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Tariff Amendment Bill –Second Reading

(Bill moved into the House by Finance Minister Michael Cullen)

Mr Speaker

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

This legislation halts a long series of unilateral tariff reductions culminating in the previous government's zero duty legislation of 1998. The coalition government rejects the unilateral rush to free trade embodied in the Tariff (Zero Duty) Amendment Act 1998. The policy now is based on balance and mutual benefit – with New Zealand’s best interests our number one priority; our only priority.

Unilateral tariff removal has made deep and significant cuts to New Zealand’s tariff levels. Most tariffs now are only about one-fifth of the levels of the late 1980s. We have also removed quantitative restrictions on imports, with import licensing generally ceasing in July 1998. New Zealand has become an extremely open market. Many other countries have much higher tariffs, and quota-type controls.

The Zero Duty Removal Bill will prevent the former government's planned reductions from July 2000 onwards. Tariffs in general will be held at current levels until July 2005. The only exceptions will be tariff removal under mutually beneficial agreements with our trading partners.

We became party to several “zero-for-zero” arrangements during the GATT Uruguay Round of trade negotiations (1986-94).

Our few pharmaceuticals tariffs were removed in 1996. The Government will remove beer tariffs by January 2002, and tariffs on paper/paper products and printed matter two years later. These commitments bring significant advantages for New Zealand exporters, since our major trading partners are mirroring New Zealand’s removal path.

This distinction between “unilateral disarmament” and the balanced approach of the Coalition will be readily apparent. Tariffs are a tax on imports. They can have a significant effect on domestic resource allocation and on levels of international competitiveness. Excessively high tariffs can create inward-looking economies which only benefit a narrow segment of the population.

This Government had no wish to fall into that trap. Levels of tariff protection on most imports are low – in the vicinity of six or seven percent. In general terms, only textiles, clothing, headgear, carpets and footwear pay higher tariffs than those modest general levels. Few economies are as open as ours.

The repeal legislation does not take us backward. Rather, the Government is allowing New Zealand to re-enter the international tariff mainstream.

Other countries do not take off their border taxes without asking for something in return. It is very difficult to find examples of across-the-board tariff removal of the type planned by the former government..

The legislation now before the House moves New Zealand into another form of policy framework. We now care very much about what the rest of the world does. We will now be influenced by the actions of our trading partners.

New Zealand is able to remove tariffs if reciprocal benefits are available. We will be good and responsible members of the international trading community. We will not take tariff benefits without giving in return. Sometimes tariff cuts may well be justifiable. Nothing in the repeal legislation prevents the Government from changing tariff levels as appropriate under the powers contained in the Tariff Act 1988. We are not constrained from taking tariff actions which can be shown to be clearly in New Zealand’s best interests.

I hope that my message is clear. We remain an open trading country. We continue to be ready to enter into mutually beneficial trade liberalisation arrangements with our trading partners. All that we ask is a good balance of benefits.

Our predecessors apparently thought that New Zealand’s rush to zero would trigger a sympathetic stampede of like-minded countries. There is no sign of such a phenomenon – and every sign that other countries plan to continue to take a cautious approach towards tariff removal.

This Government is moving to rejoin the tariff mainstream through the powers in this Bill. We are now in a much more considered policy environment. This Government’s tariff pause is a responsible action and a careful action. It will enable New Zealand producers to consolidate.
Quite simply, ever increasing competition is a reality. We cannot and will not go back to a distant dreamtime of impermeable border defences against imports. This Government is forward looking. It is not, however, disposed to shedding tariffs in advance of the rest of the world. The time has arrived for commonsense and a clear focus on the best interests of the nation. We are acting now, before New Zealand’s remaining tariffs disappear completely without sign of offsetting benefits for our people.

Thank you Mr Speaker.


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