In 1995, the U.S. trade surplus with New Zealand was $241 million, $153
million higher than in 1994. U.S. merchandise exports to New Zealand were $1.7
billion, up $185 million, or 12.3 percent over 1994. New Zealand was the United
States' forty-first largest export market in 1995. U.S. imports from New Zealand
in 1995 totaled $1.5 billion, $30 million more than in 1994.
The stock of U.S. foreign direct investment was $3.6 billion in 1994, 16
percent more than in 1993. U.S. direct investment in New Zealand is largely
concentrated in telecommunications, forestry and paper, food processing,
transportation, petroleum, and finance.
In an effort to open its market to international competition, New Zealand has
unilaterally instituted a program of significant tariff liberalization since
December 1985. At that time, New Zealand announced that tariffs on goods not
produced in New Zealand would be cut to zero unless trade policy considerations
dictated otherwise. In 1988, the government reported that 93 percent of imports
entered duty free and instituted a multi-year program to reduce remaining
tariffs. By July 1, 1996, the tariffs on most goods manufactured in New Zealand
will fall within the range of five to 15 percent.
Certain sensitive sectors will still retain tariffs which are above OECD
averages after July 1, 1996. Tariffs for motor vehicles, tires, textiles (except
yarns), curtains, carpets, clothing, and footwear will range from 20-to-30
percent as of July 1, 1996. Passenger vehicles and original equipment tires will
still face a tariff of 25 percent; replacement tires 15 percent; clothing and
adult shoes 30 percent; children's shoes 25 percent; and carpets 20 percent. New
Zealand assesses tariffs of between 13 and 20 percent on imports of distilled
spirits. These rates are scheduled to be reduced to 5 percent by the year 2000.
We are negotiating with New Zealand in the WTO to complete the "zero for zero"
on distilled spirits.
In the context of the Uruguay Round market access negotiations, the United
States sought further reduction of New Zealand's tariffs and also sought a
substantial increase in New Zealand's tariff bindings. As a result of the
Uruguay Round, all New Zealand tariffs will be bound except those for used motor
vehicles and used clothing. In addition, all remaining tariffs on
pharmaceuticals will be eliminated by July 1, 1997, on beer by July 1, 2002, and
on pulp and paper by July 1, 2004. On December 16, 1994, New Zealand announced a
further unilateral tariff reduction plan for July 1, 1997 through July 1, 2000
which will reduce all tariffs to no more than 15 percent. Under this plan, goods
with a tariff rate over 20 percent in 1996 will have a rate of 15 percent in
2000. Goods at 15 percent to 20 percent in 1996 will have rates of ten percent
in 2000. Goods at rates below 15 percent in 1996 will have rates of five percent
in 2000 (with the exception of car parts which will carry a tariff of ten
percent). Goods with a tariff of five percent in 1996 will enter duty free after
July 1, 1998.
It is the stated policy of the government that opening the New Zealand
economy to competition, particularly international competition, is a key element
of a successful growth and employment strategy. Thus, tariff reductions after
2000 are scheduled for review in 1998 to determine how to move towards a zero
end point under a unilateral domestic tariff reduction program.
STANDARDS, TESTING, LABELING, AND CERTIFICATION
Sanitary and Phytosanitary Controls
New Zealand maintains a strict regime of sanitary and phytosanitary control
for all imports of agricultural products. Due to the government's use of basic
risk analysis in developing agricultural inspection requirements, access for
some agricultural products has improved or is improving. A U.S.-New Zealand
import protocol was reached in 1995 which allows for the importation of U.S.
peaches and nectarines. However, New Zealand prohibits the import of U.S. salmon
because it has not completed the required risk assessment for this salmon,
contrary to its obligations under the WTO agreements
In 1983, New Zealand and Australia entered into a "closer economic relations"
(CER) agreement seeking for the two countries harmonization of the standards,
technical specifications and testing procedures, domestic labeling and
restrictive trade practices. One side effect has been that phytosanitary or
animal health restrictions held by one country are often followed by the
In practice, the government's procurement system is open, transparent, and
competitive. While government policy is to give local producers a fair chance,
chief executives are responsible for limiting costs and will source purchases
wherever they can get the best value for the money. Stiff laws against bribery
of government officials and those accepting bribes are enforced. New Zealand has
not joined the GATT/WTO Government Procurement Code because the government
believes the benefits would not justify the compliance cost of trying to police
New Zealand's totally deregulated government procurement system.
LACK OF INTELLECTUAL PROPERTY PROTECTION
New Zealand is a member of the World Intellectual Property Organization, the
Paris Convention for the Protection of Industrial Property, the Berne Convention
and the Universal Copyright Convention. It fulfilled its TRIPs Agreement
obligations with the passage of the Copyright Act of 1994; Layout Designs Act of
1994; and 1994 amendments to the Patents Act of 1953, to the Trademarks
Amendment Act of 1953, and the Plant Variety Rights Act of 1987. Amendments made
to existing intellectual property statutes came into force on January 1,
The 1994 Copyright Act substitutes civil for criminal penalties for parallel
importers. It is now the responsibility of the copyright owner to inform New
Zealand Customs that goods are being parallel imported into New Zealand (notice
forms are to be accompanied by a fee of $1,072) and to take civil action against
In two areas, New Zealand's legislation goes beyond its TRIPs obligations.
New Zealand's 1994 copyright legislation allows its regime to keep pace with
technological changes and ensures compliance with the 1971 revision of the Berne
Convention. Scheduled to be brought into force in 1996, the Geographical
Indications Act of 1994 establishes a regime for protecting New Zealand and
international geographical indications (e.g., for wine) from misleading or
deceptive use. The government also continues to review its intellectual property
legislation for further reforms that will take into account such developments as
the global information infrastructure.
The New Zealand government adopted amendments to its Medicines Act in 1989
which significantly weakened patent protection for pharmaceutical products. In
response to international concern, New Zealand passed the Medicines Amendment
Act in 1990 to replace the 1989 legislation. However, the 1990 Act waived
government liability for trademark or copyright infringement related to the
importation, sale or distribution of medicines for which the patent has expired.
Consequently, materials under copyright or trademark that are used in connection
with an "off patent" medicine imported by the government (e.g. pamphlets) now
may be imported, reproduced, translated, or adapted without permission from the
holder of the copyright or trademark. In practice, the government has not
actually imported such "off patent" medicines since the enactment of the 1990
Medicines Amendment Act. The Copyright Act of 1994 preserves the ability of the
government to parallel import printed materials associated with parallel
imported medicines for which the patent has expired.
Overseas Investment Commission
While there is an active public debate over the issue, foreign direct
investment is welcomed. Approval by the Overseas Investment Commission (OIC) is
required for all foreign direct investment (both acquisitions and greenfield
investments), where an "overseas person" is to acquire or take control of
"significant" assets in New Zealand. Control is defined as 25 percent ownership
or a controlling interest of an asset. Significant assets include: businesses or
property worth more than NZD 10 million (US $6.6 million); land over five
hectares or worth more than NZD 10 million; and certain "sensitive" land over
0.4 hectares (e.g., on islands, on or next to reserves, historic/heritage areas,
foreshore, and lakes). No performance requirements are attached to foreign
direct investment. Full remittance of profits and capital is permitted through
normal banking channels.
The Overseas Investment Amendment Act of 1995 replaced an outmoded,
duplicative approval system for foreign land purchases and places the
responsibility for such approvals solely with the OIC. The act gave the OIC for
the first time the authority to monitor foreign investments after approval to
enable the OIC to check when and if investment proposals proceed, and to ensure
investors live up to approval conditions. It also increases the penalty for
noncompliance. If foreign investors are found to have lied on approval
applications, the high court can order the disposal of their New Zealand
Although the screening process is discriminatory, in practice, the OIC
approves virtually all investment applications. Its approval requirements have
not posed a problem for U.S. investors. There is no limit to foreigners buying
into any sector or acquiring 100 percent ownership of any firm. The exceptions
are a maximum 35 percent ownership of Air New Zealand to preserve landing
rights; the 1983 Fisheries Act which allows foreigners only to lease New Zealand
fishing rights; and a general edict that while crown forestry assets and cutting
rights can be acquired by foreigners, the land on which the assets are situated
should remain in government hands.
International Tax Reform
As part of the government's deregulation strategy, Parliament passed an
International Tax Reform bill on December 12, 1995. Going into effect on April
1, 1996, the reforms grant foreign firms and investors national treatment on
corporate taxes; transfer pricing rules will be aligned with OECD practices; and
thin capitalization regulations will be tightened to discourage foreign
companies from using excessive debt to avoid New Zealand taxes. The new rules
offer foreign investors greater transparency and predictability.
Another issue which adversely affects both New Zealand and foreign
pharmaceutical companies is the monopsony purchasing practices of the
Pharmaceutical Management Agency (PHARMAC). Established in 1993 by New Zealand's
four government-owned regional health authorities to manage the purchasing or
funding of public medical services, PHARMAC is effectively exempted from New
Zealand's normal competition laws. PHARMAC controls a pharmaceutical schedule on
which all government-subsidized pharmaceuticals are listed. Private medical
insurance companies, furthermore, will not cover unsubsidized medicines. Thus,
PHARMAC effectively controls what prescription medicines will be sold in New
Zealand and, to a large extent, at what price they will be sold.
Pharmaceutical suppliers, domestic and foreign, complain that it is difficult
to list new chemical entities and line extensions on PHARMAC's schedule. As
PHARMAC tries to restrict the growth of New Zealand's pharmaceutical budget,
suppliers must be prepared to offer substantial discounts to be listed.
Pharmaceuticals can be de-listed if a new, cheaper alternative becomes
available, and the manufacturer of the original product refuses to discount its
price to that of the new lower priced alternative.
Statutory producer boards continue to have an effect on agricultural products
and cover many of the most important products produced and exported by New
Zealand. Export market monopolies remain in place for dairy, apples, pears, and
kiwifruit. Regulatory producer boards exist for meat and wool, but these do not
exercise control over export operations. The government does not fund board
operations. Either retained revenue from domestic growers or domestic grower
checkoffs provide funding. The Apple and Pear Board Act was amended in September
1993 and the domestic market in this product area is now open to importers.
Legislation is pending in 1996 which would address domestic concerns over
marketing boards' ownership, accountability, and powers over the dairy, meat and
Given the small size of the New Zealand market, we estimate that removal of
any one of the still existing barriers to trade and investment would not result
in a potential U.S. export gain of more than ten million dollars a year.
Nonetheless, New Zealand's increasingly open trade and investment policy is a
bellwether for regional and global trade and investment liberalization. Thus,
what New Zealand does to open its markets to further competition and foreign
participation is watched closely by our larger trading partners in the
Asia-Pacific region and elsewhere.