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Singapore Closer Economic Partnership Breifing

Singapore Closer Economic Partnership briefing paper issued

The Singapore Closer Economic Partnership agreement would be good for New Zealand, Trade Negotiations Minister Jim Sutton said today.

Mr Sutton issued a briefing paper which summarised the agreement.

He said he hoped the briefing paper would ease some people's concerns about the agreement.

"This Labour-Alliance coalition government aims to be as open as possible. The agreement has not been negotiated in secret. More people and stakeholder groups have been consulted about the agreement's contents than ever before."

The agreement is to go to Cabinet for consideration next month. After that, Mr Sutton hoped a full treaty text could be made public.

ENDS

5

S-CEP.DOC

S-CEP.DOC

SINGAPORE/NEW ZEALAND CLOSER ECONOMIC PARTNERSHIP AGREEMENT

Background Paper

New Zealand has actively sought to develop enhanced trade, economic and investment linkages with key trading partners, through the World Trade Organisation (WTO), Asia Pacific Economic Co-operation (APEC), and regional trade initiatives. The aim has been to reduce and (where possible) eliminate barriers to New Zealand exports and to build on the CER relationship with Australia.

The CEP will place the bilateral trade and economic relationship with Singapore on a new and firmer footing. New Zealand and Singapore recognised that a Closer Economic Partnership (CEP) Agreement could be a catalyst for similar forward-looking agreements with other Association of South East Asian (ASEAN) economies which generally have higher protection levels against our exports than Singapore, and eventually with other key APEC economies including the United States.

The CEP Agreement also adds impetus to APEC ‘s vision of free and open trade and investment in the region by 2010/2020 (the “Bogor” goals), and to the launch of further multilateral negotiations in the WTO.

The Agreement will deliver reciprocal benefits, encourage trade and investment and significantly enhance our economic partnership with what is a key Asian economy. Since September last year, there have been six rounds of negotiations. These concluded in Singapore on 18 August when Singapore and New Zealand negotiators initialled the draft text. This has now to be considered for approval by Cabinets in both countries. In New Zealand?s case, the CEP will also be submitted to Parliament prior to ratification and entry into force.

Key Outcomes from the CEP Negotiation

Tariffs

All tariffs will be eliminated on entry into force of the CEP. This means Singapore will remove tariffs on New Zealand beer exports.

New Zealand will eliminate all tariffs on goods of Singapore origin, including textiles, clothing and footwear (TCF). However, New Zealand already accords duty free treatment to most imports from Singapore. Textiles, clothing and footwear imports from Singapore are worth approximately NZ$5 million pa and are much less than 1 per cent of total New Zealand imports of textiles, footwear, and clothing.

Rules of Origin (ROO)

The rules of origin applied to goods traded between New Zealand and Singapore recognise the economic circumstances of Singapore as a city state. Key elements include a 40 percent ex factory cost threshold for goods partly manufactured in NZ/Singapore, and a requirement that the last process of manufacture must be performed in the exporting country. This cannot be a minimal process such as packaging. Excise and customs duties will be excluded from the calculation of qualifying content.

ROO also make provision for inclusion of ?antecedent? content in the ex factory cost calculation so that New Zealand/Singapore content in materials going offshore for further processing is included in the 40 percent calculation if the goods are then returned to New Zealand/Singapore for the last process of manufacture. The value of any inputs and processing done offshore in a third country will be excluded from the calculation.

Given the nature of modern New Zealand and Singapore companies, quality control and testing will be recognised as a last process of manufacture under defined rules for high tech industries only. This provision will not apply to textiles, clothing and footwear items.

The CEP includes a provision to minimise the scope for fraud and diversion of third country product through Singapore to claim tariff preference. Our respective customs authorities will be able to examine and verify claims for tariff preference where any doubt arises concerning origin or adherence to the rules. This may also involve visits to the exporter/supplier/manufacturer for the purpose of verifying the preference claim. If the Customs authorities are not satisfied with the outcome of their examination, the claim for tariff preference may be denied.

Competition

A key concern of New Zealand?s was to ensure that NZ businesses are able to compete in an environment where regulation is supportive of the competitive process. The competition principles in the Agreement relate to the CEP as a whole and provide some scope for disciplines in areas such as subsidies and regulation of services. There is also provision for consultation on new competition issues.

Subsidies

The CEP will prohibit all export subsidies on goods, including export subsidies on agricultural products. This goes beyond WTO achievements. However, if a domestic subsidy causes serious prejudice to the (trade) interests of the other, consultations can be sought with a view to limiting the subsidisation.

Trade Remedies Safeguards

As with CER, Singapore and New Zealand have agreed not to have recourse at any time to safeguard action on imports from each other.

Anti-Dumping

Anti-dumping provisions have been retained unlike CER where anti-dumping has been abolished and replaced with tighter disciplines on predatory pricing under competition law.

The provisions are based on the WTO Anti-Dumping Agreement, with alterations which will marginally tighten the thresholds before anti-dumping investigations can be commenced. The de minimis dumping margin will be raised from two to five percent, and the margin of dumped imports normally regarded as negligible increased from three to five percent. The CEP will retain existing WTO provisions on cumulation (A/D cases involving third countries). The Agreement will not include a competition test.

Services

Schedules attached to the CEP set out each country?s initial commitments to liberalise services trade between them. Each country will review its schedule at least every two years, and progressively add to these initial commitments, in accordance with the APEC objective of free and open trade in services by 2010.

As Singapore has not formally committed itself to the APEC 2010 end-date for full liberalisation of services, the agreement contains a provision that New Zealand and Singapore will meet in 2007 to identify the services sectors or measures it may not be able to liberalise fully by 2010. In such circumstances, there is a possibility for longer timeframes for such sectors or measures to be liberalised.

The respective lists of initial commitments expand on those already entered into globally, through the 1994 General Agreement on Trade in Services (GATS).

Singapore has granted improved access for New Zealand suppliers in a range of key services sectors, including secondary and tertiary education, telecommunications, courier services, environmental services, medical, health and social services, and architecture and engineering services.

New Zealand has added commitments in a number of sectors including engineering services, computer and related services, transport services, dental services, environmental services, and some business services (market research, management consulting and security and investigation services).

New Zealand will not need to make changes to regulatory settings to achieve the commitments made in our services offer to Singapore, other than the engineering services commitment. This reciprocally removes the residency requirement attached to registration in New Zealand as a ?registered engineer?.

The first biennial review of services commitments will include telecommunications, postal services, credit reporting services, disaster insurance and all other priority areas of interest to New Zealand.

A mechanism has been included at New Zealand?s request to provide for mutual recognition of professional qualifications to ensure professional qualification and registration requirements and procedures do not constitute unnecessary barriers to trade in services between New Zealand and Singapore. This will also offer improved opportunities for New Zealand?s education services suppliers.

Investment

For transparency and certainty, each country will bind its existing investment regimes. For New Zealand, this means the Overseas Investment Commission?s thresholds will be bound (to Singapore only) but not the OIC?s procedures or criteria. There will not be any changes to New Zealand?s current investment regime. Singapore has inscribed certain investment limitations in respect of its Government Linked Corporations (GLCs).

Technical, Sanitary and Phytosanitary Regulations and Standards

The CEP will provide on a sector by sector basis for implementation of the principles of mutual recognition, unilateral recognition or harmonisation of standards. This will reduce compliance costs for business associated with technical, sanitary and phytosanitary barriers to trade.

The text of the mutual recognition agreement for the first sector agreed, electrical and electronic equipment, will be attached to the CEP. Agreement has also been reached on other sectors for early consideration - such as telecommunications equipment, chemicals and the food sector.

Government Procurement

Threshold levels have been agreed at Special Drawing Rights (SDR) 50,000 (approximately NZ$ 125,000). This means that New Zealand suppliers will have guaranteed access to the Singaporean government procurement market for contracts over SDR 50,000.

Intellectual Property

The existing provisions of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (the ?TRIPS? Agreement) will govern the CEP without modification.

Dispute Settlement

Robust dispute settlement procedures have been included in the Agreement.

General Provisions

The CEP imposes no new obligations on local or regional governments in New Zealand.

It does not cover any taxation measure.

An exemption has been included for creative arts which will allow New Zealand to adopt measures in the exercise of its legislative, rule-making and regulatory powers ?necessary to protect national works, items or specific sites of historical or archaeological value, or to support creative arts of national value?.

A transparency provision requires each party to make available to the other all public laws, rules, regulations, judicial decisions and administrative rulings of general application pertaining to goods, services and investment, and to endeavour to allow for comment by the other country.

The Treaty of Waitangi

Under the CEP, New Zealand will, as now, be able to adopt any measures ?it deems necessary to accord more favourable treatment to Maori in respect of matters covered by the CEP including in fulfilment of its obligations under the Treaty of Waitangi?. This effectively reserves the ability of the Government to fulfil its Treaty of Waitangi commitments and to take action to close the gaps between Maori and other New Zealanders. Singapore has agreed to this.

Association with the Agreement

The CEP includes a provision to enable any other member of the WTO or any other State or separate customs territory to accede or associate itself with the Agreement, if New Zealand and Singapore agree.

Ministerial Meetings

New Zealand and Singaporean Ministers will meet every two years to review the CEP Agreement and to expand on commitments, eg in services, technical standards etc.

A full review of the CEP will be undertaken after five years.

Ministry of Foreign Affairs and Trade August 2000

Office of Hon Jim Sutton


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