Cablegate: New Zealand - 2008 National Trade Estimate Report

DE RUEHWL #0805/01 3120214
P 080214Z NOV 07





E.O. 12958: N/A

REF: STATE 119765

1. Following is Post's submission for the 2008 National Trade
Estimate Report (NTE) regarding New Zealand per request
reftel. We assume that Washington agencies will provide
updated trade and investment data.

2. Begin text of NTE submission:


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 Labour government,
elected in 1999, froze further reductions until July 2005.
The New Zealand government announced in September 2003 that
it would resume unilateral tariff reductions starting July 1,
2006. Under this unilateral tariff reduction program, New
Zealand has begun implementing gradual reductions of its
highest tariff rates (currently 17 percent), which will
reduce tariffs to 10 percent by July 1, 2009. These top rates
apply mostly to clothing, footwear and carpet. Ad valorem
tariffs on all other dutiable goods will be reduced to 5
percent by July 1, 2008.


Biotechnology Regulations

New Zealand's Environmental Risk Management Authority (ERMA),
an independent body, reviews applications for the release of
new organisms, including biotechnology products that contain
living organisms. ERMA assesses applications on a
case-by-case basis and can issue four types of approvals:
initial development in containment (such as in a laboratory
or glass house outdoor development or field test (in
containment), conditional release, and full, unconditional
release (with no controls). Biosecurity New Zealand, part of
the Ministry of Agriculture and Forestry (MAF), carries out
compliance and enforcement of all indoor and outdoor
containment and conditional release approvals. When
assessing a containment application, ERMA focuses on the
adequacy of containment to mitigate any potential effect of
the organism on the environment.

Since 1998, ERMA has granted approximately fifteen 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. 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.
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

Release approvals include both conditional release, where
controls can be placed on the organism to manage risks, and
full release where no controls are imposed. The process for
outdoor containment, conditional and full release of
biotechnology products is much more onerous than for an
indoor containment application. Among other things,
applicants must provide ERMA with detailed information and
analysis that enables them to conduct a full-scale risk
assessment that takes into account a broad range of
scientific, economic, cultural and ethical factors in the
decision making process. This includes the possible impact
of a release on New Zealand's clean, green image and the
potential impact on the Maori culture. All outdoor
containment, conditional and full release applications must
be publicly notified. In addition, a Maori consultation is

Until October 2003, New Zealand maintained a voluntary
two-year moratorium on the introduction of all biotechnology
products, which precluded applications for the commercial
planting of biotechnology crops, the commercial importation
of seeds derived by the use of biotechnology, the release
into the environment of animals derived by the use of

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biotechnology and, to a lesser extent, some human and
veterinary medicines containing biotechnology products. The
moratorium, however, did not apply to the use and sale of
processed foods and ingredients derived by the use of
biotechnology. With the moratorium's expiration and the
report of the Royal Commission on Genetic Modification,
Parliament amended the Hazardous Substances and New Organisms
Act 1996 to make the regulation of biotechnological research
more workable and to facilitate controlled release of
biotechnology products. The amendment, the New Organisms and
Other Matters Bill of 2003, introduced the conditional
release category for approval of new organisms.

Biotechnology 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),
which is the bi-national food regulatory authority for New
Zealand and Australia. FSANZ is responsible for the
development of regulations in the Australia - New Zealand
Food Standards Code (Code). The New Zealand Food Safety
Authority (NZFSA) is responsible for implementation and
enforcement within New Zealand.

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 November 2007, FSANZ has received a
total of 39 applications for assessment of genetically
modified foods. Of these, thirty-three applications have been
approved and four are under assessment. Two requests have
been withdrawn.

Biotechnology Food Labeling

Mandatory labeling requirements for genetically modified
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 New Zealand's food labeling regulations for
genetically modified foods can be extremely burdensome and is
especially relevant for U.S. agricultural exporters who deal
primarily in processed food. New Zealand wholesalers and
retailers frequently demand GM-free declarations from their
suppliers. This effectively places liability for any GM
labeling non-compliance on 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. Violators of
food labeling requirements can be assessed penalties under
the Food Act 1981. As part of the Domestic Food Review, the
New Zealand Government is reviewing the entire Food Act and a
new version is expected to be introduced to parliament in the
first quarter of 2008.

Sanitary and Phytosanitary Measures

New Zealand maintains a strict regimen of sanitary and
phytosanitary (SPS) controls for virtually all imported
agricultural products. The United States and New Zealand
continue to discuss specific SPS issues that negatively
impact trade in products supplied by the United States as
part of our annual Trade and Investment Framework Agreement
(TIFA) dialogue and in other fora.

In 2006, New Zealand implemented new processes for
undertaking risk analyses and developing import health
standards. This initiative is intended to streamline
existing processes and provide consistency in the way New
Zealand undertakes these tasks. As of July 1, 2006, New
Zealand also implemented a new system for funding and
managing the development of import health standards. The new
system is intended to be more transparent, direct government
resources to the highest priorities and increase the
resources available for developing import health standards.

During the 2006 U.S.- New Zealand TIFA discussions, the

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United States Government requested that New Zealand develop
an import standard for Pacific Northwest stone fruit (plums,
peaches, nectarines and apricots). In response to the US.
request, New Zealand has added Pacific Northwest stone fruit
to its import health standard development work program. The
work program also includes a review of import requirements
for citrus from the United States.

New Zealand completed a risk assessment of U.S. high-value
pork in June of 2006. To date, this product has been subject
to a pre-cooking requirement because of the presence of
Porcine Reproductive and Respiratory Syndrome (PRRS) in the
United States. While the analysis confirmed that there is a
risk of PRRS disease entering New Zealand, the Ministry of
Agriculture and Forestry (MAF) is recommending that high
value cuts of pork be allowed entry without any sanitary
treatment. In response to the risk assessment, MAF received
forty-four submissions, including two from the United States.
MAF completed the review of submissions in June 2007 and is
expected to announce the draft import health standard by the
end of the calendar year.

The New Zealand Food Safety Authority (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 will
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.

New Zealand continues to suspend imports of U.S. poultry meat
(except canned product) due to its restrictions on countries
that have infectious bursal disease.

(Note: New Zealand makes a functional distinction between the
use of the terms biotechnology and genetic modification. End


Copyright Protection

The New Zealand government introduced the Copyright
Amendments Bill at the end of 2006, which passed its first
reading. In 2007, the legislation was sent to Select
Committee for a comment period. The Bill was again taken up
by Parliament in November 2007 for a second reading but it is
uncertain whether the Bill in its current form has sufficient
votes to pass. If the current Bill form does not pass the
second reading before the end of this year's legislative
term, then it is unlikely to be dealt with again until after
the election period, i.e., 2009. In March 2007, during the
comment period to the Select Committee, industry argued that
the draft legislation would put New Zealand at odds with the
growing international consensus with respect to protection of
copyright in the on-line environment. The international
standards for protection of copyrightable material are
currently set by the WIPO Internet Treaties (the WIPO
Copyright Treaty and the WIPO Performances and Phonograms
Treaty) of which New Zealand is not a signatory. Industry's
main concerns regarding the draft legislation relate
primarily to the following:

The Bill fails to adequately protect Technological Protection
Measures (TPMs) that prevent unauthorized access to digital
content. The viability of many existing and prospective
business models depend on such TPMs, but the Bill excludes
protection for the very types of access controls most in need
of it. In order to meet the minimum level of protection
required by the WIPO treaties, both access and copy
protection TPMs must be protected, separate and apart from
the remedies available for infringement. There is inadequate
protection against the sale of circumvention (hacking)
devices. In its present form, the Bill would allow the sale
of circumvention devices as long as the device is capable of
any "significant application" other than circumvention. Thus
the provider of a circumvention device could avoid liability
so long as the tool performs some other function. Moreover,
the Bill only prohibits trafficking in circumvention devices

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where the trafficker has knowledge or reason to believe that
the device will, or is likely to be, used for infringement.
This allows any trafficker to hypothesize a non-infringing
use for the tools of his trade as a defense. In this way, a
proliferation of such devices would be encouraged, thus
eviscerating any protections for TPMs.

Internet Service Providers (ISPs) are provided a "safe
harbor" from liability without requiring them to apply a
repeat-infringer termination policy. The Bill also allows
ISPs to escape liability even if they have "reason to know"
that infringing activity is taking place on their networks,
yet fail to act. The only requirement is that they have
"actual knowledge or awareness" of infringement - which
constitutes a high burden of proof for right holders, and
would encourage unlawful activity. Also of significant
concern, is the addition of a provision that would make it an
offense to provide inaccurate information to ISPs regarding
illegal content on their networks. This provision further
adds to the burdens of content owners, who already take care
and incur significant expense to monitor the use of their
content on third party networks.

Patent Protection

In 2000, the Government initiated a review of the Patents Act
of 1953. Although an initial draft Bill was released in
early 2005 for consultation, it has yet to have its first
reading in the legislature. The stated purpose of the Bill
is to ensure that New Zealand's patent regime takes account
of international developments. One such development is the
international trend for countries to strengthen intellectual
property protection through patent term restoration. On
average, the patent and regulatory approval processes for new
drugs in New Zealand take about twelve years. As a result,
many drugs have very few years of patent protection remaining
after the regulatory authority grants marketing approval.
Many countries, including the U.S. and EU, have established
mechanisms to restore patent terms for pharmaceutical
products to recover time lost due to regulatory delays. The
research-based industry has urged the New Zealand legislature
to amend the current bill to include patent term restoration
in keeping with international best practices.

The issue of the patent term protection for pharmaceuticals
was the subject of a consultation exercise by the Ministry of
Economic Development in 2003. After considering all
submissions and available information, the Ministry decided
that it was not possible to determine whether the benefits of
extending the patent term for pharmaceuticals would exceed
the likely costs, and proposed that an economic study be
carried out to gather more information on the subject. After
considering the terms of reference for such a study, the
government decided in 2004 that no further work needed to be
done on this issue.

Changes to IPR Enforcement

In the copyright legislation currently under Parliamentary
consideration, there are provisions to strengthen enforcement
of trafficking in counterfeit goods and pirated works by
empowering the Ministry of Economic Development to be able to
investigate and prosecute the criminal offenses for
manufacturing, importing and selling of counterfeited goods
and pirated works. The Government is also reviewing New
Zealand Customs' border powers to prevent importation of
counterfeit goods and pirated works. Additionally, the New
Zealand has agreed to join negotiations on the
Anti-Counterfeiting Trade Agreement (ACTA), proposed by the
U.S. and Japan.


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. Although 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.

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In September 2007, the New Zealand government announced that
it was going ahead with its plan to split Telecom New Zealand
into three separate operational units to provide retail,
wholesale and network services. The determination sets
requirements for Access Network Services (ANS) to provide
services over existing copper, and future fiber and wireless
access networks, ensuring comprehensive service coverage and
ensuring that the unit is forward-looking.

Telecommunications Regulatory Environment

In November 2005, the Government commenced an assessment of
the telecommunications sector. The purpose of the assessment
was to consider developments of the telecommunications sector
as a whole over the medium term (three to five years). The
stock take found that the local loop (subscriber line, i.e.,
customer to carrier connection) remains an access bottleneck
that restricts the development of effective competition. New
entrants require access on fair and non-discriminatory terms
to Telecom's network to be able to provide high quality, cost
effective and differentiated services.

"Last-mile" access for the majority of New Zealand consumers
is likely to rely heavily on the local copper network for
sometime. The stock take analysis also indicated that an
improved Unbundled Bitstream Service (UBS) would help close
the gap with other OECD countries on broadband uptake, price
and quality.

The assessment resulted in the Telecommunications Amendment
Act 2006. The Act was passed through Parliament in December
2006. The main parts of the Act are requiring the
operational separation of Telecom; extending the range of
services subject to regulation; enhancing the ability of the
Commissioner to implement regulated services; and empowering
the Commissioner to monitor compliance in the sector.

The key features of the Act are:

-- Operational separation of Telecom New Zealand in order to
promote competition in the telecommunications market (see

-- Regulating for greater access to Telecom's local loop by
competitors by introducing new regulated Unbundled Local Loop
ULL and Unbundled Bit stream Access (UBA), naked DSL services
and unbundled backhaul services.

-- Improving transparency of Telecom's costs and pricing via
regulating for the accounting separation of Telecom.

-- Enhancing the Telecommunications Commissioner's ability to
implement services by ensuring that service providers can get
effective and timely access to regulated services.

-- Standard terms determination introduced allowing the
Commerce Commission to set terms of supply for regulated
services by providing a multilateral process for setting
these terms. This will allow the Commerce Commission to
resolve supply terms for regulated services once, rather than
for each access seeker individually.

-- Giving the Telecommunications Commissioner the ability to
initiate multi-network determinations where the Commissioner
will be empowered to initiate a determination of the terms
and conditions of regulated multi-network services, rather
than relying on access seekers to apply.

The Act requires:

-- The separation of Telecom into separate Access Network
Services, Wholesale and Retail business units;

-- A requirement for Access Network Services to be operated
on a stand-alone basis and for Telecom Wholesale to be
operated at arms-length from any retail business units;

-- The establishment of an Independent Oversight Group,
backed up by Commerce Commission enforcement, to ensure
Telecom faithfully implements its Separation plan; and

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-- A requirement that relevant products, especially Local
Loop Unbundling and Unbundled Bit stream Access, are
available to all market participants on equivalent terms.

-- As part of the operational separation process, the
Minister of Communications issued a Determination on 26
September 2007 of further requirements with which Telecom's
undertakings must comply. Telecom has 20 working days from
the Determination date to prepare their draft separation

Mobile Termination Rates

At the end of April 2007, the Economic Development Minister
announced that he would accept voluntary, and separate
binding deeds from Vodafone and Telecom New Zealand. The
deeds provide for each company's performance in passing
through reductions in mobile termination rates to fixed
calling customers to be independently audited each year. Each
deed also contains measures to ensure the independence of the
verification process.

Under the deeds, Telecom will reduce its mobile termination
rate from 20 cents per minute (cpm) to 12 cpm and Vodafone
has offered to reduce its mobile termination rate from 20 cpm
to 14 cpm, both over the next five years. These are in line
with the Commerce Commission's estimate that the cost of
mobile termination in New Zealand would be 15 cpm trending
down to 12 cpm in five years time.


Investment Screening

New Zealand's Overseas Investment Office (0I0) screens
foreign investments in: business investments that exceed
NZ$100 million and represent 25% equity or more and;
investments in land defined as sensitive within the Overseas
Investment Act 2005 (the Act); and investment in Fishing
Quota. The New Zealand government enacted The Overseas
Investment Act in August 2005, which 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.

The screening threshold for investments of over 25%, or a
control interest in, non-land business investments was raised
from NZ$50 million to NZ$l00 million. Investors are required
to satisfy the "investor test" that requires investors be of
good character, are not excluded from entering New Zealand
under the Immigration Act and be able to display both
financial commitment and business acumen. Significantly, no
business investments have been declined since 1984.

The purchase of land defined as sensitive within the Act
requires approval. Examples of sensitive land could include:
non-urban land of over five hectares, land on certain
offshore islands, or land that includes or adjoins foreshore
and seabed. Most urban land is not screened at all unless
deemed to be sensitive for other reasons. Investments by
overseas persons who are not intending to reside in New
Zealand are required to pass the "investor test" and show
that the investment will create a benefit for New Zealand.
In considering whether this benefit exists, consideration is
required to be given to a range of economic and non-economic
factors included within the Act. Where the investor has
undertaken to generate these benefits (e.g. through
significant development or investment) the realization of
these benefits may be included as conditions of consent and
progress may be periodically monitored.

The United States has raised concerns about the continued use
of this screening mechanism. New Zealand's maintain that its
commitments under the WTO General Agreement on Trade in
Services are reflected in the OIO screening program.


Government Price Controls and Reimbursement for

The U.S. Government continued to raise concerns about New

WELLINGTON 00000805 007 OF 009

Zealand's support for innovation in the research and
development of innovative pharmaceutical products. 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 conditions for
prescribing a product listed for reimbursement. PHARMAC
accounts for 73 percent 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.

With respect to accountability, PHARMAC (as a Crown Entity)
is accountable to the Minister of Health and has a Board of
Directors appointed by the Minister. PHARMAC also operates
in practice as an agent of the District Health Boards (DHBs)
and its capped (notional) pharmaceutical budget is funded by
the DHBs.

PHARMAC reports both monthly and quarterly to the Ministry of
Health (acting on behalf of the Minister of Health). In
addition, the Minister of Health may at any time ask the
PHARMAC Board for a "please explain," and has the power to
dismiss Board Members. PHARMAC staff members are accountable
to its Board of Directors who scrutinize not just the
substance of their actions, but also ensure a rigorous
adherence to the Operating Policies and Procedures (OPPs).

New Zealand does not restrict the sale of non-subsidized
pharmaceuticals in the country. However, private medical
insurance companies 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. Thus,
PHARMAC's 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.

PHARMAC continues to operate stringent cost containment
strategies, and issues of transparency, predictability and
accountability remain unresolved in industry's opinion. New
Zealand has created a commercially difficult market for
innovative medicines. In October 2005, the United Future
Party announced that it had secured an agreement from the
Labour Party to develop a national medicines policy as part
of Labour's coalition negotiations to form a Government.
This is tantamount to a review of the Government's
pharmaceutical policy, and includes three areas of focus:
Access to Medicines; Quality Use of Medicines; and the
Rational Use of Medicines. The national medicines policy will
be released through the Ministry of Health and is anticipated
to be released as a consultation document in December 2007
with some principles and possible solutions proffered. There
will follow a consultation period from the time of release,
with changes expected to be implemented later in 2008.

Market Access for Pharmaceuticals

The innovative pharmaceutical industry is advocating for the
following key policy reforms in New Zealand:

-- Patient Outcomes - The National Medicines Strategy (NMS)
should ensure the provision of quality medicines in a way
that is responsive to people's needs and achieves optimal
health outcomes.

-- Comparable Access - The NMS should ensure that New
Zealanders have at least comparable access to medicines as do
citizens in other OECD countries.

-- A Core Health Strategy - Medicines play a vital role in
the prevention, amelioration and treatment of disease and as
such the NMS is integral to the achievement of all national
health strategies and should have equal standing and

-- Integrity and Public Confidence - The current bundling of
clinical assessment and procurement decisions creates
incentives to subordinate clinical judgment to budget
imperative. For these decisions to have integrity and
improve public confidence in the system, determinations about
which medicines are cost effective and are of clinical merit

WELLINGTON 00000805 008 OF 009

must be conducted independently before being used to form
decisions about which products can be funded.

-- Transparency and Rigor of Processes and Decision Making -
Public confidence will be enhanced if decision making
processes are underpinned by openness, fairness, timeliness
and high standards of consultation and review. All
stakeholders must be able to understand the true basis of
decisions and rationing should be explicit. What is
considered 'value for money' should comparable to other OECD
countries and meet WHO recommendations. Health Technology
Assessment (HTA) methodologies must be rigorous and up to
world standards.

-- Recognition of the Value of Innovation - The NMS should
recognize the value of innovation and innovative
pharmaceuticals through the adoption of procedures that
appropriately value the objectively demonstrated therapeutic
significance of the pharmaceutical.

-- Responsive Budget Management - The pharmaceutical budget
should be determined by need and access benchmarks. Rather
than conduct health technology assessments (HTA) of products
after the capped budget has been set, thus simply creating a
priority list of new products competing for the limited
funding available, horizon scanning and HTA should be used to
establish budget estimates on an annual basis.

-- Partnership - The achievement of timely access to
medicines, quality use of medicines and other NMS objectives
is greatly enhanced by the maintenance of a responsible and
viable industry in New Zealand. Coordination of health and
industry policies and a consistent and more welcoming
environment will better enable the industry to effectively
partner the government and other stakeholders to achieve
improved health and economic outcomes.

-- Whole of System - The NMS must be a whole of system
approach. Meaningful and sustainable improvements will only
be achieved by a comprehensive, system wide, review.
Selecting and pursing only a limited range of issues will not
meet public expectations for reform and would negatively
impact the relevance and effectiveness of the National
Medicines Strategy.

Therapeutic Products and Medicines Bill

The New Zealand and Australian governments signed a treaty on
December 10, 2003, with the intent 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, but would have done
so under proposed regulations. Implementing legislation
known as the Therapeutic Products and Medicines Bill was
introduced at the end of 2006 and barely passed its first
reading. After a prolonged political battle, on July 16,
2007, the State Services Minister put the highly contentious
Bill "on hold." The New Zealand Government has shelved the
legislation, ending any near term prospects of a joint New
Zealand - Australia agency to regulate prescription and
over-the-counter medicines and medical devices. After
lengthy contentious political debate, the Government could
not secure enough votes in Parliament to ensure the bill's
passage into law. This almost certainly means the Bill's
prospects of passage are dead until after the 2008 election.

The bill was expected to grandfather products that were
already lawfully on the market at the time of the
implementation of the legislation. The Bill would have
granted an interim license valid for a transition period of
three years. It was expected that the new agency would have
charged 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.


New Zealand is not a signatory to the WTO Government
Procurement Agreement and is not an observer to the Committee
on Government Procurement. It is important to note that New

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Zealand has a unilateral open market procurement policy, and
does not use government procurement measures as trade
barriers. The position regarding participation in the
Government Procurement Agreement is kept under review. END


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