New Zealand WT/TPR/S/216 
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IV. TRADE POLICIES BY SECTOR 
(1) INTRODUCTION  
1. Since its last Review, New Zealand has continued to lower its average level of tariff 
protection as well as continuing with deregulation.  However varying levels of border protection and 
state involvement persist in certain sectors, wh ich represent potential impediments to the efficient 
allocation of resources in the economy. 
2. Agriculture, forestry, and fishing accounted for 6.2% of GDP and 7.5% of total employment 
in 2006/07, which indicates that agricultural labour pr oductivity is substantially less than the level in 
the rest of the economy.  However, agriculture's to tal factor productivity growth exceeded that of the 
wider economy and the sector is very competitive in ternationally.  Consequently, it remains an 
integral part of New Zealand's economy, accounting for over 60% of its merchandise exports in 2007.  
The Government provides very little support to the sector with the Producer Support Estimate (PSE) being 0.7% (the lowest in the OECD);  support is pr ovided in the form of san itary barriers, especially 
for poultry and eggs, disease and pest control, or relief against climate disasters.  Average applied 
MFN tariffs in the sector have declined, and no im ports are subject to non-tariff barriers, such as 
quantitative restrictions or licensing.  During the period under review, all statutory marketing boards 
have been "disestablished" and their participation in commercial aspects such as marketing and export 
rights has been deregulated.  "Industry good" activ ities previously undertaken by these boards are now 
managed as appropriate through producer-levy-funded industry or ganizations, established under the 
provisions of the Commodity Levy Act 1990.  Howeve r, one state-trading enterprise remains in place 
and has almost exclusive statutory rights for kiwifru it exports.  Fonterra cont rols 94% of the market, 
thus giving rise to competition concerns.  Changes we re also made to the Fisheries Act in 2004, which 
now allows commercial fishing of any non-quota sp ecies not on a specified list and includes other 
measures to better protect fish stocks and quota rights. 
3. In the electricity sector, there is considerable  state involvement, with approximately 60% of 
the electricity sold being generated by state-owne d companies.  The sole transmission company is 
government owned, while the distribution companie s have a variety of forms of ownership ranging 
from publicly listed companies to local community owned trusts.  Electricity is traded in a liberalized 
market system, with no regulation of wholesale or retail prices.  Some electricity transmission and distribution services are subject to price control (Chapter III and Chapter (IV)(3)(i)).  During the 
period under review, regulation was also  enacted in the gas sector and a regulator was established.  As 
a measure to reduce emissions New Zealand in troduced an emissions trading scheme in 
September 2008. 
4. The share of manufacturing in GDP changed marginally to 14.7% in 2004/05, while the share 
of employment in the sector fell from 14.4% in  2003/04 to 12.7% in 2007/08.  The share of 
manufactures in total merchandise exports declined  from 31.5% in 2003 to 27.7% in 2007.  The 
Government is committed to developing New Zeala nd into a high value, high wage and export-led 
economy.  With a view to pursuing these objectives,  the Government has taken various measures, 
such as increased budgetary fundin g for skills development, market  development and international 
marketing.  The average applied MFN tariff for manufacturing has continued to decline during the 
review period.  However, the low average of 3.65% masks tariff peaks of as much as 11.2% in 
textiles, clothing, and leather industries. 
5. Services' contribution to GDP declined slightly from 70.7% between 2003/04 to 70.4% in 
2004/05, while its share of employment increased from 69.4% in 2003/04 to 70.8% in 2007/08.  With low barriers to entry and limited restrictions on foreign investment, the services sector in WT/TPR/S/216 Trade Policy Review 
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New Zealand is relatively liberal a nd thus competitive.  However, ther e is state involvement in certain 
sectors, including aviation, where the Government h as a majority stake in the largest airline.  
Deregulation has continued in the telecommunications  sector with the unbundling of the local loop.  
With regard to coastal shipping, the legal cons traint on the use of overseas registered "demise 
chartered" ships (section (5)(iv)(b)) has been elimin ated.  The reform of the financial sector has 
continued with the implementation of the Basel II capital adequacy framework in 2008, and the 
planned prudential regulati on and supervision of the insurance sector expected in 2011.  New Zealand 
has commitments in 90 of the 155 sectors under GATS.  
(2) AGRICULTURE , LIVESTOCK , AND FISHERIES  
(i) Overview 
6. Agriculture's contribution to GDP (including fo restry and fishing) declined from 6.4% in 
2002/03 to 6.2% in 2006/071, while its share of total employment declined from 8.5% to 7.1% 
(Table I.2) implying that labour productivity in th e sector is improving, although it is still lower than 
the level in the rest of the economy.  Agricultu re's share in New Zealand's merchandise exports 
remained steady at nearly 60% between 2003 and 2007 (Table AI.1).  New Zealand's main agriculture 
exports are dairy and meat prod ucts, which accounted for over 17% and 10.2% of all merchandise 
exports in 2007.  It is a net-exporter of dairy pr oducts, meat products, fruits and vegetables.  It is a 
net-importer of food staples, such as wheat, rice, and sugar products.  
7. Economic reforms in the 1980s a nd 1990s have increased efficiency in the agriculture sector.  
Recent research by the Ministry of Agriculture and Forestry shows that, compared with other sectors, 
productivity gains have been the highest  for agriculture over the past decade.2 
8. Recent policy developments in agriculture are concerned with sustainable development and 
resource management.  In this regard, in November  2004 bio-security functions in different ministries 
were merged into Ministry of Agriculture and Forestry (MAF) Biosecurity New Zealand.  The 
Sustainable Water Programme of Action was initiated in 2003 so as to maintain the quality of water 
and meet the increasing demand for water (including for irrigation).  The Sustainable Farming Fund3, 
which has been in operation since 2000, has prov ided grants of NZ$85 million to more than 
600 producer led projects (as of 2008).  The agriculture  sector is subject to the Commerce Act and the 
Fair Trading Act, both of which are administer ed by the Commerce Commission.  The Commerce Act 
promotes long-term benefits for consumers and au thorizes the Commission to take action against 
anti-competitive behaviour.  The Fair Trading Act prohibits misleading and deceptive conduct and 
unfair trading practices. 
(ii) Border protection 
(a) Import measures 
9. New Zealand's tariffs on agricultural products ha ve continued to decline since its previous 
Review in 2003.  The average applied MFN tariff under the WTO definition of agriculture was 1.8% 
in 2008/09, compared with 2.1% in 2002.  This is lower than New Zealand's overall simple applied 
                                                      
1 Figures provided by the authorities. 
2 Since 1998, multifactor productivity growth in the agriculture sector has been 1.8% per year 
compared with 0.9% for the economy as a whol e (Ministry of Agriculture and Forestry, 2008). 
3 The fund focuses on short-term (1-3 years) projects and provides funding for projects that enable 
access to information, technol ogy or tools that bring together commun ities to address thei r problems and to 
improve their economic base. New Zealand WT/TPR/S/216 
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MFN tariff, which was 2.5% in 2008/09.  The Ne w Zealand Schedule of Commitments allows for 
tariff-rate quotas for apples, pears, and hop cones, but New Zealand does not apply these quotas because the applied MFN tariff on these products is  zero.  New Zealand's exports of several key 
agricultural products, however, are subject to ta riff-rate quotas imposed by some trading partners 
(section below). 
10. There has been no change to the Commodity  Levies Act 1990.  The Act permits products, 
including those imported, to be subject to comp ulsory levies for industrial research purposes.  
Additionally, the Act permits the farming and hortic ultural sector to fund "industry good" activities, 
such as research, information dissem ination, and product promotion. 
(b) Export measures 
11. State involvement is limited to the Governme nt allocating export licences (Chapter III) for 
certain dairy and meat products destined for certain markets. 
12. The Zespri Group Limited (Chapter III), which is owned by kiwifruit growers, has been 
authorized by the New Zealand Kiwi fruit Board, to have the automatic, but not sole, right to export 
New Zealand grown kiwifruits to all markets (except Australia).
4  All other exporters of kiwifruit 
must seek approval from the Board to be able to export kiwifruit in collaboration with Zespri, which 
effectively means that Zespri has a near monopoly on exports (for markets other than Australia).  
Exports to Australia are governed by the New Zeal and Horticulture Export Authority Act 1987 (the 
HEA Act).  The HEA Act imposes qualitative rest rictions through industry-developed export 
marketing strategies.  Restricting the volume of exports  or number of exporters to a particular market 
is not permitted under the HEA Act.  
13. Fonterra Co-operative Group (section (iii) belo w and Chapter III), created in 2001, is the 
main exporter of dairy products.  Although Fonterra has no monopoly rights on dairy exports and, in 
principle, competes with other cooperatives and dair y processing companies, it has exclusive licences, 
up to 2010, to export dairy products to designated restricted markets, as listed in the Dairy Industry 
Restructuring Act.  Under an amendment to the Ac t in December 2007, the Ministry of Agriculture 
and Forestry will allocate export licences, based on eligibility criteria5, once Fonterra's initial rights 
end.6  Also under the amendment, the New Zealand Food Safety Authority will be responsible for 
compliance, certification, and enforcement.  No  export licences are necessary for non-restricted 
markets. 
                                                      
4 Zespri Group Limited is the only state-trading enterprise notified to the WTO, and was formerly 
known as the Kiwifruit Marketing Board.   
5 To be eligible for an export licence to a restricted  market the applicant must  collect and acquire legal 
title in at least 0.1% of total milk solids collected from dairy farmers in New Zealand and be registered to export 
under the Animal Products Act 1999.  The licences will be allocated in proportion to the applicant's share of the 
total milk solids collected by eligible participants, and are transferable between elig ible persons (Ministry of 
Agriculture and Forestry online information.  View ed at:  http://www.maf.govt.nz/mafnet/publications/ 
regulated-dairy-quota-market/q-and-a.h tm#how-allocated [7 August 2008]). 
6 Export licences are to be allocated annually depending on when Fonterra's initial rights expire.  The 
designated markets after Fonterra's in itial rights expire, and the dates on wh ich those initial rights expire, are as 
follows:  milk powder to the Dominican Republic in D ecember 2007;  butter and cheese to the EC:  expiring 
progressively in 2007, 2008, 2009, 2010;  low fat ch eese and cheddar cheese to the United States:  expiring 
December 2008;  NSPF (not specifically  provided for) cheese and American-t ype cheese to th e United States:  
expiring December 2009 and;  prepared edible fat (PEF) to Japan:  expiring March 2010 (Ministry of 
Agriculture and Forestry online information.  View ed at:  http://www.maf.govt.nz/mafnet/publications/ 
regulated-dairy-quota-market/q-and-a .htm#how-allocated [7  August 2008]. WT/TPR/S/216 Trade Policy Review 
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14. Under the Meat Board Act 2004, the New Zeal and Meat Board allocates and manages export 
quotas for beef and veal for the United States, and hi gh quality beef, sheep, and goat meat destined for 
the EC.7  The New Zealand Meat Boar d also registers companies for export and provides documents 
of origin for exports.  
(iii) Domestic support  
15. Agriculture in New Zealand is relatively free of domestic contro ls and support.  According to 
the OECD, New Zealand's overall producer support es timate (PSE) was 0.7% in 2007 compared with 
2% in 2003, the lowest in the OECD (Chapter III).8  Domestic producers of poultry and eggs are 
protected from exotic diseases and pests by sanitary  measures imposed at the border.  These measures 
have resulted in domestic prices being higher than international prices.9  Between 2005 and 2007, 
single commodity transfers (SCT), which reflect the difference between world and domestic prices, 
were 19% for eggs and 11% for poultry, compar ed with 32% for eggs and 9% for poultry in 
2004-06.10  Budgetary support is also provided for basic research for pest and disease control and 
disaster relief for adverse climatic events;  a nd the Government has set up a fund to encourage 
sustainable farming.11  New Zealand's total Aggregate Measure  of Support (AMS) has been zero since 
1995.12 
(iv) Other agriculture policies 
16. At present, two producer organizations ha ve statutory powers to collect levies from 
producers;  these are Deer Industry New Zealand and the Pork Industry Board.  All other statutory marketing boards have been abolis hed and participation in commerc ial aspects of the agriculture 
sector, such as marketing and exports, has been de regulated.  "Industry good" activities previously 
undertaken by statutory marketing boards are now managed through industry organizations, 
established under the provisions of the Commodity Levy Act 1990. 
17. The Commodity Levies Act 1990 permits the imposition of compulsory levies on 
commodities by the relevant industry associations:  levies may only be imposed if they are agreed by 
producers, who decide how levies are spent.
13  The levying organizations must seek a new mandate to 
collect levies every six years through a referendu m among the levy payers.  A proportion of each levy 
is spent on research and development, while the r est is spent on quality control and marketing.  
However, the levy may not be used to fund commerc ial or trading activities.  In addition, in 1996 
                                                      
7 Under the quota, 213,402 tonnes of New Zealand beef and veal may be exported to the United States 
annually at a tariff rate of US$0.044/kg.  An ad valorem  out-of-quota tariff rate of 26.4% applies to imports 
outside the quota, while 227,854 tonnes of New Zealand sheep meat and goat meat may be exported to the 
European Communities annually at zero duty.  An out-of- quota tariff rate of 12 .8% + €90.2 - €311.8 per 
100 kg/net applies to imports outside the quota (the range  of rates is a result of different rates for different 
products).  The out-of-quota tariff is administered by the EC and collected at point of entry.  In addition, 1,300 tonnes of New Zealand high-quality beef may be exported to the EC annually and attract a 20% 
ad valorem  duty.  New Zealand may also compete to supply beef to the EC under the most-favoured-nation 
global quota, which also attracts an ad valorem  duty of 20%. 
8 OECD (2005) and (2008a). 
9 OECD (2008a). 
10 OECD (2007a) and (2008a). 
11 For details see MAF online information.  Viewed a t:  http://www.maf.govt.nz/sff/ [12 August 2008]. 
12 WTO document G/AG/N/NZL/50, 21 September 2007. 
13 To impose a levy, the industry association needs permission from the Minister of Agriculture.  Under 
the Act, a compulsory levy on imports of a product are pe rmitted so long as the rate equal to or less than that 
charged for the domestically produced commodity and that the levy order would not be contrary to New Zealand's international obligations.  For further details of how levies are imposed see WTO (2003). New Zealand WT/TPR/S/216 
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Parliament granted special provisions for the Act to be used to raise levies to enable the purchase of 
disaster relief insurance for wheat growers.  
18. In 2003, the New Zealand Wool Board was "dis established", and in 2004 a new industry-good 
organization, Meat and Wool New Zealand Limited, was established by meat and wool growers to 
take over the "industry-good" functions of the New Zealand Meat Board and the former New Zealand 
Wool Board.  In this restructuring the New Zealand Meat Board's role was reduced to the 
administration of meat export quotas.  Meat and Wool New Zealand Limited uses levies collected under the Commodity Levies Act 1990 to fund i ndustry-good activities, such as product and 
production research and development, market deve lopment, education and training, and industry 
representation.  The Deer Industry New Zeala nd Regulations 2004 entered into force in 2004, 
replacing the Game Industry Board Regulations 1 985.  The Game Industry Board was replaced by 
Deer Industry New Zealand, which is financed by a levy paid by farmers on farmed deer slaughtered 
and deer velvet sold.  Deer Industry New Zealand' s prime functions are the development of markets 
and marketing of deer products, research and development into d eer and deer products, industry 
representation, and information transfer. 
19. The Fonterra Co-operative Group (s ection (ii) above and Chapter III)
14 collects around 94% 
of milk produced in New Zealand (2007/08), and is thus the dominant player in the domestic market.15  
In order to mitigate the risks of market power, the Dairy Industry Restructuring Act, inter alia :  allows 
farmers open entry and exit to/from Fonterra by co mpelling Fonterra to issue and redeem cooperative 
shares at the same price (section 71(e));  allows F onterra shareholders to supply up to 20% of their 
weekly production to an independent dairy processo r without having to redeem shares (section 108); 
limits the ability of Fonterra to lock-in suppliers  through long-term contracts by ensuring one third of 
supply contracts either expire or can be termin ated at the end of each season (section 107);  and 
permits the Minister of Agriculture to make regulati ons to compel Fonterra to supply up to 5% of its 
milk to independent processors at a regul ated price (Raw Milk Regulations 2001).16  The Raw Milk 
Regulations were designed to protect the position of companies that previously bought milk from 
Fonterra, protect domestic consum ers, and provide an entrance pa thway for new dairy processors.  
The quantity of milk supplied under the Raw Milk Re gulations is currently set  at 600 million litres per 
annum.  
(v) Fisheries 
20. New Zealand's fishing industry is governed unde r the Fisheries Act 1996, which entered into 
force on 1 October 2001, al ong with its amendments.17  The objective of the Act is to provide for the 
                                                      
14 For details of the Fonterra merger see WTO (2003). 
15 Westland Cooperative Dairy Company collects 3% of New Zealand’s milk production, Tatua 
Cooperative Dairy Group coll ects 1%, and three new independent dairy companies are responsible for collecting 
the remaining 2%. 
16 For raw milk, the default price is calculated accordin g to a formula.  Under the formula, the price is 
based on the wholesale price of milk, a prescribed prof it for Fonterra and a reasonable transportation cost (for 
transporting the milk to independent processors).  New Zealand Government online information, Regulated Milk 
Price and Quantity the same Next Year .  Viewed at:  http://www.beehive.govt.nz/release/regulated+milk+price+ 
and+quantity+same+next+year [20 October 2008];  an d Dairy Industry Restructuring Act:  Compliance.  
Viewed at:  http://www.comcom.govt .nz//IndustryRegulation/DairyInd ustryRestructureAct/ContentFiles/ 
Documents/Compliance.pdf [20 October 2008]. 
17 Several changes were made to the new Act before  full implementation, and regular adjustments to 
the framework continued until 2004.  The only change sin ce then was made in Septembe r 2008, to section 13 of 
the Act.  This amendment addressed a technical interp retation of the section by the Courts in respect of 
information required before TACs can be set.  The amendment ensured that TACs can continue to be set for all QMS stocks on the basis of the best available information. WT/TPR/S/216 Trade Policy Review 
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sustainable use of fisheries resources and the aquatic environment.  To ensure efficient sustainability 
of New Zealand's fishing stocks, commercial fi shing is regulated under the Quota Management 
System (QMS), which has been in place since 1986  and includes most commercially caught species 
(presently 96).18  Both the Act, and the QMS are administered  by the Ministry of Fisheries.  However, 
FishServe (a subsidiary of New Z ealand Seafood Industry Council (SeaFIC))19, is contracted by the 
Ministry of Fisheries to deliver registry services required by the Act.  They issue all commercial 
fishing permits (mandatory for fishing in New Zeal and) on behalf of the Ministry.  Other registry 
functions, such as maintaining the registers of a ll quota and ACE trades, and vessel registration, have 
been devolved and are also delivered by FishServe.  T he Maori Fisheries Act, passed  in 2004, gave 
legal force to a model agreed among iwi (Maori tr ibes) for the allocation of around NZ$750 million of 
assets derived from the 1992 Fisheries Settlement.  Th e value of the assets is made up of individual 
transferable quotas (ITQ) shares, company assets, and cash surpluses derived from the management of 
the assets since the Settlement.  Under the Act a pr ivate trust has been established to allocate the 
assets transferred from the Crown through the Maori Fisheries Settlement to the concerned people 
(Maori).  The Ministry of Fisheries continues to  administer the Maori Fisheries Act and has ongoing 
obligations to provide 20% of any new QMS stocks to the trust.  Maori interests currently control 
approximately 27% of New Zealand's commercial fishing rights.  
21. The Minister of Fisheries sets a total allowa ble catch (TAC) for each fish stock managed 
under the QMS – defined as a species or species group in a quota management area (QMA).  The TAC is based on an annual scien tific assessment of population size of all major commercial fish 
species in each QMA, and is set, where possible, acc ording to what is determined to be the maximum 
sustainable yield.
20  The total allowable commercial catch  (TACC), a subset of the TAC, is 
determined after taking into account non-commercia l fishing interests and other fishing induced 
mortality.  The annual TACC is then divided into individual transferable quotas (ITQs) for each species and stock of fish.  Each share has an a nnual quantitative equivalent (annual catch entitlement 
or ACE) in proportion to the total TACC available for each stock.  ACEs can be traded during the 
fishing year;  however, leasing of ITQs or catching against another fisher's ITQ is not permitted .  
Quota rights are allocated on the basis of catch hist ory during qualifying years.  Any surplus ITQs are 
distributed by the Crown through tender.  Changes to the Fisheries Act in 2004 allow commercial fishers to fish any non-QMS species not listed in Schedule 4C of the Fisheries Act 1996.  
22. The Fisheries Act 1996 establishes a system by which permit holders must balance their 
catches against their ACE – the catch balancing regime.  The regime is designed to provide 
appropriate incentives to encourage a ll fishers to fill their catch of QMS stocks with ACE.  Fishing 
without ACE is controlled in the first instance, by administrative incentives based on the payment of 
deemed values.
21  Misreporting is a criminal offence.  Following a joint review of the balancing 
regime by industry and government, new guidelin es for setting deemed values were implemented 
from 2007.  This more rigorous approach is expect ed to better protect stocks from over-fishing and 
safeguard the value of quota rights.  In 2008, the Minister of Fisheries endorsed the Harvest Strategy 
Standard, a policy directing tighter  application of measures to protect stocks against depletion and 
                                                      
18 Ministry of Fisheries online information.  Viewed at:  http://www.fish.govt.nz/en-nz/Publications/ 
Ministerial+Briefings/Ministerial+Briefing+05/Annex+1+-+Fisheries+Management+in+New+Zealand/Fisheries 
+management+in+New+Zealand. htm [18 August 2008]. 
19 SeaFIC is funded under a Commodity Levy Order collected on all fish (including shellfish and 
crustaceans) except imported fish. 
20 The highest yield that can be achieved over time while maintaining the stock's productive capacity. 
21 Deemed values (or amounts to be paid to th e Crown if the catch ex ceeds the annual catch 
entitlements) are set in order to provide an incentive fo r all commercial fishers to acquire ACE in respect of 
each fishing year that is consistent with the catch of the stock taken by  the fisher.  The deemed value is 
supposed to be set at a level that is higher than the ACE price for the stock plus costs of obtaining ACE. New Zealand WT/TPR/S/216 
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prescribing management responses and maximum rebu ild times for stocks that drop below benchmark 
limits. 
23. To ensure that no single company or person dom inates the fishing of any particular species, 
the Fisheries Act allows capping of the total amount of the quota that may be held by individuals.  
The Minister of Fisheries sets the limit in consulta tion with organizations or persons considered to be 
representative of the classes of persons having an inter est.  However, the Minister of Fisheries has the 
authority to approve a higher limit for any entity th at applies for this prior to purchasing the shares 
that would take it above the limit set in the Act.  Fewer companies are holding a larger share of the allocated quota.
22 
24. Fishing quotas and ACE may only be held by na tionals of New Zealand or by majority-owned 
domestic companies;  permission may be granted, under certain circumstances, by the Minister of 
Fisheries and the Minister of Finance, for an ove rseas person to hold a fishing quota in New Zealand 
(Chapter II(5)).  Foreign-owned fishing vessels ma y operate in New Zealand waters (within the 
200 mile limit) if they are chartered to a New Zealand permit holder.  All fish landed from such 
vessels is the property of the New Zealand charterer who uses their ACE to balance the catch taken.  
Under the Act, foreign licensed vessels are also pe rmitted to fish in New Zealand waters;  however, 
this has not occurred for a number of years.   
(3) ENERGY  
25. New Zealand is currently self-sufficient in all primary energy sources (such as coal and gas) 
except oil;  New Zealand met only 32% of its oil demand from domestic sources in 2007.23  Oil is 
responsible for 38% of New Zealand's primary energy  supply, while gas, hydro, coal, and geothermal 
and solar energy are responsible for 23%, 11%, 9% , and 13%, respectively.  Oil is used almost 
entirely for transportation needs, wh ile gas, hydro, coal, and geothermal and solar energy are used 
mainly for electricity generation.24  The transportation sector accounted for 44% of energy 
consumption, the industrial sector for 31% and othe rs (including commercial and domestic users) for 
the remainder.25  
26. The Government's current overall objective with regard to energy policy is "to ensure that 
electricity is delivered in an efficient, fair, re liable and environmentally sustainable manner to all 
consumers".  In October 2007, the Government issu ed the New Zealand Energy Strategy to 2050 and 
the New Zealand Energy Efficiency and Conservati on Strategy.  The salient features of the former 
include, inter alia , encouraging the use of resilient low carbon transport26, security and reliability of 
electricity supply, low-emission power and heat, mo re efficient use of energy, and innovating and 
developing sustainable energy technologies.  New Zealand aims to increase the proportion of electricity generated from renewable sources to 90%  by 2025 from approximate ly 67% in 2007.  As 
part of its energy-efficiency strategy, the previous Government announced the EnergyWise Homes package.  Under the package, inter est-free loans were to be offered to  home owners to enable them to 
                                                     
 
22 Currently the leading New Zealand fishing compan ies and quota holders are Sealord Products Ltd, 
Sanford Limited, Talley's Fisheries Ltd, Te Ohu Kai Moana Trustee Ltd, and Aotearoa Fisheries Ltd, and the 
member companies of the Seafood Industry Consortium (Seafood Industry Council online information, "Industry fact file".  Viewed at:  http://www.seafoodindustry.co.nz /factfile [20 February 2009]). 
23 Ministry of Economic Development (2008a). 
24 Investment New Zealand (2006b). 
25 Ministry of Economic Development (2008a). 
26 Steps in this regard include deployment of elect ric vehicles and use of more efficient and lower 
impact transport modes, increasing use of bio-fuels and pricing greenhouse gas emissions.  As its reliance on oil subsides New Zealand would become more resilient to international price movements. WT/TPR/S/216 Trade Policy Review 
Page 80 
 
 
pay for energy-efficient upgrades as well as grants for low-income households for energy-efficient 
retrofits.  Other measures included, the trial implementation of the home energy rating system27, 
increased research funding for en ergy-efficient technologies, and an information campaign geared 
towards providing consumers with advice on how to improve energy efficiency in their homes.  
However, the new Government suspended the progr amme in December 2008.  In September 2008, the 
Government introduced an emissions trading sch eme.  The scheme puts a price on greenhouse gases 
and provides an incentive to reduce emissions and increase forest areas. 
(i) Electricity 
27. The bulk of the electricity generated in New Zealand is through hydro (55% in 2007) and 
other renewable means (10% in 2007), while gas (26%) and coal (7%) are responsible for most of the 
remainder.  Industry is the largest user of el ectricity accounting for 44% of consumption in 2007, 
followed by the residential sector (33%), and the commercial sector (23%).28 
(a) Regulation 
28. The sector is subject to generic competition an d fair trading laws, which are monitored and 
enforced by the Commerce Commission (Chapter II I).  Transmission and distribution businesses are 
subject to economic regulation, information disclos ure and price-quality regula tion under Part 4 of the 
Commerce Act (Chapter III), which is also admini stered by the Commerce Commission.  Distribution 
businesses that are "consumer-owned" are exempt from price-quality regulation.29  Furthermore, with 
respect to price-quality regulation for distribution businesses, the Commerce Commission is to set "default" price and quality paths from April 2009.
30  This includes initial prices, rates of changes 
relative to the Consumer Price Index (CPI) and qua lity standards for a specified regulatory period.  
However, individual businesses may apply for customi zed terms and propose alternative price and/or 
quality paths.  Any breaches of price-quality paths ar e subject to pecuniary and criminal penalties, 
which are to be administered by the courts.  New Zealand's only supplier of electricity transmission service, is subject to an administrative settlement  with the Commerce Commission that provides price 
and quality thresholds that are applicable until 30 June 2011. 
29. The sector is also subject to the Electricity Governance Regulations 2003 and Electricity 
Governance Rules 2003, administered by the Electri city Commission.  These regulations and rules 
govern the technical operation of the power system and the wholesale and retail markets.  The Commission, established in 2003, is required to:  promote efficient competitive markets and foster a climate conducive for investment;  use reasonabl e endeavours to ensure security of supply
31;  
                                                      
27 This is a measure of a dwelling's energy efficien cy, which is provided to the prospective buyers of 
the property. 
28 Ministry of Economic Development (2008a). 
29 A distribution business that is "consumer owned" needs to satisfy all of the following conditions:  the 
business is fully owned by consumer trusts or cooperatives, has less than 150,000 installation control points 
(ICPs), trustees or directors are elected, and at least 90% of consumers benefit from a share in the income of the 
distribution business. 
30 Presently the Commission sets thresholds for pri ce and quality, which are, in effect, a screening 
mechanism.  The regime requires the distribution compan ies to peg their prices to the Consumer Price Index 
(CPI) and deduct an efficiency fact or X.  These thresholds were used to identify lines businesses whose 
performance may require further examination, and, where necessary, the Commerce Commission could impose 
control. 
31 The Electricity Commission is required to contract for reserve generation to provide additional 
supply during very dry periods.  The Government owns a reserve energy plant, which is diesel fuelled for use in 
very dry years.  The plant can only be  operated on instructions issued by  the Commission.  The cost of operating 
reserve generation is met through a levy across all consumers. New Zealand WT/TPR/S/216 
 Page 81 
 
 
determine the transmission pricing methodology;  an d approve grid upgrades.  In addition, it provides 
information to the industry through mandatory pub lication of a Statement of Opportunities (SOO) 
once every two years.  
(b) Structure and pricing 
30. The electricity generation sector is unrestricted in terms of entry, and a producer may sell 
electricity to anyone directly or through the electri city market mechanism.  In March 2006, over 60% 
of the electricity sold was produced by state-owned companies.32  There is one foreign-owned 
electricity generator, which has a 21% market sh are.  Transpower, a gove rnment-owned company, 
owns and operates the national grid and transmits electricity throughout New Zealand by supplying 
the 29 distribution companies;  these are regiona l monopolies.  The ownership structure of the 
distribution companies varies and usually involves community trusts and local bodies.  There are 
restrictions on the amount of generation capacity  distribution companies may own, and on the 
quantities of electricity they may retail.  There are no restrictions on foreign investment in the sector. 
31. The electricity wholesale spot price is determined  for each of the 48 half-hour trading periods 
every day, across the country.  The price for each hal f-hour period is set based on the generators' offer 
for that period.  Usually generators offering the lowe st prices are brought on first to meet the system 
demand, while all generation procured for the give n time period is paid for at the highest accepted 
offer for that period.  Prices vary across the count ry mainly due to distance between generation and 
demand centres.  The retail electricity price paid by the consumer typically comprises two components:  the cost of Transpower and th e distribution companies operating and maintaining 
the transmission networks, and the cost of procuri ng electricity from the generators in the wholesale 
market.  Electricity wholesale and retail prices are unregulated for all classes of consumers.  
(ii) Hydrocarbons 
32. New Zealand is self-sufficient in the supply of natural gas.  In 2007, about 15% of the gas 
was used by the petrochemical industry and 59% fo r electricity generation.  New Zealand produced 
32% of its oil needs while the remainder was impor ted.  Domestic transport accounted for over 83% 
of oil consumption in 2007.
33  
33. The gas industry's principal policy objective is to  "ensure that gas is delivered to existing and 
new customers in a safe, efficient, fair, reliable and environmentally sustainable manner."  Against this backdrop, in October 2004 a co-regulatory sy stem of governance was introduced, and the industry 
body, Gas Industry Company (GIC), was establis hed.  The GIC is responsible for making 
recommendations to the Minister of Energy in line  with the policy objectives for the gas industry, set 
out in the Gas Act (1992) and the Government Polic y Statement on Gas Governance (GPS), issued in 
October 2004 and revised in April 2008.  The res ponsibilities of the GIC specifi ed in the Government 
Policy Statement, include:  ensuring that gas supply meets demand;  minimizing impediments to 
competition in the gas industry (both upstream a nd downstream);  enhancing investment incentives in 
the gas industry;  ensuring that delivered gas costs and prices are subject to sustained downward 
pressure
34;  and that the industry operates efficiently.  U nder the GPS, GIC is expected to protect the 
interests of small consumers by providing access to a complaints resolution system as well as ensuring 
that contractual arrangements with gas retailers prot ect the long-term interest s of small consumers.  
The GIC is also expected to wo rk towards an efficient retail and wholesale market by:  removing 
                                                      
32 Investment New Zealand (2006b). 
33 Ministry of Economic Development (2008a). 
34 The GIC also requires that the full costs of producing and transporting gas be disclosed to 
consumers. WT/TPR/S/216 Trade Policy Review 
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barriers to efficient and effective customer switching;   providing an efficient market structure for the 
provision of gas metering and pipelines, and ensuri ng that all participants, including new entrants, 
have access to key infrastructure and relate d services on reasonable terms and conditions.  
Additionally, GIC is responsible for ensuring so und arrangements for the management of critical 
contingencies;  providing access to an appropr iate compliance and dispute resolution process;  
monitoring the effectiveness and relevance of gas governance arrangements and providing good 
publicly available information on the performance and pr esent state of the gas sector.  GIC is to work 
closely with the Electricity Commission to ensure that the Government's energy objectives are met.  
Furthermore, under the Commerce Act, the Commerce Commission controls some gas distribution 
pipeline services to ensure fair pricing and quality for consumers.35 
34. With a view to improving New Zealand's self-su fficiency in oil and exploitation of domestic 
gas sources, the Government announced a package of incentives through the minerals programme in 
2005.  Royalty payments were reduced on discoveries made between 1 July 2004 and 
31 December 2009, the definition of discovery fo r the purpose of royalty eligibility was introduced, 
and the procedure to process for flaring and venting was simplified.36  There are no restrictions on 
foreign investment or participation in this sector. 
(4) MANUFACTURING  
35. The manufacturing sector is subject to the Commerce Act and Fair Trading Act, both of 
which encourage competition and protect consumer s (Chapter 3).  New Zealand manufacturing is 
open to foreign investment and has very little protection.  The share of the manufacturing sector in 
GDP has continued to decline;  its contribution w as 14.7% of GDP in 2004/05 (Table I.2).  The share 
of employment in the sector fell from 14.4% in 2003/04 to 12.7% in 2007/08.  Major industries 
include:  food and beverage processing, tobacco, a nd certain niche industries such as textiles, 
clothing, footwear, and leather.  The food and beverage industry, which accounts for 33.3% of 
manufacturing output (in 2004/05) and employs 25% of the manufacturing workforce and accounts for nearly 50% of New Zealand's total merchandise exports, is easily the most important 
manufacturing subsector.  Other manufactures exports  include machinery and transport equipment, 
chemicals, and semi-manufactures.  
36. The policy objective in manufacturing is to develop a knowledge-based economy.  The 
Government is committed to developing New Zeala nd into a high wage, high value, innovative and 
export-led economy
37;  and in this regard, recognizes the ro le of high technology industries in 
supporting growth.38  To implement its objectives, New Zealand has developed a network of 
industry-specific and regional clusters.  These cluste rs are expected to foster quality improvements, 
innovation, and business development;  they are in, inter alia , information technology, biotechnology 
(including agricultural biotechnology), and engineer ing.  In August 2005, New Zealand Trade and 
                                                      
35 Price control was introduced on gas distribution pri ces in July 2005.  Price reductions applied in 
2005 averaged 9% for one distributor (Powerco) and 9.5% for the other (Vector).  Since those reductions were 
imposed, prices have been held constant in nominal term s.  Further price reductions of 11.1% are required from 
Powerco, and 3.7% from Vector, implying that prices will be  held constant in real terms for the remainder of the 
control period (up to July 2012).  As the price reductio ns relate to average prices, the businesses have the 
flexibility to determine the appropriate balance between di fferent customer classes.  For further details on the 
price control of gas distribution pipelines see Commerce Commission online information.  Viewed at:  
http://www.comcom.govt.nz/IndustryRegulati on/Gas/formofcontrolconference1.aspx. 
36 Flaring is the controlled burning of natural gas at a well site or facility;  venting is the release of 
uncombusted natural gas into the atmosphere. 
37 Ministry of Economic Development online information, "Manufacturing Ongoing Success".  Viewed 
at:  http://www.med.govt.nz/templates/Multipage DocumentTOC____28679.aspx [20 August 2008]. 
38 Investment New Zealand (2006a). New Zealand WT/TPR/S/216 
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Enterprise (NZTE) (Chapter III) established the ma nufacturing vision group, comprising industry 
leaders, manufacturers, unions, and government repres entatives, to develop a clear vision and strategy 
for New Zealand manufacturing.  The group's report (Manufacturing Plus), released in November 2006, prescribes a framework for manufacturers to become more innovative and 
competitive.  It suggests, inter alia,  that manufacturers:  create and maintain innovative business 
models, which evolve with time and needs;  creat e world-leading brands a nd designs;  know where in 
the global value chains New Zealand manufacturing w ould best fit;  and connect  with global networks 
and information access.  In addition, the report su ggests integrating manufactured goods with service 
offerings such as providing after sales service, support, and training.   
37. Manufacturing (ISIC 3) is currently protected by an average MFN tariff of 2.7% (2008/09), 
down from 4.3% reported at the time of the previo us Review in 2003.  The relatively low overall 
average applied MFN tariff for manufacturing masks tariff peaks in textiles, clothing, and leather 
industries (ISIC 32).  The average applied MFN ta riff for these industries is 5%, down from 9.6% in 
2003.  Tariff rates for clothing (ISIC 3220) are still higher, averaging 11.2%, while footwear (ISIC 3240) imports face average tariffs of 8.1%.  Furthermore, the sector is subject to escalation, 
with rates rising from zero and 1.5% during the firs t two stages of processing, to 8.5% for fully 
processed goods (Chapter III).
39 
38. Government measures include:  funding unde r the 2007 budget for industry training 
organizations (ITO), to help them identify industr y skill and training needs;  initiatives to help 
improve the attractiveness of manufacturing as a career40;  and a skills strategy launched in 2008.  The 
latter aims to integrate the workplace and formal education or training system by improving the use 
and retention of skills, increasing employer and worker awareness of skills needs, and working 
towards a more responsive education and traini ng system to increase the supply of skills.  
Furthermore, with a view to improving New Zealand firms' international access, the authorities have 
taken new initiatives, including:  NZ$40.5 million for the Market Developmen t Assistance Scheme;  
increased funding for Beachheads41;  and NZ$2.6 million to enhance the profile of New Zealand food 
and beverage firms internationa lly.  Furthermore, the Food an d Beverage Product Development 
Infrastructure Project was initiated in April 2007 to identify possible short-comings in food and 
beverage innovation and commercialization infrast ructure and assess the need for government 
investment.  Feasibility studies on the Smart Food Network and the New Zealand Food Innovation Centre, completed in October 2007, identified a need for facilities to enable in novative foods firms to 
better develop and commercializ e new products.  Consequently, a proposal for a Food Innovation 
Network New Zealand (FINNZ) was put forward in July  2008.  The Government is expected to make 
a decision in the first half of 2009 on whether it will provide funding for this initiative.  The 2007 
Budget also reduced the base rate of company ta x and introduced an R&D tax credit (revoked from 
end April 2009) (Chapter III) to assist manufacturers. 
39. In August 2007, a manufacturing action group (a public-private partners hip between industry, 
NZTE, and MED) was created to:  support the im plementation of the Manuf acturing Plus report and 
provide advice to the Government on issues regard ing the development of the manufacturing sector;  
                                                     
 
39 WTO calculations, based on data provided by the New Zealand authorities and the New Zealand 
Customs Service. 
40 These include:  the 'Future in Tech' programm e, aimed at promoting careers in technology, 
engineering and science;  the 'Gateway' programme, o ffering senior secondary school students structured 
workplace learning across more th an 50 industries and hu ndreds of businesses around New Zealand. 
41 NZTE's Beachheads Programme gives high-growt h-potential companies faster access to better 
international networks through succes sful executives who are willing to share their experience, skills, and 
business networks to help businesses speed up their market entry in key export markets.  In 2008, Beachheads' expenditure was NZ$5.8 million. WT/TPR/S/216 Trade Policy Review 
Page 84 
 
 
coordinate the implementation of the Manufacturi ng Plus report across industry and government;  and 
assess the extent to which the manufacturing sec tor is aware of existing government support.  
Initiatives taken by NZTE include:  a series of Manufact uring Plus workshops in  regions with a strong 
manufacturing presence, in partnership with Busine ss New Zealand and its affiliate organizations;  
and a dedicated NZTE team, which is to assist firms to create business models based on the 
recommendations of the Manufacturing Plus report and identify areas for improvement. 
(5) SERVICES  
(i) Features 
40. Between 2002/03 and 2007/08, the services sector gr ew at an average annual rate of 3.9%, 
slightly faster than GDP growth.  Consequently, the share of services in GDP remained static (at 
around 70% between 2002/03 and 2004/05), while its  share of total employment increased (from 
69.4% in 2003/04 to 70.5% in 2006/07).  Within ser vices, finance, insurance, and business services, 
and wholesale and retail trade are the two largest categories, accounting for 14.4% and 12.9% of 
GDP, respectively, in 2004/05 (Table I.2).  Be tween 2003/04 and 2007/08, services exports grew to 
NZ$12.7 billion (approximately 26% of total exports of  goods and services (Table I.4), while imports 
grew at an average annual rate of approximately 4.6% to NZ$12.5 billion, resulting in a decrease in 
the services surplus to NZ$0.5 billion.  Travel, e ducation, transport and business services have been 
the main services exports, but the range of exported services has diversified in recent years. 
41. New Zealand has commitments in 90 of the 155 sectors under GATS.42  As regards individual 
modes of supplying services in almost all are as where New Zealand has made GATS commitments 
(or offers), it has made full commitments on cross- border supply (Mode 1).  However, in financial 
services, New Zealand's Mode 1 and 2 market ac cess and national treatment commitments are bound 
in line with the obligations in the GATS' Unde rstanding on Commitments in Financial Services, 
which are not as comprehensive as commitments New Z ealand has made in other areas.  New Zealand 
has Article II (MFN) exemptions for audio-visu al services, interpretation services, and maritime 
services (supply of officers on New Zealand ships is lim ited).  New Zealand is an active participant in 
the ongoing services negotiations and is committed to an ambitious outcome in the DDA.  In its view, 
it has made extensive commitments under the GATS a nd in its revised offer under the DDA, offering 
commitments in more than 100 sectors, and has an Article II (MFN) exemption for only audio-visual services (Film Co-Production Agreements).
43  New Zealand has been particularly active in pursuing 
greater commitments on education services.  New Zealand also seeks disciplines on domestic 
regulations affecting trade in services that are more robust than existing GATS disciplines, an 
objective it pursues both in the WTO and in PTA negotiations.44  
(ii) Banking and insurance 
(a) Banking 
42. There are 18 registered banks in New Zealand (July 2008), of which ten are branches of 
foreign banks, and one (Kiwibank) is a state-owne d enterprise (Table IV.1).  The banking sector is 
characterized by a high level of concentration;  the four largest banks (all predominantly Australian 
owned but incorporated in New Zealand) contro lled 83% of the banking system's assets in 200845, 
                                                      
42 WTO document S/DCS/W/NZL, 24 January 2003. 
43 WTO document TN/S/O/NZL/Rev.1, 17 June 2005. 
44 APEC (2007a). 
45 RBNZ (2008a) and (2008b). New Zealand WT/TPR/S/216 
 Page 85 
 
 
while the largest bank was responsible for over 33% of  the banking system's a ssets.  Banks are subject 
to the Commerce Act and the Fair Trading Act.  
Table IV.1 
New Zealand banks' market share and ratings, June 2008 
Credit ratings Bank Market share 
S&P Moody's Ultimate parent 
ABN AMRO Bank NV 0.4 AA- Aa2 Branch 
ANZ National Bank Limited 33.4 AA Aa2 ANZ Banking Group Limited 
Commonwealth Bank of Australia 2.0 AA Aa1 Branch 
ASB Bank Limited 17.3 AA Aa2 Commonwealth Bank of Australia 
Bank of New Zealand 17.5 AA Aa2 National Australia Bank 
Citibank N A 1.3 AA Aa1 Branch 
Deutsche Bank A G 1.3 AA- Aa1 Branch 
JPMorgan Chase Bank N A 0.0 AA Aaa Branch 
Kiwibank Limited 2.1 AA- - New Zealand Post Limited 
Kookmin Bank 0.1 A A2 Branch 
Rabobank Nederland  0.6 AAA Aaa Branch 
Rabobank New Zealand Limited 1.5 AAA - Rabobank Nederland 
Southland Building Society - - - Southland Building Society 
The Bank of Tokyo- Mitsubishi, Ltd 0.2 A+ Aa2 Branch 
The Hongkong and Shanghai 
Banking Corporation Limited 1.9 AA Aa1 Branch 
TSB Bank Limited 1.0 BBB+ - TSB Community Trust 
Westpac Banking Corporation 4.6 AA Aa1 Branch 
Westpac New Zealand Limited 14.8 AA Aa2 Westpac Banking Corporation 
Source: RBNZ (2008), Financial Stability Report , May and November .  Viewed at:  http:// www.rbnz.govt.nz/finstab/ 
fsreport/index.html [20 February 2009]. 
43. The New Zealand banking sector performed well during December 2003-December 2007.  
Capital adequacy ratios improved, and the ratio of im paired loans to total lo ans has remained static 
(Table IV.2).46  Furthermore, the overall strength of the banks in New Zealand is reflected in their 
high credit ratings.  A significant portion of banks assets (nearly 45% in 2008) are mortgages.  Mortgage rates have been subject to significant co mpetition and consequently the interest rate spread 
and the net interest margin (i.e. net interest income  as a percentage of interest earning assets) declined 
during 2003-07 (Chart IV.1).  Despite the decline in the interest rate spread, bank's after-tax profits 
have increased due to a mix of asset growth and improved efficiency.  The later is evidenced by the decreasing ratio of operating costs to income.  Nearly a third of bank funding is from offshore 
sources, of which a considerable portion is of short- term maturity (one year or less).  Against the 
backdrop of the global financial crisis, the deprecia tion of the exchange rate coupled with the recent 
reduction in the Official Cash Ra te (OCR) has resulted in non-resi dent funds drying up, and tighter 
liquidity conditions for the banks.  Furthermore,  the high proportion of mortgages on the banks 
balance sheets could also be a cause  of vulnerability if real estate prices were to fall or if mortgage 
interest rates were to rise.   
44. Nonetheless, until now New Zealand's banks  have not experienced the significant 
deterioration in loan quality seen by many of their in ternational counterparts;  also they do not seem to 
                                                     
 
46 However since 2007, the level of impaired and past due assets has grown considerably as borrowers 
are finding it difficult to meet their obligations due to th e prevailing recession.  Banks are negotiating loan terms 
and repayment plans to workout loans that have defaulted;  furthermore, there is evidence of a proactive approach by banks to at-risk borrowers to pre-empt defaults. WT/TPR/S/216 Trade Policy Review 
Page 86 
 
 
have any direct exposure to sub-prime assets.  It w ould appear that the banks have sufficient capital to 
withstand loan losses.  On the other hand, bank balance sheet expansion has slowed due to the 
contraction in the domestic economy over 2008 and a tightening in lending standards prompted by the 
global credit crunch.  This is likely to affect future bank profitability.  Despite the low historic level of 
non-performing loans, provisioning levels have been rising steadily, implying the expectation of 
higher loan losses in the future as the economy weak ens.  To mitigate the impact of the global 
financial crisis, the Reserve Bank of New Zeala nd has implemented a number of measures over the 
past year to ensure the ongoing liquidity of th e banking system.  These measures include expanding 
the range of acceptable securities in the Reserve Bank's market operations to include Residential 
Mortgage-Backed securities and the introduction of a Term Auction Facility whereby the Reserve 
Bank provides secured lending to the banks for up to  one year.  The more recently announced Crown 
wholesale guarantee facility is expected to assist the banks in obtaining access to funds in global 
markets over the period ahead. 
Table IV.2 
Banking sector statistics, December 2003 to June 2008a 
(Per cent and NZ dollars)  
 Dec. 03 Dec. 04 Dec. 05 Dec. 06 Dec. 07 June 08 
Total capital (as a % of risk-weighted assets) 10.3 10.8 10.9 10.7 10.5 11.1 
Tier 1 capital (as a % of risk-weighted assets) 7.6 8.4 8.7 8.1 7.6 8.0 
Tier 2 capital (as a % of risk-weighted assets) 2.7 2.4 2.2 2.6 2.9 3.1 
Net interest income (NZ$ b illion) 5.0 5.4 5. 4 5.9 6.2 6.5 
Operating expenses as a percentage of total 
income (%) 46.1 47.6 48.0 44.4 43.2 43.3 
Other operating income (NZ$ b illion) 2.4 2.5 2. 6 2.4 2.8 2.7 
Total operating expenses (NZ$ b illion) 3.4 3.7 3. 8 3.7 3.9 4.0 
Impaired assets (NZ$ milli on) 273.0 306.6 387. 8 254.9 353.9 633.0 
Past-due assets (NZ$ milli on) 192.3 179.6 186. 4 235.3 365.8 850.0 
Impaired & past-due assets/total lending (%) 0.3 0.3 0.3 0.2 0.3 0.5 
Impaired assets/lending (%) 0.2 0.2 0.2 0.1 0.1 0.2 
Specific provisions/impaired assets (%) 45.4 34.2 38.2 35.0 31.3 28.2 
Net profit after tax (NZ$ billi on) 2.4 2.6 2. 8 3.1 3.2 3.4 
Net profits after tax as a percentage of average 
assets (%) 1.1 1.1 1.1 1.2 1.0 1.0 
a Latest available figures. 
Source:  RBNZ (2008), Financial Stability Report , May and November .  Viewed at:  http:// www.rbnz.govt.nz/finstab/ 
fsreport/index.html [20 February 2009]. 
Regulation 
45. Banks in New Zealand are regulated under the Reserve Bank of New Zealand Act 1989, 
administered by the Reserve Bank of New Zealand ( RBNZ).  The Act stipulates the provisions for the 
registration and supervision of ba nks, as well as the various powers that the RBNZ may use if bank 
distress or failure threatens the soundness of the financial system.  The RBNZ has statutory 
independence to conduct monetary policy, as we ll as promoting the maintenance of a sound and 
efficient financial system.  Banks are also subject to the Credit Contracts and Consumer Finance Act 2003.  The Act is administered by the Comme rce Commission and ensures that the creditors 
disclose all aspects of the credit agreement with regard  to fees, charges, and interest.  Furthermore the 
Act allows consumers facing unforeseen hardship  to seek changes in credit contracts.  New Zealand WT/TPR/S/216 
 Page 87 
 
 
46. Financial institutions in New Zealand do not ne ed to be registered to provide banking 
services, but they do need to be registered to call themselves banks.  The RBNZ requires that a domestically incorporated bank (whe ther domestically or foreign-ow ned) must have NZ$30 million in 
capital and that the banks directors act in the inte rests of the bank.  Furthermore, under the current 
prudential supervision system, registered banks ar e required to make quarterly public disclosures of 
their financial and prudential state;  banks must maintain a minimum ratio of 4% of tier 1 capital to 
risk-weighted assets and 8% of total capital.  Banks are also required to disclose their level of exposure to related parties.
47  Other conditions imposed under the Act include, inter alia :  banks that 
have liabilities in excess of NZ$10 billion need to  be incorporated in New Zealand;  locally 
incorporated banks are required to provide financ ial services primarily, and to conduct a substantial 
proportion of their business in and from New Zeala nd;  and the banking group is not permitted to 
conduct material non-financial activities  and insurance business in excess of  1% of total consolidated 
group assets. 
2.12.22.32.42.52.62.7
March 2003
June 2003
September 2003
December 2003
March 2004
June 2004
September 2004
December 2004
March 2005
June 2005
September 2005
December 2005
March 2006
June 2006
September 2006
December 2006
March 2007
June 2007
September 2007
December 2007
March 2008
June 2008
Source:    RBNZ (2008), Financial Stability Report, May and November.  Viewed at:  http://www.rbnz.govt.nz/finstab/
                  fsreport/index.html [20 August 2008].Per centChart IV.1
Bank net interest margins, March 2003 to June 2008a
a               Latest available figures.  
 
47. The Reserve Bank does not guarantee private banks against failure or difficulties.  Nor is any 
deposit insurance provided.48  In the event that a registered bank fails, the Reserve Bank will seek to 
minimize damage to the financial system in a wa y that does not involve taxpayer funding.  The RBNZ 
may act as the lender of last resort and may also use its crisis management powers, which include placing a registered bank under statutory management  and directing a registered bank that is in 
difficulty.
49 
                                                      
47 This is limited based upon the credit rating of the re lated party, and the level of capital held, starting 
at 15% and rising to 75% of capital. 
48 However in response to the recent financial crisis , the Government has recently agreed to provide a 
deposit guarantee for all retail depositors over the next two years, capped at NZ$1 million.  Certain issues of 
securities to the wholesale market are also guaranteed. 
49 Mortlock (2003). WT/TPR/S/216 Trade Policy Review 
Page 88 
 
 
48. To register as a branch of an overseas incorpor ated entity, that entit y needs to have bank 
status in its home jurisdiction.50  Branches of overseas banks are not subject to minimum capital 
requirements, since branches operate on the basis of the parent bank's global ba lance sheet.  However, 
in such cases, the Reserve Bank requires the pa rent bank to have a level of capital exceeding 
NZ$30 million.51  The Reserve Bank also requires the applicant to demonstrate that the parent bank 
complies with the internationally ag reed Basel capital standards and/or the standards imposed by the 
home supervisor.  The business of the bank in New Zealand must consist primarily of the borrowing 
and lending of money or the provision of other financ ial services, or both;  and it may not constitute a 
predominant proportion of the business of the parent  bank.  In some cases, the applicant may be 
required to incorporate locally in order to provide  some degree of insulation from the effects of 
foreign laws and regulations, or where capital ad equacy standards in the home jurisdiction are 
inadequate, or where depositors and creditors are una ble to obtain reliable financial information about 
the bank. 
49. Recent regulatory changes have included, inter alia , the implementation of the Basel II 
Capital Adequacy Framework for banks incorporated  in New Zealand from the first quarter of 2008. 
All locally incorporated banks are required to comp ly with this regime;  the larger banks have 
approval for an internal-model-based approach, and the smaller adopt the standardized regime.  The 
larger banks are subject to supervisory "overlays" to their models until there is sufficient evidence of 
models' reliability.  Banks are required to adopt the New Zealand International Reporting Standards 
(NZ IFRS).52  In 2005, the Trans-Tasman Council on Ba nking Supervision (between Australia and 
New Zealand) was established to increase cooperation and information sharing on bank supervision.  
Other functions of the Council include working to wards policy harmonization, mutual recognition of 
policies, and assessing and reviewing the cris is preparedness of Trans-Tasman Banks. 
50. Other recent measures include changes in prud ential regulations regarding liquidity and 
liquidity risk, and a change in outsourcing policy, which requires banks to ensure that they would be capable of providing core banking functions, such as  settlements, if any service provider they employ 
were to fail.  These measures are expected to  be implemented over the next few years. 
51. Non-bank deposit takers became subject to pr udential regulatory oversight by the Reserve 
Bank in September 2008.  The details of this re gime are being finalized.  Such entities will be 
supervised by trustee companies, based on standa rd measurement ratios imposed by the RBNZ based 
on capital, related-party activity, and liquidity;  th ey will be required to obtain and disclose a credit 
rating from an approved ratings agency.  They will also  be required to have a board containing at least 
two independent directors.  The deposit guarantee scheme announced by the Government also covers 
these entities. 
(b) Insurance 
52. The insurance sector in New Zealand comprises life insurance and general insurance.  The 
former is quite concentrated with the three larges t insurers controlling over 57% of the market (based 
on premium income) in 2008, down from 61% in 2003.  The five largest life insurance companies are 
                                                     
 
50 Mortlock (2003). 
51 Information provided by the authorities. 
52 Under the NZ IFRS (in force sin ce January 2007), derivatives are to  be accounted for at their fair 
value, and be shown as such on the bank's balance sheet.  Fair value, also called fair price, is a rational and unbiased estimate of the potential mark et price of a good, service, or asse t, taking into account such factors as 
relative scarcity, perceived utility, risk characteristics, replacement costs, and production/distribution costs.  The 
calculation of potential credit risk losses now need to be focused more on current, rather than expected, 
conditions and events. New Zealand WT/TPR/S/216 
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foreign owned.  Premium income from life insu rance was NZ$1.51 billion in 2008, compared with 
NZ$1.05 billion in 2003.   
53. In December 2007, the New Zealand Cabinet a pproved proposals for the prudential regulation 
and supervision of the insurance s ector.  The RBNZ is to be the pr udential regulator and supervisor.  
Legislation to give effect to the prudential requi rements is expected to be promulgated in 2009 and 
implemented in 2010.53  The insurance sector is to be regulat ed in much the same way as the banking 
sector, with emphasis on corporate self-discipline, director responsibility, and published financial 
statements.54 
54. The objective of the new regulatory framework is  "to encourage the maintenance of a sound 
and efficient insurance sector that promotes po licyholder confidence".  Under the new prudential 
requirement:  the RBNZ will be the licensing and de -licensing authority;  it will also prescribe and 
enforce insurer compliance with regulatory requi rements such as financial strength rating and 
disclosure requirements;  and intervene in a situa tion of distress or potential failure of an insurer.55 
55. Under the new regulation, in order to be li censed in New Zealand insurers (domestic and 
foreign owned) will:  require minimum capital of NZ $2 million;  have to meet New Zealand actuarial 
standards;  require financial strength ratings, fro m an approved ratings agency;  and will not be 
permitted to undertake any non-insurance bus iness activities beyond a certain level.   
56. Furthermore, all life insurers operating in Ne w Zealand will be required to separate life 
insurance from general insurance.  In this regard, insurers will have to establish at least one life 
insurance statutory fund to legally separate and bette r protect life insurance policyholder interests.  In 
addition, connected-party exposures in excess of an agreed threshold will not be permitted in 
calculations of an insurer's solv ency, thereby limiting the potential risks associated with an insurer 
lending to or investing in connected parties. 
Foreign insurers 
57. Foreign-owned insurers can operate as bran ches in New Zealand, provided all licensing, 
monitoring, and other prudential requirements are me t.  However, if foreign insurers are fully 
compliant with their home-country regulator's prude ntial requirements, the RBNZ will have discretion 
to accept compliance with these requirements and ex empt these insurers from certain aspects of 
New Zealand's requirements.  
(iii) Telecommunications 
58. Since the previous Review of New Zealand, fixed line penetration has remained steady at 
around 42% (2007).  In contrast, mobile phone penetr ation has increased considerably (from 69.6% in 
2003 to 104% in 2007).  The two major fixed- line providers are Telecom New Zealand and 
                                                      
53 Previously, New Zealand's insuran ce industry was not subject to da y-to-day control by a regulator.  
Regulation of the industry was conducted through a combination of loose government supervision coupled with self-regulation (for more details see WTO, 2003). 
54 Risk-based monitoring will be primarily off-site , using publicly available information and regular 
returns provided by insurers, and will focus on insurers who might be carrying too much risk or insufficient capital. 
55 The RBNZ will have available a range of crisis response actions including the appointment of 
investigators, giving directions to the insurer, requirin g the insurer to prepare a reco very plan, and de-licensing 
the insurer in extreme circumstances. WT/TPR/S/216 Trade Policy Review 
Page 90 
 
 
TelstraClear, while in the mobile segment, Tel ecom New Zealand and Vodafone have 49% and 51% 
of the market, respectively, in 2007.56   
(a) Regulation 
59. The telecommunications sector is regulated under the Telecommunications Act 2001, which 
was amended in 2006.  The Telecommunications  Amendment Act, which took effect on 
22 December 2006, is administered by the Commerce Commission.  The telecommunications legislative framework was changed considerably under the amendment.  Telecom New Zealand was 
required to divide its operations into at least thr ee different units:  a network business that sells access 
to the copper network on an equal basis to Teleco m New Zealand and other operators;  a regulated 
wholesale business that sells wholesale broadband access services on the same conditions to Telecom 
New Zealand's retail subsidiaries and other compe titors;  and one or more retail business units.  
Telecom New Zealand has restructured and has created five customer-business segments (July 2008);  this operational separation of its services should r esult in greater competition.  Telecom New Zealand 
is also required to unbundle the local loop, to allow access to the copper loop from the telephone 
exchange to the customer premises.  Unbund ling provides access for competitive suppliers to 
elements of the local loop network and allows them to use those elements to provide their own range 
of broadband and telephone services. 
60. The Commerce Commission has been  accorded a broader set of regulatory tools to achieve 
the statutory purposes of the Act.  Furthermore, the Act requires the Commerce Commission to monitor competition, performance, and development of telecommunications sector and to make public 
its results.  The Commission is also mandated to, inter alia :  resolve disputes on the terms and 
conditions for the supply of regulated services;  determine the terms and conditions for access to 
regulated telecommunications services;  calculate and allocate the cost of telecommunications (universal) service obligations
57;  and develop and administer acc ounting separation and information 
disclosure requirements.  Additionally, the Minister of Communications (often on the recommendation of the Telecommunications Commi ssioner) may alter the number and scope of 
regulated services.  
(b) Competition and pricing
58 
61. Declining average retail prices in the telecomm unications sector are indicative of increasing 
competition.  In the mobile segment, new calling pl ans that offer favourable rates on calls made to 
users on the same network may have been partly responsible for reducing the price.  Increased 
competition was also due to the introduction of  mobile and fixed-line number portability in 
April 2007.  The expected entry of a third competit or in the market in 2009 should also result in 
increased competition and lower prices.59  However, the cost of mobile usage in New Zealand remains 
higher than the OECD average, which is due in part to high mobile-to-m obile termination rates.60  
Another factor that inhibits competition is that the two incumbent market operators use different 
technologies so that switching operators entails the extra cost of a hand set. 
                                                      
56 Commerce Commission (2008). 
57 For details of telecommunications service obligations see WTO (2003). 
58 This section is based on Commerce Commission (2008). 
59 High termination rates for voice calls and text messages would reduce the ability of a new entrant to 
compete effectively in the market. 
60 The current mobile-to-mobile termination rate for voice calls is not available, but past practice has 
been to set it at the same level as the fixed-to-mobile termination rate, which is currently US$0.17 per minute.  
A recent study recommended a mobile termination price applying for the period 1 July 2007 to 31 December 2008 of US$0.09 per minute. New Zealand WT/TPR/S/216 
 Page 91 
 
 
62. Prices of fixed-line services (except for line rentals) have been falling since December 200561, 
and are expected to decrease further on account of  Telecom's local loop unbundling.  The unbundling 
will enable other operators to buy lines at a co st-based price.  However, fixed-line prices in 
New Zealand are high compared with other OECD countries due to high line rentals and fixed-to-
mobile calling charges through lack of competition.62 
(iv) Transport 
63. New Zealand's transport policy is aimed at  "supporting economic growth and the social 
connectivity of individuals and communities".  Tran sport, storage, and communications accounted for 
over 7% of GDP and nearly 6% of total employm ent in 2004/05 (Table I.2).  After tourism, 
transportation is the next largest export services sector, with export earnings of NZ$2.8 billion in 
2007/08 slightly higher than in 2002/03 (NZ$2.5 billi on).  New Zealand relies heavily on sea transport 
for overseas trade due to its isolated position.  Appr oximately 99% of imports and exports, by volume, 
are transported by sea.  Airfreight is important for trade in perishable goods and accounts for around 15.1% of exports and 21.1% of imports, by value.   State involvement remains in place, and the 
Ministry of Transport coordinates six Crown entities in the transport sector.
63  Furthermore, the 
Government is the majority stakeholder in Ai r New Zealand, and the Crown has joint-venture 
agreements at seven airports;  there are also two state-owned enterprises involved in transport 
services.64  Local authorities have a number of regulatory roles in transport, including inland transport 
and harbour management.  The Ministry of Transport is the lead agency for virtually all transport-related policy matters. 
64. In August 2008 , New Zealand released its Transport St rategy, which maps out the strategic 
direction of the transport sector to 2040.
65  Issues addressed by the strategy include:  ensuring 
environmental sustainability and reducing pollution associated with transport;  assisting economic development;  and improving safety and public health. 
(a) Air transport services 
65. There are 27 airports in New Zealand of whic h six are international.  The international 
airports are commercial entities with both private and public ownership.  Domestic airports are either 
companies owned by local authorities or joint ventures between local authorities and the Central Government.  Airports in New Zealand are regul ated under the Airport Authorities Act.  The Act 
allows for local authorities or airport companies to be designated as an airport authority, giving them 
power to make bylaws regulating access to and use of airport facilities.  In 1997, the Airport 
Authorities Act was amended to protect airport us ers against potential abuse of monopoly power.  
This amendment requires airport companies to cons ult on charges and capital expenditure plans with 
airlines and to disclose information relating to the accounting basis for ch arges.  The Commerce 
Commission continues to have primary responsi bility for competition and pricing issues.  The 
                                                     
 
61 Commerce Commission (2008). 
62 Compared with the OECD low, medium, and high user fixed-line baskets, Telecom's "Any Time" 
service ranked 22nd, 25th, and 23rd, respectively, of the 30 OECD countries.   However, industry participants do 
not consider that the OECD baskets reflect the nature of the New Zeala nd market.  The main mobile plans 
benchmarked have not changed in price in NZ dollars in the past 18 months and have ranked in the bottom 
quartile of the 30 OECD countries surveyed. 
63 These entities are Land Transpor t New Zealand, Transit New Zeal and, Civil Aviation Authority 
(CAA), Aviation Security Service, Ma ritime New Zealand, and Transport Accident Investigation Commission.   
64 They are Airways Corporation of  New Zealand Ltd. and Meteorological Service of New Zealand. 
65 The New Zealand Transport Strategy 2008.  Vi ewed at:  http://www.transport.govt.nz/assets/ 
Downloads/NZTS-final-PDF.pdf [20 September 2008]. WT/TPR/S/216 Trade Policy Review 
Page 92 
 
 
Commerce Amendment Act, as amended in 2008, allows for imposition of  economic regulation on 
goods and services where competition is not feasible.66  The provisions of the 2008 Amendment 
transfer responsibility for the information disclosure regime for New Zealand's three main airports at 
Auckland, Wellington, and Christchurch to the Commerce Commission.  Arrangements on 
international carriage by air that are authorized by  the Minister of Transport are exempt from the 
Commerce Act provisions.  IATA slot allocation principles are followed at Auckland, Wellington, 
and Christchurch airports, where Air New Zealand perfo rms a slot coordination role;  it reports to a 
slot coordination committee at Auckland.  There ar e no restrictions on foreigners providing airport 
services. 
66. Air New Zealand is New Zealand's onl y scheduled international airline.67  At 
end-December 2008, 20 foreign airlines were opera ting aircraft to New Zealand, and a further 
14 airlines were serving New Ze aland on a code-share basis.68  Air New Zealand is majority owned by 
the Government;  the Crown holds a 76% stake.  The Crown also holds the Kiwi share (a special 
rights convertible preference share).  It enabl es the Government to place a cap on the amount of 
foreign shareholding and on investment in the airline by other airlines, to ensure that it is regarded as 
a New Zealand substantially owned and effectively c ontrolled international airline.  Presently, foreign 
ownership in a New Zealand designated airline is li mited to 49% with ownership by a single foreign 
airline or airline interest capped at 25%.  Add itionally, there is a 35% cap on all foreign airline 
investment.   
Air Service Agreements and Licensing  
67. International air services in Ne w Zealand are governed by bila teral air services agreements 
(ASAs).  The Ministry of Transport has primar y responsibility for conducting bilateral air services 
negotiations.  New Zealand has ASAs with 46 partners (March 2008).69  Open-skies agreements have 
so far been concluded with 16 countries.  An open skies ASA signed with the United Kingdom in 2005, allowed Air New Zealand to double its ser vices to London (New Zealand's second largest 
source of visitors).  Negotiations are also under wa y to remove restrictions in other air services 
arrangements, including those with South Afri ca, Canada, and the European Communities.  
New Zealand is also seeking to open negotiations with Japan, and negotiations are taking place with a 
view to establishing ASAs with Peru and Turkey.  New Zealand has in operation some of the most 
liberal existing ASAs;  under these, tariff filing is not required.  New Zealand has also sought to remove capacity and traffic rights restrictions on in ternational air services, including in respect of 
seventh and eighth (cabotage) freedom rights.
70 
68. Under the Civil Aviation Act 1990, an airline is required to hold an international air service 
licence or an open aviation market licence to operate a scheduled international air service to or from 
New Zealand.  These licences prescribe the routes and cap acity that may be operated by the airline;  
the airline is required to file a statement of the nature of its scheduled services to and from 
                                                      
66 In December 2008, the Commerce Commission initiated legal proceedings against 13 airlines for  
alleged cartel activity in the air cargo market 
67 Freedom Air, which was an Air New Zealand subsidiary, ceased operations in March 2008. 
68 Ministry of Transport online information.  Viewed at:  http://www.transport.govt.nz/international 
airlines/ [18 February 2009]. 
69 Eight of New Zealand's air services relationshi ps are now covered by one ASA, the Multilateral 
Agreement on the Liberalisation of Inte rnational Air Transportation (MALIAT). 
70 Seventh freedom covers the right to operate passenger services between two countries (A and B) 
outside the home country;  eighth freedom, also referred to as "cabotage" privileges, covers the right to move 
passengers on a route from a home country to a destination country (A) that uses more than one stop along which passengers may be loaded and unloaded. New Zealand WT/TPR/S/216 
 Page 93 
 
 
New Zealand.71  With the exception of qualifying airlines operating solely within the Australia-
New Zealand single aviation market, to qualify for a licence, an applicant airline must have been 
designated by its government in accordance with  the relevant provisions of the ASAs between 
New Zealand and that other country.  A licence for a foreign operator is normally granted for an 
indefinite period.   
69. The Civil Aviation Act was amended in Marc h 2004 and in September 2007.  Under the 
amendments, aircraft, crew, and passenger security was enhanced.  Measures were taken mainly to 
deal with unruly passengers and increase the powers of aviation security officers.  The legislation also 
implemented mutual recognition agreements w ith Australia; consequently, Australian and 
New Zealand airlines now do not need to hold safety certifications from both countries' civil aviation 
authorities, making it easier for airlines to  conduct operations in both countries. 
(b) Maritime transport 
70. Over 99% of New Zealand's imports and exports by volume are moved by sea, making the 
country highly dependant on maritime transport.  The bulk of New Zealand's maritime cargo is 
handled by international shipping lines at its 14 commercial ports.  New Zealand's coastal shipping 
industry is limited;  8 New Zealand companies operate 15 vessels and account for 15% of inter-
regional trade and 85% of coastal cargo (the ba lance is carried by international ships).72  Coastal 
freight services include:  container and general cargo;   roll-on roll-off and rail ferries;  and bulk and 
livestock carriers linking all the main ports in New Zealand, including the Chatham Islands.  
New Zealand ships, and foreign ships that tr ansport cargo or passengers to New Zealand from 
overseas, or which are in New Zealand to carry car go or passengers from New Zealand to an overseas 
destination, are also entitled to carry coastal cargo in  the course of the voyage in question.  Any other 
foreign ships are not permitted to carry New Zeal and coastal cargo or passengers unless specifically 
authorized to do so.73  On 15 December 2005, New Zealand removed a legal constraint on the use of 
overseas-registered "demise-chartered" ships74:  where such ships are New Zealand operated or 
controlled, and the crew are subject to New Zeal and law, the ships may carry coastal cargo on the 
same basis as ships registered in New Zealand (Maritime Transport Amendment Act (No. 2) 2005).   
71. In May 2008, the Government announced its st rategy for coastal shipping, under which it 
seeks to increase the share of coastal shipping in in ter-regional trade to 30% by 2040.  As part of the 
strategy, the Government established a sea freight de velopment unit, in March 2008, which acts as a 
focal point for the industry.  In addition, access to funding (NZ$36 million over four years) and 
information gathering and disse mination is being improved. 
72. Local governments have a majority stake in the companies operating New Zealand's ports.  
However, private enterprises may undertake auxilia ry service activities in port areas.  Port access, 
                                                      
71 The Secretary for Transport is the licensing au thority for open aviation market licences.  An 
application for an open aviation market licence must incl ude the following informati on concerning each service 
proposed:  the route to be followed and all destinations to be served;  the type of aircraft to be operated and, in 
the case of passenger services, the seating configuration;  the weekly frequency of the service;  details of any 
code-share arrangements;  and the intended date to commence the service.  The information filed under an open aviation market licence is for information purposes only. 
72 New Zealand Government online information, "Coastal shipping to be revitalised".  Viewed at: 
http://www.beehive.govt.nz/release/coastal+shipping+be+revitalised [21 September 2008]. 
73 Authorization would be provided when no New Zealand ship, or no foreign ship on an international 
voyage is available. 
74 A lease of a vessel in which all control is relinquished by the owner to the charterer, and the charterer 
bears all the expenses of operation.  Similar to bareboat charter. WT/TPR/S/216 Trade Policy Review 
Page 94 
 
 
related services, and inland transport must be ne gotiated on a commercial basis between carriers and 
service providers.  Furthermore, under the Commerc e Act 1986, any discrimination in port services 
that may have the effect of reducing competition woul d be subject to independent investigation by the 
Commerce Commission.  There is no discrimination in fees between imports and exports, and these 
fees are not charged on an ad valorem  basis. 
73. International and/or outward shipping is exempt from the parts of the Commerce Act 1986, 
that deal with restrictive trade practices and regulated goods or services.  Consequently, the 
Commerce Commission has no authority to investigate cartels or price collusion (over freight rates or service schedules) for international trade.  Outward shipping from New Zealand is instead subject to 
the Shipping Act 1987, which seeks to promote fair competition in outward shipping, to benefit both 
shippers and carriers.  In addition, under the Shi pping Act 1987, the Minister of Transport may issue 
directions to any carrier found to be engaging in unfair practices that would harm any New Zealand 
shipper.  The Shipping Act 1987 sets out the overall regulatory approach for outward shipping legs of multimodal transport;  the Commerce Act 1986 applies to  all the other legs, and deals with restrictive 
trade practices, business acquisitions, price contro ls, and enforcement, remedies, and appeals.  
National and foreign operators are treated the same , and there is no differentiation between foreign 
operators in terms of flag nationality.  There has been no change in the registration requirement during 
the period under review.
75  
74. With a view to improving security standards and bringing them up to international standards, 
the Maritime Security Act into force on 1 July 200 4.  Under the Act, a maritime security framework 
was established for ships and port facilities serving New Zealand's international trade.  Maritime 
New Zealand is responsible for administering the provisions of the Act.  Its responsibilities include 
managing the risk assessment process, setting the ope rational security level,  and approving port and 
ship security plans.  Maritime Ne w Zealand also provides and coordinates security information to 
ships and ports and exercises port control measure s in respect of compliance by foreign vessels 
arriving in New Zealand.  Maritime safety services to shipping are funded by the marine safety charge 
(MSC), a statutory charge levied on all commercial sh ips.  The structure of the charge was revised in 
2008:  MSC revenue is expected to increase by 11%, which would fully cover relevant costs;  it is 
intended that revenue from domestic shipping w ill increase, while revenue from foreign-going 
shipping will remain static.76 
(v) Tourism 
75. The tourism industry in New Zealand accounted for approximately 9.2% of GDP and 9.7% of 
total employment in the year ended March 2007.77  Tourism is New Zealand's largest export industry;  
it accounted for over 18% of total exports of  goods and services in the year ended 2007.78  GST on 
tourism expenditure is also a considerable source of tax revenue for the Government, with receipts 
amounting to nearly NZ$1.5 billion in the year ended March 2007.  
                                                      
75 For ship registration see WTO (2003). 
76 The rates for domestic ships are different from those for foreign ships.  According to the authorities, 
this is because New Zealand ships make far more port calls in a year, so it makes sense to apply one annual 
charge, while a foreign ship will make fewer calls, so a voyage by voyage charge is more equitable.  
77 Statistics New Zealand (2008). 
78 Statistics New Zealand (2008). New Zealand WT/TPR/S/216 
 Page 95 
 
 
76. Despite the appreciating NZ dollar and the rising cost of fuel, the tourism sector averaged 
growth in excess of 4% annually between 2004-07, with domestic tourism being particularly 
important.79 
77. New Zealand has no tourism-specific legislation.  The Ministry of Tourism's main function is 
to provide policy advice to the Minister of Touris m, including on matters re lated to investment in 
tourism, administration of grants, and assistance to ma jor events.  A key role of the Ministry is to 
continue to raise awareness of the importance of tourism's contribution to New Zealand's economy.  
Other government organizations, such as the New Ze aland Tourism Board (NZTB) (a Crown Entity) 
and its operational entity, Tourism New Zealand,  are responsible for promoting New Zealand 
internationally.  The Government is also involve d in the promotion and leveraging of major events 
such as the Rugby World Cup in 2011.80  The Government owns land at Taupo and Rotorua and the 
Maori Arts and Crafts Institute in Rotorua.  Foreign investment in the tourism sector is subject to the 
Overseas Investment Act 2005 and the Overseas Investment Regulations  2005.  The sector is also 
subject to competition policy and the Commerce Act. 
78. In November 2007, the Government released the New Zealand Tourism Strategy (NZTS) 
2015, which builds on the objectives set out in  the NZTS 2010.  The NZTS 2015 is focused on 
making tourism the leading contributor to New Zealand's economy.  In this respect, its four stated objectives are that:  New Zealand delivers a world- class visitor experience;  New Zealand's tourism 
sector is prosperous and attracts ongoing investment;  the tourism sector takes a lead role in protecting 
and enhancing the environment;  and the tourism s ector and communities work together for mutual 
benefit.
81 
79. Local governments are also active participants in the tourism industry.  They fund 
promotional activities, mainly through regional touris m organizations (RTOs) and are also involved in 
the maintenance and upkeep of  associated infrastructure. 
(vi) Education  
80. The education, cultural, and recreational sector  accounted for 6.4% of  GDP in 2004/05, and 
was responsible for nearly 7.8% of total employment  in 2007/08.  Furthermore, the education sector is 
an important export industry.82  In 2007, it was responsible for ove r 3% of exports of total goods and 
services;  91,000 foreign students were enrolled in Ne w Zealand, with approximately half in private 
training institutes and over a third in public tertiary institutes.  Nearly 60% of the foreign students in 
New Zealand are from China, Japan, and South Korea. 
81. In August 2007, New Zealand launched the In ternational Education Agenda, setting out 
objectives and priorities.  The main objectives of the agenda are:  that New Zealand students acquire 
the education needed to succeed in a globalized world;  New Zealand education providers are 
improved academically and financially;  new Zealand receives greater economic and social benefits;  
and international students are enriched by their ed ucational and living experiences in New Zealand.  
Other changes that took place during the period under  review include the in troduction of the export 
                                                      
79 Visitors form a solid base for the industry;  domestic day trips and overnight visitors were 
responsible for over 55% of total tourism expenditure in 2007. 
80 Leveraging refers to maximizing the benefits to New Zealand's tourism industry from major events 
such as those listed.  This can include financial investment and other forms of support. 
81 For more details regarding New Zealand Tourism St rategy 2015 see:  http ://www.nztourismstrategy. 
com/. 
82 Defined as enrolments of international fee-paying students with New Zealand public and private 
education providers. WT/TPR/S/216 Trade Policy Review 
Page 96 
 
 
education levy in 2003 to fund sector development83, and international PhD students and their 
school-age dependants became eligible for domestic fees status from 1 January 2006.  In addition, 
changes were made to the student immigration po licy, which would allow increased access to work 
opportunities by students while they are studying,  as well as greater access to work permits after 
completion of studies. 
                                                      
83 The rates are 0.45% of turnover from internatio nal enrolments, and a fl at fee of NZ$185 per 
provider.  The EEL provided NZ$2 .76 million in revenues in the year ended 30 June 2008. New Zealand WT/TPR/S/216 
 Page 97 
 
 
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