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Cablegate: 2005 National Trade Estimate Report: New Zealand

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 06 WELLINGTON 001075

SIPDIS

STATE FOR EB/MTA/MST AND EAP/ANP
STATE PASS USTR FOR BWEISEL AND DKATZ
COMMERCE FOR GPAINE/4530/ITA/MAC/AP/OSAO

E.O. 12958: N/A
TAGS: ETRD ECON EFIN NZ
SUBJECT: 2005 NATIONAL TRADE ESTIMATE REPORT: NEW ZEALAND

REF: STATE 240980

1. Following is post's input for the 2005 National Trade
Estimate Report on New Zealand. We assume that Washington
agencies will provide updated trade and investment data.

2. We also note that the section on "Biotechnology Food
Approval" should be consistent with the NTE on Australia.

3. Begin text of NTE submission:

IMPORT POLICIES

In general, tariff rates in New Zealand are low as a result
of several rounds of unilateral tariff cuts that began in the
mid-1980s and continued until the current Labor government,
elected in 1999, decided to freeze further reductions until
at least July 2005. The New Zealand government announced in
September 2003 that it would resume unilateral tariff
reductions. On July 1, 2006, New Zealand plans to begin
gradually reducing its highest tariff rates of between 17
percent and 19 percent to 10 percent by July 1, 2009. The
top rates apply mostly to clothing, footwear, carpets, and
certain autos and auto parts. Ad valorem tariffs on other
goods also will gradually be reduced to 5 percent by July 1,
2008. The New Zealand government will conduct a review in
2006 to determine rates after July 1, 2009.

STANDARDS, TESTING, LABELING AND CERTIFICATION

Biotechnology Commercial Release Moratorium
New Zealand's Parliament passed the New Organisms and Other
Matters (NOOM) Bill 2003 on October 14, 2003, ending New
Zealand,s moratorium on acceptance of applications for the
commercial release of products produced through modern
agricultural biotechnology into the environment. The new law
put in place a revised regulatory framework by amending the
Hazardous Substances and New Organisms (HSNO) Act 1996, under
which the moratorium was scheduled to sunset on October 29,
2003. New Zealand's commercial release moratorium had
precluded applications for the commercial planting of
biotechnology crops, the commercial importation of
biotechnology seeds, and the release into the environment of
biotechnology animals. It did not, however, affect the use
and sale of processed biotechnology foods and ingredients or
veterinary medicines.

The NOOM Bill 2003 provides for a new conditional release
category of approval for new organisms, including
biotechnology products. This will permit New Zealand's
Environmental Risk Management Authority (ERMA) to accept for
review and its approval applications for release of
biotechnology products with controls applied on a
case-by-case basis. Under the provisions of the NOOM Bill,
ERMA now will be able to approve a conditional release for
biotechnology products that will allow field trial activity
to expand from the limited scope of a fully contained trial
to larger farm scale, encouraging ongoing research activity
in New Zealand. Products from large-scale conditional field
trials that ERMA may now approve could be sold domestically
if the terms of project approval do not explicitly preclude
such sales.

A Member of Parliament representing New Zealand,s Green
Party is sponsoring an amendment to the HSNO Act, which would
reinstate the ban on the commercial release of genetically
modified organisms into the environment until 2008. The bill
is not likely to receive its first reading in Parliament
before early 2005. After the first reading, Members of
Parliament will vote on whether the bill should move forward
to a select committee or be removed.

Biotechnology Food Approval
Imported biotechnology foods can be offered for sale and
consumption in New Zealand after being assessed and approved
by Food Standards Australia New Zealand (FSANZ) under
delegated authority of the New Zealand Food Safety Authority
(NZFSA). In mid-1999, a mandatory standard for foods produced
using modern biotechnology came into effect. The standard
established under the Food Act 1981 prohibits the sale of
food produced using gene technology, unless the food has been
assessed by FSANZ and listed in the food code standard. FSANZ
had received 28 applications for safety assessments of
bioengineered foods as of March 2004. Of these, 23 had been
approved, four applications were being processed, and one
approval request was withdrawn.

Biotechnology Food Labeling
Mandatory labeling requirements for foods produced using gene
technology became effective in December 2001. Biotechnology
labeling is required if a food in its final form contains
detectable DNA or protein resulting from the application of
biotechnology, with a few exceptions. Meeting New Zealand's
biotechnology food labeling regulations places a burden on
manufacturers, packers, importers, and retailers. They are
especially relevant for U.S. agricultural exports, which
consist primarily of processed food. Wholesalers and
retailers frequently demand biotechnology-free declarations
from their supplier/importer, which passes liability in the
event of biotechnology 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.

The NZFSA conducts periodic compliance audits. Individuals
and companies found to be in non-compliance with
biotechnology food labeling requirements may be assessed
penalties under the Food Act 1981. The New Zealand government
is reviewing authorized penalties stipulated under the act to
make sure that they represent an adequate economic deterrent.
New Zealand food retailers are discouraged from sourcing
biotechnology food products, in part because of these
regulations.

A retail food audit conducted by NZFSA in September 2004
reportedly found 17 of the 117 processed products evaluated
to have genetically modified (GM) content that exceeded a 1
percent threshold. These included two products that had been
labeled as GM-free, which were referred to the New Zealand
Commerce Commission for action under the Fair Trading Act
1986. Additional NZFSA measures were taken to ensure that
companies involved with those products whose labels failed to
provide information on their GM content, but did not have
false GM-free declarations, meet future labeling compliance
standards.

Sanitary and Phytosanitary (SPS) Measures
New Zealand maintains a strict regime of SPS control for
virtually all imports of agricultural products. The United
States and New Zealand have held discussions on New
Zealand,s highly conservative regulatory approach as well as
on specific SPS issues. The two sides continue to make
progress in addressing specific issues that negatively impact
trade in products supplied by the United States.

Beef. U.S. beef and beef variety meats were restricted from
entering New Zealand following the December 2003 announcement
of bovine spongiform encephalopathy (BSE) in the United
States. Import restrictions also have been imposed on live
cattle, certain pet food, non-protein free edible tallow, and
U.S. processed food products containing beef such as soups or
those containing gelatin made from bovine bone material. New
Zealand imports of U.S. bovine products for human consumption
now require assessment and approval by NZFSA on a
case-by-case basis before importation. This can be time
consuming, results in additional costs to importers and
exporters, and deters sales. As of early December 2004, the
NZFSA had not yet responded to a U.S. Department of
Agriculture (USDA) request for New Zealand to accept U.S. BSE
control measures as equivalent to that of New Zealand. This
would eliminate individual product approval procedures
initiated following the BSE detection in the United States. A
country assessment review by the Ministry of Agriculture
(MAF) is under way which would permit a reinstatement of New
Zealand,s Import Health Standard (IHS) for U.S. live cattle
and a resumption of trade.

Table Grapes. The New Zealand Ministry of Agriculture (MAF)
in September 2002 issued a new IHS for the import of table
grapes from California that effectively reopened trade to
U.S. exporters. The IHS contained specific mitigation
measures to address the detection of post-border, black widow
and other exotic spiders. As of December 2004, no significant
biosecurity breaches were reported to the New Zealand
government following the resumption of trade. The United
States requested a modification of these mitigation measures
to reduce costs to U.S. exporters and New Zealand importers
without compromising New Zealand,s biosecurity standards.
MAF responded by reducing the table grape inspection levels
for the 2004 shipping season, but mandatory cold treatment
remains in force. As of early December 2004, MAF had not
responded to USDA documentation supporting the elimination of
the unwarranted cold treatment of California grapes.

Pork Meat. In June 2002, New Zealand modified its regulations
imposed a year earlier requiring pork meat products imported
from countries with porcine reproductive and respiratory
syndrome (PRRS), including the United States, to be cooked to
a certain temperature, either before export or after import
in special facilities in New Zealand. The cooking requirement
results in a darker meat color, which tends to be negatively
received by consumers. New Zealand revised its import
regulations in 2003, allowing pig meat products from the
United States to be microwave treated. MAF again modified its
import regulations for U.S. pork meat in November 2004, this
time allowing entry of pork meat products derived from pigs
imported live into the United States from Canada for
immediate slaughter. Prior to this, New Zealand,s IHS had
allowed entry only of U.S. pork meat derived from U.S.
resident animals or from pigs resident and slaughtered in
Canada and further processed in the United States. The
Ministry of Agriculture remains willing to consider
scientific evidence related to the PRRS issue that would
justify a review of its import health standard for pork meat.

Poultry Meat. New Zealand implemented measures that suspended
the importation of poultry meat from various nations,
including the United States, in late 2001 because of the risk
of introducing infectious bursal disease (IBD). U.S.
exporters are unable to sell uncooked poultry meat to New
Zealand, while cooked poultry meat is restricted to canned
products. Discussions between the United States and New
Zealand on this issue continue.

Soybean meal. New Zealand,s import regulations for oilseed
meals were modified in May 2004, requiring an official
phytosanitary certification to address certain manufacturing
practices. USDA does not monitor or inspect U.S. production
facilities for soybean meal and was unable to meet New
Zealand,s new certification requirements. Following
consultations with USDA, MAF again amended its IHS for
oilseed meals in August 2004 and November 2004. These
revisions allow an independent verification authority in
conjunction with a manufacturer,s certificate to address the
production process issue and, taken together with USDA
documentation, meet New Zealand,s import requirements. The
new import regulations establish clarity and certainty
regarding certification of U.S. soybean meal and allowed
normal sales and supplies to resume.

INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION

In October 2003, the New Zealand Parliament enacted a ban on
the parallel importation of films, videos and DVDs for the
initial nine months after a film's international release.
The ban applies only to film media, not to parallel
importation of music, software and books. It is scheduled to
sunset in 2008, unless extended.

The new legislation, which amended the Copyright Act 1994,
also makes it easier to challenge copyright violations in
court by shifting the burden of proof in certain copyright
infringement cases to the defendant, who must prove that an
imported film, sound recording or computer software is not a
pirated copy.

By omitting a ban on parallel imports of music, software and
books, however, the legislation failed to roll back all the
provisions of the New Zealand government's 1998 amendment to
the Copyright Act. While the legislation addressed many of
the U.S. film industry's concerns about parallel importing,
other U.S. industries, particularly producers and
distributors of music and software, have voiced concerns that
allowing parallel imports makes it more difficult to detect
and combat piracy and erodes the value of their products in
New Zealand and in third-country markets.

The music industry also is concerned about a proposed
amendment to the Copyright Act that would legalize the
duplication of sound recordings in other formats for a
purchaser's private use. The government says this would
enable consumers to employ new digital technologies and would
legalize what already is common practice. The music industry
warns that such an exception to copyright protection would
make copyright infringement difficult to police, send the
wrong message to consumers and cost the industry an estimated
$13.7 million in sales revenue and $1.97 million in profits
per year.

With amendments proposed in June 2003 to the Copyright Act
1994, the government aims to bring New Zealand law into
closer conformity with the WIPO Copyright Treaty (WCT) and
the WIPO Performances and Phonograms Treaty (WPPT). The
amendments are intended to reflect developments in digital
technologies and international developments in copyright law
and are expected to be introduced in 2005. If this
legislation is enacted, the New Zealand government will
determine whether to accede to the WCT and WPPT treaties.

New Zealand also took a number of actions to strengthen its
IPR enforcement regime. To deter counterfeiting and
copyright piracy, the Trade Marks Act 2002, which entered
into force in August 2003, creates new criminal offenses for
counterfeiting trademarks and increases the penalties for
pirating copyright goods. For those offenses, the act
provides for penalties of up to NZ $150,000 (US $97,065) in
fines or up to five years' imprisonment.

Following a government review of the Patents Act 1953 that
began in August 2000, the Ministry of Economic Development
has drafted legislation intended to bring the act into closer
conformity with international standards. The draft would
keep the maximum patent term at 20 years, but would tighten
the criteria for granting a patent, from a patentable
invention being new in New Zealand, to being new anywhere in
the world and involving an inventive step.

The draft's prohibition of patents for methods of medical
treatment concerns some pharmaceutical companies. The
industry also is concerned by the Cabinet's decision in
mid-2004 to halt a study on the economic impact of extending
patent terms for pharmaceuticals. In a submission to the New
Zealand government, the pharmaceutical industry group,
Researched Medicines Industry Association of New Zealand, had
contended that New Zealand's effective patent life for
pharmaceuticals had been substantially eroded. It
recommended adoption of a supplementary protection
certificate arrangement, similar to those used in a number of
OECD and European Union countries. This would effectively
extend patent protection. However, the draft legislation
fails to address this issue.

The pharmaceutical industry also is troubled by an amendment,
enacted in December 2002, to the Patents Act 1953. The
amendment provided that it is not a patent infringement for a
person to make, use, exercise or vend an invention for
purposes related to gaining regulatory approval in New
Zealand or other countries. It effectively expedites the
approval process for generic competition to products going
off patent. The amendment was passed quickly and not as part
of the ongoing and thorough review of the Patents Act. The
pharmaceutical industry is strongly opposed to this
"springboarding" legislation.

The United States continues to monitor developments in IPR
issues closely.

SERVICES BARRIERS

Local Content Quotas

Radio and television broadcasters have adopted voluntary
local content targets, but only after the New Zealand
government made it clear that it would otherwise pursue
mandatory quotas. While New Zealand government officials
have said they are sensitive to the implications of quotas
under the WTO General Agreement on Trade in Services (GATS),
they reserve the right to impose them.

Telecommunications

U.S. industry has expressed concern about the cost of
completing calls onto mobile networks in New Zealand, which
ranks among the highest in the world for this charge. The
New Zealand regulating authority began an investigation in
May 2004 into mobile termination rates and in an October 2004
draft decision said that mobile network operators had been
able to set unreasonably high rates because of limited
competition in the market. The authority called for such
charges to be regulated. Its final recommendation, expected
in early 2005, may or may not retain the draft decision's
recommendations. The final decision rests with the
Communications Minister, who can accept the regulating
authority's recommendation, reject it or refer it back for
further consideration. The final decision is expected in
late 2005.

Competitors of the formerly state-owned monopoly Telecom were
disappointed by the New Zealand government's decision in May
2004 against unbundling the local loop. Although under
competitive pressure, Telecom still dominates the market.
The Communications Minister accepted the regulator's
recommendation against ordering Telecom to open its national
fixed-line network to competitors. Saying he aimed to
increase competition in broadband services, the Minister also
agreed with the regulator's recommendation to require
bitstream unbundling, or access to Telecom's equipment by
service providers in order to sell their own broadband
services, and to accept Telecom's offer to provide within six
months unbundled partial private circuits, primarily used for
business data services. As of the end of 2004, however,
Telecom and regulators had yet to agree on commercial terms
and conditions for the unbundled bitstream service.
INVESTMENT BARRIERS
Investment Screening
New Zealand screens certain types of foreign investment
through the Overseas Investment Commission (OIC). Amid a
growing public outcry about foreigners buying coastal
properties, the New Zealand government in November 2003
launched a review of OIC's powers. That review led to
proposed legislation, introduced in November 2004, that would
raise the minimum threshold for scrutiny of proposed business
purchases, but toughen the screening and monitoring of land
purchases. Under the legislation, the threshold for
screening non-land business assets would be increased from NZ
$50 million (US $35.7 million) to NZ $100 million (US $71.3
million), where a foreigner proposes to take control of 25
percent or more of a business. Government approval still
would be required for purchases of land over 5 hectares
(12.35 acres) and land in certain sensitive or protected
areas. For land purchases, foreigners who do not intend to
live in New Zealand would have to provide a management
proposal covering any historic, heritage, conservation or
public access matters and any economic development planned.
That proposal would have to be approved and generally made a
condition of consent. In addition, investors would be
required to report regularly on their compliance with the
terms of the consent. Overseas persons would continue to
have to demonstrate the necessary experience to manage the
investment. Any application involving land in any form still
would have to meet a national interest test. The United
States has raised concerns about the continued use of this
screening mechanism. New Zealand's commitments under the
GATS Agreement of the WTO are limited as a result of New
Zealand's screening program.

OTHER BARRIERS

Pharmaceuticals

The U.S. Government continued to raise concerns about New
Zealand's pharmaceutical sector policies, which do not
appropriately value innovation and diminish the contribution
of New Zealand to research and development of innovative
pharmaceutical products. New Zealand's Pharmaceutical
Management Agency (PHARMAC) administers a Pharmaceutical
Schedule that lists medicines subsidized by the New Zealand
government and the reimbursement paid for each pharmaceutical
under the national health care system. The schedule also
specifies conditions for prescribing a product listed for
reimbursement. PHARMAC, a stand-alone Crown entity
structured as a statutory corporation, accounts for 73
percent of expenditures on prescription drugs in New Zealand.

New Zealand does not directly restrict the sale of
non-subsidized pharmaceuticals in the country. However,
private medical insurance companies will not cover
non-subsidized medicines, and doctors are often reluctant to
prescribe non-subsidized medicines for their patients, who
would have to pay out-of-pocket costs. Thus, PHARMAC's
Pharmaceutical Schedule decisions determine the selection and
pricing of the bulk of pharmaceutical drugs sold in New
Zealand. Its decisions have a major impact on the
availability and price of non-subsidized medicines and the
ability of pharmaceutical companies to sell their products in
the New Zealand market.

The United States has serious concerns relating to the
transparency, predictability and accountability of PHARMAC's
operations. U.S. pharmaceutical suppliers report that the
methodology used to determine Pharmaceutical Schedule
decisions lacks transparency. The Boards of PHARMAC and the
Researched Medicines Industry Association of New Zealand have
been meeting to discuss these concerns. The U.S. Government
will continue to closely monitor developments in this sector.

On December 10, 2003, the New Zealand and Australian
governments signed a treaty to create a joint agency to
regulate medical devices, prescription and over-the-counter
medicines, dietary and nutritional supplements, and cosmetics
such as sun creams. Aside from prescription pharmaceuticals,
New Zealand does not currently regulate market entry of these
products. TThe new agency is scheduled to begin operations
July 1, 2005. Each country's government will continue to
determine funding of prescription medicines. The new agency
may charge full cost-recovery fees to register products and
require additional documentation and assessments for certain
products, even if they already have U.S. Food and Drug
Administration approval. U.S. manufacturers and distributors
of non-pharmaceutical therapeutic products have expressed
concerns that those requirements would be overly burdensome
and costly and serve to discourage exports of their products
from the United States to New Zealand.
End text of submission.
Swindells

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