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Tariff (Zero Duty Removal) Amendment Bill

11 May, 2000

TARIFF (ZERO DUTY REMOVAL) AMENDMENT BILL - FIRST READING

Mr Speaker

I move that the Tariff (Zero Duty Removal) Amendment Bill be now read a first time.

This Bill repeals the former government's Tariff (Zero Duty) Amendment Act 1998. That legislation had the effect of setting in place a series of unilateral tariff reductions.

The government intends to hold tariffs at their current levels until 1 July 2005. To do that it is necessary to repeal the 1998 Act.

The repeal of the zero duty policy and the freeze on tariffs is in line with our manifesto promises and is an important part of the coalition government's intention to assist industry development and employment in New Zealand.

This coalition government does not agree with the former government's policy of unilateral tariff reductions. They are not immediately necessary for New Zealand to succeed in the international marketplace and indeed it is senseless for New Zealand to attempt to lead the world into a tariff free playing field without ensuring it receives reciprocity from its trading partners.

Times have changed since New Zealand began its process of tariff reduction around 1986. At that time tariffs were at very high levels and it was decided to reduce them. New Zealand also removed the then extensive system of import licensing. The intent of those policies was to increase competition in the New Zealand market, lower costs and move resources into areas where they could be used more effectively. This process of tariff reduction continued during the 1990’s.

In 1998 the previous government announced its intention to completely phase out all tariffs. Industry pressure led to it backing off on textiles, clothing and footwear tariffs and holding rates at 1 July 2000 levels for four years before phasing them out. Backing down on textiles, clothing and footwear tariffs was not a voluntary action by the former government.

The new coalition government is putting an end to the unilateral removal of all tariffs. We do not believe a small country like New Zealand can possibly gain from that process. New Zealand does not have the wealth or advantages of economies like Singapore and Hong Kong, China. Other countries are not flocking to follow our example.

What we do have is a small but important manufacturing sector, which is critical in terms of employment, and regional wellbeing.

Our view is that we need a balanced approach to tariff levels, which considers the overall wellbeing of the economy.

This Bill to repeal the 1998 Act is just one necessary step in that process of achieving balance. We have made it clear that we will continue removing or reducing tariffs where it is in New Zealand’s overall interests to do so.

That means that as agreed in the Uruguay Round of tariff negotiations we will continue the required phase out of tariffs on beer by January 2002, and a range of paper, paper products and printed material by January 2004. Our major trading partners are also removing tariffs on these products, and we believe New Zealand will benefit from this agreement.

We will also continue to investigate possible free trade agreements and other initiatives that might give New Zealand real benefits in terms of access to other markets for important exports, or that open up other opportunities.

New Zealand will not lose by imposing a 'freeze' on tariffs. Our tariffs are already low compared to most other countries. We have a free trade agreement with Australia, and we allow duty free imports from most Pacific Islands under SPARTECA. Around 93% of imports into New Zealand enter duty free already.

In fact when you compare New Zealand with other countries on applied tariff rates we prove to be among the lowest of the OECD countries. Our exporters are also able to make use of the duty drawback scheme which allows refunds of duty paid on imports used for export production. Special concessions help exporters make use of capital equipment duty free in certain circumstances.

New Zealand will not have a system of quotas on imports as applied by members of the GATT Multifibre Arrangement. New Zealand will remain an extremely open market. It is important to remember that tariffs are the only cost imposed on imports into New Zealand, we do not have non-tariff barriers on imports.

Contrary to some popular belief about tariffs, they are not a major factor in costs for New Zealand consumers or business. A much bigger factor has been the fall in the value of the New Zealand dollar which took place in the last part of the previous government’s administration.

The repeal of the 1998 legislation is in no way a return to a tariff protected “fortress New Zealand”. Most producers will only have a tariff of six or seven percent between them and their competitors. Even the clothing, footwear and carpet manufacturers will not be highly protected by world standards.

The tariff "freeze" we will introduce is not absolute; but tariff cuts are no longer unconditional. We now have a markedly different policy framework with New Zealand's overall best interests, including employment and business development, as its cornerstone.

The new policies will give local industry time to adapt to ever-increasing competition. It will help industrial development, with associated benefits for employment as manufacturers respond to the assistance provided by the Bill.

The coalition government is driven by a concern for reasonable balance - a balance involving jobs and industry development and a competitive economy, and a balance between what New Zealand does on the tariff front and what other people do in our principal overseas markets. The Bill puts New Zealand once again in the international tariff mainstream with our trading partners.

ends


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