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Cablegate: New Zealand - 2009 National Trade Estimate

VZCZCXRO5201
RR RUEHNZ
DE RUEHWL #0379/01 3120503
ZNR UUUUU ZZH
R 070503Z NOV 08
FM AMEMBASSY WELLINGTON
TO RUEHC/SECSTATE WASHDC 5522
INFO RUEHNZ/AMCONSUL AUCKLAND 1781
RUEHBY/AMEMBASSY CANBERRA 5309
RUEHDN/AMCONSUL SYDNEY 0748
RUEHRC/USDA FAS WASHDC 0391
RUEHRC/DEPT OF AGRICULTURE WASHDC
RHHMUNA/CDR USPACOM HONOLULU HI
RUCPDOC/USDOC WASHDC 0262
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 07 WELLINGTON 000379

SIPDIS

STATE FOR EAP/ANP, EB/TPP/BTA, STATE PASS TO USTR
BWEISEL, GBLUE AND DBELL, COMMERCE FOR ITA/MAC/AP/OSAO,
TREASURY FOR OASIA, PACOM FOR J01E/J2/J233/J5/SJFHQ

E.O. 12958: N/A
TAGS: ECON ETRD EFIN APEC PGOV PREL NZ
SUBJECT: NEW ZEALAND - 2009 NATIONAL TRADE ESTIMATE
REPORT

REFTEL) STATE 88685

1. (U) Following is Post's submission for the 2009
National Trade Estimate Report (NTE) regarding New
Zealand per request reftel. We understand that
Washington agencies will provide updated trade and
investment data.

2. Begin text of NTE submission:

IMPORT POLICIES

Tariff rates in New Zealand are generally low as a
result of several rounds of unilateral tariff cuts that
began in the mid-1980s and continued through the
current Labour government, first elected in 1999. The
government suspended additional reductions until July
2005. The New Zealand government announced in
September 2003, that it would again resume unilateral
tariff reductions starting July 1, 2006. Under this
unilateral tariff reduction program, New Zealand has
reduced its highest tariff rates to 12.5 percent
beginning July 1, 2008 and will further reduce these
tariffs to 10 percent by July 1, 2009. These top rates
apply mostly to clothing, footwear, and carpeting. Ad
valorem tariffs on all other dutiable goods were
reduced to 5 percent beginning July 1, 2008.

STANDARDS, TESTING, LABELING, AND CERTIFICATION

Regulations on Genetically Modified Organisms

New Zealand's Environmental Risk Management Authority
(ERMA), an independent agency, is responsible for
assessing and deciding on applications to introduce new
organisms, including genetically modified organisms
(GMOs), into New Zealand. ERMA assesses applications
on a case-by-case basis and can issue four types of
approvals: 1) initial development in containment (such
as in a laboratory or glasshouse), 2) outdoor
development of field tests (in containment), 3)
conditional release, and 4) full, unconditional release
(with no controls).

ERMA makes decisions on the importation and domestic
use of GMOs on the basis of a thorough assessment of
the potential risks and benefits posed by the
organisms, under the stringent requirements of the
Hazardous Substances and New Organisms (HSNO) Act 1996.
If approval is given for development in containment, or
for importation into containment, further approval must
be given before an organism can be field tested,
conditionally released or fully released. Approval is
only given if, in the opinion of ERMA, the benefits of
the GMO outweigh the risks.

Since 1998, ERMA has granted approximately 15 approvals
for contained field trials of genetically modified
crops. Of these, approximately five have been
completed, six are still ongoing, and the remaining
approvals have either ceased or were unused for various
reasons. However, to date, there have been no
applications for either a conditional or a full release
of products derived by the use of biotechnology in New
Zealand. Many attribute this to the onerous, costly
and unproven nature of the GM regulatory framework,
which includes a lengthy public consultation process.
As the first applicant for a GM release will likely
come under intensive public scrutiny and pressure from
a number of different groups, some New Zealand
companies have opted to go through the regulatory
approval process in other countries.

The most recent approval granted by ERMA was in May
2007 for Crop and Food Research to conduct a contained
field test for broccoli, cabbage, cauliflower, and
forage kale derived by the use of biotechnology and
engineered for pest resistance. Three years ago, ERMA
approved an application from the same organization to
field test onions derived by the use of biotechnology.

WELLINGTON 00000379 002 OF 007

The United States has raised concerns about New
Zealand's regulatory policies regarding genetically
modified organisms in meetings under the United States-
New Zealand Trade and Investment Framework Agreement
(TIFA) and other fora and will continue to press New
Zealand on these issues.

Genetically Modified Food Approval

Foods with genetically modified content can be offered
for sale and consumption in New Zealand after being
assessed and approved by Food Standards Australia New
Zealand (FSANZ). FSANZ, a statutory authority operating
under the Food Standards Australia New Zealand Act
1991, was established in 2002. FSANZ is responsible
for setting food standards that govern the content and
labeling of foods sold in both New Zealand and
Australia. The standards cover food composition,
labeling and contaminants, including microbiological
limits. In New Zealand, the New Zealand Food Safety
Authority (NZFSA) enforces these standards.

A mandatory standard for foods produced using modern
biotechnology came into effect in mid-1999. The
standard, which was established under the Food Act of
1981, prohibits the sale of food produced using genetic
modification unless such food has been assessed by
FSANZ and listed in the food code standard. As of July
2008, FSANZ has received a total of 43 applications for
the assessment of genetically modified foods. Of
these, 35 applications had been approved and 6 are
under review. Two requests had been withdrawn.

Labeling of Genetically Modified Food

Mandatory labeling requirements for genetically
modified (GM) foods took effect in December 2001. With
few exceptions, a food in its final form that contains
detectable DNA or protein derived from genetic
modification must be so labeled.

Meeting the requirements of New Zealand's food labeling
regulations places a burden on manufacturers, packers,
importers, and retailers to take reasonable steps to
determine if the food is genetically modified or has a
GM ingredient and to ascertain if the GM food is
approved. The importer usually has the primary
responsibility for ensuring the accuracy of the label
and compliance with GM food labeling requirements.
Wholesalers and retailers usually demand GM-free
declarations from their supplier, which passes
liability in the event of GM labeling non-compliance
back to the importer. New Zealand food legislation
requires businesses to exercise due diligence in
complying with food standards, which usually is defined
as maintaining a paper or audit trail similar to a
quality assurance system.

Sanitary and Phytosanitary Measures (SPS)

New Zealand maintains a regime of SPS controls for
virtually all imported animal and plant products. The
United States and New Zealand continue to discuss
specific SPS issues that impact trade in both
directions as part of the annual TIFA dialogue and in
other fora.

In July 2006, Biosecurity New Zealand adopted a new
system for the funding and management of import health
standards. While the new system is more transparent,
it is resource intensive and Biosecurity New Zealand is
still only able to complete only about 10% of the
requests for new import health standards. Biosecurity
New Zealand announced in 2007 that it would only take
applications for the development of import health
standards from the competent authorities of exporting
nations and not from domestic constituents. It is
currently conducting a review of current procedures
with a view toward changing them in the future.

WELLINGTON 00000379 003 OF 007

At present, Biosecurity New Zealand is working on
several import health standards for U.S. products
including stone fruit (plums, peaches, nectarines, and
apricots) from the Pacific Northwest, pork, cherries
and lemons.

On March 3, 2006, the United States requested market
access for stone fruit from the Pacific Northwest.
(Stone fruit from California is currently allowed entry
into New Zealand.) Biosecurity New Zealand put the
U.S. request on its work program in 2007 and expects to
announce a draft import health standard in early 2009.

New Zealand currently maintains restrictions on U.S.
pork meat and meat products due to concerns related to
the Porcine Reproductive and Respiratory Syndrome
(PRRS) virus. Having concluded a draft import health
standard, New Zealand is proposing an import standard
that will allow unrestricted importation of uncooked,
consumer-ready, high-value cuts of pork meat from the
United States. However, New Zealand is maintaining
restrictions on other types of pork meat and meat
products, as it asserts that the PRRS virus risks
associated with these products is non-negligible. The
import health standard is expected to be finalized in
2009.

New Zealand continues to suspend imports of US poultry
meat (except canned product) due to its restrictions on
countries that have infectious bursal disease - a
foreign animal disease to New Zealand that is present
in most poultry exporting countries of the world.

NZFSA requires case-by-case assessment of U.S. bovine
products before importation due to concerns over Bovine
Spongiform Encephalopathy (BSE). In February 2007
NZFSA announced a move to modernize its food safety
importing requirements for beef and beef products in
light of the new science that surrounds BSE. Among
other things, the new measures enable New Zealand to
categorize the BSE risk status of countries exporting
to New Zealand. Once these measures are finalized, the
current requirement to assess U.S. products on a case-
by-case basis is expected to be eliminated.

On December 6, 2007, New Zealand filed a WTO case
against Australia with respect to Australia's
phytosanitary import requirements for New Zealand
apples. The United States has entered the dispute as a
third party.

GOVERNMENT PROCUREMENT

New Zealand is not a signatory to the WTO Government
Procurement Agreement but has recently applied for
observer status at the WTO Committee on Government
Procurement. The New Zealand Government is keeping the
issue of its participation in the Government
Procurement Agreement under review.

INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION

Copyrights

The Copyright (New Technologies) Amendment Act 2008 was
passed April 15, 2008. Most of its provisions came
into force in October 2008. There were a number of
changes made to the Bill following its report back from
the Parliamentary Select Committee and prior to its
final passage by Parliament. In particular, changes
were made to the Internet Service Providers' (ISP)
liability provisions in response to concerns raised by
industry. Key changes were:

-- That an ISP will not be protected from liability if
it has reason to believe that material on its clients?
websites is infringing, regardless of whether they have
received a notice from a rights-holder to that effect;


WELLINGTON 00000379 004 OF 007


-- A requirement for ISPs to have and reasonably
implement a policy for termination of the accounts of
repeat infringers was reinstated into the Bill; and

-- The offence provision for sending false or
misleading notices to ISPs which was inserted at Select
Committee was removed from the Bill.

The provisions relating to technological protection
measures (TPMs) are largely unchanged. The government
of New Zealand maintains that the Act reflects the
concern that TPMs should not be protected to the extent
that they restrict acts which are not protected by
copyright law. The provisions of the Act dealing with
TPM have been drafted to accommodate access to a work
for non-infringing purposes, including the exercise of
a permitted act, is retained. The U.S. maintains that
the TPM provisions inadequately protects against the
distribution of circumvention (hacking) devices and
only prohibits trafficking in circumvention devices
where the trafficker has knowledge, or reason to
believe, that the device will, or is likely to be, used
for infringement.

Patent Protection

The grant of patents in New Zealand is governed by the
Patents Act 1953. A new Patents Bill was introduced to
Parliament on July 9 2008 and will, when enacted,
replace the 1953 Act. It is expected that the Bill
will be referred to a Select Committee, which will
likely seek public submissions as part of its
consideration of the Bill in early 2009.

The Patents Bill (2008) requires that, to be
patentable, an invention must be a "manner of
manufacture", be novel, involve an inventive step, and
be useful. The Bill excludes certain subject matter
from patent protection:

-- Human beings and biological methods for their
generation;

-- Methods of treatment of human beings by surgery or
therapy, or methods of diagnosis practiced on human
beings;

-- Inventions whose commercial exploitation would be
contrary to morality or public policy;

-- Plant varieties.

The "prior art base" for novelty and inventive step
includes all material made available to the public in
any form anywhere in the world. This replaces the
"local" novelty standard applied under the 1953 Act.
Patent applications will be examined for inventive step
and utility; there is no examination for these criteria
under the 1953 Act.

The Patent term will remain at twenty years from filing
with no provision for extension. The Bill will remove
the 1953 Act provision for pre-grant opposition and
will introduce a "re-examination" provision which can
be invoked at any time after acceptance of an
application. Re-examination will be limited to issues
of novelty and inventive step based on documentary
prior art. The 1953 Act post-grant opposition
provisions will be expanded and it will be possible to
invoke post-grant opposition at any time during the
patent term. The current provision for revocation of a
patent through the courts will be retained.

The Bill also provides for the establishment of a Maori
Advisory Committee to advise the Commissioner of
Patents where patent applications involve traditional
knowledge and indigenous plants and animals.

The New Zealand Medicines and Medical Devices Safety
Authority (Medsafe), a business unit of the Ministry of

WELLINGTON 00000379 005 OF 007


Health, regulates therapeutic products in New Zealand.
Completed applications for marketing approval for
prescription medicines received by Medsafe since August
2006 have taken an average of 198 days to process. On
average, 66 days of this time was taken by companies to
respond to queries raised by the regulator.

The New Zealand pharmaceutical trade association -
Researched Medicines Industry (RMI) expressed its
concern that pending patent legislation would allow
under the "specific experimental use exception" what it
perceives to be an infringement. While RMI admits that
it is uncertain of the intention or scope of the
provision they believe there is a potential for the
property rights of pharmaceutical companies to be
compromised by patented product data being accessed by
generic drug manufacturers and others under the guise
of "experimental use."

SERVICES BARRIERS

Media

Radio and television broadcasters have adopted
voluntary local content targets after the New Zealand
government made it clear that it would otherwise pursue
mandatory quotas. New Zealand government officials
have said they are sensitive to the implications of
quotas under the GATS, but nonetheless they reserve the
right to impose them.

Telecommunications

New Zealand has, over the past decade, moved from
relying primarily on the courts to regulate the
telecommunications sector under general antitrust
statutes (that proved time consuming and ineffective)
to the introduction of enforceable sector specific
rules. New Zealand amended the 2001 Telecommunications
Act in 2006 (the Act), separating Telecom New Zealand
(Telecom) into separate access network services,
wholesale, and retail business units. The separation
is aimed at promoting competition in the
telecommunications market. The Act requires Telecom to
operate its Access Network Services unit on a stand-
alone basis and its wholesale and retail units at arms-
length from one another. As part of the operational
separation process, the Minister of Communications and
Information Technology (Minister for Communications)
issued a determination on September 26, 2007, requiring
Telecom to prepare a draft separation plan. Telecom
submitted a plan that was opened for public comment in
January 2008. Taking into account comments received,
the Minister for Communications approved Telecom's
amended Separation Plan on 30 March 2008. The
determination also set requirements for providing
Access Network Services over existing copper, and
future fiber and wireless access networks to ensure
comprehensive service coverage and a forward-looking
approach.

Other key features of the Act require Telecom to
provide unbundled local loop and unbundled bit stream
access, "naked" DSL services, and unbundled backhaul
services; improve transparency of Telecom's costs and
pricing by requiring separate wholesale and retail
accounting; and enhance the Telecommunications
Commissioner's ability to enforce effective and timely
access to regulated services. The Act also empowers
the Commerce Commission to set terms and conditions of
supply for regulated services and to resolve supply
terms and conditions for regulated services, rather
than only for individual operators. It empowers the
Telecommunications Commissioner to initiate
determinations of the terms and conditions of regulated
multi-network services. In addition, the Act requires
Telecom to make relevant services, especially unbundled
local loops and unbundled bit stream, available to all
market participants on equivalent terms.


WELLINGTON 00000379 006 OF 007


With respect to mobile termination rates, the Economic
Development Minister announced in April 2007 that he
would accept voluntary and separate binding commitments
from Vodafone and Telecom to reduce such rates to more
reasonable levels. The commitments also require
operators benefiting from such reductions to pass
through reductions to their customers. Based on such
commitments and over a five year period, Telecom has
offered to reduce its mobile termination rate from 20
New Zealand cents per minute (cpm) to 12 cpm, and
Vodafone has offered to reduce its mobile termination
rate from 20 cpm to 14 cpm. This outcome contrasts
with the 2005 Commerce Commission recommendation that
rates be reduced immediately to 15 cpm by 2006, which
was not implemented due to legal challenges brought by
mobile operators.

INVESTMENT BARRIERS

Investment Screening

New Zealand maintains investment screening
requirements, and has not blocked any foreign
investment approvals for business investment since
1984. New Zealand's Overseas Investment Office (OIO)
screens foreign investments that exceed NZ$100 million
and represent 25 percent or more of the equity in a New
Zealand enterprise, foreign investments in land defined
as sensitive within the Overseas Investment Act 2005,
and foreign investment in fishing. In August 2005, the
New Zealand government enacted The Overseas Investment
Act that liberalized the investment screening regime by
refocusing screening on assets of critical interest.
The review also strengthened the monitoring and
enforcement of conditions of consent made under the
Act. Investors are also required to satisfy an
"investor test." In particular, an investor must be of
good character, must not be excluded from entering New
Zealand under the Immigration Act, and must be able to
display both financial commitment and business acumen.
The United States has raised concerns about the
continued use of this screening mechanism.

OTHER BARRIERS

Pharmaceuticals

The U.S. Government continues to raise concerns
regarding the level of New Zealand Government support
for research and development of innovative
pharmaceutical products.

Medicines must be approved by the regulator, Medsafe,
before they can be marketed in New Zealand, or
considered for subsidy by the New Zealand government.
New Zealand's Pharmaceutical Management Agency
(PHARMAC), a stand-alone Crown entity, administers a
Pharmaceutical Schedule that lists medicines subsidized
by the New Zealand government. The schedule also
specifies criteria for prescribing a product listed for
reimbursement. PHARMAC accounts for the majority of
New Zealand's expenditures on prescription drugs. The
New Zealand government also supports hospitals'
pharmaceutical expenditures, bringing its share of
total spending on prescription drugs in the country to
about 80 percent.

New Zealand does not restrict the sale of non-
subsidized pharmaceuticals. Most private medical
insurance companies, however, will not cover the cost
of non-subsidized medicines and doctors are often
reluctant to prescribe them to patients who would have
to pay the cost themselves. As New Zealand's Primary
Health Care Strategy is designed to improve access to
health services through measures including cost
reduction, practitioners are encouraged to prescribe
subsidized medicines. PHARMAC's decisions, by virtue
of the agency's functions, have a major impact on the
price of subsidized medicines, while pharmaceutical
companies' pricing policies influence the price of

WELLINGTON 00000379 007 OF 007


unsubsidized medicines. Pharmaceutical companies may
choose not to market a medicine in New Zealand if it
does not receive a government subsidy. This may
reflect the small size of the New Zealand market. U.S.
industry continues to have concerns about the
transparency, predictability, and accountability of
PHARMAC's processes.

The New Zealand pharmaceutical trade association -
Researched Medicines Industry (RMI) has expressed its
concern that New Zealand lags in the desired level of
investment in innovative medicines relative to other
OECD countries. As a result, RMI feels that
pharmaceutical companies have largely withdrawn from
clinical trials due largely to the "harshness" of the
market. RMI points to a drop in levels of investment
noting that 10 years ago over NZ$100 million was
invested annually in clinical trials which has
currently sunk to NZ$15 million per year.

In October 2005, the United Future Party announced that
it had secured an agreement from the Labour Party to
develop a national medicines strategy as part of
Labour's coalition negotiations to form a government.
Following extensive consultation, the Government
released the medicines strategy (Medicines New Zealand)
and an associated action plan in December 2007. The
strategy is intended to provide a framework to support
sound decision-making over time. It is based on
principles (equity, effectiveness, confidence, value
for money, affordability and transparency), and aims to
deliver a transparent and coherent approach to
medicines issues in New Zealand. The outcomes sought
from the action plan are quality, safe and effective
medicines for New Zealanders; access to medicines; and
optimal use of medicines. A portion of the plan was
implemented in 2008 with a NZ$17 million increase in
PHARMAC's budget but the full implementation is
expected in 2011.

END TEXT.

McCormick

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