulatory authority thatincludes export marketing andlicensing; however, theydonot
exercise theirpotential control overexport operations.16Eachoftheabove bodies isastatutory entity
that,withtheexception oftheHorticulture Export Authority, operates without government assistance
andisdirectly orindirectly producer-controlled. Insum,theseentities directly control, orarepotentially
abletoinfluence, theexport ofabout 80percentofNewZealand 'sagricultural andhorticultural exports.
Thisexport marketing structure, andespecially therôleofsingle-seller export marketing boards, has
beencriticized onseveral grounds, particularly thatofefficiency (Box IV.1)
22. Inmany cases theBoards 'activities require exemptions from provisions ofNewZealand 's
competitionlegislation,theCommerceAct(ChapterIII(5)(ii)).Thisexemplifiestheexceptionalcharacter
oftheBoards within NewZealand 'sotherwise verycompetition-oriented framework. TheDairy Board
Act1961: (i)allows theDairy Board toprohibit, restrict andcontrol theexport ofanyother entity;
(ii)gives theBoard special powers intheacquisition andmarketing ofdairy products forexport; and
(iii)setsformulae forthedetermination ofprices paidbytheBoard todairy product manufacturers.
TheApple andPearMarketing Act1971 contains exemptions from theCommerce Actallowing the
Board: (i)toestablish export standards forapples andpears; (ii)monopoly powers overtheexporting
ofthese products; and(iii)tofixprices fortheapples andpears thatitpurchases. Export-related
powers oftheMeat Producers Board andtheWool Board areexpected tobemade explicitly exempt
frompartsoftheCommerce ActbytheProducer Board ActsReform Billcurrently being considered
byParliament.
15TheApple andPearBoard, Dairy Board andKiwifruit Board cangrant export consent toother entities;
however, todate, exports byother entities havenotaccounted forasubstantial share ofexports oftherespective
products.
16TheWool Board andMeat Producers Board do,however, setexport standards fortheirrespective products,
andtheMeat Producers Board doescontrol theexport ofmeat torestricted access (tariff-quota) markets. The
Producer Board ActsReform Billwould eliminate theexport marketing powers oftheMeat andWool Boards
toacquire andsellproducts. Theexport licensing powers oftheWool Board would alsobeeliminated, butthe
Meat Board would retain itspowers torestrict exports, particularly tothose countries thathave market access
restrictions.New Zealand WT/TPR/S/20
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BoxIV.1 New Zealand 'ssingle-exporter marketing boards
New Zealand 'ssingle-exporter marketing boards seek tomaximize export returns forthebenefit of
domestic producers. Proponents ofthesingle-seller approach argue thatinthehighly-distorted world
markets foragricultural products, asingle seller abletosetdifferential prices willbeabletogenerate
higher revenues andtopassthese ontoproducers.
Thismaybethecaseforasingle seller exporting aproduct intoamarket protected byabilateral tariff-
ratequota. Under competition, theproduct would beexported from New Zealand atorneartheworld
market price. Amonopsonistic exporter, however, could probably sellatahigher price; economic rents
-thedifference between theworld market price andthedistorted internal price intheprotected market -
could thenbecollected mainly bytheexporting country rather thantheimporting country. Thissituation
mayexist forexports ofbutter totheEuropean Union (EU) andofbeeftotheUnited States, butthere
arefewother examples involving New Zealand. Even when thisisthecase, theimporting country may
setthein-quota tariff athighrates, soastoeffectively collect these economic rents astariff revenue.
Thesingle-seller approach might alsobeadvantageous toNew Zealand ifitwere theonly, orthe
predominant, exporter ontheworld market. New Zealand isnot,however, a"large" exporter onthe
world market foranybroad product categories. A1993 Ministry ofAgriculture report stated that
New Zealand 'sexport share onworld markets suggested "exporters arenotinaposition toinfluence
greatly thereturns received fortheir primary products onworld markets" (MAF, 1993). This report
noted thatother factors alsodetermined whether New Zealand exporters could influence their prices.
However, thenotion thatNew Zealand might exercise market power topositively affect itsexport prices
hasbeen challenged bymany observers, andtheauthorities have indicated thattheDairy Board isa
"price-taker" inallmarkets andforallproducts.
Theadvantages toNew Zealand ofsingle-seller boards maythusbedoubted, while there areprobably
several disadvantages ofsuch boards.
First, thesystem canleadtoallocative inefficiency. Producer returns may bebased onabundle of
products rather thanjustthose products soldbytheproducer tothemarketing board. Thisbundle could
consist ofseveral different farm-level products, orofamixoffarm-level products andelements of
marketing, packaging, processing andother services engaged inbytheboard. Ineither instance, a
farmer receives aprice based onsome average ofthecomponents ofthebundle, rather thanaprice equal
totheadditional revenue thathisproduction would bring. These distorted market price signals canlead
farmers toallocate their resources inefficiently.
Asecond possible disadvantage, noted byMAF (1993), isthat statutory monopolies face less
competition. This may reduce incentives tocontain costs ofpreparing andprocessing products for
export. Theinfluence ofcompetition onefficiency hasbeen animportant motivation behind reforms in
other areas oftheeconomy. Thisfactor hasnot,however, received widespread attention intheexport
marketing ofagricultural andhorticultural products.
Ithasalsobeen suggested thatmonopolistic marketing boards, bypreventing orrestricting entry into
export marketing, may suppress theuseofother strategies andthusreduce innovation. Examples of
missed marketing opportunities have been cited, although itremains difficult toassess theeconomic costs
ofreduced innovation.
Source: Hussey (1992); Kerr (1996); Ministry ofAgriculture andFisheries (1993); OECD (1996).WT/TPR/S/20 Trade Policy Review
Page 84
23. Theobjective oftheApple andPearMarketing Board istomaximize thetotallong-term export
income ofthedomestic apple andpearindustry. Itsmainfunctions under theApple andPearMarketing
Act1971 aretoacquire, export andmarket allNewZealand-grown fresh apples andpears thatmeet
itsexport standards andtosettheprices paidtogrowers forexport-standard apples andpears. The
Board setsprices forvarious sizesandvarieties ofapples andpears based largely onitsexpected return
forthesizeandvariety ofthefruitontheworld market. Itmaypermit other traders toundertake
exporting; suchconsent isconditional onthefruit, country ofdestination, andsometimes thespecific
export customer. Inthiscase, charges arelevied, largely based onthesizeoftheexport shipment,
torecover theBoard 'sprocessing andother costs, toalimitof$12,000 incharges.17
24. UndertheDairyBoardAct1961,theNewZealandDairyBoardcontrolsalmostalldairyproduct
exports.18Dairy exports accounted for18percentofNewZealand 'smerchandise exports in1995/96.
While theBoard maygrant export permission toother entities, andguidelines fordoing sohavebeen
published, some 99percentofdairy exports areundertaken bytheBoard itself.19TheBoard purchases
dairy products fromNewZealand 'sseveral producer-owned co-operative dairy manufacturers andsets
export prices andquantities foreachproduct andexport market.20Themanufacturers purchase
competitively from dairy farmers. TheBoard setstheprice itpaystomanufacturers asfollows:
quarterly, onthebasisofmanufacturing costsanditsexpected export returns fromalldairy products,
itcalculates aguide price forfluidmilk; thisprice isthenadjusted forthecostofproducing each
dairyproduct,andforanyincentive/disincentivethattheBoardwishestobuild-intoinfluenceinvestment
orinnovation.21Annually,baseduponactualreceipts,afinalaccountingismadewitheachmanufacturer;
inpractice thedifference between theinitial andfinalprices received bythemanufacturers maybe
ashighas20percent, depending onmovements inworld prices overtheseason.
25. Arecent OECD report notes thattheDairy Board 'sexclusive export control hashadaclear
impact "onthestructure oftheexisting industry andthebehaviour ofindividual firms" because the
current arrangement notonlyrestricts export marketing bydomestic firms butalsoeffectively restricts
theability ofoverseas firms toprocess NewZealand milkforexport.22Thereport notes thatseveral
proposals havebeenmade forreform, including: (i)theliberalization oftheentitlement toexport,
byallowing co-operatives direct access tointernational markets; and(ii)privatization oftheBoard,
withshares being allocated toexisting producers. Thislatter approach would berelatively simple,
given thattheproducers, through theirownership oftheco-operatives, arealready indirect owners.
26. TheKiwifruit Marketing Board exercises fullcontrol overkiwifruit exports, other thanto
Australia. Itsetsexport standards andacquires domestically produced kiwifruit thatmeets these
standards. Theprices itsetsforexport-standard kiwifruit areprincipally based onexpected market
17Apple andPear Marketing Board (1994).
18TheBoard 'sexport control islimited toproducts withgreater than30percentbyweight ofdairy products.
19TheBoard hasover70fully-owned subsidiaries, associate companies andagencies andistheworld 'slargest
multinational dairy marketing entity (Statistics New Zealand, 1995a).
20OECD (1996).
21Thus, iftheBoard expects afuture price riseforaparticular product itmaytrytobring about anincrease
inproduction capacity byraising itsoffer price fortheproduct.
22OECD (1996).New Zealand WT/TPR/S/20
Page 85
returns minus costs, butalsoonother factors, including themaintenance ofstability intheindustry.
Attheendofeachseason theKiwifruit Marketing Board makes finalpayments to(orrecoveries from)
growers, thereby balancing itsbooks forthatyear.
27. Horticultural producer groups formulate export marketing strategies, which mayinclude placing
conditions orlimitations onexports. TheHorticultural Export Authority grants export licences in
accordance withthemarketing strategy. Exporters thatdonotcomply withtheagreed export marketing
strategy aresubject tothelossoftheirexport licence (Chapter III(3)(ii)). TheHorticulture Export
Authority doesnotrequire anexemption from theCommerce Act.
28. TheGovernment keeps theBoards under constant review andthishasledtochanges inrecent
years, including inownership structures, improved accountability tofarmers andproducers, theremoval
ofcontrols overimports, reduced controls overdomestic marketing, andincreased transparency of
export consent guidelines fortheApple andPearMarketing Board andDairy Board. However, no
substantial changes havebeenmade toexport-related powers andnosuchchanges arebeing proposed
forthesingle-exporter marketing boards.
(ii) Forestry
29. Forestry isamong NewZealand 'sfastest growing industries, withitsshare ofGDPmore than
doubling, to2.5percent,inthetenyears to1993. Processing andmanufacturing offorestry products
accounted foranother 2.8percentofGDP. Forestry andfirst-stage processing accounted for
1.5percentofemployment asatFebruary 1996. Planted-production forest areagrew atanannual
rateof7.5percentinthe1970s and4.4percentayearsince 1980. Asaresult, withthese plantings
coming tomaturity, production increased bysome 55percentfrom 1989 to1995.23Supplies from
planted production forest, which account for97percentoftotalproduction, areexpected toincrease
by70percentfrom 1995 to2005.
30. Export volumes increased by82percentintheperiod 1989to1995andnowaccount forover
three fifths ofproduction. Primary andsemi-processed forestry products accounted for13percent
ofmerchandiseexportsintheyeartoDecember1995,withJapan,AustraliaandKoreajointlyaccounting
forsome threequarters ofthetotalexport value. Withrapidincreases inproduction andlittleexpansion
indomestic demand, thevolume offorestry products exported isexpected torisesharply, perhaps
doubling by2005. Theauthorities areoftheviewthattheexpected growth inglobal demand forwood
products, theenvironmental benefits, andtheadvantages ofland-use diversification andcarbon
sequestration make clearthebenefit ofafurther expansion ofplanted forests, including thecontinued
integration offorestry andfarming.24
31. There hasbeensubstantial privatization offorestry cutting rights forplanted forests. Themajor
reasons fortheprivatization ofState-owned forests were theperceived conflict ofinterest between
thefunctions oftheForest Services. Additionally, byallowing private companies topurchase cutting
rights andthusgainmore certainty overtheirwood supply, thesevertically-integrated companies have
beenencouraged toincrease theirinvestment inprocessing facilities.25
23Production ismeasured interms ofroundwood equivalent. Data arebased onthestatistical releases of
theNew Zealand Ministry ofForestry; annual figures refer toyears ending 31March.
24Ministry ofAgriculture andMinistry ofForestry (1994).
25Ministry ofForestry (1995).WT/TPR/S/20 Trade Policy Review
Page 86
32. Theownership andcontrol structure oftheforestry industry isundergoing change. About
36percentofplanted forests areowned bytwopublic companies, 16percentbyprivate companies,
13percentbyState-owned enterprises, and33percentbyamixofprivate ownership, Maori leases
andlocal authorities. TheState hadheld48percentoftheplanted forest areain1990 when the
privatization offorestry assets wasbegun; by1995, thishaddeclined to19percent. TheState's
involvement intheindustry isnowlimited totheownership offorests byfourStateentities, thelargest
ofwhich, theForestry Corporation ofNewZealand (FCNZ), manages 12percentofthetotalplanted
area; italsohassubstantial processing assets.26InAugust 1996, theGovernment announced thesale
ofFCNZ toaconsortium forsome $2.0billion, withnetproceeds of$1.6billion, aftercovering
liabilities, tobeusedtoreduce Government netforeign currency debt. Asuccessor totheNewZealand
ForestService,theNewZealandForestryCorporation(NZFC),wasestablishedin1987asaState-owned
enterprise aspartofarestructuring process toisolate commercial activities from non-commercial
functions suchasresearch, training, andregulation (Brown andValentine, 1994). TheNZFC was
renamed Crown Forestry Management andnowmanages 24,000 hectares ofplanted forests.
33. Other thanthecontrol ofsome forestry assets, NewZealand hasnospecific forestry-related
policies other thanenvironmental measures.27Theprovision ofloans andgrants toencourage forestry
hasbeendiscontinued, including theForest Encouragement Grants andLoans which could beused
toclearnatural forests andwerediscontinued in1984. Tariffs aretheonlymeans ofimport protection;
andm.f.n. ratesarelow,averaging 0.5percentforforestry andlogging products. Tariffs onwood
products andpaper products (ISIC 33and34)aresubstantially higher, ranging to25percent
(Section 3(iii)).
(iii) Fishing
34. Fishingaccountedforsome0.4percentofNewZealandGDPin1993.Fourfifthsofproduction
isexported; seafood exports accounted for5.5percentoftotalmerchandise exports intheyearending
June1995. Exports rosefrom about $10million annually inthe1970s to$1.2billion in1995, and
areexpected bytheindustry toreach $2.0billion by2000. Australia, Japan andtheUnited States
arethemajor markets, eachbeing thedestination forabout athirdofNewZealand 'sseafood exports.
However, theindustry isdiversifying itsmarkets, withexports toHong Kong, Chinese Taipei and
Spain growing inimportance.
35. TheGovernment 'sprimary policy objective forthesector istosettheframework forthe
sustainable useoffisheries resources. Thisisimplemented mainly through theQuota Management
System (QMS), begun in1986. Commercial fisheries aremanaged under theQMS through theuse
ofIndividual Transferable Quotas (ITQs), which apply to31species groups intengeographic areas
26TheFCNZ wascreated in1990, after thefirstround ofasset sales, andcombined seven Crown forests
covering 170,000 hectares.
27TheResource Management Act1991 isdesigned topromote thesustainable management ofallnatural and
physical resources. TheActdoesnottarget activities butrather environmental effects, andisimplemented by
Regional andDistrict Councils, which develop policies andplans fortheirareas. Options available toCouncils
arediscussed inNew Zealand Forest Owners Association (1994). Inaddition, commercial forestry interests
andenvironmental andother groups havesigned several agreements, including theNew Zealand Forestry Accord
in1991 andthePrinciples forCommercial Plantation Forest Management inNew Zealand in1995. Seealso
Ministry fortheEnvironment (1991).New Zealand WT/TPR/S/20
Page 87
ofNewZealand 'sExclusive Economic Zone(EEZ).28ITQs, which arefullytransferable, arespecified
asapercentageoftheTotalAllowableCommercialCatch(TACC)foreachspeciesgroupandgeographic
area. TACCs aresetannually bytheMinister ofFisheries afterconsultation withinterested groups;
179TACCs areactive. Inmostcases, ITQs wereallocated tofishermen onthebasisofdemonstrated
history anddependency onthefishery. Owners ofITQsmustbeNewZealand residents orNewZealand
companies thatarelessthan25percentforeign-owned.29
36. NewZealand provides nodirect support tothefisheries sector. Thelastremaining indirect
subsidization ofthefishing industry wasremoved in1994withtheFisheries Amendment Act,which
gaveGovernment theauthority torecover fromtheindustry costs associated withproviding fisheries
management andconservation services, enforcing fisheries legislation, andconducting relevant research.
Earlier, andparticularly inthe1970s, Government loanguarantees were provided forthepurchase
offishing vessels, andtomake aquacultural andprocessing investment. Thiswaspartly inresponse
totheperception thatthemany licensed foreign fishing vessels thenworking offNewZealand 'scoast
represented aforgone opportunity forNewZealanders. Since then,thedomestic fishing fleethasgrown
substantially andtheuseofforeign vessels chartered byNewZealand companies remains common.
Thesizeoflicensed foreign fleets hasdropped markedly. In1983, 59,087 tonnes wereharvested from
theNewZealand EEZbyforeign licensed vessels. By1995, thisfigure haddropped to37tonnes.
37. ForeignfleetscanbelicensedforNewZealandwatersunderNewZealand'sbilateralagreements,
which areineffect withJapan, Korea andRussia. In1993/94, suchaccess waslimited totunaspecies,
andlicensed fishing activity hasbeensteadily falling inrecent years, andislikely tobezeroin1996.
(iv) Mining
38. Mining andquarrying accounted for1.5percentofNewZealand 'sGDP and0.5percent
ofemployment in1993. About three quarters ofthesector 'svalue added, andonequarter ofits
employment, isintheextraction ofcrude petroleum and,particularly, natural gas;NewZealand exports
twothirds ofitsoutput ofcrude oilandcondensate, butimports 80percentofitsdomestic consumption.
Crude oilisexported because NewZealand 'soilrefinery isconfigured tohandle crude oilsheavier
thanthose produced domestically. Themining ofminerals accounts forabout aquarter ofsectoral
output, primarily gold, silver, andsand, rockandgravel. Imports ofmineral products accounted for
5percentofmerchandise imports in1993, some fourfifths being crude petroleum orcondensate.
Exports oftheseproducts, alsoprimarily consisting ofcrude petroleum orcondensate, were2percent
ofNewZealand 'smerchandise exports.
39. Tariffs onimports ofmostmining products arezeroandtherearenoother import restrictions.
Theonlysubstantial tariffs areintheareaofstone quarrying, clay,andsand, where m.f.n. ratesaverage
3.1percent; imports oftheseproducts account for1to2percentofallmining andquarrying imports.
Nodirect financial assistance isprovided theindustry. Taxconcessions areoffered tominers ofcertain
minerals, including goldandsilver; these allow thededuction ofallexploration anddevelopment
expenditure intheyearincurred.30Theauthorities estimate thatthecostofthetaxconcession scheme,
interms offorgone government revenue, is$7to$10million ayear. Asimilar régime isprovided
28New Zealand 'sEEZ, which wasexpanded in1978 to200miles, isamong thelargest intheworld.
29Under theFisheries Act1996, theMinister ofFisheries mayallow aquota owner tohaveforeign ownership
ofupto40percentofitsshares, subject tocertain criteria.
30Thisdeduction would otherwise betreated asacapital expense andbewritten offoveranumber ofyears.WT/TPR/S/20 Trade Policy Review
Page 88
forpetroleum mining (allowing theimmediate deduction ofexploration anddevelopment expenditure),
andalessgenerous régime isinplace forcoalmining (allowing theamortization ofcapital expenditure
overtheexpected lifeofthemine). According totheauthorities, thetaxrevenue forgone because
ofthepetroleum mining scheme issmall andnorevenue isforgone because ofthecoalmining scheme.
40. TheGovernmentbeganin1984toseparateitscommercialactivitiesfromitspolicyandregulatory
functions inthesector. With theexception ofthemarkets forelectricity andgas,where reforms are
progressing, markets throughout thesector have been deregulated. TheCoal Corporation of
NewZealand istheonlyremaining State-owned enterprise involved inprospecting, exploration or
mining; itoperates onacommercial basis. Price controls onpetroleum products were eliminated
in1988; those ongaswere among thelasttoberemoved, having beenlifted in1993.
41. Allpetroleum, gold,silver anduranium inNewZealand isowned bytheCrown; otherminerals
areeither inCrown orprivate ownership. Theextraction ofCrown-owned minerals iscontrolled by
permits forprospecting, exploration andmining. Permits areallocated bytheMinistry ofCommerce
either non-competitively (based onanacceptable frontier offerorthefirstacceptable work programme
offer) orcompetitively (based onstaged workprogramme bidding orcashbonus bidding). Landowners
(oroccupiers) haveaneffective rightofvetoovertheextraction ofnon-petroleum minerals, which
maybeoverruled onlyforreasons ofnational interest. Inthecaseofapermit forpetroleum mining
where thelandowner andpermit holder cannot reach agreement, anarbitrator maybeappointed.
42. TheResource Management Actandotherlegislation requires certain environmental safeguards
onprospecting,explorationandmining.Environmentalcontrolsareeffectsbased,requiringallextractors
ofminerals toavoid, remedy ormitigate theeffects oftheiractivities ontheenvironment. Thegas,
petroleum andother mining industries aresubject totheCommerce Act, including thethreat of
regulation ifmarket dominance isabused.
43. Special levies areapplied onseveral mining andenergy products. These (andtheusetowhich
therevenues areput)are: natural gasandcoal(Energy Resources Levy (ERL), usedforgeneral
government revenue); compressed natural gasandliquefied natural gas(excise tax,earmarked for
theTransport Fund, theAccident Compensation Corporation levyandthepetroleum fuelsmonitoring
levy). Apart fromtheERL, other levies andtaxeslisted apply tofuelssoldfortransportation purposes.
Allsuchlevies andtaxes areapplied equally ondomestic andimported products.
(3) Manufacturing
44. TheNewZealand manufacturing sector accounted for21percentofGDP and18percent
ofemployment in1995. Manufactured products comprised 86percentoftotalmerchandise exports
and96percentoftotalmerchandise imports. Thecomposition ofNewZealand 'smanufacturing sector
anditsinternational trade inmanufactures reflects itsstrength inprimary production. Onethirdof
manufacturing isinfoodprocessing; manufactured foodproducts comprise 41percentofmanufacturing
exports (Table IV.2). Pulpandpaper products account for6percentofmanufacturing value added
and6percentofmanufacturing exports. Imports ofmanufactured products areconcentrated in
machinery andequipment (27percent), transport equipment (20percent), andpetroleum andbasic
chemicals products (22percent).New Zealand WT/TPR/S/20
Page 89
Table IV.2
Share ofmanufacturing value added, wages andtrade, byproduction group andindustry
(Percent)
Share of
manufacturing
value addedShare of
manufacturing
wagesShare of
manufacturing
importsShare of
manufacturing
exports
1987 1993 1987 1993 1995 1995
Food, beverages andtobacco
Meat andmeat products
Dairy products
Other food
Beverages, malts andtobacco
products28.4
10.3
3.4
7.4
7.333.0
8.0
6.0
8.4
10.526.1
...
...
...
...27.9
...
...
...
...5.8
0.3
0.4
4.1
1.140.9
15.6
15.6
8.9
0.9
Textile andapparel 8.4 6.0 10.1 7.6 6.7 8.8
Wood andwood products 6.3 6.3 7.3 7.5 0.9 6.9
Pulpandpaper products, printing and
publishing
Paper andpaper products
Printing andpublishing11.6
4.6
7.013.6
6.4
7.213.0
...
...14.5
...
...4.5
2.7
1.86.8
6.4
0.4
Petroleum, chemical, plastics and
rubber products
Petroleum, coalandbasic chemicals
Rubber, plastic andother chemical
manufacturing15.1
8.5
6.612.1
4.7
7.49.8
...
...10.9
...
...24.8
22.1
2.711.8
10.2
1.7
Non-metallic minerals 3.6 3.2 3.6 3.3 1.5 0.4
Basic metals 2.9 4.7 3.4 5.0 3.7 11.2
Fabricated metal products, machinery
andequipment
Fabricated metal products
Machinery andequipment (incl.
prof. andscientific equip.)
Transport equipment22.7
7.2
9.9
5.620.2
6.4
9.0
4.725.8
...
...
...22.3
...
...
...49.6
2.0
27.1
20.511.7
1.5
8.6
1.5
Other manufacturing 1.0 1.0 0.9 0.9 2.5 1.4
... Notavailable. Estimates havenotbeenmade forthese industries fortheyears indicated.
Source: Statistics NewZealand (1995), "New Zealand System ofNational Accounts"; andWTO Secretariat calculations based ondata
provided byNewZealand authorities.
45. Thetariff isvirtually theonlysource ofimport protection formanufacturing; m.f.n. rates
aremoderate anddeclining. Thetariffreductions of1July1996lowered m.f.n. tariffs formanufactured
products fromanaverage of7.5percenttothecurrent average of6.5percent(Appendix Table IV.1).
Only afewindustries continue tobeprotected byaverage m.f.n. tariffs ofover10percent: these
aretextiles, apparel, footwear andleather; furniture; paper containers andboxes; rubber products;
andcertain fabricated metal products.31
31Industry definitions arebased ontheInternational Standard Industry Classification (ISIC). Tariff rates
were matched totheISIC industries using theWTO Secretariat 'sconcordance from theHarmonized System
(HS) toISIC.WT/TPR/S/20 Trade Policy Review
Page 90
46. TheJuly1996tariffreduction appears tohavereduced tariffescalation. Rates onunprocessed
products ofthemanufacturing sector fellslightly, from 1.2to1.0percent, while average tariffs on
semi-processed products fellfrom4.1to3.6percentandthose onprocessed products werereduced
from 9.6to8.4percent. Nevertheless, tariff escalation remains important, andtends toprotect
processing activities attheexpense ofprimary andsemi-processing activities. Asratesforprimary
andsemi-processed products arenowquite low,future tariff cutswillhavetheirgreatest effect on
processed products andwillthusdiminish theremaining tariff escalation (Chapter III(2)(i)(b)).
47. Future tariffcutswillalsoreduce themargins ofpreference given toimports frompreferential
tradingpartners,includingAustralia,Canada,SPARTECAcountriesanddevelopingcountriesreceiving
GSPtreatment (Chapter III(2)(i)(k) and(2)(ii)). Asimports fromAustralia andSPARTECA countries
enter dutyfree,theaverage preference margin formanufactured imports fromthese countries equals
theaverage m.f.n. tariff, 6.5percent. Australia accounts for22percentofNewZealand 's
manufactured imports andSPARTECA countries account for0.3percentofimports. Theaverage
tariffonimports fromCanada, which accounts for1.5percentofmanufactured imports, is2.9percent,
3.6percentage points lessthantheaverage m.f.n. rate.Preference margins under NewZealand 'sGSP
scheme fordeveloping countries arelessthanthose forCanada; imports fromleast-developed countries
enter dutyfree.
48. NewZealand 'smanufacturing sector washeavily protected byimport licensing andhightariffs
untilthemid-1980s. Controls ontheimport ofmostmanufactured goods wereeliminated during the
period January 1987-July 1992. However, theinitial tariffreductions of1986and1987affected only
goods forwhich there wasnotanindustry plan(Chapter III(2)); thus,in1988 average m.f.n. tariffs
forpulpandpaper products, textiles andapparel, footwear, machinery, transport equipment, and
miscellaneous manufactures remained above 20percent.32General tariffreductions oftwothirds were
made from1988to1996; smaller reductions havebeenmade for"sensitive sectors", namely textiles
andapparel, footwear, motor vehicles andcomponents, andtyres.33In1993, effective protection,
according toestimates bytheMinistry ofCommerce, washighest intransport equipment, followed
byapparel andfootwear, andtextiles. These estimates suggest thatsuchprotection came mostly at
theexpense ofthefoodprocessing industries; printing andpublishing; petroleum refining; basic
metals industries; andprofessional equipment.
49. Theelimination ofimport licensing andthereduction oftariff rateshasencouraged domestic
manufacturerstobringtheirproductionpatternsmoreintolinewithNewZealand'sapparentcomparative
advantage. Thus, asmeasured byvalue added, between 1987and1993textiles andclothing andbasic
chemical manufacturing contracted by16and35percent,respectively; food, beverages andtobacco
manufacturing expanded by37percent,wood andwood products by18percent,andpaper andpaper
products by39percent. Theshare ofmanufactured output thatisexported hasalsoincreased markedly.
From ashare of32.7percentofproduction in1984/85, exports roseto42percentofproduction
in1992/93, thelastyearforwhich dataareavailable. Most ofthisgrowth hasbeenintheabove noted
areas where value added hasexpanded.
32Ministry ofCommerce (1994a).
33Theeffective protection ofapparel andfootwear products isactually estimated tohaveincreased asaresult
oftariff reductions made between 1990 and1993, because tariffs oninputs were being reduced relatively more
rapidly thantariffs ontheproducts produced bythese industries (Ministry ofCommerce, 1994a).New Zealand WT/TPR/S/20
Page 91
(i) Food, beverages andtobacco manufacturing
50. Theshare ofNewZealand 'sfoodmanufacturing industries34inmanufacturing value added
rosefrom28.4to33.0percentintheperiod 1987to1993. Thiswasbased ona37percentincrease
inthesector 'svalue added, ledbyrapid growth indairy-product manufacturing (110percent), raising
itsshare inmanufacturing from3.4to6.0percent,andbeverage andmaltmanufacturing (70percent).35
Theshare ofmeatandmeatproducts inmanufacturing declined slightly, butin1995itstillaccounted
for8.0percentofmanufacturing value added.
51. Over halftheproduction ofthefoodmanufacturing industries isexported, including nearly
90percentofdairy products.36Processed foodexports in1995 totalled $8.9billion andaccounted
for41percentoftotalmanufacturing exports and35percentofallmerchandise exports. Meatproducts
anddairy products eachaccounted for38percentoftheexports offoodmanufacturing industries,
followed byfishandfishproducts (11percent)andfruitandvegetables (5percent). Dairy products
maybeexported onlybytheNewZealand Dairy Board, orentities authorized bytheBoard; other
marketing boards mayalsodirectly orindirectly influence exports ofcertain products (section 2(i)(a)
andChapter III(3)(iii)).
52. The Uruguay Round results onincreased market access andreduced export subsidies on
agricultural products areimportant toNewZealand, particularly foritsdairy products.37Thisis
particularly sowithrespect tothemarket access andexport subsidy reduction commitments ofthe
European Union (EU) andtheUnited States. NewZealand 'scountry-specific tariff quota onbutter
intotheEUincreased byalmost 50percent, from 51,380 tonnes in1994 to76,667 tonnes asfrom
1996; itsin-quota tariff, however, hasmore thandoubled, fromECU 408.6 to868.8 pertonne. An
in-quota tariff reduces theeconomic rents thatmayaccrue toNewZealand because ofthequota. If
there wasnotanin-quota tariff, NewZealand 'sDairy Marketing Board could sellamounts uptothe
quota limitataprice neartheinternal EUprice. With thein-quota tariff, theimport price could be
reduced toapproximately theinternal EUprice minus thein-quota tariff rate. Thisweakens oneof
themainarguments forhaving a"single-seller" dairy exporter (Box IV.1). TheEUhasalsoincreased
itsglobal cheese access, forwhich NewZealand expects tobevery competitive. Inaddition,
NewZealand hasreceived increases initscountry-specific access forcheese totheUnited States and
buttertoCanada,andsecuredcountry-specificaccessforpreparedediblefatstoJapan.Reducedvolumes
ofsubsidized dairy exports, particularly EUcheese andUnited States skimmed milkpowder, arealso
expected tobenefit theNewZealand dairy industry.
53. Tariff cutson1July1996reduced NewZealand 'sm.f.n. tariffaverage formanufactured food
products from5.5percentto4.9percent. These cutsweregreatest ontherelatively hightariffitems
inthesector, including bakery products (from 11.5percentto9.4percent), softdrinks (9.8percent
to8.4percent) andcocoa, chocolate andsugar products (9.7percentto8.1percent). Thelowest
34ISIC 31;these industries include food products, animal feeds, beverages andmanufactured tobacco.
35Rapid growth inthese industries actually started inlate1986, withvalue added in1987 28percenthigher
thantheprevious year. Because ofconfidentiality concerns, thefigure forbeverage andmaltmanufacturing also
includes tobacco product manufacturing; however, thelatter accounts forasmall share ofthetotal.
36Statistics New Zealand (1995b). Figures refer to1990/91.
37New Zealand feelsthat,among itsindustries, "The dairy industry willprobably bethelargest beneficiary
oftheexport subsidy disciplines negotiated intheUruguay Round" (Ministry ofForeign Affairs andTrade, 1994).WT/TPR/S/20 Trade Policy Review
Page 92
tariffs inthese industries arethose onrefined sugar, imports ofwhich aredutyfree.38TheJuly1996
tariff cutsalsohelped reduce tariff escalation intheindustry. Rates onfullyprocessed andsemi-
processed products fellfrom 6.2to5.6percentand5.8to4.9percent, respectively; those on
unprocessed products fellfrom1.1to0.9percent. Thegreater reduction onhighly processed items
isimportant because theseproducts account forfourfifths ofnon-preferential imports ofmanufactured
foodproducts. Other thantariffs andsanitary andphytosanitary requirements, noborder measures
apply toimports ofprocessed fooditems.
(ii) Textiles, clothing andfootwear
54. Thetextiles, clothing andfootwear (TCF) industries (ISIC 32)accounted for6percentof
NewZealand 'smanufacturing activity in1993, down from 8.4percentin1987. According tothe
authorities, these industries havefaced adifficult adjustment overthepastdecade. Imports increased
from $300 million in1988 to$1,150 million in1993, mainly asaresult oftheprogressive removal
ofimportlicensing.Thisrequireddomesticfirmstoimprovetheircompetitiveness,orleavetheindustry.
Withmany firms exiting, investment inthetextiles sector fellfrom$19million in1988to$3million
in1992, andthatinclothing fellfrom $46to$29million.
55. NewZealand doesnotrestrict imports ofTCFthrough import licensing orother quantitative
barriers.39Tariffs aretheonlymeans ofimport protection. M.f.n. tariffs, however, average
12.9percent,nearly triple theaverage forallother goods, andrange ashighas30percent.40Tariffs
arehighest forwearing apparel, at26.6percent,followed byproducts ofknitting mills(23.7 percent),
carpets andrugs(21.9 percent) andfootwear (17.8 percent). Many ofthetariff lines, suchasthat
onleather clothing, include alternative specific rates, which areusedifthedutyrevenue fromapplying
thespecific ratewould exceed thatfrom applying theadvalorem rate. Thisoccurs most frequently
forrelatively low-priced products, thusincreasing protection forthedomestically produced, competing
item.
56. Tariffs forTCFproducts tendtorisewith, andprotect, thelevelofprocessing. Allunprocessed
TCFproducts (accounting for38tarifflines) havem.f.n. ratesofzero,while tariffs onsemi-processed
products (506 lines) average 4.4percentandrates onprocessed products (634 lines) average
20.4percent. However, escalation willbereduced withtheimplementation ofplanned tariff cuts
during theperiod 1997-2000.
57. Because TCFproducts weresubject toindustry plans, tariffs ontheseproducts werenotreduced
inlinewiththegeneral tariff reductions of50percentbetween 1988and1992andafurther onethird
from1993to1996. Rather, tariffreductions onTCFproducts wereeffected more cautiously. Tariffs
38Thiscombination oflowrates onsugar andrelatively highrates onsugar-based products appears togive
substantial effective protection toactivities such aschocolate andbeverages manufacturing.
39Theremoval ofimport licensing forTCF goods began withtheimplementation ofthe1985 review ofthe
Textile Industry Development Plan. Licensing requirements were eliminated forimports oftextiles andclothing
from Forum Island Countries in1988 andAustralia in1989. Imports oftextiles from allother countries were
subject tolicensing until1991; clothing imports from other countries were thelastproducts subject toimport
licensing, withrestrictions eliminated inJuly1992.
40New Zealand 'saverage m.f.n. tariff is6.2percent; excluding TCF, however, theaverage is4.8percent.
Thetariff reduction of1July1996 cuttheaverage m.f.n. tariff forTCF byoveronepercentage point, from
14.0 percent.New Zealand WT/TPR/S/20
Page 93
onfootwear remained atabout 45percent,withsome exceptions, until1992, andwerephased down
to25percent(children 'ssizes) and30percent(adult sizes) by1996.41From 1989 to1992, m.f.n.
tariffs onclothing were reduced from arange of40to65percentto40percent; these rateswere
subsequently reduced byaquarter, to30percent, intheperiod 1993-1996. Fortextiles, mostrates
over30percentwere reduced to30percentintheperiod 1988 to1992. Thereafter, withsome
exceptions, textiles became subject tothegeneral tariff reduction programme, andrateswerereduced
byathirdfrom July1993 toJuly1996.
58. Aspartofthe1997-2000 tariff reduction programme, m.f.n. tariffs onTCFproducts areto
besubstantially reduced. Most ratesonclothing andadult footwear willbeprogressively lowered
fromthe30percentrateintroduced on1July1996to15percenton1July2000; ratesonchildren 's
footwear willbecutfrom25percentto15percent. Rates oncarpets willbereduced fromthecurrent
23percentto15percent; those onmost textiles (including knitted andwoven fabrics, twine and
cordage) willbereduced from20percentto10percentandratesonyarns willbecutfrom13percent
to5percent.
(iii) Wood andpaper products
59. NewZealand'swoodandpaperproductsindustries(ISIC33and341)accountedfor12.7percent
ofmanufacturing value added in1993, upfrom10.9percentin1987. Much ofthisexpansion took
placeinpaper products, theshare ofwhich increased from4.6to6.4percent. Wood andpaper products
accounted for13.4percentofmanufactured exports and3.6percentofmanufactured imports in1995.
60. Tariffs aretheonlymeans ofprotection orassistance totheindustry. M.f.n. tariffs areat
moderate rates, withtheaverage tariff onimports ofwood products having beenreduced from6.7to
5.5percenton1July1996; concurrently theaverage tariff onpaper products wascutfrom 9.1to
7.6percent. NewZealand willreduce itstariffs onpulp, paper andprinted matter tozeroby2004,
aspartofitstariff-reduction commitments intheUruguay Round.
61. Theauthorities expect particularly strong growth overthenextfiveyears inthewood products
industry, based onincreased wood production fromplanted forests (section 2(ii)), increased investment
inforest-basedindustries,andincreasedmarketaccessforNewZealand'sexportsascountriesimplement
theirUruguay Round commitments. Implementation ofthese commitments willreduce theaverage
tariff applied bydeveloped countries onimports offorestry products from 3.5to1.1percent.
NewZealand mayalsobenefit fromtheexpanded scope oftariff bindings bymany developing Asian
economies.
(iv) Motor vehicle manufacturing
62. Motor vehicle production (ISIC 3843) contributes about 2percentofthemanufacturing sector 's
value added.42Theindustry hasundergone substantial restructuring inrecent years, partly asaresult
oftheprogressive removal ofimport licensing andreductions intariffs. Imports ofmotor vehicles
increased bynearly 80percentfrom 1987 to1992, reaching avalue of$1.9billion, equivalent to
nearly double thedomestic output. During thisperiod, employment inmotor vehicle assembly fell
41Tariffs onadult footwear were actually increased from 45to55percentforoneyearon1July1991.
42Motor vehicle manufacturing comprises roughly halfofthetransport equipment manufacturing sector;
thissector accounted for4.7percentofmanufacturing sector value added in1993, down from 5.6percentin
1987. Data arelargely drawn from Ministry ofCommerce (1994a).WT/TPR/S/20 Trade Policy Review
Page 94
from 4,300 to2,300 andemployment inmotor vehicle component manufacturing fellfrom 3,000 to
1,500. Investment inthese areas remained steady.
63. Import licensing requirements formotor vehicles andcomponents wereprogressively eliminated
between 1985 and1989. Tariffs, however, remained high: m.f.n. ratesonpassenger carsandlight
commercial vehicles remained at55percentuntilJuly1988andwerecutto35percentbyJuly1992.
From 1988 to1990, tariffs oncommercial vehicles were reduced, andthose onheavy commercial
vehicles were eliminated. Tariffs onpassenger vehicles were progressively reduced to25percent
from July1993 toJuly1996. Tariffs oncomponents were phased down to35percentfororiginal
equipment and20percentforreplacement parts by1992. These tariffs weresubsequently reduced
to25percentand12.5percent, respectively, on1July1996. With thefinalinstalment oftariff
reductions under the1993-96 programme, on1July1996 theaverage m.f.n. tariff inallcategories
ofmotor vehicles fellfrom 10.7percentto9.8percent.
64. Under the1997-2000 tariff reduction programme, tariffs onreplacement parts aretobe
progressively reduced from 12.5to10percentandtariffs onoriginal equipment components areto
bereduced from 25to15percent. Forpassenger andcommercial vehicles, tariffs willbereduced
to15and5percent, respectively.
(4) Services
65. NewZealand 'sservices sector accounts forabout 62percentofGDPand65percentoftotal
employment.43External trade inservices comprised 23percentofNewZealand 'stotaltradein1995
andhasincreased slightly more rapidly thanmerchandise tradeoverthepastfiveyears. NewZealand
isnormally asmall netimporter ofservices, withnetimports equivalent to0.8percentofGDP in
theyearending March 1995. Services exports areequivalent toover7percentofGDP, upfrom
6percentin1990.44
66. Thesizeoftheservices sector gives itspecial economic importance: astwothirds of
NewZealand 'sproductive resources areemployed inservices, theirefficiency andproductivity are
keydeterminants inthenation 'seconomic welfare. Thesector, moreover, plays amuch greater part
inNewZealand 'sexport performance thanitsshare oftotalexports would suggest. Most ofthe
economy, including theexport ofgoods, intensively usesservices. Forexample, inthefood
manufacturing industry, which accounts foronethirdoftotalexports, services comprise 40percent
ofdirect input costs.45Totheextent thatsuchcosts canbereduced, through open international
competition andincreased productivity, thiswillbereflected intheenhanced competitiveness ofsectors
suchasfoodmanufacturing.
67. Given thisclear importance ofservices, theauthorities placed thesector attheforefront of
NewZealand 'sstructural reform. Ingeneral, competition isnowrelied upon, withdirect regulation
largely absent under whatistermed the"light-handed" approach toregulation. Virtually allkeyState-
owned enterprises havebeenplaced onacommercial footing, andmany havealsobeenprivatized.
Particularly given NewZealand 'srelatively small market, theopenness ofservices markets to
international competition hasbeenvitaltoestablishing thedesired levels ofeconomic competition.
43New Zealand Treasury (1996b), p.23.
44Services exports roseby8percentayearfrom 1990 to1995.
45Based oninter-industry transactions datafor1990/91 inStatistics New Zealand (1995b).New Zealand WT/TPR/S/20
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68. NewZealand relies oncompetition lawinareas where market failure might arise, suchaswith
vertically-integrated natural monopolies inbasic telecommunications. Even here, NewZealand has
eschewedtheuseofindustry-specificregulation:thereis,forexample,notelecommunicationsregulatory
body. Instead there isacombination offreedomestic andforeign market entry, theapplication of
competition policy, andtheuseofindirect regulation toenhance theoperation ofthemarket by,for
example, seeking toensure thatadequate information ismade available toconsumers andcompetitors.
(i) Commitments under theGeneral Agreement onTrade inServices (GATS)
69. NewZealand actively participated intheUruguay Round services negotiations. Itmade many
commitments inabroad range ofservice industries; these aresummarized inAnnex IV.1, asperthe
Services Sectoral Classification List(SSCL). NewZealand alsoundertook onehorizontal (i.e.cross-
sectoral) commitment andspecified three horizontal limitations; these, andm.f.n. exemptions are
described below.
70. Byaccepting theGATS, NewZealand agreed toprovide m.f.n. treatment inallGATS sectors
other thanthose inwhich ittookaGATS Article II(m.f.n.) exemption. These sectors are:audiovisual
services, interpretation services, andmaritime services; inaddition, inallsectors, NewZealand has
anm.f.n. exemption ontherightofentryofnatural persons. Theaudiovisual services exemption relates
toapreferential measure applied toCanada, France andtheUnited Kingdom andconcerns financial
andtaxconcessions andsimplified requirements forthetemporary entry ofskilled personnel.46Its
objective istosupport thedomestic filmindustry andtoshare benefits withother countries withsimilar
policies. Them.f.n. exemption forcertain translation services reflects thepolicy ofgiving more
favourable entry conditions toJapanese nationals withtherequisite skills asinterpreters. Itspurpose
istohelpdevelop tourism.47Themaritime services exemption, which isfully explained below
(section 5(v)(a)), reflects preferential treatment forcertain Commonwealth personnel. Theexemption
fortheentry ofnatural persons forallsectors relates toNewZealand 'spolicy ofproviding favourable
temporary entry conditions for20Kiribati and80Tuvalu nationals ayear. Thepurpose isdevelopment
assistance byproviding income, jobskills, on-the-job training andwork experience.
71. OneofNewZealand 'shorizontal limitations isintheareaofnational treatment forthe
establishment ofcommercial presence; itconcerns approval fromtheOverseas Investment Commission
forcertain foreign direct investments (Chapter I(4)). NewZealand 'shorizontal commitment guarantees,
inmarket access, theentry andtemporary stayofcertain employees ofservice suppliers witha
commercial presence inNewZealand; itislimited tothefollowing categories ofemployees: executives
andsenior managers; specialists orsenior personnel; installers andservicers; andservice sellers.
NewZealand 'sother horizontal limitations relate to:(i)enterprises currently inStateownership, and
(ii)special treatment forMaori indigenous interests.
(ii) Agreement withAustralia
72. TheProtocol onTrade inServices totheAustralia-New Zealand Closer Economic Relations
Agreement wassigned in1988andentered intoforce on1January 1989. TheProtocol callsforfree
bilateral services trade forallsectors notinscribed onanegative listandisapplied automatically to
anynewservices (Chapter II(2)(iv)). TheParties 'respective negative listshavebeenconsiderably
46New Zealand iswilling toconsider extending thispreference toother countries withwhich cultural co-
operation maybedesirable andwhich arewilling toexchange preferential treatment.
47This measure maybeextended toother countries.WT/TPR/S/20 Trade Policy Review
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shortened since1989. Sectors fullyorpartially represented are:(i)forAustralia, telecommunications,
airport services, domestic airservices, international aviation (passenger andfreight services), coastal
shipping, broadcasting andtelevision (short-wave andsatellite broadcasting), basic health insurance
services, third-party insurance, workers 'compensation insurance andpostal services; and(ii)for
NewZealand, airways services, telecommunications, andpostal services. Itistheexpectation ofthe
Parties thatfurther sectors willberemoved from thenegative listovertime.
(iii) Telecommunications
73. Thecommunications sector accounted for3.3percentofNewZealand 'sGDP in1993, up
slightly from 2.9percentin1987. Value added inthesector grew bysome 11percentintheyear
toJune1995, ledbyrapidly growing activities suchascellular services. TheGovernment 'sobjective
isthatthesector "establish andmaintain efficient markets intelecommunications goods andservices."48
74. TheTelecommunications Act1987deregulated partofthesector andsubsequent amendments
totheActopened thesector completely tocompetition in1989. Thesector nowconsists oftwomajor
competitors, Telecom andClear, andmany smaller firms thatareactive insome areas, suchasdata
transmission. Telecom, theformer State-owned enterprise, owns andoperates much ofthecountry 's
telecommunications network; itisunder alegallimitation nottoincrease basic residential ratesin
realterms, alimitation made necessary, according totheauthorities, byTelecom 'sdominant position.
Clear competes withTelecom inmostservices areas, andhasasubstantial share ofthelongdistance
andinternational markets.
75. Telecommunication reform came early inNewZealand 'sstructural adjustment effort. From
asituation in1987 withamonopoly State-owned enterprise (SOE) thatcovered nearly allaspects of
telecommunications, thesector progressed through corporatization oftheSOEandtheestablishment
ofTelecom, deregulation ofvirtually theentire market, andTelecom 'ssubsequent privatization in1990.
TheNewZealand approach indicates thateveninsectors withconsiderable scaleeconomies andother
complexities, techniques canbefound tofacilitate andencourage competition.
76. Theestablishment ofaliberal telecommunications régime appears tohavebrought anumber
ofpositive results, including animprovement inthestandard andrange ofservice, therapidintroduction
ofnewtechnologies, greater variety, higher productivity, andlower prices.49Thus, Telecom greatly
increased investment while modernizing itsnetwork during thelate1980s andearly 1990s. Thishas
ledtoahighshare ofdigital switches (98percent)andacommitment tobefullydigitalized by1998.
Ontheservices side,thewaiting timeforanewtelephone connection hasbeenreduced fromsixweeks
totwodays. While in1988only76percentofpayphones wereoperational atanyonetime, thisfigure
isnow98percent. Productivity, measured bythenumber oflinesperTelecom employee, hasalso
greatly increased, moving from 86in1990 to214in1994.50Prices havefallen, creating business
andconsumer savings; from 1990 to1994, residential prices fellby7percentinrealterms andthe
average pricecharged perminute byTelecom forlongdistance callsfell55percent,innominal terms,
48Ministry ofCommerce (1994e).
49deBoer andEvans (1995), Galt(1995), andMinistry ofCommerce andtheNewZealand Treasury (1995).
50TheOECD average (based onlatest available data) moved from 150in1990 to168in1992.New Zealand WT/TPR/S/20
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from1988to1994.51Despite thesepricereductions, Telecom hasenjoyed amoderate return oncapital
inrecent years andClear isnowalsoshowing signs ofamoderate return.
77. Thebenefits ofthesedevelopments arefeltbeyond thetelecommunications sector. Forexample,
productivity improvements havenotonlybrought improved service buthavealsofacilitated lower
telecommunications prices andhence business costs. Thus, telecommunications reform hasalsohad
animportant effect onthecompetitive position ofNewZealand 'sexporters anditsimport-competing
firms.
78. NewZealand hasmade GATS commitments inrelation tovalue-added services (Annex IV.1)
andisaparticipant intheongoing WTO negotiations onbasic telecommunications. According tothe
authorities, nocurrent policies would require change intheevent thatNewZealand weretomake new
commitments inthesector.
Sectoral overview andtheimpact ofreform
79. Prospective entrants intoNewZealand 'stelecommunications market facenolegalrestrictions.52
Prior to1987, theNewZealand PostOffice heldamonopoly inpublic telecommunications services.53
That year, thePostOffice wassplitintothree entities, including theTelecom Corporation of
NewZealand,Ltd.(Telecom),54each"corporatized"undertheStateOwnedEnterprisesActandexpected
tooperate as"successful businesses" (Chapter III(5)). Regulatory policy andadvice functions were
transferred totheDepartment ofTrade andIndustry, which subsequently became theMinistry of
Commerce. TheTelecommunications Act1987 provided forthederegulation ofthemarket for
telecommunications customer premises equipment over theperiod October 1987 toApril 1989.
Amendments tothisActin1988ledtotheremoval ofalllegalrestrictions onentryintotheNewZealand
market by1April 1989.55According totheMinistry ofCommerce andtheNewZealand Treasury,
NewZealand became atthattime"thefirstmember oftheOECD tointroduce fullcompetition toall
sectors ofthetelecommunications industry."56Since theprivatization ofTelecom inSeptember 1990,
themajor telecommunications policy issueinNewZealand hasbeentheconditions forinterconnection
ofcompetitors tothenetwork owned andoperated byTelecom.
51Prior toreform, thelongdistance ratestructure wascorrelated closely todistance, although costs aremuch
more closely correlated tothevolume oftraffic along aroute; competition hasledtoespecially sharp reductions
inprices onthemain routes.
52Ministry ofCommerce (1995c) andGalt(1995).
53Atthattime, theonlyother suppliers oftelecommunications services were certain State-owned enterprises,
such asNew Zealand Rail, thatmaintained facilities fortheir ownuse.
54Theother entities formed were thePostOffice Bank andtheNew Zealand Post.
55Other provisions oftheTelecommunications Actrelate toregulatory powers regarding international
telecommunications services andthepromotion ofcompetitive conditions withrespect toland. Aservice provider
thatprovides telecommunications services toatleasttenpersons orcable broadcast services toatleast500persons
may bedesignated asanetwork operator byanOrder inCouncil oftheGovernor General, upon the
recommendation oftheMinister ofCommere. Thisdesignation allows access tocertain lands inorder tolay
cables orconstruct lines; itisnotarequirement fortheprovision ofservices (Ministry ofCommerce, 1994f).
56Ministry ofCommerce andtheNew Zealand Treasury (1995).WT/TPR/S/20 Trade Policy Review
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Privatization anduniversal service requirements
80. Telecom wassoldbytheGovernment inSeptember 1990 toaconsortium ofAmeritech and
BellAtlantic oftheUnited States andtwosmaller domestic partners forNZ$4.25 billion; theentire
proceeds wereusedtoretire Government debt. Thesalewasmade purely oncommercial considerations,
subject totheKiwi Share obligations inTelecom 'sArticles ofAssociation.57Therequirements on
Telecom bytheKiwiShare are:(i)tomaintain alocalfree-calling option forallresidential telephone
customers andtolimitincreases inthestandard telephone (pre-GST) rental, including freelocalcalling,
toincreases intheconsumer price index (Telecom hasregularly reviewed prices tokeepthem ator
nearthepermitted level);58and(ii)tomaintain rurallinerental ratesatorbelow standard rates. The
Kiwi Shareholder restricts theownership share ofanysingle foreign party to49.9percentandmay
requirehalfofTelecom'sBoardofDirectorstobeNewZealandcitizens.Subsequenttoitsprivatization,
shareholding inTelecom hasbeenconsiderably diversified withmore than50percentofitsstock sold
toprivate NewZealand andforeign investors.
Theregulatory régime andinterconnection
81. NewZealand 'sliberal regulatory régime restsonthebasis thatcompetition isthebestform
ofmarket regulation.59Thus, forexample, entry isnotlegally restricted andprices arenotregulated.
Theauthorities recognize thatTelecom holds adominant position astheowner andoperator ofthe
localloop. Instead ofanindustry-specific regulator, however, withrespect toaccess toessential facilities
suchastelecommunications networks, reliance isplaced onTelecom anditscompetitors tonegotiate
interconnection agreements. Thisistheenvironment inwhich NewZealand 'skeytelecommunications
interconnection dispute hasbeenlitigated (Box IV.2).
82. While theNewZealand approach hasraised some difficulties, theauthorities areoftheview
thatgeneral competition lawcanaddress thespecific competition issues ofthesector, including disputes
overinterconnection totelecommunications networks.60Theenvironment inwhich these negotiations
takeplace hasthreebasic features: competition law,disclosure requirements, andthethreat offurther
regulation.
83. First, Section 36oftheCommerce Act,NewZealand 'smaincompetition law,makes itillegal
touseadominant market position torestrict, prevent, oreliminate competition inamarket. TheAct
isenforced bytheCommerce Commission andthrough private legalaction (Chapter III(5)(ii)).
57TheMinister ofFinance holds theKiwi Share.
58Telecom hasdeveloped optional tariff packages.
59Theexception, forinternational services under particular circumstances, isdiscussed below.
60Advantages tothisapproach mayinclude: saving thecostofanindustry-specific regulator; allowing the
concentration ofexpertise intheCommerce Commission; thedevelopment ofprecedents intheCourt system
thatmayusefully guide conduct inother industries, which maybeofparticular importance inasmaller country
withrelatively fewrelevant legal precedents; promoting aconsistent approach across industries; reducing the
riskofanindustry-specific regulator being "captured" byinterests oftheindustry; andspeeding theresolution
ofdisputes, since under theNew Zealand legal system many decisions ofaregulatory body would nonetheless
bebrought before theCourts andbecause layassessors withspecialist expertise maysitalong withJudges in
theHigh Court tohearCommerce Actcases (Galt, 1995).New Zealand WT/TPR/S/20
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BoxIV.2 New Zealand 'stelecommunications interconnection dispute
Clear Communications wasincorporated inAugust 1990 andconcluded along-distance interconnection
agreement withTelecom inApril 1991. Italsooffered domestic andinternational tollservices, thelatter
initially through theresale ofTelecom 'sservices andthenthrough itsownservices. Inorder tooperate
local telephone services, Clear sought anagreement withTelecom forlocal interconnection. When no
agreement wasreached, andClear thusfailed tofulfil acontractual obligation toacustomer, Clear
initiated legal proceedings inAugust 1991.
Telecom initially sought alevyonaccess toitsnetwork onthegrounds thatsome ofthecosts itincurred
because ofitsgeneral service (Kiwi Share) obligations should beshared byother telecommunications
services providers. Subsequently, Telecom alsoargued thatunder theCommerce Actitsinterconnection
price could lawfully include theprofit itwould forgo byproviding anintermediate component,
interconnection, atacompetitive price rather thanthefinal service atamonopoly price. Clear argued
thatTelecom should price access toitsmarket onlyattheincremental costofproviding thataccess. The
High Court issued adecision inDecember 1992 thatheld forTelecom. TheCourt ofAppeal in
December 1993 ruled forClear.
Onappeal, New Zealand 'sfinal appellate Court, theJudicial Committee ofthePrivy Council, ruled in
favor ofTelecom inOctober 1994. Itconcluded that therule Telecom proposed forpricing
interconnection, known astheEfficient Component Pricing Rule ortheBaumol-Willig Rule, wasnot
anti-competitive under theCommerce Act. ThePrivy Council wasoftheview thatthemonopoly profits
accruing toTelecom under thisrulewould becompeted away inthelongrunbytheentry ofnewfirms
intothismarket andmarkets forsimilar services. Thetwoparties have continued tonegotiate since the
Privy Council decision, butasatAugust 1996 hadnotreached agreement.
Following thedecision ofthePrivy Council, theMinistry ofCommerce andtheTreasury issued ajoint
Discussion Paper ontheRegulation ofAccess toVertically-Integrated Monopolies. Itnotes thatthe
Telecom v.Clear interconnection dispute hasraised three particular concerns: theappropriateness ofthe
Baumol-Willig rule, which was developed inacontext where final prices were controlled, for
New Zealand 'smarket; thehandling ofTelecom 'scosts stemming from general service obligations, in
theevent theBaumol-Willig ruleisnotretained; andthereliance onthecourts andtheCommerce Act
fortheresolution ofinterconnection disputes.
Local access istheonly interconnection issue notsatisfactorily resolved through theliberal regulatory
approach. Agreements have been reached inareas such asinternational services, customer premises
equipment, resale, andcellular services.
Source: Ministry ofCommerce andtheNew Zealand Treasury (1995); andBlanchard (1995).
84. Certain information disclosure requirements areinplace under theTelecommunications
(Disclosure) Regulation 1990, promulgated under theTelecommunications Act.These aimto"facilitate
effective competition intheprovision oftelecommunication goods andservices."61They areviewed
bytheauthorities asanimportant partofNewZealand 'scompetition policy, because inanimperfectly
competitive market thedominant firm'scompetitors andanypotential entrants mayotherwise lack
sufficient planning information. Thus, theregulations require Telecom tomake available financial
statements, including foritsprincipal operating subsidiary, andtodisclose prices, terms andconditions
61Ministry ofCommerce (1994g). Inaddition, following a1990 request from theMinistry ofCommerce,
Telecom publishes semi-annually certain service performance indicators, suchasconnection times, payphone
availability, andinformation onbilling disputes.WT/TPR/S/20 Trade Policy Review
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under which itsupplies certain goods andservices. Thisrequirement wasextended totheactual terms
andconditions ofitsinterconnection agreements bya1993 amendment totheRegulations.
85. Finally, negotiations between theintegrated monopolist anditscompetitors takeplace under
thethreatoffurtherregulationifthemonopolist'sdominantpositionisabused.PartIVoftheCommerce
Actprovides fortheimposition ofpricecontrols either: (i)generally, (ii)onparticular firms, or(iii)on
particular products andservices, iftheMinister ofCommerce feelsthattheconditions ofeffective
competition areabsent. TheGovernment signalled itsintentions inthisrespect inaDecember 1991
statement, which noted thatinterconnection wasthecritical competition issue inthesector andthat
"ifitproves necessary, theGovernment willconsider theintroduction ofother statutory measures or
regulation."62
86. Asanetwork operator, Telecom setsstandards forequipment attached toitsnetwork, butin
doing soissubject totheCommerce Act(Chapter III(2)(v)). Under theTelecommunications Actany
network operator hastherighttoapprove theattachment ofequipment toitsnetwork.
International competition safeguards
87. Generally, NewZealand telecommunications providers arefreetonegotiate agreements with
overseas operators astheyseefit,although operators mustregister withtheSecretary ofCommerce.
However, NewZealand thinks that"competitive suppliers ofinternational telecommunications services
arepotentially vulnerable totheactions ofoverseas operators whomaybeinaposition, onaccount
ofbarriers tomarket access intheirownmarkets, toplayonesupplier offagainst another, tothe
detriment oftelecommunications users inNewZealand."63Theauthorities areconcerned thatforeign
monopolists, when seeking tosetratesandconditions ofservice withmultiple NewZealand operators,
willexploit theirbargaining advantage.
88. Inresponse, NewZealand maintains safeguards intheform ofreserve powers thatmaybe
exercised bytheSecretary ofCommerce under theTelecommunications (International Services)
Regulations 1994.64The1994 Regulations allow theSecretary ofCommerce torequire thatinan
agreement between aregistered NewZealand operator andanoverseas operator: (i)termination fees
besetataratefixed bytheSecretary ofCommerce, and(ii)thedomestic operator 'sshare oftraffic
toNewZealand fromthatoverseas operator equal thedomestic operator 'sshare oftraffic totheoverseas
operator (i.e., proportional return requirements).65Thereserve powers havenotbeenexercised to
date.
62Statement oftheGovernment ofNew Zealand, 9December 1991, cited inMinistry ofCommerce (1994e).
63Ministry ofCommerce (1995d).
64These regulatory powers areconsidered bytheauthorities tobetransitional. The1994 Regulations replaced
the1989Regulations,whichhadsimilarobjectivesbuttookamoredirectapproach.Undertheearlierregulations,
forexample, there were parallel accounting andproportionate return oftraffic requirements forallregistered
New Zealand operators contracting withthesame overseas operator.
65According totheMinistry 'sCompliance Statement, theSecretary willbeparticularly interested insituations
where: (i)twoormore domestic operators usedifferent accounting rates ormethods withthesame overseas
operator andreceive shares oftraffic from thatoverseas operator dissimilar totheir shares ofoutgoing traffic
tothatoperator; (ii)thedomestic andoverseas operator arerelated, leading, forexample, totransfer pricing,
(iii)adomestic operator receives particularly favourable terms andconditions, and(iv)large volumes oftraffic
arerouted overinternational leased circuits.New Zealand WT/TPR/S/20
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89. The1994Regulations apply tointernational public switched services andleased circuits. The
Secretary ofCommerce isobliged toregister anyapplicant thatprovides public switched services to
orfromNewZealand. Indetermining whether toregister applicants forleased circuits, theSecretary
willconsider regulatory conditions intheoverseas country concerned, andinparticular whether they
arebroadly equivalent withthose ofNewZealand; consideration willextend, forexample, towhether
resale tothirdparties ispermitted intheothercountry andwhether interconnection tothepublic switched
network inthatcountry ispossible.66Theauthorities haveindicated thattheywillfavourably consider
registration applications fortheprovision ofservices using leased circuits between NewZealand and,
bilaterally, Australia, Sweden, theUnited Kingdom andtheUnited States. Other countries willbe
considered foraddition tothelistupon request.
State ofcompetition inNewZealand telecommunications
90. ActivecompetitionnowexistsinallpartsofNewZealand'stelecommunicationssector,although
itremains relatively limited intheprovision oflocaltelephone service, where ithasonlyrecently begun
andremains limited tocertain geographic areas.67Thefirstpartofthesector inwhich deregulation
wasintroduced, namely thesupply ofcustomer premises equipment, isnowsubject toconsiderable
competition, withsome 190companies having received approval fortheirequipment tobeconnected
totheTelecom network (Chapter III(2)(v)). Indomestic toll(long-distance) services, Clear hasemerged
asamajor competitor andholds about 20percentofthemarket, withtheremainder virtually allheld
byTelecom. Alltelephone customers have access toatleast onealternative longdistance and
international carrier. Clear andTelecom holdmarket shares forinternational services similar totheir
long-distance shares; athird firmisactive inproviding international service viasatellite. Atleast
eight firms havebeenregistered asinternational operators. Telstra andSprint aremajor providers
ofinternational service tocorporate customers, andthere areseveral callback service operators. In
cellular services, BellSouth NewZealand holds 15to20percentofthemarket, withTelecom holding
therest; acellular frequency hasbeenawarded toathird firm, Telstra, which hasyettoinitiate
service.68WhileTelecom'snetworkisthelargest,severalsmallernetworksexist,havingbeenpurchased
fromformer government agencies suchasNewZealand Rail. These areoperated commercially, with
capacity often leased toresellers, ofwhich atleastfourexist.
91. Theauthorities aresatisfied withtheoverall levelofcompetition inthesector under theliberal
regulatory approach. They attribute thesuccess ofthisapproach toseveral keyfactors, including:
(i)theabsence ofregulatory entry barriers; (ii)theabsence ofindustry-specific foreign investment
limitations, other thanthatplaced onTelecom through itsKiwiShare obligations; (iii)theprivatization
ofTelecom; (iv)theoption tousetheprovisions ofgeneral competition law; and(v)thedisclosure
requirements placed onTelecom, particularly withrespect tointerconnection agreements.
66Ministry ofCommerce (1995d).
67Clear hasrecently introduced local telephone service inthecentral business districts ofthemain cities.
68Some commercial frequencies andspectrums areallocated bytheMinistry ofCommerce according to
competitive bids. Sixradio spectrum auctions have been completed since theRadiocommunications Actwas
introduced in1989. Initially these were sealed-bid, second-price tenders inwhich thehighest bidder wonthe
rights butpaidtheamount bidbythesecond highest bidder; thiswaslaterchanged toafirst-price system. In
cellular communications, themanagement rights tothespectrum suitable toAMPS technology iswholly held
byTelecom; BellSouth andTelstra hold management rights forGSM cellular technology. Thus "there is
competition intheoverall provision ofcellular services butnotwithin thecellular technologies concerned" and
"consumerscannottransferbetweenoperatorswithoutalsoexchangingcellphones"(MinistryofCommer ce,1995e).WT/TPR/S/20 Trade Policy Review
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Remaining issues
92. Twoissues remain inthesector. Firstisthesuccessful implementation oflocalinterconnection
agreements under the"light-handed" regulatory approach. Unsatisfactory results intelecommunications
would notonlyaffect thetelecommunications sector butcould alsoaffect other areas withvertically-
integrated monopolies. InlightofthePrivy Council decision inTelecom v.Clear, theauthorities carried
outareview ofinter-connection issues, including extensive consultations withinterested parties. The
Government decided attheconclusion ofthereview tocontinue torelyprimarily oncompetition and
theCommerce Acttoachieve itsobjectives inthetelecommunication sector. TheGovernment stated,
inannouncing itsdecision, that: (i)itwould beveryconcerned toseeafirmdelaying negotiations,
orotherwise attempting torestrict competition; (ii)itwould beconcerned iftheBaumol-Willig pricing
rulesweretobeapplied inthefuture; (iii)thesigning oftheClear/Telecom interconnection agreement
inMarch thisyearhadresolved themajor outstanding dispute inthesector andmight actasaframework
forfuture interconnection agreements; and(iv)where theGovernment isnotsatisfied thattheparties
arenegotiating ingood faith, theGovernment willresume regulatory action, suchasinitiating a
Commerce Commission price control enquiry, or,ifcircumstances warrant, directly imposing price
control.TheGovernmentalsoindicatedthatitwasconcernedaboutslowprogressinintroducingnumber
portability andwould beseeking afurther report onthisissue from officials. Carriers havesince
indicated theiragreement tointroducing both0800andlocalnumber portability, butwithpricing terms
forlocalnumber portability stilltoberesolved.
93. Thesecond issue concerns New Zealand 'sinternational-services competitive safeguards.
NewZealand hasnotusedthesetorestrict tradeanditshould continue toshow restraint. Afavourable
development would befurther market-oriented telecommunications reform inothercountries, obviating
theconcerns thathaveledNewZealand tomaintain these safeguards.
(iv) Financial services
94. NewZealand 'sfinancial services sector, including banking, insurance andsecurities, accounted
forsome 5.4percentofGDPin1993, down fromanaverage 5.7percentin1987-1989, andforabout
6.4percentofemployment. Some three quarters ofthesector 'seconomic activity isinbanking.
Financial services inNewZealand underwent vigorous market-oriented reforms inthemid-1980s.
Remaining regulation isforprudential purposes ortofacilitate competition. Policy objectives are
achieved primarily through generic framework legislation, suchastheSecurities Act,theFinancial
Reporting Act,andduties imposed ondirectors under NewZealand companies law.
95. Thehighly regulated régime inplace until1984 haditseffect throughout theeconomy.69In
thethreeyearsprecedingreform,banklendinganddepositrateswerecontrolledandreserverequirements
oftrading banks were usedtorestrain bank lending andperhaps toensure demand forgovernment
securities.70Resulting distortions encouraged disintermediation -ashiftindeposits toward non-bank
financial institutions -andtrading banks responded byrationing theiravailable credit, concentrating
itonlarge, established customers. Theshortage ofcredit fornewfirms andtherelatively highcosts
imposed bytheinefficiency ofthesector raised costs fortheproduction sectors, including importers
andexporters. Theregulatory régime reduced competition andledtoresource misallocation.
69Massey (1995).
70Thetrading banks were themost important ofseveral categories ofbank, each withdelineated statutory
functions; despite adeclining share, trading banks stillheldthemajority ofprivate sector credit in1980.New Zealand WT/TPR/S/20
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Disintermediation, combined withtechnological developments thateffectively opened international
financial markets, alsoundermined theefficacy ofmonetary policy.71
96. These factors contributed totheurgency ofopening thesector tocompetition, andin1984
thesector became among thefirstintheeconomy tobereformed. Change wasrapid anddramatic:
within ninemonths "thefinancial system wentfrombeing themosttopossibly theleastregulated within
theOECD."72Interest ratecontrols wereabolished inJuly1984; credit growth guidelines andreserve
assetratios werephased outinAugust andSeptember 1984; andcertain rules limiting thetermand
rateofoverseas borrowing wereeliminated inOctober 1984.73InMarch 1985, a70percentforeign
ownershiplimitonfinancialinstitutionswasabolished.In1986theReserveBankwasgiventheauthority
toregister newbanks, eachofwhich hadpreviously required individual ActsofParliament, andthe
NewZealand banking market waseffectively opened tooverseas banks.
97. Since deregulation, anexpanded range offinancial instruments hasbeenoffered. Competition
hasledtoreducedlendingmargins.Deregulationappearstohavehelpedbothconsumersandbusinesses,
byreducing borrowing costsandmaking available abroader range oftoolswithwhich tomanage interest
rate,exchange rate,andother risk.
(a) Insurance andinsurance-related activities
98. Theregulation ofNewZealand 'sinsurance industry relies largely onmarket-based disciplines
andincentives, andongeneric rules. Allinsurance business iscovered bytwopieces oflegislation,
bothprudential innature; separate, additional legislation addresses life,mutual, andmarine insurance,
respectively. TheInsurance Companies (Ratings andInspections) Actrequires insurance companies
toobtain arating from anapproved rating agency. Rating agencies areapproved bytheRegistrar
ofCompanies, andratings areprovided totheRegistrar anddisclosed tocustomers before theyenter
orrenew acontract.
99. TheInsurance Companies Deposit Act1953 setsoutprudential requirements fordeposits of
funds byinsurance companies. Since 1974, astandard deposit of$500,000 isrequired tobepaidby
insurance companies commencing business, whether theybelocalorforeign-owned. These deposits
comprise themainprudential requirements. TheActalsorequires detailed annual reports andfinancial
statements ofallinsurance companies; lifeinsurance companies mustalsomake anannual actuarial
statement.74Allinsurance companies aresubject toother areas oflegislation, including business law,
competition law,andconsumer protection law.
100. NewZealand'svalueaddedtax,theGST,appliestoinsuranceproductsotherthanlifeinsurance.
Theincome taxapplies tolifeandnon-life insurers andinsurance transactions.
71Massey(1995)notesthat"deregulationwasconsideredessentialtotheauthorities'macroeconomicstrategy."
72Massey (1995).
73TheReserve Bank subsequently developed open market operations inJanuary 1985.
74Inaddition, theInsurance Intermediaries Act1994, administered bytheMinistry ofJustice, regulates certain
activities ofinsurance agents andbrokers, including howbrokers mayuseinsurance premiums, payments due
totheinsured, andtheoperation ofclient accounts.WT/TPR/S/20 Trade Policy Review
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101. NewZealand 'sinsurance industry islightly regulated.75New entrants donotneed tobe
registered, theonlyrequirements being therating anddeposit requirements discussed above. Entry
isnotsubject tonational ownership ormanagement requirements, requirements toinvolve certain
reinsurers, orobligations other thanthose directly related toprudential supervision. There areno
requirements toinvest assets inparticular activities orlocation restrictions onre-insurance. No
restrictions areplaced ontheproducts thatinsurance companies mayofferandthere arenoapproval
procedures fornewproducts. Agents andbrokers arenotrestricted todealing withcertain companies
orindividuals.76Foreign-based insurance companies operate freely under thesameregulatory controls
applied todomestic companies. Foreign companies mayorganize themselves astheyseefit.
102. TheGovernment 'sliberal regulatory régime iscomplemented byameasure ofself-regulation.
TheInsurance Council, forexample, hasadopted consumer information requirements foritsmembers,
andtheLifeOffice Association hasastatutory relationship withtheSecurities Commission and
independent review authority overitsmembers. Lifeoffices must comply withtheLifeOffice
Association Code ofPractice, andareexempt fromtheprospectus andinvestment statement disclosure
requirements oftheSecurities Act. TheInvestment Product andAdviser (Disclosure) Billcurrently
before theParliament would remove thisexemption.
Government involvement intheinsurance industry
103. Traditionally, theGovernment wasdirectly involved inmostareas ofinsurance, oftenthrough
government-backed mutual andlifeinsurance funds. Over thepastseveral years, theGovernment
haslargely withdrawn fromfireinsurance andlifeinsurance. Additionally, therôleoftheEarthquake
Commission (EQC), aCrown entity, isbeing narrowed asaresult oftheEarthquake Commission Act
1993; afterDecember 1996, non-residential property andsome types ofpersonal property, including
motor vehicles, willnolonger becovered, andcapshavebeenplaced onresidential property coverage.
EQCcoverage isautomatic uponthepurchase offireinsurance through private companies, which collect
premiums fortheEQC. TheEQCmustholditsreserves primarily inNewZealand Government Bonds
andTreasury Bills.
104. Insurance forpersonal injury toNewZealand residents andvisitors isprovided through the
Accident Rehabilitation andCompensation Insurance (ARCI) scheme. Thescheme isadministered
bytheAccident Rehabilitation andCompensation Insurance Corporation (ACC), aCrown Agency with
agovernment-appointed Board. Thescheme isfunded byemployers, workers, vehicle owners and
users, theGovernment, andusers ofthescheme; participation iscompulsory.
Structure oftheinsurance industry
105. According totheauthorities, theGovernment doesnotmonitor thestructure andcomposition
oftheinsurance industry. Thus, figures arenotgenerally available ontheimportance offoreign
companies intheindustry. However, according todatafromAdams (1994), thelifeinsurance industry
isclosely integrated withoverseas insurance markets, particularly inAustralia andtheUnited Kingdom
(UK). Twothirds ofthelifeinsurance companies inNewZealand arebranches orsubsidiaries of
multinational corporations, andin1992Australian entities (64percent)andUKentities (30percent)
accountedformostofthepremiumincome.Inaddition,manysmallerdomesticlifeinsurancecompanies
75According toCommerce Clearing House Australia, Ltd.(1991), New Zealand 'sinsurance industry isthe
most unregulated market inthewestern world.
76ThetraditionalNewZealandsystemofanetworkofagentsforeachinsurancecompanyisnowcomplemented
bynetworks ofinternational andlocal insurance brokers andanexpanding network ofindependent agents.New Zealand WT/TPR/S/20
Page 105
increasingly reinsure withmultinational reinsurance companies. There areover30fireandgeneral
insurance companies operating inNewZealand, ranging fromlargemultinationals tosmall specialized
firms. According totheauthorities, thepresence offoreign companies issignificant.
(b) Banking
106. TheReserve Bank isresponsible forpromoting thesoundness andefficiency ofthefinancial
system.77Anemphasis onmarket control disciplines through disclosure liesatthecoreoftheapproach
taken tobanksupervision. Market participants, rather thantheReserve Bank, appraise theriskexposure
ofeachregistered bankand,apart fromcertain exceptions, including minimum capital requirements,
detailed rulesandguidelines forbanks havebeeneliminated. Appraisal bymarkets isbased onpublicly
available information, particularly mandatory quarterly disclosure statements, which include, interalia,
financial statements, credit ratings anddetails onsignificant riskexposures.78Disclosure strengthens
incentives forbankmanagers anddirectors tomanage theirownbusiness risksandtobehave prudently.
Theemphasis ondisclosure alsoreinforces theperception thatthemanagement anddirectors ofabank
havethesoleresponsibility tomanage abank'saffairs. Theauthorities feelthatthishelps toreduce
anyperception thatbanks cannever failandthattheGovernment hasaresponsibility torescue abank
indistress.
107. TheReserve Bank continues tohaveresponsibility forsupervising thebanking system; itis
responsible forregistering banks, andmonitors banks through theirpublic disclosure statements. The
Reserve Bank haswide-ranging authority torespond tofinancial distress orbankfailure. TheReserve
Bank ofNewZealand Act1989 addresses theReserve Bank'spowers regarding registration and
supervision. TheReserve Bank's"Statement ofPrinciples -BankRegistration andSupervision", which
replaced the1992 Principles inJanuary 1996, elaborates ontheAct.
Bank registration
108. Banking activity isnotrestricted: nolegalrequirements pertain totheactivity ofbanking and
thesupply ofbanking services isnotlegally restricted toregistered banks. Norarethere limitations
onthetypes ofactivity thatregistered banks mayundertake. Instead, banking supervision in
NewZealand turns ontheuseoftheword "bank" andontheReserve Bank'sregistration ofbanks.
109. Onlythose institutions registered bytheReserve Bank mayusetheword "bank" intheirtitle.
TheReserve Bank, inassessing registration applications, attempts toensure that"only financial
institutions ofappropriate standing, which areabletodemonstrate theirability tocarry onbusiness
inaprudent manner" qualify forregistration.79Inapproving anapplication, theReserve Bank must
besatisfied thattheapplicant 'sbusiness willsubstantially consist ofproviding financial services;80
theReserve Bankwillalsohaveregard tothepotential bank'sownership structure, itssize,itsstanding
77TheReserve Bank hasbroad crisis management powers. These include theauthority torecommend to
theMinister ofFinance thederegistration ofabank orthatabank beplaced under statutory management and,
withtheapproval oftheMinister, togivewritten directions tothebank.
78Bank directors must publicly confirm theadequacy oftheir bank'sriskmonitoring andcontrol systems,
andaresubject tocivil andcriminal liability forfalse ormisleading statements.
79Reserve Bank ofNew Zealand (1996).
80TheReserve Bank hasnotattempted todefine "financial services" forthese purposes since thistypeof
service evolves overtime.WT/TPR/S/20 Trade Policy Review
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onthefinancial markets and,foranoverseas bank, thelegalandregulatory requirements initscountry
ofdomicile.81
110. Generally, overseas banks arefreetoincorporate locally ortoestablish branches. Locally
incorporated registered banks musthaveandmaintain atleast$15million incapital. Allbanks must
maintain capital adequacy requirements consistent withaninternational standard known astheBasle
Capital Accord, developed under theauspices oftheBank ofInternational Settlements. Forthe
establishment ofabranch: (i)anentity must havethestatus ofabankinitshome country; (ii)the
supervisory ordisclosure requirements, ortheeffectiveness ofmarket disciplines, inthecountry of
incorporation mustbeadequate; and(iii)theoperations oftheNewZealand branch mustnotconstitute
apredominant share ofthebank'stotalbusiness. When theReserve Bank isnotsatisfied onthese
points, itmayrequire theapplicant toincorporate locally; inparticular, thiswould apply toapplicants
incorporated inacountry thatdoesnotapply thecapital adequacy framework oftheBankofInternational
Settlements (BIS) orasatisfactory equivalent. Nominimum sizerequirement isapplicable tobranches
ofoverseas banks; however, theReserve Bank mustbesatisfied thatthecapital ofthebankinitshome
country isequivalent toatleast$15million andthatthebank complies withtheminimum capital
adequacy andother requirements ofthehome supervisor.82
111. Directors mustattest quarterly totheirbank'scompliance withitsconditions ofregistration.
Structure ofthebanking industry
112. Theopenness ofNewZealand 'sbanking industry toforeign competition isevidenced bythe
industry 'sstructure. Asat31March 1996 there were 14registered foreign-owned banks andtwo
domestically owned banks. There arenoState-owned banks. Fourmajor banks eachaccount for14
to21percentoftheindustry 'sNewZealand assets.
(v) Transport
113. TheNewZealand transport andstorage sector accounted for5.0percentofGDP in1993,
ashare thathasbeensteady since themid-1980s. About athirdofthesector 'svalue added results
from roadtransport activity, aquarter from airtransport, afifthfrom railandwater transport and
theremainder from support services tothesector. Transport services employed some 5percentof
thefull-time work force in1993. Intheyearending June1995, transport exports accounted for
40percentofNewZealand 'stotalservice exports, orsome 9percentoftotalexports. Imports of
transport services accounted for40percentoftotalservices imports and10percentoftotalimports.
Transport services provided toforeigners inNewZealand areconsidered tourism exports; theyaccount
foranadditional 10percentoftotalservices exports.
114. Economic linksbetween transport andothersectors areimportant. According toNewZealand 's
inter-industry accounts for1990/91, transport services make up4.5percentofinput costs formeat
anddairy manufacturing industries and8.6percentofcostsforother foodmanufacturing industries,
suchasfruitandvegetables. Forpaper andpaper products manufacturing, thecostshare oftransport
services equalled nearly 15percent. Further, NewZealand 'stourism officials havenoted thevital
importance ofthetransport sector, particularly airservices, totourism (section (vi)). Thisaccords
fullywiththeobservation byFrancois andReinert thatduetotheintermediate structure ofproduction,
81Anapplicant mayberequired toincorporate locally toinsulate itself from effects offoreign laws and
regulations.
82This willnormally require compliance withatleast theBISminima.New Zealand WT/TPR/S/20
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services areamajor partofproduction, even formerchandise exportables.83Itisclear thatthe
importance ofefficient transport extends totheexport sector.
115. Prior toreform, government intervention pervaded thetransport sector.84TheGovernment,
rather thanmarket forces, regulated competition. Thenumber ofsuppliers inland,railandairtransport
wascontrolled, aswere theroutes thateachsupplier could service. Insome cases, ratesofreturn
oncapital were directly regulated. Themajor airlines andtwolarge shipping operations were
government-owned andoperated, aswere thelargest passenger andfreight transport operators and
nearly allports andairports. Policy favoured some transport modes attheexpense ofothers. For
example, goods could notbetransported byroad, except forshort distances.85
116. Therecognition oftransport asaninfrastructural service laybehind thecomprehensive domestic
andexternal reforms begun inthesector in1983.86Reform, which isnowcomplete except forsome
issues ofroadtransport, wasguided byseveral keyprinciples, including: (i)theestablishment of
competition within andbetween transport modes; (ii)ownership andoperation oftransport systems
bytheprivate sector onacommercial basis; (iii)theclear separation ofgovernment policymaking
functions from regulatory andservice-delivery functions; (iv)inter-modal policy neutrality; and
(v)safety regulation asajointoperator/government responsibility onauser-pays basis. Inlinewith
theseprinciples,reformencompassedthecommercializationofgovernmenttransportoperations,followed
asappropriate byprivatization, andtherepeal oflegislation governing thesupply andpricing oftransport
services. Commercial regulation isnowlimited tolaws, suchastheCommerce Act,thataffect all
business inNewZealand. Inmany areas, thereduction orelimination oftradeandforeign investment
barriers hasraised thelevelofcompetition inthemarket andenhanced theeffectiveness ofthereforms.
Onsafety, NewZealand hasmoved toward anauditandmonitoring approach, withmoreresponsibility
given totransport andother operators inthesector.
117. Transport reform appears tohavebeensuccessful. Rates fellsome 40percentinrealterms
inthefiveyears following theabolition oftherailway 'sfreight monopoly.87Airfaresonmaindomestic
routes fellby10percent, innominal terms, bytheendof1987, following theentry ofAnsett.
According totheauthorities, thisexpansion reflects structural reform andgenerally strong economic
activity, particularly intourism andforeign trade. Transport hasseensubstantial investment inthe
lasttwoyears, including upgrading ofportandairport facilities andthepurchase ofnewairplanes
andferries, presaging further sectoral growth.
83Francois andReinert (1995). Theauthors notethatinJapan, forexample, despite theconcentration of
exports intransport equipment andother machinery andequipment, theactivity composition ofexports isactually
concentrated inservices.
84Ministry ofTransport (1995a).
85Initially thisdistance was40miles; later, itwasraised to150kilometres.
86Ministry ofTransport (1995b).
87Until 1990, therailsystem wasmaintained andoperated bythegovernment-owned NewZealand Railways,
which alsooperated anetwork ofroadpassenger services andanational parcel service thatcompeted withprivate
firms. Thecorerailbusiness washived-off in1990. New Zealand Railwassubsequently commercialized, then
privatized in1993. Itwaspurchased byaconsortium ledbytheAmerican enterprise Wisconsin Central and
including various New Zealand interests. Restructuring included reduction instafffrom 23,000 in1982 to6,000
in1991; keyoperations, including therailway network andtheferry service between thetwomain islands, were
notsubstantially altered.WT/TPR/S/20 Trade Policy Review
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(a) Maritime transport
118. Maritime transport isimportant forNewZealand 'sinternational trade, some 90percentof
which iscarried bysea.88Thevastmajority ofseaborne trade isbyabout 30foreign companies.89
Foreign operators havefreeaccess toshipping toandfrom NewZealand.
119. NewZealand 'sinternational shipping competition lawissetoutintheShipping Act1987.
TheActexempts linershipping conferences from anti-trust legislation oftheCommerce Act1986.
Thisreflects theperception ofshippers ofcargo andshipping companies thatthere ismutual benefit
incarriers combining under alinerconference agreement toprovide ajointservice. TheShipping
ActsetsNewZealand 'sliberal policy oninternational shipping trades, inkeeping withthegeneral
regulatory environment inNewZealand overthelastdecade. Theonusisonshippers andcarriers
tonegotiate thebestpossible terms -freefrom, andwithlimited recourse to,government involvement.
While theActisbased ontheassumption thatfairly negotiated tariffs andterms ofcontract areaprivate
matter inwhich theState should havelittleornoinvolvement, there isscope forlimited action by
theMinister ofTransport intheevent ofanyunfair practice byacarrier.
120. PartIIoftheShipping Act1987gives totheMinister ofTransport reserve powers totakecertain
regulatory actions indefence ofNewZealand 'sshipping ortrading interests. These powers maybe
usedifaforeign government damages those interests bylimiting theaccess of:(i)NewZealand flag
carriers toseaborne cargo, or(ii)NewZealand shippers totheservices ofcarriers oftheirchoice.
Measures maybeapplied onlyagainst ships controlled bythatforeign government, anational ofthe
country ofthatgovernment, oranenterprise based inthatcountry. Themeasures might include:
(i)restricting, orlevying charges on,ships entering NewZealand ports, and(ii)setting theterms and
conditions ofshipping agreements. These reserve powers havenotbeenused. Anyfuture usewould,
according totheauthorities, beinamanner consistent withtheGATS.
121. InFebruary 1995 theMaritime Transport Act1994 came intoeffect, substantially opening
NewZealand 'scoastal shipping trades toforeign carriers engaged ininternational shipping to
NewZealand. Nolimitations areplaced onthenumber ofportsvisited orserviced orthetypeofcargo,
butimmigrationlaweffectivelylimitsthetimeinwhichforeignshipscancarrycoastalcargoto28days.90
According totheauthorities, oneyearaftertheintroduction ofcabotage, foreign operators werecarrying
10percentofthetotalinter-island container trade. Increased competition hasreduced transport costs
andincreasedthechoiceofdomestictransportservices,particularlyforthemanufacturingandagricultural
sectors.
122. Thecorporatization andpartial privatization ofNewZealand 'sports haspositively affected
itstrade. All13major ports were corporatized under thePortCompanies Act1988 andarenow
primarily owned bylocalauthorities, albeit withupto45percentprivate shareholding. Inaddition,
theWaterfront Industry Commission, which hadregulated waterfront employment, wasabolished in
1989andreplaced withasystem oflabour relations similar tothatintherestofNewZealand industry.
Although there hasbeenareduction intheworkforce ofnearly 60percent, shipturnaround times
havebeencutinhalfandfreight rateshavebeensignificantly reduced.
88WTO document S/NGMTS/W/2/Add.2, January 1995.
89According totheauthorities, there arenoforeign direct investment restrictions specific tothesector. Four
New Zealand companies, allprivately owned, carry some 10percentofthisvolume.
90AnAustralian-crewed shipcould engage inNew Zealand coastal trade indefinitely because ofprovisions
onimmigration under theCER.New Zealand WT/TPR/S/20
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123. NewZealand hasaGATS m.f.n. exemption inmaritime transport. Under this,officers on
NewZealand ships canbelimited tonationals ofNewZealand andcertain other countries: Canada,
Hong Kong, Ireland, India, Malaysia, Pakistan, Singapore, South Africa, andtheUnited Kingdom.
Themeasure, which favours harbour pilots from Commonwealth countries, stems from the1931
Commonwealth Merchant Shipping Agreement; itsaimistopromote local maritime recruitment.
According totheauthorities, theprovision onthenationality ofofficers islikely tobeeliminated by
1998, andthem.f.n. exemption willthenberemoved.
124. TheAustralian Bureau ofIndustry Economics (BIE, 1995) argues that,despite liberalization,
thecurrent practice oftrans-Tasman shipping remains animpediment toNewZealand-Australia trade.
According tothisreport, trans-Tasman shipping costsremain highbyinternational standards because
ofaprivate agreement between major labour unions, theAustralian andNewZealand Maritime and
Stevedoring Accord. Neither Government isparty totheAccord, which reportedly seeks toprevent
non-Australasian crewed ships fromtransporting cargo between Australia andNewZealand. Again,
according tothereport, Australian andNewZealand shipping companies donotactively oppose the
agreement because itraises thecostsofforeign-crewed ships -which musthirealocalcrewinaddition
tothenormal crew -byagreater amount thanitraises thecosts ofdomestic companies. Ajoint
governmentstudyin1987estimatedthattrans-Tasmanfreightcostscouldbereducedbyupto25percent
ifthird-country ships visiting bothAustralia andNewZealand wereallowed touplift cargo enroute.
Asubsequent jointgovernment study, in1991, indicated thatfreight ratesonAustralasian-crewed ships
hadfallen, inrealterms, byover20percentintheprevious three years.
(b) Airtransport
125. NewZealand 'sairtransport sector hasbeensubstantially liberalized since1983. Keyreforms
haveincludeddomesticeconomicderegulationandtheprivatizationoftheformerState-ownedmonopoly
enterprise,AirNewZealand,andtheeliminationofforeigninvestmentrestrictionsfordomesticairlines.91
NewZealand grants noexclusive rights, suchasobligations ongovernment entities toemploy specified
carriers, intheairtransport industry. There arenorestrictions on,orincentives for,domestic carriers
topurchase from particular sources. According totheauthorities, NewZealand airlines receive no
subsidies orgovernment guarantees. However, asinmany countries, international services continue
toberestricted under arégime ofbilateral agreements.
Domestic airtransport
126. Restrictions onthenumber oflicensed operators offering domestic airservices wereeliminated
in1983 forlocalairlines andforeign-owned airlines incorporated inNewZealand. Certification to
operate onthedomestic market issolely onthebasis ofsafety andoperational matters andisthe
responsibility oftheCivil Aviation Authority. There isnoeconomic regulatory body fordomestic
airtransport. Australian airlines donot,asyet,haveanyspecial privileges ondomestic NewZealand
routes.
127. Astatutory 24percentlimitonforeign investment indomestic airservices wasrevoked in
1986, andtheGovernment issued guidelines totheOverseas Investment Commission allowing itto
approve foreign investments upto50percent. Thiscapwasremoved in1988.
91AirNew Zealand wasprivatized in1989. Themaximum foreign investment allowed inAirNew Zealand
is35percent. According totheauthorities, thisresults from limitations inNew Zealand 'sbilateral airservices
agreements.WT/TPR/S/20 Trade Policy Review
Page 110
128. Major domestic routes areserved bythree airlines: AirNewZealand, Ansett NewZealand
andMount Cook Airlines. Ansett NewZealand iswholly owned byAnsett Australia, andMount Cook
Airlines iswholly owned byAirNewZealand.92Tensmaller airlines, twoofwhich areowned by
AirNewZealand, offerscheduled domestic services onprovincial routes. Another domestic airline
isexpected tobegin operations incompetition withAirNewZealand andAnsett inlate1996.
International airtransport
129. Anairline requires aninternational airservice licence before itmayinitiate international air
services toorfrom NewZealand. These licences areissued bytheSecretary forTransport, in
accordance withtheprovisions ofbilateral agreements, andspecify theroute andcapacity thatanairline
isentitled tooperate. InAugust 1996, 26international airlines operated scheduled passenger service
intoandoutofNewZealand (sixonacode-share basisonly); eightofthesecarriers havebegun service
since 1989. Oneofthese airlines alsooffers scheduled cargo service; twoother international airlines
provide cargo-only service. Airlines arerequired todisclose theirproposed tariffs totheGovernment
onlyatthetimeoftheirinitial application foraninternational airservice licence, andsubsequently
iftheywishtoincrease previously-approved standard fares.
130. TheNewZealand Government isparty to30air-service agreements, andanon-governmental
agreement isinplace withChinese Taipei.93Keyparameters covered bythese agreements include:
(i)thesingle (oneairline isdesignated byeachparty) ormultiple designation ofairlines; (ii)thetariff
régime; (iii)principles regarding capacity; and(iv)theroute schedule. Most agreements limit
capacity;94inthiscase, airlines mayoperate thenumber ofservices forwhich theyarelicensed; the
Minister oftransport allocates traffic rights toNewZealand airlines.
131. NewZealand hasopen-capacity arrangements withArgentina, Australia, Chile, Cook Islands,
Fiji,Luxembourg, theUnited States, andWestern Samoa. Theagreements withAustralia andWestern
Samoa provide foropencapacity onlyforairservices between thetwocountries, notbeyond, andthe
agreement withChile contains nobeyond rights. None oftheseagreements include cabotage, andsome
contain route restrictions andsingle destination clauses. Intotal, New Zealand hasairservices
agreements with12Asian andPacific RimStates (plus those withHong Kong andMacau, andthe
non-governmentalagreementwithChineseTaipei),fiveEuropeancountries,ninePacificIslandcountries,
andtwoSouth American countries (excluding Chile, which isincluded intheAsiaandPacific Rim
total).
132. NewZealand considers code-sharing tobeasubset oftraffic rights andtobeautomatically
included inanyexchange oftraffic rights; itseeks toconfirm thisviewinnegotiations withitsbilateral
partners. Three international carriers haveaccess beyond theirNewZealand gateway bywayofcode-
92AsatAugust 1996, AirNew Zealand 'sproposal topurchase 50percentofAnsett Australia wasbeing
considered bytheAustralian Foreign Investment Review Board (FIRB), competition authorities inAustralia and
New Zealand having already approved thepurchase. Thelatter'sapproval wasgiven oncondition that,ifAir
NewZealand 'sproposal isapproved bytheFIRB, News Ltd.(AirNewZealand 'sprospective 50percentpartner
inAnsett Australia) willpurchase 100percentofAnsett New Zealand, thereby ensuring theindependence of
thatcarrier.
93TheNewZealand signatory totheagreement istheNewZealand Commerce andIndustry Office inChinese
Taipei. Although notasextensive asatypical airservices agreement, theagreement withChinese Taipei has
similar parameters toother agreements.
94Maximum capacities arenormally inamemorandum ofunderstanding associated withtheagreement.New Zealand WT/TPR/S/20
Page 111
sharing withAnsett NewZealand. Code-sharing policy alsoextends insome cases totheaircraft of
third-country airlines; forexample, British Airways code-shares withQantas (anAustralian carrier)
between Auckland andLosAngeles.
133. Noforeign carriers currently havecabotage rights inNewZealand. NewZealand iswilling
toconsider exchanging cabotage rights forrights ofequivalent value. The1992 Memorandum of
Understanding (MOU) signed withAustralia provides forairlines ofeither country tooperate with
fulldomestic traffic rights intheother, including theright tocarry cabotage traffic. However, the
MOU hasyettocome intoeffect inthisrespect.
134. According totheauthorities, NewZealand 'sinternational aviation policy seeks toencourage
bilateral air-service partners tonegotiate liberal agreements inorder toincrease competition inexisting
andpotential markets. Thenumber andscope ofbilateral air-service agreements hasincreased
substantially, particularly withAsian andPacific RimStates.95
135. Provision ismade under theCivil Aviation Actforexemption from NewZealand 'sgeneral
competition lawintwosituations. First, inter-airline tariffagreements may,subject tostatutory criteria,
beexempted fromtheCommerce Act'sprovisions onrestrictive tradepractices, including pricefixing;
theauthorities areoftheview that"interlining" byairlines benefits consumers. Second, anairline
worried thatacompetitor mayregard apromotional fareaspredatory mayseekprotection from the
Commerce Actprovisions regarding abuse ofadominant position.96These provisions apply todomestic
routes only.
136. TheairservicesMemorandumofUnderstandingsignedinAugust1992withAustraliaenvisaged
"beyondrights"fordesignatedairlines,andthegradualintroductionofadditionalairlinestotrans-Tasman
routes.97Subject toconsultations, theUnderstanding alsoallowed designated airlines tooperate with
fulldomestic traffic rights intheothercountry (including cabotage). InOctober 1994, Australia advised
NewZealand thatitwould neither allow NewZealand airlines access toitsdomestic market norgrant
beyond rights other thanthose ineffect inNovember 1994 (BIE, 1995). Thus NewZealand airlines
areexcluded fromcarrying domestic passengers within Australia andremain limited totheequivalent
of12Boeing 747services perweek beyond Australia, andthissame limitisapplied onAustralian
airlines wishing tocarry passengers beyond NewZealand. According totheAustralian Bureau of
Industry Economics, restrictions ontrans-Tasman civilaviation areamong themostimportant remaining
impediments toNewZealand 'strade withAustralia.
Related services
137. NewZealand 'smajor airports havebeencorporatized, ashavemany aviation-related services.
Thethreeinternationalairports(Auckland,Wellington,Christchurch)currentlyhaveamixtureofcentral
andlocalgovernment ownership, andAuckland International Airport hasasmall private shareholding.
Auckland, thelargest, andWellington aremajority-owned bytheCentral Government. Christchurch
ismajority-owned bytheChristchurch CityCouncil. TheGovernment hasindicated itsinterest in
sellingsharesinNewZealand'sairportcompaniesandwilladdressownershipissuesatparticularairports
onacase-by-case basis.
95Thenumber ofpassengers flown onroutes toAsia doubled from 1987 to1990 andmore thantrebled in
thefiveyears toMarch 1996.
96TheCommerce Commission hascompetence inthisregard.
97This would allow airlines from onecountry toflyviatheother todestinations outside Australasia.WT/TPR/S/20 Trade Policy Review
Page 112
138. Theallocation ofslotsatairports isdetermined byairport authorities, based oncommercial
considerations. Intheevent ofadispute overslotallocation, parties would haverecourse tothe
Commerce Actprovisions, butaccording totheauthorities slotavailability hasnotbeenaproblem.
Ground handling atNewZealand 'sairports isopentocompetition, although theauthorities notethat
airlines often provide theirown; however, atAuckland thereiscompetition between AirnewZealand
andaU.S.non-airline company. TheMinistry ofTransport, in1987, separated itsairtraffic control
services, creating aState-owned enterprise, theAirways Corporation, tooperate onacommercial basis,
withrevenues from users ofthesystem. Thishasbeensuccessful: charges havebeenhalved, yet
Airways Corporation earns profits fortheGovernment andismaking investments tomodernize air
traffic control. Similarly, airport meteorological services wereseparated from theMinistry andthe
Meteorological Service established torunonacommercial basis. Taxpayer costsformeteorological
services havebeenhalved overthepastfouryears, andservice hasreportedly improved substantially.
(vi) Tourism
139. Tourism isNewZealand 'ssingle largest source ofexport revenue, accounting forsome
18percentoftotalforeign exchange earnings.98Thesector contributes anestimated 5to6percent
ofGDP. Itisgrowing rapidly, withinternational visitor arrivals upfrom under 600,000 in1984 to
1million in1992andnearly 1.4million in1995; from1993to1995, spending pervisitor increased
by44percent, to$3,000.
140. Traditionally, tourist arrivals aremainly fromAustralia (29percentofvisitors in1995), Canada
andtheUnited States (together accounting for14percent), Japan (11percent)andtheUnited Kingdom
(9percent). Thesource ofmuch ofthevisitor growth since1992, however, hasbeenAsia, particularly
theRepublic ofKorea, Thailand andChinese Taipei.99Thenumber ofvisitors fromAsia, excluding
Japan, increased by45percentintheyeartoJune1994, by31percentthefollowing year, andby
30percentintheyeartoJune1996.
141. Tourismhascloseeconomiclinkswithothersectors.100ExpandedairservicetoAsiahasspurred
visits from thatregion. Tourism activity hascontributed toincreased occupancy androom ratesin
NewZealand hotels, increasing returns forhotelowners andleading toadditional construction work.
Thetrade, restaurants andhotels sector grew by8.4percentintheyeartoMarch 1996, partly due
totourism. Theauthorities havenoted avirtuous circle withrespect totourism andeconomic reform:
NewZealand 'seconomic reforms havehelped boost tourism, while tourism growth hascontributed
togrowth inother areasoftheeconomy. Despite therelatively liberal approach taken byNewZealand,
some bilateral airservice agreements remain aconstraint ontourism growth.
142. TheNewZealand Tourism Board wasestablished bya1991ActofParliament toensure that
NewZealandis"marketedasavisitordestinationsoastomaximizelong-termbenefitstoNewZealand."
TheBoard, financed bytheGovernment, co-operates injointventures withtheprivate sector for
98Thisfigure, which inabsolute terms issome $4.8 billion, includes $1.3 billion inoverseas ticket sales by
AirNew Zealand.
99Overall, Asia(minus Japan) accounted forhalfofthegrowth in1994/95 andnowaccounts forsome 20per
centofthetotal. Korea 'sshare ofthetotalgrowth was33percent, followed byChinese Taipei (9percent),
Thailand (8percent) andChina (3percent).
100Satellite accounts fortourism arebeing established inNew Zealand 'snational accounts. Thiswillallow
amore precise calculation ofthesector 'scontribution totheeconomy andwillgivetheauthorities valuable
information ontherelationships between tourism andother sectors oftheeconomy.New Zealand WT/TPR/S/20
Page 113
marketing activities. In1991 theBoard setagoalof$9billion inforeign exchange earnings bythe
sector intheyear2000, nearly double 1995earnings. Given thecurrent expansion ofvisitor numbers
andaverage visitor spending, thisgoalappears tobeachievable. Ifso,thiswould mean added foreign
exchange earnings fortheeconomy equivalent tosome 20percentoftotalcurrent earnings, anincrease
exceeding thecurrent value ofalldairy product exports.WT/TPR/S/20 Trade Policy Review
Page 114
Annex IV.1
NewZealand 'sSpecific Commitments under theGATS101
(i) Business services
(a) Professional services
143. NewZealand hasbound thefirstthree modes ofsupply (cross-border supply, consumption
abroad, andcommercial presence) without limitation formany professional services. These bindings
apply tolegal, accounting, taxation, architectural, engineering102,andveterinary services. No
commitments havebeenmade inother areas, including integrated engineering; urban planning and
landscape architecture; medical anddental services; andservices ofmidwives, nurses physiotherapists
andpara-medical personnel.
(b) Computer andrelated services
144. Consultancyservicesrelatingtohardwareinstallation;softwareimplementation;dataprocessing
services; anddatabaseservices haveallbeenfullybound withnolimitations. Nocommitments have
beenmade regarding "other" services.
(c) Research andDevelopment services
145. Nocommitments havebeenmade.
(d) Realestate services
146. Thisarea, consisting ofservices involving ownorleased property andservices onafeeor
contract basis, hasbeenfullybound withnolimitations.
(e) Rental andleasing services without operators
147. Thisarea, withtheexception of"other" services, hasbeenfullybound withnolimitations.
(f) Other business services
148. NewZealand hasfullybound advertising services, building cleaning services andtranslation
services,withnolimitations.Servicesincidentaltoagriculturehavebeenfullyboundwithnolimitations,
except thatcommercial presence fortheprovision ofservices incidental toanimal husbandry islimited
byaprovision thatherd-testing services maybesupplied onlybyproviders licensed bytheDairy Board,
andthatthenumber oflicences maybelimited.
149. Nocommitmentshavebeenmadeontheremainingbusinessservices,includingmarketresearch;
management consulting; services incidental tofishing, mining, manufacturing andenergy distribution;
andphotographic, packaging, printing, andconvention services.
101Thisannex summarizes New Zealand 'sspecific commitments. Itdoesnotcontain thesame level ofdetail
astheSchedule andisnotasubstitute forit.Unless otherwise noted, thepresence ofnatural persons isunbound
except asindicated inthetextofthechapter.
102Nationaltreatmentofengineeringservicesislimitedbytherequirementthatregisteredengineersbeordinarily
resident inNew Zealand.New Zealand WT/TPR/S/20
Page 115
(ii) Communication services
150. NewZealand hasmade fullbindings withnolimitations inmost areas ofcommunications
services, except thatanational treatment limitation results from the49.9percentshareholding limit
onanysingle overseas entity inTelecom NewZealand. Areas where commitments havenotbeen
made include electronic mail, voice mail, enhanced value-added facsimile services, voice telephony;
datatransmission services; telex, telegraph andfacsimile services; andprivate leased circuit services.
NewZealand isanactive participant intheWTO telecommunications negotiations andthesemayresult
insubstantial changes toNewZealand 'sSchedule.
151. Limitations havebeenplaced intheSchedule foraudiovisual services onnational treatment
(cross-bordersupplyandcommercialpresence,becauseofgovernmentassistancetosupportNewZealand
films andspecial funding forMaori programming) andmarket access (presence ofnatural persons,
because ofspecial entry procedures forentertainers).
152. Nocommitments havebeenmade intheareas ofpostal andcourier services.
(iii) Construction andrelated engineering services
153. Inthissub-sector, NewZealand hasbound, without limitations, allareas except the"other"
category. Thebound activities include general construction work forbuildings andcivilengineering;
installation andassembly; andbuilding completion andfinishing. Inthe"other" category, site
preparation fornewconstruction (other thanpipeline) andthemaintenance andrepair offixedstructures
havebeenbound withnolimitations.
(iv) Distribution services103
154. Commission agents 'services, wholesale trade andretail trade have been fully bound by
NewZealand. Nocommitments havebeenmade withrespect tofranchising orother distribution
services.
(v) Educational services
155. Primary, secondary andtertiary eduction inprivate institutions hasbeenfullybound withno
limitations. Noother commitments havebeenmade.
(vi) Environmental services104
156. NewZealand hasmade nocommitments inthisarea.
103Distribution services consist ofcommission agents 'services; wholesale trade; retailing; franchising;
andother distribution services.
104Environmental services include sewage disposal; refuse disposal; andsanitation services.WT/TPR/S/20 Trade Policy Review
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(vii) Financial services105
(a) Insurance andinsurance-related services
157. NewZealand hasfullybound, withnolimitations, reinsurance andretrocession. Ithasbound
non-life insurance services, withmarket access limitations: (i)cross-border supply isbound onlyfor
maritime shipping, commercial aviation, space launching andfreight, andgoods ininternational transit;
and(ii)market access ofcross-border supply andcommercial presence arelimited by:compulsory
worker 'scompensation insurance funded through alevyonvehicle owners, employers andtheself-
employed (theAccident Rehabilitation andCompensation Insurance Commission); theexclusive insurer
status given theEarthquake Commission forresidential property disaster insurance uptocertain limits;
andtheauthority given theApple andPearMarketing Board toorganize compulsory hailinsurance
onbehalf ofgrowers.
158. NewZealand hasmade nocommitments intheareas oflife,accident andhealth insurance or
services auxiliary toinsurance (including broking andagency services).
(b) Banking andother financial services
159. NewZealand hasbound allareas ofthiscategory initsSchedule. Limitations apply onlyto
market access forcross-border supply andtocertain national treatment provisions withrespect to
commercial presence.
(viii) Health-related andsocial services
160. Nocommitments havebeenmade byNewZealand inthisarea.
(ix) Tourism andtravel-related services
161. NewZealand hasbound, withnolimitations, services intheareaofhotels andrestaurants;
travel agencies andtouroperator services. Nocommitments havebeenmade in"other" tourism and
travel-related services.
(x) Recreational, cultural andsporting services
162. Nocommitments havebeenmade byNewZealand inthisarea.
(xi) Transport services106
163. NewZealand hasbound, withnolimitations, services intheareasofrailtransport, commercial
roadtransport, pipeline transport, storage andwarehousing, maritime freight forwarding, theselling
andmarketing ofairtransport services,107andcomputer reservation systems.
105Many forms ofinsurance arerequired tobepurchased through monopoly suppliers; these arediscussed
inSection (5)(iii). Financial services include insurance andinsurance-related services; andbanking andother
financial services.
106Thisincludes maritime; internal waterways; air;space; rail; road; pipeline; andservices auxiliary
toallmodes oftransport.
107Except theproducts covered under CPC 01,02,211, 213-216, 22,2399 and261.New Zealand WT/TPR/S/20
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164. Inaddition, maritime transport108andairtransport havebeeninscribed intheSchedule but
withsome limitations. Forinternational maritime transport, cross-border supply andconsumption
abroad areunbound; commercial presence islimited (fortheestablishment ofafleettooperate under
theNewZealand flag)andthepresence ofnatural persons isunbound, notwithstanding thecommitments
indicated inthehorizontal section. Nocommitments havebeenmade withrespect tospace transport,
services auxiliary toallmodes oftransport, orother transport services.
(xii) Other services notincluded elsewhere
165. Nocommitments havebeenmade.
108Except themarketing andsalesoftransport services forproducts covered under CPC01,02,211,213-216,
22,2399 and261.WT/TPR/S/20 Trade Policy Review
Page 118
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