WT/TPR/S/115 Trade Policy Review
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III. TRADE POLICIES AND PRACTICES BY MEASURE
(1) INTRODUCTION
1. As a result of major market-oriented reforms initiated in the mid 1980s, New Zealand greatly
reduced barriers to trade, largely unilaterally; in particular, tariffs were cut considerably and non-tariff
barriers in the form of quantitative restrictions (including those on textiles and clothing) were
eliminated.  These reforms have contributed to a marked improvement in New Zealand's economicperformance during the past decade or so.
2. With the elimination of quantitative restrictions, the tariff has become New Zealand's main
trade policy instrument.  Nonetheless, the average applied MFN tariff fell from 14.5% in 1988
1, to
4.1% in 2002.  Although average MFN rates are low, tariff "peaks" apply to textiles, clothing and
leather products2; consequently, the average applied MFN rate for textiles and clothing, for example,
is 9.5%.  Clothing products are subject to "alternative specific" tariff rates, which may conceal tariff
peaks, and tariff escalation as importers pay whicheve r of the two rates turns out to be the highest, the
use of "alternative-specific" tariff rates in place of ad valorem  rates for the same product imparts a
degree of complexity (and therefore opacity) as well as unpredictability to the tariff.  Under a phase-
out programme, MFN tariffs were due to be reduced further to an average of 3% by 2000 andremoved between 2001 and 2006.  However, in 2000, further unilateral tariff reductions were
suspended until 2005, pending an ongoing review:  of ficial statements have suggested that any future
tariff reductions were more likely to be on a multilateral, regional or bilateral basis than unilateral.
3
The tariff review will also have regard to the APEC goal of removing trade and investment barriers by2010, on a reciprocal basis.
3. New Zealand applies no tariffs to imports from Australia or Singapore and maintains trade
preferences with Canada under bilateral trade agreements.  Preferential access is also granted to mostproducts from developing countries under the generalized system of preferences (GSP);  least
developed countries have been provided with duty free access to the New Zealand market for all
products as of 1 July 2001.  All qualifying imports from Pacific Island Forum countries also enter free
of duty.  A large number of duty-free concessions (on an MFN basis) are also provided to importers in
respect of many products, including those not produced in New Zealand, and also for trade policypurposes.  Needless to say, cuts in New Zealand's MFN tariffs have eroded these preferences and
concessions.
4. Imports of animal and plant products are regulated by New Zealand's sanitary and
phytosanitary laws.  Some products, notably unpasteurized cheese, live poultry and fresh eggs cannot
currently be imported because their risk to human, animal and plant health is being assessed.  Therehave been minor changes to legislation on anti-dumping, countervailing and safeguard legislation
since the previous Review to reflect the changes brought about by the New Zealand/Singapore Closer
Economic Partnership agreement.
5. New Zealand maintains few barriers to exports.  On the other hand, many key agricultural
exports are subject to tariff quotas by its trading partners.  Reform of state-trading enterprises (STEs)in recent years has reduced their influence on exports of New Zealand's major agricultural products.
                                                     
1 OECD (1996).
2 Specifically for carpets, clothing, headgear, and footwear.
3 See, for example, statement by Hon. Trevor Mallard on first reading of the Tariff (Zero Duty
Removal) Amendment Bill, 11 May 2000, [Online].  Available at:  http://www.beehive.govt.nz/View
Document.cfm?DocumentID=7419 [15 January 2003].New Zealand WT/TPR/S/115
Page 27
6. In addition to an apparent shift away from unilateral trade liberalization to reductions based
on reciprocity, the Government has indicated that it will become more actively involved in the
economy.  Thus, in contrast to the 1984-99 period, when government economic policy was largely
passive, New Zealand has recently adopted a more proactive approach to economic policy.  This
includes targeting biotechnology, information and communications technology, and creative
industries, in which the Government believes New Zealand has a comparative advantage, and whichhave high potential spill-over effects for growth in other sectors.  In addition, and in contrast to
previous efforts to reduce state ownership of companies;  the present Government has stated its
intention not to further privatize state-owned companies; in this context, it has also recently taken a
majority 80% shareholding in previously privatized Air New Zealand, re-nationalized the Accident
Compensation Corporation, and established Kiwibank, which is operated by the state-ownedNew Zealand Post.  The state-owned Terralink was, however, put into receivership following
financial difficulties, and the authorities will consider commercial ownership on a case by case basis.
The Government is also taking a more active interest in export promotion, which is carried out
through Trade New Zealand, to be merged with Industry New Zealand.  The organization is expected
to be operational in July 2003 and will help to develop, promote and increase business and exports.The government provides an unsubsidized export credit scheme, which works with the banks toprovide insurance or guarantees to exporters.
7. Changes in certain industries have also required changes to the competition policy
framework.  New Zealand's competition legislat ion, the Commerce Act, 1986, which was developed
when the economy was being liberalized, was further strengthened during the period covered by this
Review.  In addition, while the Commerce Act remains the main competition law, there appears to be
a shift in policy favouring the development of additional sector-specific legislation, particularly where
there appear to be incumbents with significant market power which may be misused.  This was the
case recently for the dairy industry, electricity, and telecommunications, suggesting, perhaps,weaknesses in New Zealand's generic competition law in dealing with such issues.
(2) M
EASURES DIRECTLY AFFECTING IMPORTS
(i) Procedures
(a) Registration and documentation
8. New Zealand Customs operates electronic import entry services available to all importers.
Details required for clearance of goods include:  the name of the buyer and seller;  product
description;  selling price;  cost of packaging, transportation and additional costs; insurance costs;
and any handling charges.  Importers may also be required to provide airway bills or bills of lading,
invoices, and any other documents requested by Customs.  Other documentation may also be required
for specified products, sanitary and phytosanitary certificates for most agricultural and processed
foods, and permits for goods subject to import restrictions (section (vi) below);  certificates of origin,although not a prerequisite to entry under preferenti al agreements, may form part of the importer's
evidence presented to Customs if claim of preferential entry is challenged.  In general, importers are
not required to register with any agency unless they wish to avail themselves of Customs' deferredpayment system.
(b) Preshipment inspection
9. According to the authorities, New Zealand does not recognize any preshipment inspection of
exports to New Zealand in customs areas, such as classification, valuation or quantity.  The MinistryWT/TPR/S/115 Trade Policy Review
Page 28
of Agriculture and Forestry does, however, perform some preshipment inspections overseas for bio-
security purposes.4
(ii) Customs valuation and clearance
10. New Zealand's legislation on customs valuati on is based on the WTO Agreement on Customs
Valuation (Agreement on the Implementation of Article VII of the GATT 1994) and is contained inSection 61 and the Second Schedule of the Customs and Excise Act 1996.
5  Valuation is according to
the f.o.b. value of imported goods.
11. New Zealand uses the transaction value, or the price paid or payable for the goods when sold
for export to New Zealand, for calculating the value of imported goods.6  Where the transaction value
is unavailable, identical or similar goods value, deductive value, computed value or residual valuemay be used.
12. Failure by importers to declare the correct value or to make any other false or "materially
incorrect declaration"  may be subject to administrative penalties under Part X of the Customs and
Excise Act 1996.  All decisions taken by Customs may be appealed with the Customs Appeal
Authority.  Any penalties imposed are refunded in full if the appeal is upheld.  Further appeals may bemade to the High Court and to the Court of Appeal.
13. New Zealand Customs maintains a performance agreement with the New Zealand
Government, which requires compliant EDI entries for import and export to be processed within
30 minutes;  manual entries are to be processed within 24 hours.  According to the authorities, this
target is currently achieved over 99.5% of the time, with an average turnaround of 12 minutes.  This isa considerable improvement over the 1995 average turnaround of 20 minutes.  In addition, the
authorities estimate that with most of New Zealand's import and export entries now handled by EDI,
traders' costs in transmitting electronic data to Customs have also been reduced over the last two years
from $NZ1.25 to $NZ0.40 per message.
(iii) Tariffs
(a) Overview
14. New Zealand's average MFN tariff is 4.1%.  The Government collected around 1.7% of its
total tax revenue from customs duty in 2001/02.  This share has declined from 2.8% in 1996/97.
New Zealand grants unilateral preferences to developing and least developed countries under the
Generalized System of Preferences (GSP);  in this context all tariffs on imports from least developed
countries were abolished in July 2001 (section (d) below).
15. In addition to preferences, New Zealand has traditionally granted tariff concessions for
customs facilitation, for social and humanitarian reasons, for trade policy, and, in some cases, for
industry assistance where the imported goods are no t produced in New Zealand (section (e) below).
All imports that are subject to tariffs are also subject to goods and services tax, which is levied at the
same rate on equivalent goods manufactured in New Zealand (section (4)(ii) below).
                                                     
4 Examples of this include cars in Japan, grapes in  the United States, and citrus fruit in Australia and
the United States, before they are transported to New Zealand.
5 In 1995, New Zealand informed the WTO Committee on Customs Valuation that its notification
under the Tokyo Round Agreement on Implementation of GATT Article VII (Customs Valuation Code)remained valid (WTO document G/VAL/N/1/NZL/1, 28 August 1995).
6 Customs and Excise Act, 1996, Second Schedule, Article 2.New Zealand WT/TPR/S/115
Page 29
(b) Bound tariff
16. New Zealand's bound tariff schedule is based on the Harmonized Commodity Description and
Coding System (HS96 nomenclature).  As a result  of negotiations in the WTO, New Zealand bound
99.7% of its tariff lines of which 96.7% were ad valorem  rates;  192 and 11 lines carry specific and
compound rates of duty, respectively (usually as alternatives to ad valorem  rates), while 35 lines have
other rates.7  Only the ad valorem  rates, involving 7,011 lines8, were used in this analysis, as
ad valorem  equivalents were not available for the specific rates.  Once the Uruguay Round of tariff
cuts is fully implemented, the average final bound rate will be 11.6%.  Bindings were not made for
some 20 tariff lines, 18 of which relate to transport equipment and two to clothing and footwear;
there are no partially bound lines.  Although a comparison between the bound and applied tariffs is
not possible because of differences in nomenclature9, it would appear that the final bound rate is
considerably higher than the current applied MFN average of 4.1% (see (c) below).  Differences
between bound and applied rates may provide the Government with scope to raise applied tariffs,
especially in sensitive sectors, although this has not been the case during the period under review.
(c) Applied MFN tariff
Structure17. New Zealand's applied MFN tariff is based on the HS 2002 nomenclature.  It is applied at the
HS eight-digit level and has 7,432 lines.  Around 96.9% (7,198 lines) of the tariff is subject to
ad valorem  rates;  of the non- ad valorem  rates, two are specific rates, 188 are alternative specific
rates, and 11 are alternative compound rates (0.1%) of duty
10;  in addition, there are 33 "other" lines.11
The majority of the specific duties are applied to imports of clothing usually as alternatives toad valorem  rates.
12  According to the authorities, alternativ e specific rates of duty apply to clothing
because it was "recognized that the apparel industry had unique features and that it was difficult forthe industry to take anti-dumping action".  Ad valorem  equivalents for the specific and compound
rates were provided by the authorities for most tariff lines (around 12% of specific, alternative-
specific, and alternative compound rates do not have AVEs).
13
                                                     
7 Other rates apply mainly to parts and components for which the tariff depends on the final
manufactured product in which they are used.
8 Including the ad valorem  part of the compound rates.
9 While the applied tariff is available at the 2002 HS nomenclature, the bound tariff is only available in
the HS96 nomenclature and is therefore not comparable.
10 New Zealand uses "alternative specific" tariff rates, with a specific and an ad valorem  component,
for 390 tariff lines or 195 tariff "pairs".  The tariff pairs refer to two different lines with the same productdescription:  in most cases, one line carries the ad valorem  rate and the second the specific rate;  other pairs
carry an ad valorem  and a compound rate.  Ad valorem  equivalents (AVEs) provided by the authorities are
based on the percentage of trade subject to the ad valorem  and/or specific duty components.
11 The "other" rates apply mainly to parts and components, for which the tariff varies subject to its end
use.
12 There are also four lines relating to alcohol product s that are classified in the New Zealand tariff as
specific rates of duty;  however, as they form part of an alternative specific tariff pair, for the purposes of thetariff analysis, these have been classified by the Secretariat as alternative specific tariffs.  The authorities state
that "while in effect the specific rates of duty act as alternative specifics (with imports of the same product
description either paying an ad valorem  rate or a specific rate) they are not classified as alternative specifics";
hence these should be classified as specific tariffs.
13 The figure is almost 25% if all non- ad valorem  rates (including "other" rates) were taken into
account.WT/TPR/S/115 Trade Policy Review
Page 30
18. Almost 55% of tariff lines carry a zero rate (Chart III.1), while more than a third of the tariff
(34.5%) is subject to rates of between 5% and 10%.  Among the AVEs, most rates are in the 19-21%
range, although one line, relating to plastic articles of apparel and clothing accessories, has an AVE of
135.7%.14  Thus, specific duties, which are already applied to tariff peaks, may conceal high rates of
tariff protection.  The use of "alternative specific" tariffs, with importers paying either an ad valorem
rate or a specific rate, depending on the value of the imported product, also adds to the complexity ofthe tariff, thereby reducing its transparency.  It also renders the tariff less predictable than if only
ad valorem  tariffs were used, because importers pay whichever of the two rates, the ad valorem  rate
or the specific rate, turns out to be the highest.  The authorities maintain that because most specific
duties are alternate rates, the average estimated AVE for these lines is 20.7%, slightly higher than the
average ad valorem  rate of 19%.
15  Moreover, tariff concessions may be requested by the importer in
cases where the specific part of the duty results in an excessive amount of duty payable.16  The goods
considered under this concession category are parts of apparel for use as manufacturing inputs or
disposable articles of apparel classified in the plastics or textiles apparel chapters of the tariff.  Given
that the average AVE of these alternate rates appears to be only slightly higher than the ad valorem
rate, and that concessions are available for goods subject to excessive rates of duty, the rationale forusing specific rates rather than ad valorem  in this instance is not clear.
Tariff average, dispersion, and escalation
19. In 2002 the simple average tariff, based on the ad valorem  part of the tariff and AVEs
provided by the authorities, was 4.1% (Table III.1).
17  Under a unilateral tariff reduction programme
initiated in 1997/98, New Zealand was expected to reduce its average to 3% by 2000.  Despite the
considerable consumer benefits resulting from unilateral tariff cuts since 198718, the new Government,
which was elected in 1999, decided to freeze further tariff reductions until at least July 2005.According to the authorities, the freeze was motivated by the view that unilateral tariff reductions
were no longer appropriate and that further tariff lowering would be based on reciprocity under the
WTO and bilateral agreements.  However, an exception to this policy was made in 2001 when under
the Tariff (Least Developed Countries Duty Removal) Amendment Order 2001, all tariffs on imports
                                                     
14 According to the authorities, if tariff concessions were included while calculating the AVE for plastic
articles of apparel and clothing accessories the AVE would fall from 135.7% to 31%.
15 According to the authorities, "almost 12% of alternative non- ad valorem  rates had no imports and all
imports of these products were therefore subject to the ad valorem  rate of duty".  For those tariffs with an ad
valorem  rate of 17.5% the AVE averages are 21.7% and 21.5%, while the two pairs whose ad valorem  rates are
6.5% have adjusted AVE averages of 9.3% and 9.4%.  Because the AVE is calculated on the basis of thepercentage of imports entering under the ad valorem  rate and the specific duty, it can vary from period to period,
adding a further element of uncertainty to the tariff.
16 This arises when the goods imported are of such low value that the resultant duty payable is very
high.
17 As New Zealand levies ad valorem  duties on the basis of the f.o.b. (free on board) price, thereby
excluding the costs of insurance and freight, it affords less tariff protection than in most other WTO Memberswho levy ad valorem  duties on the c.i.f. price, which includes such costs.
18 Comparing prices as of March 1998 with levels that would have existed had tariffs been held at their
1987 rates, cuts in previously high tariffs on cars, household appliances, clothing and shoes have already
reduced the prices paid by consumers for these products (which account for about one-quarter of consumer
spending) by 5% for shoes, 9% for household appliances, 15% for clothes, and 16% for cars.  With the completephase out of tariffs, and comparing prices projected to March 2010, the prices paid by consumers for theseproducts would be 22% lower for shoes, 16% lower for household appliances, 34% lower for clothes, and 31%lower for cars.  (See New Zealand Institute of Economic Research, 1999.)New Zealand WT/TPR/S/115
Page 31
from least developed countries were removed.  The Government has initiated a review of post-2005
tariffs and decisions are expected to be taken by mid 2003.19
Table III.1
Structure of MFN tariffs in New Zealand(Per cent)
1996a2002a2002bU.Ra,c
1. Bound tariff lines (% of all tariff lines) 99.7 .. .. 99.7
2. Duty-free tariff lines (% of all tariff lines) 49.9 54.8 54.8 39.1
3. Non- ad valorem  tariffs (% of all tariff lines) 3.4 3.1 3.1 3.4
4. Tariff quotas (% of all tariff lines) 0.0 0.0 0.0 0.0
5. Non- ad valorem  tariffs with no AVEs (% of all tariff lines) 3.4 0.8 0.8 3.4
6. Simple average bound rate .. .. .. 11.6
Agricultural products (HS01-24) .. .. .. 7.1
Industrial products (HS25-97) .. .. .. 12.3
WTO agricultural products .. .. .. 7.3
WTO non-agricultural products .. .. .. 12.2
Textiles and clothing .. .. .. 19.4
7. "Nuisance" bound rates (% of all tariff lines)d.. .. .. 0.1
Table III.1 (cont'd)
                                                     
19 According to the authorities, the review will include traditional issues such as export competitiveness
and consumer welfare but also equity issues affecting Maori, women, Pacific Island peoples, and other regions.(0.8%)(7.0%)
(1.7%)(27.8%)(54.8%)
(6.8%)
(0.2%)
05001,0001,5002,0002,5003,0003,5004,0004,500
Duty free >0- 5 >5-10 >10-15 >15-20 >20-25 >250102030405060708090100Chart III.1
Frequency distribution of MFN tariff rates, 2002
Number of tariff lines Per cent
Cumulative per cent
Number of lines (% of total)
Including AVEs, as available, provided by the authorities of New Zealand.   Total does not add up to 100% as for 
0.8% (representing 58 lines) no tariff rate is available.
WTO Secretariat calculations, based on data provided by the authorities of New Zealand.Note:
Source :WT/TPR/S/115 Trade Policy Review
Page 32
1996a2002a2002bU.Ra,c
8. Simple average applied rate 7.1 3.7 4.1 ..
Agricultural products (HS01-24) 4.4 2.1 2.1 ..
Industrial products (HS25-97) 7.6 4.0 4.4 ..
WTO agricultural products 4.5 2.1 2.1 ..
WTO non-agricultural products 7.5 3.9 4.4 ..
Textiles and clothing 13.9 7.9 9.5 ..
9. Domestic tariff "spikes" (% of all tariff lines)e6.3 7.2 9.4 ..
10. International tariff "spikes" (% of all tariff lines)f9.1 5.4 8.0 ..
11. Overall standard deviation (SD) of tariff rates 8.8 5.1 5.9 ..
12. "Nuisance" applied rates (% of all tariff lines)dn.a. n.a. n.a. ..
.. Not available.
n.a. Not applicable.
a Excluding AVEs, but including the ad valorem  part of alternate and compound rates.
b Including AVEs provided by the authorities of New Zealand.
c Final bound calculations are based on the 1996 tariff schedule.
d "Nuisance" rates are those greater than zero, but less than or equal to 2%.e Domestic tariff spikes are defined as those exceeding three times the overall simple applied rate (indicator 8).
f International tariff spikes are defined as those exceeding 15%.
Note: 1996 tariff is based on 8-digit HS96 nomenclature;  2002 tariff is based on 8-digit HS02 nomenclature.
Source: WTO Secretariat calculations, based on data provided by the authorities of New Zealand.
20. Although the overall average is relatively low and almost 55% of tariff lines are not subject to
import duty, tariff peaks in some sectors remain a potential source of distortion.  In particular, whileagriculture faces relatively low tariff rates (2.1%, under the WTO definition of agriculture), average
rates for textiles and clothing (9.5%) are significantly higher.  The percentage of the tariff exceeding
15% is 8%, suggesting a significant degree of deviation from the overall average of 4.1%;  the
percentage of the tariff that is subject to domestic tariff peaks (exceeding three times the overall
simple applied rate) is higher, at 9.4%.  A comparison of these indicators with the tariff in 1996
suggests that such domestic tariff peaks have increased.
20
21. The tariff also shows a tendency to escalation, with the average for unprocessed,
semi-processed, and fully processed goods rising from 0.6% to 2.2% and 5.6%.  In particular, the
textiles and clothing sector shows significant tariff escalation, although the degree of escalation has
declined since 1996 (Chart III.2):  the average tariff for fully processed textiles and clothing and
leather products has declined from 22.4% but remains high at 14.8%;  the tariff for semi-processed
products has fallen from 4.7% to 2.8% during this period.  Not only is tariff escalation a potentialimpediment to the efficient allocation of resources in New Zealand, it also constitutes an obstacle to
local processing of domestically produced primary products, and of semi-finished goods in exporting
countries, thereby impeding the industrialization of developing countries seeking to export to
New Zealand.
(d) Tariff preferences
22. New Zealand has three bilateral trade agreements (with Australia, Canada, and Singapore)
under which it grants preferential rates of customs duty;  unilateral tariff preferences are also provided
for countries from the Forum Islands (SPARTECA) and to developing and least developed countries
(Generalized System of Preferences).
                                                     
20 Even when AVEs for the 2002 tariff were excluded (more comparable to the tariff in 1996, for which
AVEs were not available), this indicator is higher (7.2%) in 2002 than in 1996 (6.3%) (Table III.1).New Zealand WT/TPR/S/115
Page 33
0510152025
Food,
beverages &
tobaccoTextiles &
leatherWood &
furniturePaper,
printing &
publishingChemicals Non-
metallic
mineral
products Basic metal Fabricated
metal prod.
&
machineryOther All industryChart III.2
Tariff escalation by 2-digit ISIC industry, 1996 and 2002
Not applicable.
For 1996 calculations exclude specific duties and include the ad valorem  component of compound rates;  
for 1st stage of processing of textiles and leather the only rates above zero were specific duties.For 2002 calculations include AVEs provided by the authorities, as available.WTO Secretariat calculations
, based on data provided b y the authorities of New Zealand.0510152025
Food,
beverages &
tobaccoTextiles &
leatherWood &
furniturePaper,
printing &
publishingChemicals Non-
metallic
mineral
products Basic metal Fabricated
metal prod.
&
machineryOther All industryAverage applied rate in manufacturing
(7.5%)
n.a.
Note:
Source :Per cent
First sta ge of processin g Fully processed Semi-processedPer cent
2002
Average applied rate in manufacturing
(4.3%)1996
n.a.n.a.WT/TPR/S/115 Trade Policy Review
Page 34
23. Customs duty under the bilateral agreements with Australia and with Singapore is zero.  In
addition, New Zealand has removed all tariffs on products originating in the Forum Island countries,
(under SPARTECA) and, as of 1 July 2001, from least developed countries.  Tariff preferences are
also maintained for goods imported from Canada and, for a few products, mainly motor vehicles,
from the United Kingdom;  as a result, the overall average tariff in 2002 was 1.28% and 4.08% for
goods imported from Canada and the United Kingdom, respectively.  Developing countries receiveunilateral preferences under the GSP;  as a result they face an overall average tariff of 3.51%, which,
although lower than the MFN rate, is still higher than that offered under most of New Zealand's
bilateral agreements.  This raises a concern frequently expressed by developing countries about the
erosion of their market access through the proliferation of preferential agreements.  In this case,
developing country rates are significantly higher than rates offered under bilateral agreements, withthe exception of relatively few preferences offered to the United Kingdom.  The gradual decline in
MFN tariff rates also raises similar questions about the erosion of preferential market access for
developing countries and for all parties to preferential agreements in general.
(e) Tariff concessions
24. Tariff concessions are granted to importers under Section 8 of the Tariff Act 1988.  The Act is
administered by the Ministry of Economic Development, although enforcement at the border has been
delegated to New Zealand Customs.  Tariff concessions are granted for various reasons, including for
humanitarian work, for customs facilitation, trade policy, and industry assistance purposes.  During
the period July 2001 to June 2002 some 20% of merchandise imports, by value, entered under tariff
concessions.
21
25. There are currently 14 concession references;  the most common relate to those notified under
Concession Reference 99 for imports of goods for which no suitable domestically producedalternative product exists.  Reference 99 concessions may be granted for various reasons.  In addition
to the general concessions for products not produced in New Zealand, these include:  for inputs to
manufacturing and shortfalls in manufacturing inputs;  for woven fabrics containing wool;  for
low-value apparel and parts of apparel that are subjec t to alternative specific tariffs;  and for capital
equipment for use in the manufacture of apparel.  With the exception of general concessions, the rest
are granted for a limited period and, in some cases, such as those of a shortfall, may be restricted in
quantity.  Over the years the approach to granting concessions has changed so that in certain
circumstances, concessions may be granted even if there is "suitable alternative" New Zealand
production.
22  A recent example of this is capital g oods, where the equivalent imported machinery is
more efficient.  Reference 99 concessions are administered directly by the Ministry ofCommerce/Economic Development due to their impact on tariff policy;  importers may apply for
concessions with the Ministry.  Approximately 550 Reference 99 concessions are approved by the
Ministry of Economic Development each year.  All decisions taken by the Minister are notified in the
New Zealand Gazette  and updated every two months.  Concessions become effective from the
first day of the month in which the application is received by the Ministry.
26. Tariff remissions are also granted for exports under the drawback, temporary import, and
export warehousing schemes (section (3)(iv) below).
                                                     
21 Data based on value for duty, provided by the authorities.
22 Suitable alternative goods are defined as those which perform the same or similar function as the
imported good and which would compete directly with the imported good (Ministry of Economic Development,1998).New Zealand WT/TPR/S/115
Page 35
(f) Tariff quotas
27. New Zealand maintains tariff rate quotas for apples, pears, and hop cones, but allows all
imports at in-quota rates, as the MFN tariff for these products is zero.23
(iv) Rules of origin
28. New Zealand has preferential rules of origin under its three bilateral agreements.  With the
exception of the most recent agreement, with Singapor e, to qualify for preferential treatment at least
50% of value addition is required to take place either in the country of origin or in New Zealand, and
the last manufacturing process is required to have taken place in the country claiming the preference.
For the agreement with Singapore the threshold was reduced to 40% of value addition to take place in
Singapore.
29. Unilateral preferences are also granted to the Forum Island countries under SPARTECA and
to developing and least developed countries under the Generalized System of Preferences.  Like the
ANZCERTA, the rules of origin require that at least 50% of value addition takes place in
New Zealand or the exporting country and that the last stage of processing takes place in the exporting
country;  a 45% derogation applies for apparel imported under SPARTECA.  As of July 2001,
cumulation is not permitted between categories of countries (such as between developed and leastdeveloped countries), but is permitted within categories;  no distinction is made between WTO
Members and non-members.
30. New Zealand does not maintain formal rules of origin for non-preferential purposes.
(v) Other taxes
31. In addition to customs duty, imports, like domestic products, are subject to a 12.5%
value-added goods and services tax (GST), which is levied on most goods and services
(section (4)(ii)(b)).
(vi) Import prohibitions, restrictions, and licensing
32. New Zealand abolished all import licensing requirements in 1992;  a licensing system is,
however, operated under the Ozone Layer Protection Act 1996.  A number of imports are prohibited
or restricted for health and safety reasons or in compliance with international conventions to which
New Zealand is party.
(vii) Contingency measures
(a) Anti-dumping and countervailing measures
33. There have been minor changes to New Zealand's legislation on anti-dumping and
countervailing measures during the period under review, resulting from its bilateral agreement with
Singapore.24  Anti-dumping and countervailing procedures are determined under the Dumping and
Countervailing Duties Act, 1988, the Dumping and Countervailing Duties Amendment Act 1990, and
the Dumping and Countervailing Duties Amendment Act, 1994.  Final determinations of dumping or
unfair subsidization, according to the legislation, would be taken within 180 days of initiation of an
                                                     
23 WTO document G/AG/N/NZL/1/Add.1, 21 June 2001.
24 The closer economic partnership agreement (CEP) with Singapore amended the Dumping and
Countervailing Duties Act Sections 3BA, 11(2) and 14(9).WT/TPR/S/115 Trade Policy Review
Page 36
investigation.  No measures may remain in force beyond a period of five years from imposition of
duty or undertaking, unless a review is initiated.  An y review must be initiated before the expiry date
of the original duty.  The procedures for a review are the same as those for initial investigations.
34. Under Article 4 of the ANZCE RTA Protocol signed by Ne w Zealand and Australia, on
acceleration of free trade in goods, as of 1 July 1990 anti-dumping actions may not be taken on goodscovered by the agreement.  Instead, the treaty extended each country's competition law prohibitions
on the misuse of market power to each other's markets.  Article 15.8 of the ANZCERTA, moreover,
allows one member state to request the other to take action, consistent with its international
obligations, against alleged dumping by a third country.  Countervailing measures may be taken by
either member state, but in accordance with the relevant provisions of the GATT.
35. Since 1995, New Zealand has initiated 37 anti-dumping investigations;  in the majority of
these cases (65% or 24 cases), the investigation was terminated with no final measures being taken
(Chart III.3).
25  Most of the investigations concern articles of machinery and mechanical appliances
and electrical equipment (32%), followed by bu ilding products, glass and glassware (24%).  Most
investigations were initiated on products imported from neighbouring countries, including
Thailand (18.9%), Korea and Indonesia (13.5% each);  imports from the European Union (16.2%)
have also been the subject of frequent anti-dumping investigations.
36. New Zealand, initiated six countervailing investigations between 1995 and 1997, of which
final measures were taken in four cases;  all relate to prepared foods.  The measures were taken onproducts originating in Italy, South Africa, and the European Union.
26
(b) Safeguards
37. There have been no changes to New Zealand's legislation on safeguards, the Temporary
Safeguards Authority Act, 1987, amended in 1994.
38. Since 1996, New Zealand has held consultations in the WTO with Korea, Chile27, and the
United States on safeguard measures taken by thes e Members.  New Zealand requested consultations
with Korea on its measures applied to certain dairy products;  Korea informed the Committee on
Safeguards in March 1997 that no mutually satisfactory solution could be reached through
consultations.28  Consultations held on safeguard measures imposed by the United States on imports
of certain steel products led to the notification that the 90-day period,  set forth in Article 8.2 of the
Agreement on Safeguards and Article XIX:3(a) of the GATT 1994, shall be considered to expire on
20 March 2005.29
                                                     
25 These data are from the Database maintained by the WTO's Rules Division, which is based on
notifications by Members to the WTO.
26 Database maintained by the WTO's Rules Division.
27 WTO document G/SG/24/Suppl. 4, 20 October 2000.
28 WTO document G/L/156, 18 March 1997.
29 WTO document G/C/13, 17 May 2002.  Article 8.2 of the Agreement on Safeguards allows a
Member to suspend the application of substantially equivalent concessions or other obligations underGATT 1994, to the trade of the Member applying the safeguard measure, not later than 90 days after themeasure is applied subject to approval of the Council on Goods (Article 8.2, WTO Agreement on Safeguards).New Zealand WT/TPR/S/115
Page 37
0246810
1995 1996 1997 1998 1999 2000 2001 2002
Source :  Notifications to the WTO.Canada  2.7
Saudi Arabia  2.7United States 2.7
 EU15
16.2
 Switzerland  2.7
China
10.8Other
13.5
Chemicals & prod. 
thereof
10.8(b) Initiations by product 
Per cent(c) Initiations by origin 
Per centChart III.3
Anti-dumping cases, 1 January 1996 - 20 December 2002
(a) By number of cases initiated
Final measures No final measures
South Africa 
8.1Pending cases
Articles of stones, etc.; 
glass & glassware
24.3Machinery & mechanical appliances;  
electrical equipment
32.4
Textiles &
 articles thereof
5.4
Chinese Taipei  
5.4Korea, Rep. of
13.5
Indonesia
13.5Philippines  2.7Thailand
18.9
Prepared food, etc.
        8.1Base metals
& articles thereof
5.4WT/TPR/S/115 Trade Policy Review
Page 38
39. Under the ANZCERTA, no safeguard measures have been permitted for goods covered by the
agreement since 1990.30  However, under Article 17, either member may initiate consultations, only in
the case of goods, if there is severe material injury caused or a demonstrable threat thereof.31
According to the authorities, no consultations have been held under this article since 1990.
(viii) Standards and conformity assessment
40. New Zealand's primary standards body is Standa rds New Zealand, a crown-owned entity.  It
is the trading arm of the Standards Council and operates under the Standards Act, 1988.32  Standards
New Zealand accepted the Code of Good Practice for the Preparation, Adoption and Application of
Standards under Annex 3 of the WTO Agreement on Technical Barriers to Trade in June 199533, and
is the enquiry point under the Agreement.34  Standards New Zealand also represents New Zealand in
other international standardization bodies including the International Organization for Standardization
(ISO), the International Electrotechnical Commi ssion (IEC) and the Pacific Area Standards Congress
(PASC).35
41. New Zealand cooperates actively with Australia under the Trans-Tasman Mutual Recognition
Arrangement (TTMRA), concluded in July 1996 and in force since 1 May 1998.  Under the
Arrangement, a good that may be sold legally in Australia may be sold in New Zealand withouthaving to meet the New Zealand standard, and vice versa.
36  In respect of occupations, a person
registered to practice an occupation in Australia is entitled to an equivalent occupation in
New Zealand, and vice versa.37
42. New Zealand has mutual recognition agreements with other countries and regions.  The
Agreement between New Zealand and the European Community for Mutual Recognition of
Conformity Assessment (NZ/EU  MRA) for CE Marking came into effect on 1 January 1999 and
currently covers seven product sectors:  medicinal products GMP inspection and batch certification;medicinal devices;  telecommunications terminal equipment;  low voltage equipment;
electromagnetic compatibility;  machinery; and pressure equipment.  In addition, the New Zealand
Singapore Agreement on a Closer Economic Partne rship, provides a broad framework for addressing
technical barriers to trade including harmonizing standards and technical requirements with
international standards, and recognition of confor mity assessment systems.  Within the framework of
this Agreement, mutual recognition of conformity assessment has been agreed in electrical and
electronic equipment.
38  New Zealand also participates in the APEC Sub-Committee on Standards and
Conformance, which has already established regional MRAs covering electrical and electronic
equipment and food products, while an APEC MRA on telecommunications is currently being
negotiated.
                                                     
30 Article 17 of the ANZCERTA allowed the temporary use of safeguards during a transitional period,
which ended in 1990.
31 WTO document WT/REG111/R/B/2, 13 May 2002.
32 Standards New Zealand funds its own activities, including through contracts with industry and the
government for the development and support of services, and through the sales of standards publications(Standards New Zealand, About us  [Online].  Available at:  http://www.standards.co.nz/about/body.htm
[26 June 2002]).
33 WTO document G/TBT/CS/2/Rev.8, 13 February 2002.
34 WTO document G/TBT/ENQ/20, 13 March 2002.
35 WTO document G/TBT/2/Add.24, 11 October 1996.
36 There are some permanent and special exemptions to the TTMRA.
37 The only occupation category exempt from this is medical practitioners.
38 Ministry of Economic Development (2001a).New Zealand WT/TPR/S/115
Page 39
43. Preparation of a New Zealand or joint Australia/New Zealand standard takes between
six months to two years, depending on the nature of the standard and the issues involved, to obtain a
consensus.  The process is based on review of draft standards through a Standards Committee,
followed by a six to eight week period of public comment.  There are currently 47 New Zealand
Committees and 132 Joint Australian/New Zealand Committees actively developing or revising
standards.  The New Zealand Standards Council appoints New Zealand's Committee members. Informing a Committee, the key considerations are that it should be representative and balanced to
ensure that interests are adequately represented.  If a standard cited in an Act or Regulation is to be
reviewed, or when a new standard is likely to be cited, the relevant Government agency/ies is/are
represented on the Committee.
39  As of end 2002, there were 1,319 New Zealand representatives on
New Zealand Committees and 1,747 on Joint Australian/New Zealand Committees andsub-committees.  Standards New Zealand also has membership of 130 ISO and 117 IEC Committees.
After incorporation of any relevant comments, the draft standard must be approved by the
New Zealand Standards Council.  The approved standard must then be notified through the Standards
Update Magazine  maintained by Standards New Zealand and on its website.
40  The time taken to
adopt an overseas or international standard is much shorter, between two and three months.
44. Most standards in New Zealand are voluntary;  mandatory standards are those stated in laws
or regulations as formal requirements or approved practice.  The authorities do not maintain data on
mandatory standards but indicated that they are a very few number (Table III.2).  Standards
New Zealand also issues joint Australian/New Zealand (AS/NZS) Standards for use in both countries;
the standards are developed jointly with Stan dards Australia International under a cooperation
agreement.  There are currently 2,561 New Zealand standards in use, of which 1,956 are joint
AS/NZS standards.41  The percentage that are equivalent to international standards has remained
relatively stable since 1996, ranging from 29% to 35%, although according to the authorities, the
current trend is towards adopting international standards, where possible.
Table III.2
New Zealand standards, 1996-02
1996 1997 1998 1999 2000 2001 2002
Total number of standardsa2,149 2,365 2,386 2,301 2,445 2,492 2,561
Per cent developed by New Zealand 20 18 18 17 16 15 15
Per cent developed jointly by Australia and
New Zealand41 48 60 70 73 74 76
Per cent of total equivalent to ISO standards .. .. .. .. .. 19 ..
Per cent of total equivalent to IEC standards .. .. .. .. .. 12 ..
Per cent of total equivalent to ISO and/or IEC 29 30 29 31 33 31.2 35
Per cent for which no internationally equivalent
standards available71 70 71 69 67 69 65
.. Not available.
a According to the authorities, although they do not keep statistics on the percentage of standards that are mandatory, this wou ld be
very low.
Source: Data provided by Standards New Zealand.
                                                     
39 For joint Australia/New Zealand Committees, the representation from each country needs to be
balanced, as does the total representation of the Joint Committee.
40 Standards New Zealand, New Zealand or Joint AS/NZS Standard  [Online].  Available at:
http://www.standards.co.nz [26 June 2002].
41 Ministry of Economic Development (2001b).WT/TPR/S/115 Trade Policy Review
Page 40
45. Since its previous Review, New Zealand has made some changes to the conformity
assessment infrastructure under the Testing Laboratory Registration Council, which was established
by an Act of Parliament in 1972.  Until 1997, the Council provided conformity assessment services
through a statutory body, Telarc New Zealand, whic h reported to the Minister of Commerce.  In
July 1997, the functions of the Council were split into International Accreditation New Zealand
(IANZ) and Telarc Limited.42  IANZ is a non-profit crown-owned entity operating under the Public
Finance Act and ISO/IEC Guide 58:199343;  it provides accreditation of technical professional
services.  Telarc Limited, a wholly owned subsidiary of the Council, established by an Act of
Parliament, provides quality management and environmental management systems certification, and
assessment services.  All mutual recognition agreements signed between New Zealand and its trading
partners are also the responsibility of the IANZ.
46. In addition to the Testing Laboratory Registration Council (through IANZ), the Joint
Accreditation System of Australia and New Zealand (JAS-ANZ) provides accreditation for, inter alia,
inspection bodies, bodies that certify management systems or auditor training courses or personnel,
and bodies that licence products.44  The JAS-ANZ was established as a result of a formal treaty
between the two Governments signed in October 1991.
47. The Measurements Standards Laboratory of New Zealand provides for the use of uniform
units of measurement throughout New Zealand.  The Trading Standards Service of the Ministry of
Consumer Affairs has responsibility for ensuring th at goods are exchanged on the basis of recognized,
informed, and accurate weights or measures.  New Zealand also works with international and regional
groups such as the International Organization of Legal Metrology, the Asia Pacific Legal Metrology
Forum, the Bureau International des Poids et Mesures (BIPM), and with Australia and the ASEAN
Free-Trade Area (AFTA) to harmonize measurement standards in the region.
(ix) Sanitary and phytosanitary measures
48. New Zealand's sanitary and phytosanitary measures are based primarily on the Biosecurity
Act, 1993, the Animal Products Act 1999, the Agricultural Compound and Veterinary Medicines Act
1997, the Diary Industry Amendment Act 2001, the Food Act, and the Food Amendment Act 2002.
New Zealand's approach to the development of SPS standards is based on the use of risk analysisconsistent with international standards.  The authorities are of the view that the pursuit of a "zero risk"
policy is not realistic and could be counterproductive, both globally and domestically.
45  Nevertheless,
the policy has led to an effective ban on imports of several products including most unpasteurized
dairy products, eggs, and chicken meat.46  In the WTO, New Zealand has also been criticized on its
SPS requirements by some of its trading partners, with regard to the import of dairy products.47  As a
                                                     
42 The split was necessary, in part, due to concerns expressed by regulators in New Zealand about a
possible conflict of interest in the accreditation of technical competence activities for regulatory purposes as aresult of one institution performing both accreditation of te sting and inspection facilities as well as certification
of management systems (Testing Laboratory Registration Council online information.  Available at:
http://www.ianz.govt.nz/ianz/council/council.htm [26 June 2002]).
43 ISO/IEC Guide 58:  1993, Calibration and Testing Laboratory Accreditation Systems – General
Requirements for Operation and Recognition (International Accreditation New Zealand, undated).
44 Ministry of Economic Development (2001c).
45 WTO document G/SPS/W/20, 22 June 1995.
46 As a result of a risk analysis done by the Australia–New Zealand Food Authority (now the Food
Safety Authority of Australia and New Zealand), Standard 2.5.4 of the Joint Australia New Zealand Food
Standards Code permits imports of some non-pasteurized cheeses (Gruyere, Sbinz, and Emmental) fromSwitzerland.  New Zealand does not import fresh eggs or poultry.
47 New Zealand (along with Australia) under its Food Regulation 1984, requires that cheese be
pasteurized or thermized as a measure to mitigate the human health risks that may arise from the presence ofNew Zealand WT/TPR/S/115
Page 41
mainly agricultural country, however, heavily dependent on exports of agricultural commodities and
agri-food products, which receive relatively little government support (section (4)(iii)(b) and
Chapter IV) and are sold at world market prices,48 the authorities believe that such measures are
necessary to ensure that New Zealand's reputation as a reliable exporter of high quality agricultural
products is not jeopardized by pests and diseases, and also that its unique biodiversity is protected. 49
Moreover, the authorities state that on receipt of a request from an exporting country, the Ministry of
Agriculture and Forestry works with that country on a bilateral basis to establish a country- and
commodity-specific import health standard that mitigates the risk associated with poultry meat of
importing exotic strains of infections bursal dise ase (IBD).  National treatment is accorded, with
domestically produced goods facing the same health standards.
49. The process of developing SPS measures remains unchanged since New Zealand's previous
Review.  The relevant agency determines the acceptable level of protection in relation to a product
proposed for importation, followed by the development of SPS standards that take into account
international obligations, standards, and guidel ines.  A period of consultation with concerned
domestic and foreign parties follows, after which the required SPS standard is published.  Compliance
checks are carried out at the border upon entry into New Zealand followed, if necessary, by a periodof post-entry quarantine.
50
50. At the time of its previous Review, New Zealand's Regulatory Framework consisted of
three implementing agencies:  the Ministries of Agriculture, Health, and Forestry.51  There have been
three main changes since then.  On 1 March 1998, the Ministries of Agriculture and of Forestry were
merged to become the Ministry of Agriculture and Forestry (MAF);  on 1 July 1999 the MAF
Regulatory Authority, which administers legislation, was split into MAF Biosecurity and MAF Food;
and finally, on 1 July 2002, MAF Food (which administered, inter alia , the Animal Products Act,
Meat Act, Agricultural Compounds and Veterinary Medicines Act) and the food-related functions of
the Ministry of Health (which administered th e Food Act covering domestically sold food) were
brought together under the New Zealand Food Safety Authority (NZFSA).  The NZFSA, a
semi-autonomous body attached to the MAF, administers legislation covering food sold domestically,
primary processing of animal products and their export, exports of plant products, and the use of
agricultural compounds and veterinary medicines.  The NZFSA also controls imports and exports of
food and food-related products.
51. At present the main implementing agency of New Zealand's SPS measures is the Biosecurity
Authority in the Ministry of Agriculture and Forestry (MAF Biosecurity), formed in 1999;  other
agencies involved in biosecurity issues are the Biosecurity Council, the Ministries of Health andFisheries, and the Department of Conservation.
52  One of MAF Biosecurity's principal functions is to
                                                                                                                                                                    
pathogens in raw milk products (WTO document G/SPS/R/11, 17 August 1998);  raw milk may be used for
specified types of cheese manufactured in Switzerland.  Other WTO Members have argued, however, thatpasteurization often contradicted production methods used  for certain cheeses and considered that respect of
good hygienic practices provided equivalent guarantees to those sought by the restriction (WTO document
G/SPS/R/13, 15 January 1999).  The authorities note that a mandatory New Zealand standard for the processing
of milk and milk products is planned.
48 In New Zealand, 99% of gross farm receipts ar e generated at world prices without support (OECD,
2002b, p. 23).
49 MAF Biosecurity (undated).
50 Based on WTO document G/SPS/W/3, 5 April 1995.
51 WTO document G/SPS/W/3, 5 April 1995.
52 The Biosecurity Council provides a forum for the discussion of broad, biosecurity policy issues
among the agencies responsible.  It has an independent chair and includes chief executives of the variousgovernment departments.  MAF online information.  Available at:  http://www.maf.govt.nz/biocouncil/biomain.htm [7 February 2003].  According to the authorities, the Ministry of Agriculture and Forestry isWT/TPR/S/115 Trade Policy Review
Page 42
protect New Zealand's biosecurity and biodiversity by ensuring the "effective management of risks
associated with the importation or introduction of risk goods".53  In developing import health
standards, MAF Biosecurity is obliged under the Act to base its decisions and recommendations on a
scientific risk analysis that considers, inter alia,  the likelihood that the good concerned may introduce
organisms in New Zealand;  its effect on people, the environment, and the economy;  and
New Zealand's international obligations.54  These guidelines have been in use by MAF Biosecurity
since February 2001.55
52. The Government is currently developing a Biosecurity strategy for New Zealand;  its aim will
be to reach agreement on priority areas for biosecurity activities and to provide direction for all
agencies involved in biosecurity.56
53. The agreement between New Zealand and Australia, Establishing a System for the
Development of Joint Food Standards, signed in December 1995, established Food Safety Australia
New Zealand (FSANZ) (known until 2002 as the Aust ralia New Zealand Food Standards Authority).
FSANZ, an independent statutory authority, sets f ood standards (primarily composition and labelling)
for Australia and New Zealand.  As of 20 December 2002, under the joint Australia New Zealand
Food Standards Code57, all food businesses and manufacturers are required to label their products in
accordance with the standards in the joint Code.  Major labelling changes include the introduction of
compulsory nutrition information panels for most packaged food, percentages characterizing
ingredients, and the declaration of the major food allergens.  FSANZ will also be responsible for the
development of food standards in the two countries although overall policy guidelines are to be
developed by a new Australia and New Zealand Food Regulation Ministerial Council based on advice
from a Food Regulation Standing Committee comprising senior government officials from
New Zealand and Australia.58
(x) Government procurement
(a) Introduction
54. Following a review of its procurement policy  in April 2001, the Government endorsed the
following principles:  best value for money;  open and effective competition;  full and fair opportunity
for domestic suppliers;  improving business capacities including e-commerce capability;  andrecognition of New Zealand's bilateral obligations to Australia and Singapore, and New Zealand's
trade policy interests in open and transparent government procurement markets.  New Zealand has
                                                                                                                                                                    
responsible for approximately 95% of the Government's biosecurity activities (WTO document
G/SPS/GEN/233, 2 March 2001).
53 Part III(16) of the Biosecurity Act 1993.  Risk goods are defined in section 2 of the Act as "any
organism, organic material or other thing or substance that (by reason of its nature, origin or other relevantfactors) it is reasonable to suspect constitutes, harbours or contains an organism that may: cause unwanted harm
to natural and physical resources or human health in New Zealand;  or interfere with the diagnosis, management
or treatment, in New Zealand, of pests or unwanted organisms.
54 Section 22 of the Biosecurity Act, 1993.
55 WTO document G/SPS/R/21, 22 May 2001.
56 A public consultation due to be completed by December 2001 aimed, inter alia, to inform
stakeholders about the strategy development process;  identify all relevant issues;  generate approaches todealing with issues identified;  and invite stakeholders to contribute to the development of the strategy.  The
final biosecurity strategy is expected to be launched in December 2002 and implemented during 2003
(WTO document G/SPS/GEN/284, 5 October 2001).
57 The joint Australia New Zealand Food Standards Code replaced New Zealand's Food Regulations
1984 (under the Food Act 1981) and Australia's Food Standards Code.
58 Food Standards Australia and New Zealand (undated).New Zealand WT/TPR/S/115
Page 43
also endorsed the APEC Non-Binding Principles on Government Procurement.59  In this regard,
public sector entities are expected to act like private companies in their purchasing decisions.
Although there is no centralized purchasing agency in the New Zealand Government, all purchasing
decisions taken by government agencies are subject to guidelines issued by the Ministry of Economic
Development.  New Zealand does not gather procurement data on a regular basis due to the
decentralized nature of purchasing, and because this is not considered a priority.60  However, in a
survey of 40 central government departments carried out in September 2000, it was determined that
annual spending was some $NZ1.9 billion during 1999/00 with an additional $NZ3.5 billion spent by
Crown entities (excluding state-owned enterprises) (a total expenditure of around 5% of GDP).
According to the OECD, procurement by the Government in 1998 was around 7.3% of GDP.61
55. New Zealand is not a member of the WTO's plurilateral agreement on Government
Procurement (GPA).  It believes that the liberalizing effect of the GPA is limited by its small
membership, value thresholds, and bilaterally negotiated exclusions of purchasing entities or industry
sectors.62  By contrast, procurement in New Zealand is deregulated and decentralized and joining the
GPA, New Zealand argues, would involve increased ad ministrative and transaction costs by requiring
re-regulation of the procurement regime, which it considers to be already open and non-discriminatory.  This position is being kept under review in light of procurement and trade policy
developments.  Nonetheless, New Zealand does participate in the Working Group on Transparency in
Government Procurement and in the Working Party on GATS Rules on the issue of government
procurement in services.
56. Under the Australia–New Zealand Government Procurement Agreement (ANZGPA), revised
in 1997, a single government procurement market is maintained for both countries;  a five-yearly
review of the Agreement is being carried out and is expected to result in renewal with only minor
changes for clarification.  The Agreement is administered by the Australian Procurement and
Construction Council (APCC), in which New Zealand has full participation rights.
63
(b) Procedures
57. Procurement is usually carried out either by an open call for tender or by selective (closed)
tender following an open call for registration of in tent.  In determining procedures to be followed,
agencies are required to be guided by the procurement policy framework set out above and by the
Auditor General's good practice guide.64  Government agencies usually have discretion to publish
their purchasing requirements through any channels  thought to be appropriate, such as commercial
print media or electronically;  they must also advertise on the Government Electronic Tenders Service
(GETS) to New Zealand and Australian industry.  It would appear that a large proportion ofpurchasing is carried out through open tenders, although no data are available on the exact proportion.
However, in some cases, where large and complex purchases are involved, agencies may prefer to
                                                     
59 Transparency, value for money, open and effective competition, fair dealing, accountability and due
process, and non-discrimination.
60 The recently established "Go Procure" system, an online transaction hub, which will host supplier
catalogues and enable electronic buying transactions, is  expected to improve information on procurement
activities and, according to the authorities, facilitate inter-agency collaboration in more strategic approaches toprocurement (Media statement of Minister of State Services, "Government e-procurement gets go-ahead",[Online].  Available at:  http://www.e-government.govt.nz/news/ 2002110601.asp).
61 OECD (2001).
62 Ministry of Economic Development (2002a).
63 Australia New Zealand Government Procurement Agreement (Revised 1997).  Available online at:
http://www.finance.gov.au/ctc/publications [25 June 2002].
64 Office of the Auditor General (2001).WT/TPR/S/115 Trade Policy Review
Page 44
issue tenders selectively to certain companies or identify potential suppliers through a staged process.
In New Zealand's devolved regime, procurement management procedures, including any thresholds
are a matter of autonomous decision by individual agencies.  Value thresholds would therefore vary
from agency to agency, but should be consistent with the general procurement policy principles and
good business practice.
58. More routine supplies may be purchased through regular contracts with an established list of
suppliers.  The list is established through registration of interest;  according to the authorities, many
agencies find it cost effective to purchase under period supply contracts of standing offers arranged
with suppliers by commercial supply broking co mpanies.  The New Zealand Government has well
established historical relations with the formerly state-owned company GSB Supplycorp Ltd, now
privately owned;  Supplycorp establishes and main tains period supply contracts with many central and
local government agencies on an open tender basis.  Another company, Serco Supply initiates,
operates, and monitors local purchase contracts under a franchise agreement with Supplycorp.65
However, according to the authorities, "these comp anies operate in an open and fully contestable
government marketplace".
59. In an effort to enhance transparency, the Government issued post-award transparency
guidelines and rules for publication of contract award notices in October 2001.66  A s  o f
30 November 2001, all agencies are required to publish contract awards with a value above a
threshold of $NZ50,000 (excluding goods and service tax), via the Internet.
60. Under its bilateral agreements, New Zealand is committed not to discriminate between
suppliers of goods and services in New Zealand, Australia, and Singapore.67  However, the
New Zealand Industrial Supplies Office (NZISO), a unit within Industry New Zealand, facilitates
contacts between public-sector purchasers and loca l (New Zealand/Australian) suppliers;  it also
liaises with Australian State and Territory industrial supply offices to identify and exchange
information on procurement opportunities in Australia and New Zealand.  Purchasers are expected to
"give full consideration to the value for money advantages of sourcing from domestic production".68
To ensure that the NZISO has sufficient information to carry out its role, the Government hasinstructed departments and encourages other agencies to notify the NZISO of intended procurementsvalued at over $NZ50,000 (excluding goods and services tax).
69  The NZISO also operates the
Government Electronic Tenders Service (GETS), a centralized website for government tenders.70
Purchasers are expected to take "due consideration of potential commercial and practical advantagesin purchasing locally produced goods and services".  Government departments have therefore been
instructed to require information about origin and local content of goods offered so that theseadvantages may be taken into account.
71  Purchasers are also advised that having given consideration
to domestic suppliers, they should buy from the best source available, according to their judgement of
costs and benefits.
                                                     
65 Ministry of Commerce (1998).
66 Ministry of Commerce (2001).
67 For Singapore, a value threshold applies, currently $NZ134,500.
68 Ministry of Commerce (1998).  Value for money advantages may include better price and after sales
service;  shorter supply times;  reduced inventory costs and exchange rate risks (more details in Ministry of
Economic Development, 2002a).
69 Notification rules and guidelines [Online].  Available at:  http://www.med.govt.nz/irdev/gov_pur/
industrynz-notif.htm.
70 Industry New Zealand (undated).
71 Ministry of Commerce (1998).New Zealand WT/TPR/S/115
Page 45
(xi) Local content
61. New Zealand does not maintain any local-content requirements.  However, tariff concessions
may be granted to importers and manufacturers if they can demonstrate that the domestic content of
the locally produced "suitable alternative" product is not less than 25% of its ex-factory cost of
production (section (iii)(e) above).
(xii) State trading
62. New Zealand does not operate state-trading companies for imports (but does for some
exports) (section (3)(v)).
(3) MEASURES DIRECTLY AFFECTING EXPORTS
(i) Procedures
63. All exporters are required under Section 49 of the Customs and Excise Act 1996 to lodge an
export entry with the New Zealand Customs Service.  Export details may be lodged manually or
electronically, via the Internet or through electronic data interchange (EDI).  Information required
includes details about the exporter, description of th e goods, country of origin, f.o.b. value, as well as
the permit issuing authority, if relevant.  The time taken to process the export entry, according to the
authorities, ranges from a few minutes in the case of electronically lodged entries to up toone working day for manually lodged entries.
72
(ii) Export taxes and charges
64. New Zealand imposes commodity levies and some cost recovery charges on some exports.
(iii) Export prohibitions and restrictions
(a) Export prohibitions and restrictions
65. Export restrictions are maintained mainly for health and safety reasons, but also in the case of
some agricultural products, including kiwifruit,  dairy products, and horticultural products, for
marketing reasons.
(b) Price controls
66. New Zealand does not appear to have price cont rols on exports.  New Zealand's state-trading
companies have export monopolies in some cases, but according to New Zealand's notifications to the
WTO, they export at world prices.73
(iv) Duty and tax concessions
(a) Drawback and duty remissions
67. Drawback on duty paid on goods imported into New Zealand is available for exporters under
Section 117 of the Customs and Excise Act 1996.  Under the Act, drawback may be allowed for:
goods imported into New Zealand that are later exported;  goods manufactured and exported from
                                                     
72 New Zealand Customs Service (2002).
73 WTO document G/STR/N/7/NZL, 27 July 2001.WT/TPR/S/115 Trade Policy Review
Page 46
New Zealand;  imported parts and materials used for goods manufactured in New Zealand and
subsequently exported;  and imported materials, except fuel or plant equipment, used in the
manufacture of goods in New Zealand and exported.   Re-import of goods exported under drawback
provisions is permitted (subject to payment of appropriate customs duty), except for certain types of
motor vehicles.  Motor homes and camper vans may not be re-imported within 12 months from the
date of export.
68. Under Section 116 of the Act, goods imported temporarily into New Zealand may be waived
duty, if the Chief Executive of Customs is satisfied that the goods have been exported or shipped or
packed for export in a Customs Controlled Area, or destroyed within 12 months from the date of their
importation.  Duty remissions are also available for goods held in Customs controlled areas such as
export warehouses and duty-free shops.  Customs controlled areas must be licensed by New ZealandCustoms and are subject to audit and control by customs officials.
(b) Export subsidies
69. New Zealand does not subsidize exports.
(v) Export monopolies
70. State-trading enterprises (STEs) that have exclusive or special rights to export certain
agricultural products, such as dairy and horticultural products, continue to operate, although under
commercial terms.74  According to the authorities, although these STEs are export monopolies
established under statute, they trade as fully commercial entities and therefore conform fully to
Article XVII of the GATT 1994.75
71. Several changes in this area have been implemented since New Zealand's previous Review.
These include changing the status of some (including the Wool Board and the Meat Producers Board)
so that they are no longer considered to be STEs and converting others into private companies(Table III.3).  Recent legislative changes have converted the Apple and Pear Marketing Board, the
New Zealand Dairy Board, and the Kiwifruit Marketing Board into private companies;  the extent of
their monopoly over exports has also diminished.  The companies still, however, tend to export all (in
the case of dairy products and hops) or most of the products concerned;  there has been a gradual
increase in the percentage of exports carried out by non-STEs for apples and pears and kiwifruit since1998.
76
                                                     
74 WTO document G/STR/N/7/NZL, 27 July 2001.
75 WTO document G/STR/N/4/NZL, 5 May 1999.
76 For apples the percentage of total exports by the STE declined from 98.7% to 94.7% between 1998
and 2000;  the percentage for pears fell from 92.7% to 91.3% between 1998 and 1999, before rising again to94.6% in 2000.  According to the authorities, ENZA currently has approximately 60% of exports.  For kiwifruit,the percentage of total exports carried out by the STE declined from 99.7% to 94.9% between 1998 and 2000(calculated from WTO document G/STR/N/7/NZL, 27 July 2001).New Zealand WT/TPR/S/115
Page 47
Table III.3
State-trading enterprises, 1995 and 2002
Name of enterprise in 1995aStatus in 2002 Changes since 1996
Apple and Pear Marketing
BoardENZA Limited (not an STE) The Apple and Pear Industry Restructuring Act was enacted in
September 1999 and converted the New Zealand Apple and Pear
Marketing Board into a company on 1 April 2000.  Enza's shares
have been allocated to apple and pear growers, based on theirsupply of apples and pears to ENZA.  The Apple and Pear Export
Regulations 1999 gives Enza an automatic, although not sole,
right to export apples and pears.  In 2001, Enza's control on
exports of apples and pears was removed.
New Zealand Dairy Board Fonterra Cooperative Group (not
an STE)With the passage of the Dairy Industry Restructuring Act 2001,
the New Zealand Dairy Board was converted into a company andbecame a subsidiary of a private cooperative company, the
Fonterra Cooperative Group.  Exports of certain dairy products
subject to tariff quotas or other restrictions (including to Canada,the European Union, Japan and the United States) may only be
carried out by Fonterra;  quota allocations for these products are
to be made for a six to ten-year transitional period after which theGovernment is expected to put in a new mechanism to allocate
quotas.
Hop Marketing Board Unchanged A Bill to convert the Board into a company and to remove
controls on exports is currently in Parliament.
New Zealand Kiwifruit
Marketing BoardbZespri Limited With the enactment of the Kiwifruit Industry Restructuring Act
in September 1999, the Kiwifruit Marketing Board was
converted into a company, Zespri Group Limited on
1 April 2000;  shares in Zespri Group limited have been allocatedto kiwifruit growers, based on their supply of kiwifruit to Zespri.
The Kiwifruit Export Regulations 1999 provide Zespri with an
automatic, although not sole right to export kiwifruit.  A newnon-trading regulatory body, the New Zealand Kiwifruit Board
(Kiwifruit New Zealand), monitors and enforces Zespri's
compliance with the "mitigation measures" stated in theRegulations, for example restrictions on Zespri's ability to
diversify and discriminate between suppliers.  Kiwifruit New
Zealand also issues permits to other exporters to export kiwifruitcollaboratively with Zespri to markets other than to Australia;
kiwifruit exports to Australia are not regulated.
Raspberry Marketing Council Discontinued In 1999, the Raspberry Marketing Regulations establishing the
Raspberry Marketing Council were revoked and the Council'sstatutory powers to control the purchase and sale of raspberries
was discontinued.
New Zealand Wool Board Discontinued The Wool Board Act 1997, removed the New Zealand Wool
Board's powers to impose controls on wool exports.  the Boardcurrently collects a compulsory levy from wool growers to fund
activities that benefit the industry, such as research.  Following a
review of the industry, the Government has announced that itintends to introduce legislation to restructure the Wool Board,
with no ongoing specific legislative backing for wool industry
organizations.
New Zealand Meat ProducersBoardNo longer considered an STE by
New ZealandThe Meat Board Act 1997 removed the New Zealand Meat
Producers Board's powers to impose controls on meat exportsand changed its name to the New Zealand Meat Board.  The
Meat Board funds industry activities, such as research, from a
compulsory levy collected from meat producers.  The Board alsoallocates access to markets to which exports are restricted under
tariff quotas.
Table III.3 (cont'd)WT/TPR/S/115 Trade Policy Review
Page 48
Name of enterprise in 1995aStatus in 2002 Changes since 1996
New Zealand Game Industry
BoardNo longer considered STE by
New ZealandThe powers of the New Zealand Game Industry Board to licence
exporters were removed by the Animal Products (Ancillary and
Transitional Provisions) Act 1999.  The Board currently collectsa compulsory levy from producers to fund activities that benefit
the industry, such as research.
New Zealand Horticulture
Export AuthorityUnchanged
a As notified by New Zealand to the WTO (WTO document G/STR/N/1/NZL, 8 August 1995).
b Other than exports to Australia.
Source:  WTO documents (G/STR/N/1/NZL, 8 August 1995;  G/STR/N/4/NZL, 5 May 1999;  G/STR/N/6/NZL,
28 September 2000;  and G/STR/N/7/NZL, 27 July 2001);  Fonterra Cooperative Group online information.Available at:  http://fonterra.com [4 June 2002].
(vi) Export finance, insurance, and guarantees
72. In an apparent reversal of policy not to assist the private sector directly, the Government
established an Export Credit Scheme (The New Zealand Export Credit Office, or ECO) in
March 2001.77  The scheme, funded by the Government through an appropriation, was expected to
assist small and medium-sized enterprises to break into export markets.  It provides assistance for
insurance or guarantees to exporters, which ensures that they get paid and also enables them to offer
financing terms to their buyers.  The ECO works with  the banks to provide this financing to buyers of
New Zealand exports;  it does not provide financing directly.  The authorities state further that the
scheme must fully cover its costs.  Its pricing conforms to WTO and OECD guidelines, which meansthat exporters compete on price and products or services and not on the financing package.  Pricing in
this manner also ensures that the funding provided by the Government is fully recovered.  The scheme
was evaluated after one year and was refined to increase its use by exporters and financial institutions.
These changes, according to the authorities, will also make the ECO more comparable to other OECD
export credit agencies.  At this stage, the ECO has not provided support for any export transactions.
73. There are no other export finance assistance, insurance or guarantees provided by the
Government of New Zealand or any of its agencies.
(vii) Export promotion and marketing assistance
74. New Zealand's export promotion activities are carried out by Trade New Zealand, a Crown
entity established under the New Zealand Trade Development Board Act 1988.  Some 95% of itsannual $NZ75.3 million budget is funded by the Government, with the remainder provided by client
revenues.  Trade New Zealand's key outputs are:  international business consultancy;  export
promotion;  and policy support.  A new addition to Trade New Zealand's services is the development
of an e-Business programme, to be launched in November 2002.  This will allow exporters and
foreign buyers to be linked automatically through Trade New Zealand's web portal.  The major
change to the export promotion and assistance framework in place at the time of New Zealand's last
Review is the Government's decision to establ ish an investment promotion agency, Investment
New Zealand, an independently managed unit reporting to the Board of Industry New Zealand.
75. The Government announced recently that it will create a new organization that will integrate
the business and export development services curren tly provided by Industry New Zealand and Trade
New Zealand, respectively;  it is expected to start operating on 1 July 2003 (section 4(iii)).
                                                     
77 OECD (2000), p. 95.New Zealand WT/TPR/S/115
Page 49
(viii) Measures maintained by trading partners
76. Other than tariffs and tariff rate quotas mainta ined by its main trading partners, New Zealand
also argues that it loses nearly $NZ1 billion in revenue on an annual basis due to non-tariff barriers
(NTBs) maintained by trading partners.  These NTBs appear mainly to affect agriculture, fisheries and
the food processing industry;  the barriers identified appear to be mainly import quotas, SPS and
technical regulations standards, and customs procedures.  A study commissioned by governmentagencies found that the main markets where access was a problem included New Zealand's main
export markets in Asia, the United States, and Australia.
78
77. It has been estimated in a recent study that a 50% cut in global protection of agricultural
markets would result in a one-off welfare gain to the New Zealand economy of around US$1.1 billion
(some 1.5% of GDP).79  Gains to individual export sectors have also been examined by the Australian
Bureau of Agricultural and Reso urce Economics (ABARE) which sh ows that New Zealand stands to
make the greatest gains from liberalization by 2010 in beef and sheep meat (82% increase in value of
exports), followed by dairy products (41%).80  Removal of barriers to trade in the market for beef
products would also result in an increase in producer profits in New Zealand.81  The authorities have
also identified services barriers to the Mode 1 and Mode 4 provision of key exports, in particular,education, postal, air transport, consultancy and professional services.  Other barriers have been
identified in relation to services, which have a commercial presence abroad and cross-border trade.
Small and medium-sized enterprises involved in services exports are particularly affected given their
reliance on Mode 1 and Mode 4 service exports.
(4) OTHER MEASURES AFFECTING PRODUCTION AND TRADE
(i) Company law
78. All companies, including foreig n companies, if they wish to operate in New Zealand, must
register with the Registrar of Companies in the Companies Office, under the Companies Act 1993, as
amended.  Under the Act, in order to be incorporated, the Company must provide:  a name that has
been reserved by the Registrar of Companies;  the names and addresses of each applicant, director,
and shareholder as well as the number of shares to be issued to every shareholder;  the registered
office of the proposed company;  and the address for service of the proposed company.82  Persons
wishing to register a company must do so within 20 working days following the issuance of a notice
of reservation for the name issued by the Registrar.83
79. Overseas companies are also required to register under the Companies Act 1993 but the
procedures differ depending on which of three ways  they wish to operate in New Zealand:  as a
wholly owned subsidiary;  as a branch;  or by transferring the entire operation to New Zealand.84  To
establish a wholly owned subsidiary in New Zealan d, companies must register under Part II of the
                                                     
78 The agencies were:  Standards New Zealand, Mini stry of Foreign Affairs and Trade, Ministry of
Economic Development, Ministry of Agriculture and Forestry, and Trade New Zealand.  Standards
New Zealand (2001).
79 Department of Foreign Affairs and Trade (1999).
80 The estimates are based on partial agricultural trad e liberalization in addition to that agreed during
the Uruguay Round, to be phased in over the period 2005 to 2010 (Podbury et al., 2000).
81 Meat and Livestock Australia (2001).
82 Section 12, Companies Act 1993.  Available online at:  http://www.rangi.knowledge-basket.co.nz/
gpacts/public/text/1993/an/105.html [9 August 2002].
83 Section 22(3) of the Companies Act 1993.
84 Overseas companies are defined by the Companies Act 1993 (section 2(1)) as a body corporate that
is incorporated outside New Zealand.WT/TPR/S/115 Trade Policy Review
Page 50
Companies Act and submit details of their own names and addresses and those of their directors, and
registered offices and address for service of the company;  they must also, as is required of all
companies, have obtained a notice issued by the Registrar reserving the name of the company.
Companies wishing to establish as a branch are required to register under Part XVIII of the Act,
which relates to Overseas Companies.85
(ii) Taxation
(a) Overview
80. As a result of several years of tax reform, New Zealand's overall tax to GDP ratio has
declined since the late 1980s and was estimated by the OECD to be below the OECD average by the
late 1990s.  It nevertheless remains higher than that of some of its main trading partners, including
Australia, Japan, and the United States.86  This appears to have been one of the reasons for a review of
the tax system carried out in 2000.  The review concluded, inter alia,  that while the overall structure
was sound, efforts should continue to lower income tax rates further (section (c) below).
(b) Indirect taxes
81. New Zealand levies a 12.5% value-added goods and services tax (GST) on virtually all goods
and services.  Services that are excluded are:  imported services;  financial services;  life insuranceand reinsurance;  residential rental accommodation;  and unconditional gifts.  In addition, for
long-term stays in a commercial dwelling the effective rate of GST is 7.5%.  All exports of goods and
services, the supply of fine metal (gold, silver or platinum) from a refiner to a dealer, local authority
petroleum tax and offshore warranty arrangements are zero rated.  In a recent review of the tax
structure, no further changes to the GST were sugge sted;  it was believed to have a less distortionary
impact on economic decisions than direct taxes (see  (c) below).  According to the authorities, the
Government is reviewing the exemptions for importe d services and financial services with a view to
removing them.
82. Excise tax is levied on petroleum products, alcoholic beverages, and tobacco products.
87  All
the rates are specific.  Excises on tobacco were raised in 1998 (by $NZ0.50 per packet of cigarettes)
and 2000 (by $NZ0.89 per packet of 20 cigarettes).  There is also a tax on entities that provide gaming
activities.88
83. Local taxes are mainly in the form of real estate taxes, which are levied at the discretion of
local government authorities.
(c) Direct taxes
84. In the year ended June 2002, the Government of New Zealand raised 57% of its revenue from
corporate and personal income taxes.  As a result of tax reforms carried out since the mid 1980s, the
                                                     
85 Registration requirements include details of the ov erseas company and its incorporation;  full names
and residential addresses of the directors;  address of the place of business in New Zealand;  and the names and
addresses of persons authorized to accept service in New Zealand of documents on behalf of the overseascompany (Section 336, Companies Act 1993).
86 Dalsgaard (2001).
87 Excise rates on tobacco and alcohol are CPI adjusted  on an annual basis to maintain the real value of
the excise.
88 The rates are:  20% of betting profit for racing;  5.5% of turnover for lotteries commission;  20% of
gaming machine profits;  and 4% of casino wins.New Zealand WT/TPR/S/115
Page 51
statutory corporate rate of tax has declined from 48% (53% for non-resident companies) to 33% at
present.  While the current corporate tax rate is lower than the OECD average rate of 36%, it is higher
than some of its neighbours.  Indeed, Australia's recent cut in the corporate tax rate to 30%, as of
mid-200189, may also put pressure on New Zealand to move to a comparable rate.90  The top marginal
personal rate declined from 66% to 33%, before being raised again to 39% in 200091;  thus, personal
income tax rates currently range from 19.5% (up to $NZ38,000) to 39% (above $NZ60,000).  Very
few exemptions are allowed from either corporate or personal income tax so that the tax bases are
broad.  New Zealand does not have a capital gains tax.
85. In an effort to improve the New Zealand tax system further, the Government announced a
review of the system in 2000.  The results were submitted to the Treasurer and Minister of Economic
Development in October 2001.  The review found that  the broad structure of the tax system was sound
and that the programme of reform that started two decades ago should be maintained.  Some concerns
were, however, raised.  For example, the addition of the new personal income tax rate of 39% has
created a gap between this rate and that of the corporate tax rate of 33%, creating an incentive for
individuals to ensure that income above $NZ60,000 is earned through a company and therefore taxed
at the lower rate.92  Other issues discussed include:  whether capital gains should be taxed more
comprehensively;  the need for continued excise ta xation;  and the introduction of eco-taxes.  On the
tax structure, it was suggested, inter alia,  that the top rate of corporate tax should be aligned with that
of personal income tax and that tax reform should concentrate on the income tax structure rather than
the GST.93  The Government has not made any changes to tax rates in response to the review, but has
indicated that the proposals relating to international tax warrant further consideration.
(d) Tax incentives
86. New Zealand's general position with regard to the tax system is that it should be broad based
with minimum distortions.  Thus, few tax ince ntives are provided for any particular economic
activities so as to avoid creating distortions in the incentive structure for New Zealand industry.94  In
October 2001, the Tax Review recommended that the Government review how it might attract
investment and skilled migrants.  Although the initial advice did not recommend major changes on
how FDI is taxed, consultations are being undertaken before any decisions are made on taxation ofFDI.  Pursuant to the review's recommendations, the taxation of temporary residents' offshore income
may be changed to ensure that skilled immigrants are not discouraged from coming to New Zealand
by an offshore tax regime that may be more comprehensive than global norms.
87. The tax system permits deductions, including for research and development (R&D)
expenditures (if they can be expensed for accounting purposes) under the Income Tax Act.  Theseinclude a general deduction for business expenditure not of a "capital nature", for capital expenditure
incurred for scientific research, and capital R&D, which is deductible over time if it results in a
                                                     
89 WTO (2002).
90 The pressure of this development on the New Zealand tax structure was also acknowledged in a
review of the tax system completed in October 2001 (Treasury, 2001a, p. 66).
91 As a result, the New Zealand income tax structure has three statutory rates, 19.5%, 33%, and 39%,
but the Low Income Earner Rebate effectively creates fo ur rates, 15%, 21%, 33% and 39%.  The Rebate applies
to labour income earned below $NZ9,500.  This compares to three rates (15%, 21%, and 33%) with a topthreshold of $NZ38,000 before the addition of the 39% rate.
92 The Government has introduced a rule allowing the Commissioner of Inland Revenue to deem
income earned by certain companies to be earned by their shareholders and therefore potentially subject to the
39% rate of tax, but the review suggested that this may affect only certain companies, as well as companies thatwere set up for genuine reasons (Treasury, 2001a:  Issues Paper).
93 Treasury (2001a), Executive Summary.
94 Tax incentives exist in the film, forestry, and mining industries.WT/TPR/S/115 Trade Policy Review
Page 52
depreciable asset.95  In general, it appears however, that New Zealand would prefer to encourage
R&D through an increase in annual government budg etary spending on R&D rather than through tax
incentives.96
(iii) Industrial development policies
(a) Industrial development
88. While efforts have been made to reduce government involvement and intervention in the
economy since the mid 1980s, the new Government that  took charge in 1999 decided to take a more
"proactive" approach.  This includes the creation of a more supportive business and regulatory
environment including through increased government assistance for industry, and regulatory changes.
Thus, recent steps that have been taken include the establishment of Industry New Zealand, a Crown
entity, to assist businesses, regions and industry sectors, and the creation of a number of programmesto assist the growth of businesses and for nationa l and regional economic development.  Regulatory
reform has concentrated on infrastructure such as telecommunications and electricity (Chapter IV).  In
addition, steps have been taken to strengthen competition policy (section (v)).
97
89. In order to deliver new forms of government assistance to industry, Industry New Zealand
was created and became operational in October 2000.  The Crown-owned entity is charged with,inter alia :  working closely with industry, government , and relevant community groups to develop
and implement industry strategies at sectoral and regional levels;  providing a conduit for input and
advice from industry, government, and local communities on government programmes;  and working
closely with the Ministry of Economic Development to contribute to the development and
implementation of these strategies.
98
90. A key objective of the Government's policy is to improve innovation.  According to a recent
policy statement, failure to raise New Zealand's per capita income significantly since the mid 1980smay in part be attributed to its low rate of investment in research and development (which was little
over 1% of GDP in 1999, compared with well ov er 2.5% for Switzerland and Finland);  private
investment in R&D, according to this report, is pa rticularly low, some 28% of the total, compared
with an average of 78% for the OECD.
99  Thus, steps taken recently to address the problem include
improved tax relief for R&D expenditure, crea tion of a Venture Investment Fund, the doubling of
grants provided to support private-sector R&D;  and an e-commerce strategy.  In the initial stages of
the new innovation strategy, biotechnology, information technology, and creative industries (such as
music, film etc.) are being targeted.  New Zealand also intends to attract skilled workers from abroad
to improve its pool of skilled labour and FDI in targeted areas;  New Zealand, however, stresses that it
will not compete with other small economies in providing financial or other incentives to attract FDI.A new agency, Investment New Zealand was created in 2002 as part of this strategy to attract FDI
(Chapter II).
                                                     
95 OECD (2002c).
96 It has been suggested that the Government was not convinced of the level of market failure
associated with New Zealand's relatively lower levels of R&D than the OECD average, or of the effectivenessof tax concessions (OECD (2002c) .
97 See for example, Government of New Zealand (2002b).
98 Ministry of Economic Development (2000a).  A full list of programmes administered by Industry
New Zealand is available online at:  http://www.industrynz.govt.nz/about-us/_documents/fact-sheet.doc[5 March 2003].
99 Another problem identified by the Government is the relatively low export to GDP ratio for a small
open economy (See for example, Government of New Zealand, 2002b).New Zealand WT/TPR/S/115
Page 53
(b) Subsidies
91. New Zealand does not appear to provide direct subsidies for any economic activities.  In
agriculture, New Zealand's producer support estimate  (PSE) is low (1%), with support being provided
only for basic research and the control of pests and diseases100;  direct payments may be made only in
the event of large-scale natural disasters or adverse climatic conditions.
(c) Price controls
92. New Zealand maintains no price controls.101  However, the listing of subsidized
pharmaceutical products by the Crown agency PHARMAC (the Pharmaceutical Management
Agency) has put pressure on companies to reduce prices.102  The New Zealand Pharmaceutical
Schedule lists around 3,000 prescription and other medicines subsidized by the Government.  The list
is published three times a year and updated on a monthly basis.  PHARMAC was originally set up tomanage rising government expenditure on prescription medicines.
(iv) Role of state-owned enterprises, and privatization
93. As part of New Zealand's economic reforms initiated in the mid 1980s, a large number of
state-owned enterprises (SOEs) were corporatized, of which a significant number were subsequently
privatized (Box III.1).  As noted in the previous  Review, several large SOEs were privatized.103  As a
result, SOEs' share in the economy declined from 12% of GDP in 1984 to 5% in 1994;  this share was
4.6% of GDP as at 30 June 2002.  The Government 's position, since it came to office in 1999, has
been that there will be no further privatization of state assets during its term.104  In fact, with the
Government's purchase of a majority shareholding in the previously privatized Air New Zealand, the
re-imposition of the public monopoly on workplace accident insurance, and the decision to create
Kiwibank, operated through the state-owned New Zealand Post, there appears to be a reversal in the
policy of privatization, suggesting a greater willin gness by the Government to get involved in the
economy.
                                                     
100 OECD (2002b).
101 According to the OECD, market price supports appear to be maintained for eggs and poultry
(OECD, 2002b ).  However, according to the authorities, these calculations may be based on the fact that there
were, in the past, significant tariffs on these products, which resulted in domestic prices being higher thaninternational prices,  the authorities also estimate that the calculation methods used by the OECD may result inthe indirect effects of some biosecurity measures being captured in the calculation of such market pricesupports.
102 PHARMAC has suggested that it has been so successful in reducing the prices of drugs in
New Zealand that there appears to be little remain ing scope for further reductions (PHARMAC, 1999).
103 These include the Telecom Corporation of New Zealand;  the Petroleum Corporation of
New Zealand;  the Bank of New Zealand;  Air New Zealand;  and New Zealand Steel (WTO, 1996).
104 OECD (2000), p.110.WT/TPR/S/115 Trade Policy Review
Page 54
Box III.1:  Reform of state-owned enterprises
Reform of the state-owned sector dates back to the mid 1980s when state-trading activities were identified
as a key source of New Zealand's economic problems.  The main reasons identified included the confusion
between commercial, social and regulatory objectives;  and prices of products produced by governmentdepartments, which often did not reflect the cost of inputs, thus causing distortions in the economy.  Thereform programme set out to separate the sector into three components:  government departments as defined
in the Public Finance Act, 1989;  crown entities, which are statutory corporations other than state-owned
companies;  and state-owned enterprises (SOEs) registered under the State Owned Enterprises Act, 1986.
Under the reform programme, efficiency of the SOEs was to be improved through corporatization, with
state-trading activities being restruct ured along the lines of limited liability companies.  The programme set
out five governing principles for corporatization:
- separation of non-commercial functions from major state-trading activities;
- the requirement that state-trading activities be run as successful business enterprises;- the requirement that managers be responsible for using inputs and pricing and marketing their
products to meet performance objectives set by ministers;
- the requirement that the SOEs operate without "competitive advantages or disadvantages"so that
managerial performance could be judged using commercial criteria;  and
- the setting up of SOEs along the lines of their commercial purpose under the guidance of boards
modelled on the private sector.
Since 1986, with the passage of the State Owned Companies Act, 1986, a number of state-trading activities
have been transferred to Crown-owned limited liability companies that are subject to the Companies Act (as
are all private companies).
Source: Crown Company Monitoring Advisory Unit (1999), Briefing to the Incoming Minister for State
Owned Enterprises , 26 November [Online].  Available at:  http://www.ccmau.govt.nz/PDF/
SOE1999.pdf [8 August 2002]
94. As of 30 June 2002, there were 16 SOEs with total revenue of around $NZ3.5 billion105;  most
government equity (97%) is in the three electricity  generators (Genesis Power, Meridian Energy, and
Mighty River Power), and Transpower, Landcorp, and Television New Zealand.106
95. SOEs are required to operate under the State Owned Enterprises Act 1986, which requires
them to be as profitable and efficient as comparable businesses not owned by the Crown, a good
employer, and to exhibit sense of social responsibility towards the community in which they
operate.107  Their Boards have complete autonomy on operations, including allocation of resources
and pricing of products and services.  The Board is required, on an annual basis, to present to itsshareholding Ministers (usually the Ministers for State Owned Enterprises and of Finance) a statement
of corporate intent and an outline of business objectives
108;  these are closely monitored by the
                                                     
105 These are:  AgriQuality New Zealand Limited;  Airways Corporation of New Zealand Limited;
Asure New Zealand Limited;  ECNZ Residual Limited;  Genesis Power Limited;  Landcorp Farming Limited;Meridian Energy Limited;  Meteorological Service of New Zealand Limited;  Mighty River Power Limited;New Zealand Post Limited;  New Zealand Railways Corporation;  Solid Energy New Zealand Limited;Television New Zealand Limited;  Terralink New Zealand Limited;  Timberlands West Coast Limited;  and
Transpower New Zealand Limited (CCMAU, 2001).  Terralink, New Zealand is presently in liquidation.
106 Shares calculated from CCMAU (2000a).
107 Section 4, State Owned Enterprises Act, 1986.  Available online at:  http://rangi.knowledge-
basket.co.nz/gpacts/public/text/1986/an/124.html [8 August 2002].
108 The Act requires that the Crown owns all voting shares of the SOE.New Zealand WT/TPR/S/115
Page 55
relevant ministries.109  Under the Act, the Government is required to negotiate an explicit contract
with the SOE if it wishes it to carry out non-commercial operations.110  In addition to the SOEs, there
are Crown-owned companies (COEs) and Crown research institutes (CRIs).  SOEs tend to have a
stronger bias towards commercial objectives than COEs.  In addition, COEs, while operating as
limited liability companies under the Companies Act 1993, are not subject to the State Owned
Enterprises Act, 1986.  In most cases COEs are created under their own legislation to fulfil specificpublic service functions.
111
96. The performance of Crown companies is m onitored by the Crown Company Monitoring
Advisory Unit (CCMAU), established in 1993.  The CCMAU is administratively linked to the
New Zealand Treasury, but is operationally independent.  Its main function is to monitor the
performance of SOEs and other Crown companies and provide advice to shareholding Ministers.112  In
addition, the Treasury, as the main government agency concerned with overall public-sector balance
sheets, also performs an advisory function to shareholding Ministers.  The CCMAU is charged with
monitoring 34 Crown companies with a net worth of $NZ6.0 billion, as at 30 June 2001, and total
revenue of $NZ5.9 billion;  this includes SO Es, Crown companies; Crown entities and Crown
research institutes.  The 16 SOEs represent $NZ4.6 billion in revenue, with a net worth of$NZ5.5 billion.
97. A recently completed Review of the Centre, while acknowledging the strengths of
New Zealand's public management system, also suggest ed that improvements could be made in three
areas:  ensuring state organizations are aligned to government objectives in their planning and
structures;  integrating service delivery throughout the state sector;  and in human resource
management and training systems.
113
(v) Competition policy
(a) Introduction
98. New Zealand's approach to competition policy has been described as "light handed" with the
emphasis being on encouraging competition and efficiency in the New Zealand economy.114  It was
developed at a time when New Zealand was moving away from state intervention in the economy to
deregulation during the mid 1980s.  The main legislation governing competition is the CommerceAct, 1986, which aims to "promote competition in markets for the long term benefit of consumers
within New Zealand".  In addition, the Fair Trading Act 1986 ensures that traders comply with
consumer information and product safety standards.  There are also a number of sector-specific laws
that deal with competition, such as:  the Electricity Industry Reform Act, 1998;  the
Telecommunications Act 2001;  the Dairy Industry Re structuring Act, 2001;  and the Apple and Pear
Industry Restructuring Act Repeal Act, 2001.  While the Commerce Act extends to all sectors of the
economy, certain entities are partially exempt from its provisions.  These include:  the Pharmaceutical
Management Agency Ltd. (PHARMAC), which has a pa rtial exemption from Part II (restrictive trade
practices) of the Act, although according to the authorities PHARMAC does not take advantage of
                                                     
109 Government of New Zealand (undated).
110 If such an agreement is reached, the Crown will appropriately reimburse the SOE for its goods or
services (Section 7, State Owned Enterprises Act, 1986).
111 Some examples of COEs are:  Animal Control Products;  Learning Media Limited;  and Radio New
Zealand Limited.
112 CCMAU (2000b).
113 State Services Commission (SSC) (2002).
114 See for example, Allport (1998).WT/TPR/S/115 Trade Policy Review
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this exemption115;  some services (see Chapter IV);  and some of New Zealand's state-trading
enterprises, which require exemption from some of the provisions of the Commerce Act for the
purpose of funding or for carrying out their activities .  Exemptions from the Act provided to the dairy
industry during its restructuring have now been removed.
99. The Commerce Act prohibits restrictive trade practices such as:  practices substantially
lessening competition, price fixing, the abuse of "unilateral" market power and resale pricemaintenance;  and mergers and acquisitions that substantially lessen competition.
116  T o  m e e t
changing circumstances, such as the restructuring of certain state-owned companies117, the Act has
been amended several times, most recently in May 2001, with the passage of the Commerce
Amendment Act, 2001.  The amendment strengthened key provisions in the law relating to the use of
dominant position and the prohibition of anti-competitive mergers and business acquisitions.  Thedefinition of anti-competitive practices has been broadened in the amendment by replacing "dominant
position" with "substantial degree of market power".
118  Section 47, which deals with mergers and
acquisitions, has been replaced by a section prohibiting certain acquisitions if they "have the effect, or
likely effect, of substantially lessening competition in a market", thereby broadening the definition of
what constitutes anti-competitive mergers and acquisitions.119  The amendment also strengthened
penalties, remedies, and the legal process, as well as the enforcement powers of the regulator, the
Commerce Commission.  In some cases where greater intervention is required, the Commission is
also authorized to determine prices revenues and quality standards for controlled goods and services
under Part IV of the Act.  Since 1993, when price controls were removed on natural gas, no price
controls have been imposed under this provision.  In 1998, however, the Government requested the
Commission to examine whether price controls should be introduced for airfield activities at
Auckland, Wellington, and Christchurch;  the Commission reported on this issue in August 2002 anda decision by the Minister of Commerce is due shortly.
120  On 6 November 2002, the Minister of
Energy requested the Commerce Commission to carry out an inquiry into gas pipeline services.
Part IVA of the Act also provides for control of electricity line businesses that breach prescribed
thresholds, but no companies are subject to control presently.
100. Under an agreement signed in 1990, the provisions of the Commerce Act also extend to
Australia under section 36A of the Act, which prohibits the use of a dominant position in either
Australia or New Zealand to restrict entry into any particular market.121  Any alleged dumping of
Australian products in the New Zealand market is examined under section 36A of the Act, rather than
the dumping provisions of the Dumping and Countervailing Duties Act.  Furthermore, with the new
                                                     
115 According to the authorities, the presence of the exemptions is critical because it prevents a great
deal of potential litigation (see PHARMAC, 1999).
116 Commerce Act, 1986.  Available online at:  http://www.rangi.knowledge-basket.co.nz/gpacts
[1 August 2002].  Mergers that would result in the creation of a company with assets above a certain thresholdmust be reported.
117 For example the Dairy Industry Restructuring Act.
118 Commerce Amendment Act 2001, Section 9 replacing Sections 36 to 36B.
119 Commerce Amendment Act, 2001, Section 11 replacing Section 47.
120 The final report of the Commission was delivered to the Minister of Commerce in August 2002.
Available online at:  http://www.comcom.govt.nz/publications/display_mr.cfm?mr_id=1015, [6 A ugust 2002].
The critical issues identified by the Commiss ion in a preliminary report are available at:
www.comcom.govt.nz/price/Airfield/ reports/cipA01_1.pdf.
121 As a result of the Agreement under Article 4 of the 1988 ANZCERTA Protocol on Acceleration of
Free Trade in Goods to discontinue as of 1 July 1990 the use of anti-dumping measures against each other,Australia and New Zealand agreed to extend the application of their respective competition laws to each others'markets.  These provisions are covered under Section 36 of New Zealand's Commerce Act, 1986 (seeCommerce Amendment Act, 1990, Section 15) and Section 46A of the Australian Trade Practices Act 1974.New Zealand WT/TPR/S/115
Page 57
changes introduced by the Commerce Amendment Act, 2001, "dominant position" was broadened to
the term "substantial degree of market power".122
101. Although the Commerce Act was developed as a national competition law that would extend
to all sectors of the economy, there has been a need to develop sector-specific legislation recently for
example for agriculture, telecommunications, and electrici ty.  It has been argued that this need has, in
part, arisen because of the underlying weaknesses in the Commerce Act.123  According to the
authorities, "sector specific competition regulatio ns were necessary in these sectors due to their
importance to the New Zealand economy and the significant public detriment caused by the
concentration of market power."  The telecommunications, electricity, and dairy sectors continue to be
subject to the Commerce Act.  However, in ad dition, the vertically integrated incumbent for
telecommunications, and also for dairy products, are subject to a specific access regime.  The supplyof electricity is subject to oversight, pending possible control by the Commerce Commission.  Other
than in telecommunications and dairy products, the Commission does not have general powers to
resolve disputes.
(b) Enforcement measures
102. The Commerce Commission was established under the Commerce Act 1986.  Its role is to
promote competition and fair trade in the economy through its enforcement and regulatory control
functions under various laws including the Commerce Act, the Fair Trading Act 1986, the Electricity
Industry Reform Act 1998, the Dairy Industry Restructuring Act 2001 and the Telecommunications
Act 2001.  Appeals against decisions taken by the Commission are heard by the High Court of
New Zealand and the Privy Council and also in the court of appeal, if leave is granted.
124
103. As a result of recent changes in legislation, the Commerce Commission issued new business
guidelines in May 2001.  The guidelines provide details of how the Commission will implement the
"substantially lessening competition" thresholds in considering applications for business acquisitions.
The Commission would study the relevant market fo r each proposed business acquisition, including
the market shares of existing competitors as well as  the market share of the new merged company;  if
the market share of the latter exceeds the Commission's firm concentration ratio "safe harbour", the
Commission then considers other sources of competition, such as imports, and barriers to entry in themarket, to determine whether competition is likely to be substantially lessened as a result of the
proposed acquisition.
125  The Commission's "safe harbours" have been changed to more closely reflect
those used in Australia, but continue to reflect New Zealand's market characteristics.  While under the
previous law, the merged entity was required to have 40% or less of the relevant market, or 60% or
less of the market but at least one competitor with 15% of the market, the new safe harbour is definedas the merged company having 40% or less of the relevant market unless there is a concentrated
market (three firms having 70% of the market), the merged entity should have no more than 20% of
the market.
126
                                                     
122 Commerce Amendment Act, 2001, Section 9.
123 See Webb and Taylor (1998).  In the telecommunications industry, for example, the authors argue
that, as a consequence of New Zealand's reliance only on generic competition law to govern interconnectionissues, extensive litigation has accompanied this issue.
124 Proposals are currently being considered to extend the right of appeal regarding Commerce
Commission decisions to the proposed new Supreme Court of New Zealand.
125 Commerce Commission (2001a).
126 The Commission's current safe harbours are discussed in section 4.4 of Commerce Commission
(2001a);  previous safe harbours are defined in OECD (2002d).WT/TPR/S/115 Trade Policy Review
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104. The Commerce Amendment Act, 2001 also strengthened the Commission's enforcement
powers.  In particular, under sections 74A to 74D the Commissioner is provided cease and desist
orders and the penalty for contravention of such orders may be up to $NZ500,000.  In addition,
penalties for persons found to be contravening restrictive trade practices have been raised from
$NZ5 million up to $NZ10 million (or three times the illegal gain) for corporations, and penalties for
individuals of $NZ500,000 have been supplemented with powers to ban serious offenders frommanagement position in companies.
127
105. Since 1995/96, most investigations conducted by the Commerce Commission have concerned
fair trading followed by business acquisitions (renamed market structure in 2001) (Table AIII.1).  In
addition, the Commission commenced four investigations relating to the dairy industry in 2001/02
(Chapter IV(2)(iv)).  A relatively small number of these investigations appear to reach the litigation
stage.
(vi) Corporate governance
106. Good corporate governance is a pre-requisite for the efficient functioning of capital markets
and for the allocation of resources into sectors where they can be used most productively.  Recent
high profile bankruptcy cases around the world have had repercussions in international capitalmarkets and on investor confidence, leading to an examination in several countries of the
effectiveness of corporate governance policies.
107. Corporate governance and financial reporting requirements of companies in New Zealand is
based mainly on the Financial Reporting Act 1993 and the Companies Act 1993;  companies listing
on the New Zealand stock exchange must also comply with the stock exchange listing rules.  The Act
is administered by the Registrar of Companies.  The Accounting Standards Review Board, established
under the Act, reviews and approves financial reportin g standards.  All companies (reporting entities),
other than those that are exempt, are required to report their financial statements on an annual basis.
128
Reporting requirements differ slightly depending on the kind of entity.129  In general, if a reporting
entity is an issuer of stock or if it has one or more subsidiaries, its financial statements must be
audited.130  Registration of financial statements are required of companies if they are:  issuers of
public securities;  overseas companies;  subsidiaries of companies incorporated outside New Zealand;or companies in which 25% or more of the voting power is controlled by a company incorporated
                                                     
127 Amendments to section 80 of the Commerce Act, 1986.
128 Reporting entities are defined to include issuers, overseas companies, subsidiary companies,
companies that have one or more subsidiaries, companies with assets valued at more than $NZ450,000 andcompanies with a turnover in excess of $NZ1 million (Ministry of Economic Development, Companies Office,2000).
129 It appears that the main difference in reporting requirements for reporting and exempt entities is that
reporting entities must include a statement of cash flows where this is required by a financial reporting standard,
and comply with generally accepted accounting practices;  the exempt company is required to comply withdirections on the preparation of financial statements provided in the Financial Reporting Order 1994.  Bothkinds of entities are also required to provide balance sheets, profit and loss statements (or income andexpenditure statements if not operating for profit) to be signed and dated by two directors (or one if the companyhas only one director).
130 Auditors must also be appointed by certain kinds of companies.  These are:  a New Zealand
subsidiary of a company incorporated outside New Zeal and;  a company in which 25% or more of the voting
power is controlled by overseas interests;  and a company that is an issuer of securities.  Other companies maydecide through a unanimous resolution at or before the annual general meeting of their shareholders that the
appointment of an auditor is not necessary (Ministry of Economic Development, Companies Office, 1998).New Zealand WT/TPR/S/115
Page 59
outside New Zealand or by a person resident overseas.131  The Act also stipulates the maximum level
of fines that may be imposed on directors if they fail to comply with these requirements (Section 36).
108. Companies that are exempt from filing their financial statements with the Registrar of
Companies are defined as "exempt companies".  An exempt company, as defined by section 2 of the
Financial Reporting Act 1993, is a company that:  is not an overseas company or an issuer;  has no
more than $NZ450,000 in assets;  has no more than $NZ1 million per annum in turnover;  and doesnot form part of a group of companies.  Exempt companies are required to report "core financial
details" thus limiting the costs of full reporting requirements imposed on larger companies.
132  No data
appear to be available on the number of such exempt companies because they are not required to file
their financial statements with the Registrar of Companies.133  The authorities note, however, that a
discussion document, on the future of the Exempt Companies Regime, solicits the public's opinion onwhether to retain and/or modify the regime or whether it should be abolished so that small companies
are completely exempt from the requirement to provide general purpose financial reports.
109. The New Zealand Securities Commission regulates New Zealand's capital markets.  The
Commission operates under the Securities Act 1978 and requires entities issuing stock to provide
investment statements to subscribers before issuin g securities to them.  For companies listed on the
New Zealand Stock Exchange (NZSE), listing requirements are monitored and enforced by the
Market Surveillance Panel, an independent entity.
110. While believing that New Zealand's financial reporting system is sound, the Government has
launched a benchmarking study to assess how the regulatory regime compares with those of
New Zealand's main trading partners, including Australia, the European Union, Singapore, and the
United States.
134  New Zealand's Institute of Chartered Accountants (ICANZ) has also issued a
discussion paper on corporate transparency, which will form the basis for formal proposals to bepresented to the Government before the end of 2002.  The ICANZ has suggested in the discussion
paper that, inter alia,  companies could report on the basis of principles of good governance such as
those outlined in the OECD Principles of Good Governance.
135  Corporate governance issues are also
being examined by the Securities Commission, which issued a discussion paper on the proposed
conduct rules of the New Zealand Stock Exchange in June 2002, and the NZSE, which is seeking tostrengthen its listing rules re lating to corporate governance.
136  A recent review of the state-owned
                                                     
131 Ministry of Economic Development, Companies Office (2000).
132 In particular, while reporting entities must pr epare their financial reports in accordance with
generally accepted accounting practices, exempt companie s must prepare financial reports in accordance with
accounting policies identified in th e Financial Reporting Obligations.
133 However, it is estimated that as small and medium-sized companies make up a significant
percentage of enterprises in New Zealand, a large percentage of these would qualify under the exemptcompanies regime (Ministry of Economic Development, 2002b).
134 Institute of Directors (2002).  Other related developments, including a decision by the Australian
Financial Reporting Council to commit Australia to adopting international financial reporting standards by1 January 2005, is also likely to have an impact on the future design of New Zealand's financial reportingregime.
135 More details of these and other proposals are available in Institute of Chartered Accountants of
New Zealand (2002).
136 The changes proposed include requiring greater independence of an issuing entity's directors;
separation of the roles of chief executive and chairman of the board of a company to avoid any potential conflict
of interest;  requiring all listed issuers to have an aud it committee with a majority of independent directors;  and
requiring all directors to complete an NZSE certifica tion course, which would educate and update directors on
corporate governance, corporate strategy, and relevant laws and regulations (NZSE, 2002).WT/TPR/S/115 Trade Policy Review
Page 60
sector addressed governance in the public sector and suggested that although there had been recent
improvements, governance issues remained uneven.137
(vii) Intellectual property rights
(a) Introduction
111. New Zealand is a member of the Berne Convention on Literary and Artistic Works (1928),
the Paris Convention on Industrial Property (1931), the Madrid Agreement on False or DeceptiveIndications of Source of Goods (1931), the Geneva Convention on Unauthorized Duplication of
Phonograms (1976), the WIPO Convention (1984), and the Patent Cooperation Treaty (1992).
138  As a
WTO Member, New Zealand is obliged to have implemented the TRIPS Agreement within one year
of the entry into force of the WTO.  New Zealand's legislation has been examined in the TRIPS
Council.
(b) Industrial property
Patents
112. New Zealand's protection of intellectual property rights through patents is based on the
Patents Act 1953.  Since New Zealand's previous Review, its original legislation on patents has been
amended twice, in 1996 and 1999.
113. Under the Patents Amendment Act 1994, the term of protection for patents was extended
from 16 to 20 years from the date of filing to meet the minimum requirements of the TRIPS
Agreement.  Patents of addition, which are granted for improvements in the original invention may
also be granted under the Patents Act 1953 but not for longer than the term granted for the original
patent.139  Both product and process patents may be granted.  Patents may be filed by any person
claiming to be the inventor or by a patent holder in a convention country;  under the Patents
Amendment Act, 1999, a convention country is defined as one being a party to any internationalagreement to which New Zealand is also a party, thus extending this right to all Members of the
WTO.
140
114. New Zealand also grants two forms of endorsement of patents.  The first, "licences of right"
under Section 44, is voluntary and allows the patent holder to apply for a licence of right at any time
after the patent has been granted.  If a patent is an endorsed "licence of right" any person is entitled toa licence, with the patent renewal fees reduced by half;  the provision is of assistance to patent holders
who experience difficulty in finding someone to exploit the patent and/or paying the renewal fees and
helps them to retain their interest in the patent without letting is lapse.  Any person interested in
working the patent is entitled to a licence of righ t;  the terms of the licensee may be settled by the
licence and patent holders, or failing agreement, either party may ask the Commissioner to settle theterms.
115. The second form of endorsement is compulsory.  Under section 46 of the Act, any person
interested in working a patent may, after a period of three years from the grant of the patent or four
                                                     
137 State Services Commission (SSC), (undated).
138 World Intellectual Property Organization (2001).
139 Section 34 of Patents Act 1953.
140 Patents Amendment Act 1999, Section 3, repealing and replacing section 77 of the Patents Act
1953.  Available online at:  http://rangi.knowledge-basket.co.nz/gpacts/public/text/1999/se/119se3.html[2 July 2002].New Zealand WT/TPR/S/115
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years from the date of filing, whichever is later, apply to the Court for a licence.  The Court may grant
the licence if it is satisfied that the applicant has tried and failed to obtain a licence from the patent
holder, and that the market for the patented invention is not being supplied or not being supplied on
reasonable terms in New Zealand.141  Compulsory licences granted under this provision are not
necessarily exclusive, may not be assigned to persons other than the business in which the licence
holder is involved and are limited to supply mainly the New Zealand market.  The cost of the licenceis to be agreed between the licensee and patent holders or may be set by the Court if agreement
between the two parties is not possible.  Finally, in the case of an emergency (for example if the
security or defence of New Zealand is concerned or for civil defence measures), the Crown may use a
patented invention;  use in these circumstances is not exclusive;  "must not be assigned otherwise than
in connection with the goodwill of the business in which the patented invention is used";  and is
limited to New Zealand.  The patent holder is entitled to adequate remuneration in these
circumstances.
142  No compulsory licences or patent endorsed "licenses of right" have been granted
under these provisions since 1996.
116. The Patents Act was recently amended to allow manufacturers of generic medicines to
commence chemical trials before a patent has expired.143  The Patent Act is currently being reviewed;
this review is expected to be completed during 2003.  The purpose of the review is to update the
Patents Act 1953 to bring it more into line with cu rrent international practice.  Major issues being
examined include the definition of patentable inventions, whether there should be exclusions from
patentability, and the concerns of Maori regarding the granting of patents for indigenous plants and
animals and inventions involving traditional knowledge.   The review will also consider the criteria for
examining a patent application.144
117. Patent applications are filed with the Intellectual Property Office of New Zealand (IPONZ),
based in the Ministry of Economic Development.   The Office, through the Commissioner, grants
patents, and registers trade marks and designs.  Once the patent application has been examined and
accepted the IPONZ sends the applicant a Notice of Acceptance and publishes summary details of the
patent in the Intellectual Property Journal  and on the IPONZ website;  the patent specification is also
published on the IPONZ Website.  If there is no opposition to the patent within three months ofpublication, a Letters Patent is issued.
145  Currently all patent applications are examined within a week
of being filed (for Patent Cooperation Treaty national phase applications as soon as the required
documentation is received).  Applicants are given a maximum of 18 months from the first
examination to overcome all objections made by the examiner.  Replies to applicants' responses to
examination reports are sent within a few weeks of receipt.  Although the total number of patentsgranted has been declining since 1996, the share of patents granted to New Zealand nationals has
remained at around 7% (higher than 5% in 1996/97 but lower than 9% in 1998/99) (Table III.4).  The
overall number of patents in force has been increasing with the share held by foreigners resident
abroad remaining steady at just over 60% of the total.
                                                     
141 Section 46 of the Patents Act 1953 as amended by the Patents Amendment Act, 1994 (section 7).
"Reasonable terms" would be interpreted as "reason able commercial terms" in accordance with TRIPS
Article 31(b).
142 Section 58 of the Patents Act 1953, amended by the Patents Amendment Act 1994 (section 15).
143 According to the auth orities, the Patents Amendment Act 2002 is based on a similar provision in
Canadian legislation and is also the practice of other countries.
144 A discussion paper outlining some key issues such as the patentability of biotechnology, software,
and medicines is available in the Ministry of Economic Development online information.  Available at:http://www.med.govt.nz/buslt/int_prop/patent sreview/index.html [7 August 2002].
145 Intellectual Property Office of New Zealand (undated a).WT/TPR/S/115 Trade Policy Review
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Table III.4
The number of patents granted and in force, 1996-01
1996-97 1997-98 1998-99 1999-00 2000-01
Patents granted
New Zealand nationals 412 491 593 380 295
Foreigners resident abroad 7,206 6,178 5,918 4,661 3,887
Total 7,618 6,669 6,511 5,041 4,182
1996 1997 1998 1999 2000 2001
Patents in force
New Zealand nationals 1,687 1,920 2,499 2,885 3,020 3,235
Foreigners resident abroad 25,235 28,656 33,917 37,083 39,234 42,289
Total 39,802 44,725 52,264 57,564 62,679 68,616
Source: Ministry of Economic Development.
Trade marks
118. New Zealand's protection for trade marks is based on the Trade Marks Act 1953, which
entered into force in 1954.  The Act has been amended several times, including in 1994, to bring it
into compliance with the TRIPS Agreement.  In the period under review, it was amended in 1996 and
1999.  The amendment in 1996, inter alia:   ensured that the Act complied with the TRIPS Agreement
in respect of geographical indications146;  reinserted two sections on powers of, and restrictions on,
assignment and transition147;  and clarified the position allowing the registration of trade marks for
persons other than the proprietor when the proprietor has authorized the use.148  The Trade Marks
Amendment Act, 1999, inter alia:  added new provisions on collective trade marks149;  and defined a
"convention country" as a country that is party to any international agreement or convention to which
New Zealand is party.150
119. Under Section 29 of the Trade Marks Act, trade marks are granted for seven years, renewable
indefinitely for periods of 14 years.  Applications may be made to the Commissioner based in the
IPONZ.  An Examination Report or Notice of Acceptance is sent to the applicant if the application is
accepted, usually within five working days of receipt.  This is followed by a Notice of Acceptance if
the trade mark is accepted, and the trade mark is advertised in the Intellectual Property Office
Journal .  If there is no objection to the trade mark, it can be registered within three months, followed
by a Certification of Registration after six months.151
120. A new Trade Marks Bill is currently before Parliament to updated the Trade Marks Act, 1953.
The purposes of the Bill are to:  define more clearly the scope of rights protected by registered trade
marks;  simplify procedures for registering a trade mark in order to reduce costs to applicants and toreduce business compliance costs generally;  address Maori concerns relating to the registration of
trade marks that contain Maori text or imagery;  deter pirate and counterfeit activity in relation to
                                                     
146 This involved repealing an addition that had been made by the Trade Marks Amendment Act 1994,
which stated that it would be lawful to register a trade mark even if the use of the trade mark was restricted or
prohibited under the Geographical Indications Act.  The amendment in 1996 removed the reference to theGeographical Indications Act.
147 These sections were also deleted by the Trade Marks Amendment Act 1994.
148 Section 5 of the Trade Marks Amendment Act 1996, amending Section 38 of the original Act.
149 A new Section 46A-46M extending protection fo r collective trade marks was inserted by the
Amendment.
150 Section 4 of the Trade Marks Amendment Act 1999 amending Section 3 of the original Act.
151 Intellectual Property Office of New Zealand (undated b).New Zealand WT/TPR/S/115
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copyright works and registered trade marks in New Zealand;  and ensure that New Zealand's trade
mark regime takes account of international developments.
Industrial designs
121. New Zealand provides protection for Industrial designs under the Designs Act 1953, which
was amended most recently in 1996 and 1999.  Under the Act, new and original designs may be
registered with the Commissioner at IPONZ for a period of five years, extendable for a furthertwo periods of five years each.
152  Compulsory licences for use of the design may be issued at any
time after registration if an application is made on the grounds that the design is not applied in
New Zealand.153  The New Zealand Government may also use the design either free of any royalty
payments or upon agreed terms with the design holder.154
(c) Copyright and related rights
122. The Copyright Act, 1994 is the principle legislation governing copyright protection for:
original literary, dramatic, musical, and artistic works;  sound recordings;  films;  broadcasts;  cable
programmes;  and typographical arrangements of published editions.155  Protection is granted for the
author's lifetime plus a period of 50 years from the calendar year in which the author died, for literary,
dramatic, musical, and artistic works;  and for 50 years from the calendar year in which they weremade, for sound recordings and films.  For broadcasts and cable programmes, this period is 50 years
from the calendar year in which they were first made or included in the cable programme service.
156
123. Under the Copyright (Removal of Prohibiti on on Parallel Importing) Amendment Act 1998,
the Government removed the prohibition in the Copyright Act 1994 on parallel imports of goods
subject to copyright protection.157  The ban was lifted because it was felt that it would promote a more
open and competitive environment.158  In February 2000, under a new administration, it was decided
to consult with stakeholders and other interested parties on the effect of parallel importing oninvestment in New Zealand's creative industries (f ilm, music, both publishing and computer software).
Following this, in December 2001, the Government announced that it would be introducing legislation
to ban parallel imports of films, videos, and DVDs for nine months from a title's first international
release.  The ban is to remain in effect for five years.  However, the Government felt that the
consultations did not produce substantive evidence that a ban on parallel imports of music recordings,books, and software would increase internati onal investment in New Zealand and promote
                                                     
152 Under Section 12 of the Act, the extension will only be granted if the applicant has submitted the
prescribed form and prescribed fee before  the expiration of the period of protection.
153 Section 14 of the Designs Act 1953.
154 Moreover, if the Government had applied for use of the design before it was registered, use may be
made of the design without the need to pay any royalty or similar payment to the design holder (Section 16 ofthe Designs Act 1953).
155 Copyright Act 1994, Part I (14).
156 Copyright Act 1994, (22-25).
157 The rationale for the ban was originally that by increasing the ability of local subsidiaries of
international producers and publishers to guarantee profit margins on titles distributed locally, New Zealandwould encourage them to invest in local talent and would also encourage exports of New Zealand products.Ministry of Economic Development, Competition and Enterprise Branch (2000).
158 The decision to lift the ban was based in part on a study by the New Zealand Institute of Economic
Research (NZIER) for the Ministry of Commerce, which looked at the impact of the ban on three industries:
books, music, and used cars.  The study concluded that parallel importing restrictions had led to higher prices inNew Zealand for books and music than in some other countries;  moreover, it concluded that considerablesavings had been made in the cost of motor vehicles since import licensing restrictions were removed in 1989(Ministry of Economic Development, Competition and Enterprise Branch, 2000).WT/TPR/S/115 Trade Policy Review
Page 64
New Zealand products overseas.  The Government therefore decided that it would not ban parallel
importation of these products.  It decided, however, that the impact of parallel importing on the music
recording, book publishing, and software industries wo uld be kept under review over the next three
years.159  The Government intends to introduce legislation to strengthen the onus of proof in civil
copyright infringement cases, making it easier for rights holders to take action against copyright
infringements in relation to certain imported copyright works.160
(d) Other IPRs
124. Geographical indications are protected under consumer protection legislation (the Fair
Trading Act), the common law tort of "passing off", and the Geographical Indications Act 1994,
which was amended in 1996.  The Act, which is not yet in force, provides for a registration system for
local and foreign geographical indications.161  The Register for this purpose is maintained by the
IPONZ.  Applications are considered by a geographical indications committee consisting of
New Zealand Geographic Board memb ers, and representatives of the relevant industry.  The process
is open to public debate.162
125. Under the Designs Act 1953, New Zealand provides protection for a period of 15 years.
Where the design has not been registered, under the Copyright Act 1994, the copyright in anindustrially applied design will apply for 16 years, and for 25 years in works of artistic
craftsmanship.
163  For a registered design, copyright will apply only for the period of the design
registration.164
126. The protection of plant varieties is provided through the Plant Variety Rights Act 1987, which
replaced the Plant Varieties Act 1973.  A plant variety right gives its holder the exclusive right to
produce and sell propagating material of that particular plant variety.  In addition, for vegetatively
propagated fruit and ornamental and vegetable varieties, the owner has the right to propagate theprotected variety for commercial production.  Protection is granted for a period of 20 years from the
date of grant of the plant variety right (23 in the case of woody plants).
165  Applications may be made
to the Plant Variety Rights Office in the Ministry of  Economic Development.  The eligibility of a new
variety for the grant of a plant variety right is assessed by growing trials, which may take several
years.  In some cases, the results of growing trials conducted overseas may be accepted by the PlantVariety Rights Office.  A review of the Plant Variety Rights Act is expected to be completed during
2003.  The major issues being examined include:  whether New Zealand should ratify UPOV91;
whether farmers should be required to pays a royalty for use of saved seed of protected varieties;  and
how the concerns of Maori regarding the granting of plant variety rights over indigenous plant
varieties may be addressed.
                                                     
159 Ministry of Economic Development (2001d).
160 The changes, according to the authorities, will in clude a presumption that suspected imported goods
are pirated unless the defendant proves otherwise (Ministry of Economic Development, 2001d).
161 In their response to questions raised by Members, the authorities stated that the Geographical
Indications Act provides a broader definition for geographical indications than that provided for under theTRIPS Agreement (WTO document IP/Q2/NZL/1, 19 January 1998).
162 WTO document IP/Q2/NZL/1, 19 January 1998.
163 Section 75 of the Copyright Act 1994, which provides that a work has been industrially applied
where more than 50 copies of the work have been made in three dimensions for the purpose of sale or hire.
164 Section 74 of the Copyright Act 1994.
165 Section 14 of the Plant Variety Rights Act 1987.New Zealand WT/TPR/S/115
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(e) Enforcement measures
127. New Zealand's measures to enforce intellectual property rights were reviewed by the Council
for Trade-Related Aspects of Intellectual Property Rights in November 1997.166  Any allegations of
infringements of intellectual property rights may be dealt with through the civil courts.167  Statutory
provisions to award damages, penalties and other measures are provided under specific intellectual
property rights legislation including the Copyright Act and the Trade Marks Act.168
128. Criminal proceedings may also be initiated by the New Zealand Police for copyright
infringements.169  For copyright works, criminal liability arises primarily in respect of commercial
uses of infringing goods (sections 131 to 133 of the Copyright Act 1994).  Measures that may be
imposed include imprisonment, monetary fines, and seizure, forfeiture and destruction of infringing
goods and materials used to produce them.  For cases where copyright infringement is determined, thecourt will impose imprisonment for up to three months;  where a corporation is involved, every
director and every manager will be found guilty of the offence.  Other measures include fines of up to
$NZ50,000, and seizure and destruction of infringing goods.  For trade marks, fines of between
$NZ30,000 for an individual and $NZ100,000 for a corporation may be imposed;  other measures
include the seizure and destruction of infringing goods.
129. For counterfeit trade marks or copyright products, additional powers are granted to the
Customs authority, who can suspend the release into circulation of imports of such goods if the right
holder has lodged a notice with Customs.
170  Such goods may be detained by Customs for a period of
ten working days, extendable to 20 days.  Since 1 January 1995, the New Zealand Customs Service
has accepted 135 notices and, in Auckland, conducted 750 investigations.  These investigations have
resulted in over 400,000 items being either forfeited to the Crown or surrendered to the copyright or
trade mark owner after initially being detained by the New Zealand Customs Service.  Further actionmay be taken by Customs in accordance with the decision taken by the Court.  Although not explicitly
stated, Customs could take ex officio action ag ainst certain imports under the Customs Import
Prohibition (Trade Descriptions) Order 1991.
171
                                                     
166 WTO document IP/Q4/NZL/1, 5 August 1998.
167 Including district courts, high courts, and the Court of Appeal.  The final appellate tribunal is the
Judicial Committee of the Privy Council (WTO document IP/N/6/NZL/1, 24 February 1997).
168 Subject to the other provisions of the Copyright Act, relief by way of, inter alia , damages, and
injunctions, is available to the plaintiff in a copyright action as is available in respect of the infringement of any
other property right.  Under the Trade Marks Act 1953, trade mark owners can initiate court action for allegedbreeches of intellectual property rights.  Under common law, the courts have a range of civil remedies availableto them, including damages, injunctions, orders to account  for profits, and orders to deliver up infringing goods
to right holders.  When passed, the Trade Marks Bill currently before Parliament, will allow the Court to, inter
alia, order an injunction on any terms it thinks fit as well as either damages or account for profits.
169 WTO document IP/N/6/NZL/1, 24 February 1997.  According to this notification, criminal
proceedings could also be initiated by the Commerce Commission for products infringing trade marks under theFair Trading Act 1986 (Section 126);  however the reference to trade marks was removed from this provision in1995, thus removing the right by the Commerce Commissio n to initiate criminal proceedings for trade mark
infringements.
170 The notice must contain certain information, such as proof of ownership of copyright or trade mark,
and evidence of infringement.
171 Although not specifically dealing with intellectual property rights, the authorities in their checklist
of issues relating to enforcement submitted to the Council for Trade-Related Aspects of Intellectual PropertyRights have suggested that the illegal use of trade marks could be taken as an indication that the counterfeitproduct meets the standards of the genuine product and therefore should not be permitted entry intoWT/TPR/S/115 Trade Policy Review
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130. According to data provided by the authorities, since 1998 and up to mid-April 2002, there
have been:  28 cases citing the Copyright Act 1994;  26 cases citing the Trade Marks Act 1953;  and
19 cases citing the Patents Act 1953 before New Zealand Courts.
                                                                                                                                                                    
New Zealand under the above-mentioned law;  they also add that the use of this Order in this way has not been
tested in the courts (WTO document IP/N/6/NZL/1, 24 February 1997).