Policy Advice Outputs
This Ministry's policy advice focuses on developing and maintaining a high-quality framework of rules to support efficient business organisation and activity in an open and competitive domestic and international economy. As issues move beyond the traditional trade agenda to include investment, competition and corporate governance and integrating international and domestic regulatory regimes, we play an important role in identifying New Zealand's broader external economic objectives and priorities. Accordingly, the Ministry's activities under Vote: Commerce have a strong international dimension.
The two branches responsible for delivering policy advice under Vote: Commerce are:
- Regulatory and Competition Policy branch, under Deputy Secretary Mark Steel
- Resources and Networks branch, under Deputy Secretary David Smol
Regulatory and Competition Policy branch is accountable for outputs across all the policy areas under Vote: Commerce, except for environmental issues with an economic perspective - the Resources and Networks branch is responsible for those. In addition, the Business Services branch, under Deputy Secretary Neville Harris, is responsible for certain enforcement and service delivery activities, including registering and granting intellectual property rights, administering insolvencies and registering and inspecting documents under the Companies Act, the Securities Act and other legislation. (The Ministry's Statement of Intent has further details on the range of outputs produced within several output classes under Vote: Commerce).
The broad areas of policy advice under Vote: Commerce are:
- business law
- intellectual property
- competition policy and law
- quality of regulation and business compliance costs
- standards and conformance
- tariff policy and trade rules
- government procurement policy
- environmental policy and resource regulation
- Crown entities
The work done in relation to each of these areas is outlined further in the following sections.
Business Law
A high-quality business law framework, benchmarked against the rest of the world and which underpins a sound and efficient financial sector, is a key element of the foundation for economic growth. Business laws cover financial markets, financial institutions, corporate governance, insolvency, personal property securities and insurance. These laws aim to promote growth and innovation in the business sector, encourage wealth accumulation and facilitate effective risk management by:
- increasing our financial markets' efficiency, effectiveness and integrity to improve participation and reduce the cost of capital to businesses
- encouraging firms to adopt appropriate corporate forms and make sound business decisions
Next Three Years
A very extensive programme of business law reform is well underway. The review is focused on three dimensions: the laws' substance and their enforcement, and cooperation on law reform initiatives with Australia.
- A review of financial products and providers - This review covers all non-bank financial products and providers. Its purpose is to ensure that New Zealand has a regulatory regime that promotes a sound and efficient financial sector in which consumers and investors have confidence. The previous Minister of Commerce (in consultation with the Minister of Finance) agreed on general directions for reform, with policy decisions expected in mid- to late-2006. Closely related to this work is a review of financial intermediaries. An independent Financial Intermediaries Taskforce has reported to government with recommendations on improving the quality and advice that financial intermediaries provide. In principle policy decisions are anticipated to be made on the Taskforce's recommendations after the general election.
- The Financial Reporting Review - This review makes changes to the Financial Reporting Act to ensure that New Zealand can effectively adopt international financial reporting standards by 2007. It also addresses some deficiencies with several aspects of our regime. In particular, legislation is likely to change the enforcement and institutional arrangements relating to financial reporting, and amend who should be required to provide financial reports. The Ministry has finished its policy analysis and will make final policy recommendations before the end of calendar year 2005. Before we do so, we are undertaking a further round of feasibility testing with the Accounting Standards Review Board and the Securities Commission.
- The Securities Legislation Bill - This Bill amends the way in which securities trading law applies to certain financial products, strengthens the law relating to insider trading, introduces comprehensive prohibitions on market manipulation, improves the quality and enforcement of investment adviser disclosure law, improves the law relating to substantial security holders' disclosure, and increases the range and size of penalties and remedies. The Bill has been reported back by the Commerce Select Committee and is due for its second reading. A small supplementary order paper will be required for the Committee-of-the-Whole stage of the Bill. Cabinet agreement on the supplementary order paper is to be sought after the general election.
- KiwiSaver - Treasury is currently leading work on developing a New Zealand workplace savings scheme called KiwiSaver, a scheme to assist New Zealanders save for their retirement. The Ministry administers the Superannuation Schemes Act and has been involved in the scheme's policy and drafting, and is in the process for tendering of providers. We have a particular interest in the scheme's impacts on providers, employers and investors. A draft Bill is expected to be introduced towards the end of 2005 or the beginning of 2006.
- The Insolvency Law Reform Bill - This Bill modernises and simplifies the procedure for administering insolvent individuals' estates, introduces a no-asset procedure as an alternative to bankruptcy for those who are unable to repay their debts, and introduces a procedure that allows for rehabilitation of insolvent companies, which is modelled on the Australian voluntary administration procedure and provides for the United Nations Commission on International Trade Law Model Law on Cross-Border Insolvency to be adopted. It creates a mechanism that will enable regulations to be made to allow a single proceeding for insolvencies between New Zealand and other specified countries. It will also consider the regulation of insolvency practitioners. Policy decisions have been approved by Cabinet on all issues other than insolvency practitioner regulation. The options open to government are to proceed with the existing Bill in 2005 and introduce a separate Bill on insolvency practitioner regulation later, or wait a further six months and introduce a comprehensive Bill. We shall provide you with advice on this matter shortly.
- The Limited Partnerships Bill - This Bill is currently being drafted and implements a new limited partnership regime that meets international best practice. This Bill is designed to help encourage the flow of venture capital into New Zealand. We anticipate it being introduced in mid-2006, but this depends on IRD's work on the tax flow status of limited partnerships.
- A mutual recognition regime for securities offerings between Australia and New Zealand - This regime would allow securities to be offered in both countries, with issuers of securities having to comply only with their home jurisdiction regulation and some minimal entry and ongoing requirements. The regime will facilitate investment between the two countries, enhance competition, reduce costs for businesses and increase consumer choice. Cabinet policy decisions have been made and a treaty between Australia and New Zealand is likely to be signed in October, with regulations currently being drafted to give effect to the regime.
The effectiveness of business law statutes is not determined simply by the soundness of their substantive provisions and whether the penalties and remedies provisions promote general deterrence. In addition, New Zealand's regulatory agencies need to have:
- sufficient resources to enforce and administer the law effectively
- highly-qualified members with leadership qualities, a sound understanding of the key roles of those bodies and the will to perform those roles well
The Ministry recommends resourcing levels and membership appointments for, and monitors the performance of, four business law Crown entities - the Commerce Commission, the Securities Commission, the Takeovers Panel and the Accounting Standards Review Board. The first three of these have enforcement roles under various statutes that regulate business activity, while the fourth approves financial reporting standards.
Intellectual Property
A sound intellectual property rights regime is central to supporting a creative, innovative economy and attracting international investment in creative business endeavours in New Zealand. The broad rationale for granting intellectual property rights is that they provide economic incentive to innovate. These benefits need to be balanced against the costs associated with granting these exclusive rights, that include constraints on competition, impacts on prices and choices for consumers, and constraints on broader cumulative innovation by other parties.
In making judgements about the optimal intellectual property regime for New Zealand, the following factors are significant:
- New Zealand is a net technology importer and must carefully consider the cost of further increasing intellectual property protection.
- The need to attract foreign technology and foreign investment.
- The changing centres of technological innovation in the New Zealand economy. Where once this innovation used to be centred on the primary sector, today it is more widely distributed through broader creative industries, and the information and communication technology, and biotechnology sectors.
- The challenges of digitalisation.
- The need to meet New Zealand's international obligations under the World Trade Organisation's Trade-Related Aspects of Intellectual Property Rights Agreement and the various World Intellectual Property Organisation treaties.
- There may be both costs and benefits of including intellectual property issues in free trade agreements or coordinating intellectual property regimes with other countries such as Australia, not all of which will relate to the intellectual property regime. Tradeoffs may be required.
Next Three Years
The Ministry is engaged in comprehensively reviewing New Zealand's major intellectual property statutes: the Geographical Indications Act 1994, the Copyright Act 1994, the Patents Act 1953 and the Plant Variety Rights Act 1987. (Many of these reviews are nearing completion). It is also exploring opportunities for intellectual property coordination with Australia in the areas of patents, trade marks and plant variety rights, and is in the early stages of a work programme (part of the Ministry's Māori economic development strategy) that is to examine the interface between intellectual property and the traditional knowledge of indigenous and local communities. We are continuing our review of the impacts of removing the ban on parallel importing on the creative industries (a partial ban having been re-introduced in 2003), examining New Zealand's possible accession to a number of international treaties in the area of trade marks and reviewing the enforcement of the criminal provisions against counterfeiting and piracy available under both the Trade Marks and Copyright Acts. Advice on the intellectual components of free trade agreements and multilateral negotiations is also an important work area.
The intellectual property law reform work contributes to a number of our strategic priorities, including those relating to innovation and international linkages. It has two dimensions:
- technical and operational updating to reduce compliance costs and reflect international best practice
- amendments that give effect to government's broader economic development objectives
The work on protecting traditional knowledge and intellectual property also contributes to government's goals in relation to Māori economic development and social and cultural objectives.
Current work in progress includes:
- The Geographical Indications (Wine and Spirits) Registration Bill. This brings New Zealand law on geographical indications into line with international developments. It is awaiting its first reading in Parliament.
- Drafting of a new Patents Bill and Plant Variety Rights Bill. This is nearly complete. The timing of the Patents Bill has been delayed to allow options for coordination with Australia to be considered.
- The Copyright (New Technologies and Performers' Rights) Amendment Bill, which is ready for introduction to Parliament.
- Further considering options for intellectual property coordination with Australia on delivering intellectual property services. (Information on the delivery of intellectual property services by the Intellectual Property Office of New Zealand is provided in the section on enforcement and service delivery outputs).
- Continuing the traditional knowledge work programme as part of the Ministry's Māori economic development strategy.
- Reviewing section 21 of the Copyright Act 1994 relating to commissioning certain types of copyright works.
- Reviewing the enforcement of the criminal provisions against counterfeiting and piracy available under both the Trade Marks and Copyright Acts to determine if the Ministry's National Enforcement Unit might play a role in enforcement activities. This project arose in recognition of the fact the police have been unable to dedicate significant resources to intellectual property law enforcement. Most intellectual property rights do not, however, have criminal sanctions, but are privately enforced.
- Preliminary research on the impact of contract law on the Copyright Act 1994.
- Promoting and protecting New Zealand's interests in free trade agreements, the World Trade Organisation and World Intellectual Property Organisation, including those in respect of geographical indications and traditional knowledge.
Competition Policy and Law
Businesses can start and thrive, and consumers get a fair deal, when anti-competitive behaviour is restricted and firms compete fairly under transparent rules. The Ministry is responsible for administering the Commerce Act 1986, which regulates the competitive environment by a set of general and specific prohibitions that apply, with some minor exceptions, to all business activity within New Zealand. The broader aims of the Commerce Act are to promote efficient resource allocation and use, to promote innovation and to protect consumers from monopoly pricing. Applying the same standard of competitive conduct across the economy largely avoids the need for industry-specific regulation. The Commerce Act was substantively amended and strengthened in 2001 when the Commerce Amendment Bill 1999 was passed.
Other recent legislation has also had important competition implications: the Dairy Industry Restructuring Act 2001 authorised one large dairy company, Fonterra, being created, but also stipulated that Fonterra should be fully subject to the disciplines of the Commerce Act; the Telecommunications Act 2001 and the Electricity Industry Reform Act 1998 have also introduced specific regulations in the telecommunications and electricity sectors. These sectors continue to be regulated within the generic competition framework provided by the Commerce Act, with specific regulations providing additional provisions to achieve competition objectives within these industries.
Next Three Years
The strategic priorities for the next three years include:
- Monitoring and evaluating the Commerce Commission's greatly extended role and functions. The Commission is a key institution that plays an important role in ensuring that competitors compete in well-functioning markets and that New Zealand consumers benefit from competitive prices, better quality and greater choice. Its roles and functions have increased greatly in recent years, when sector-specific functions, functions under the Credit Contracts and Consumer Finance Act 2003 and new consumer information standards under the Fair Trading Act 1986 were added. Officials will continue to monitor and evaluate the Commission's capability to fulfil these increased functions.
- Supporting the introduction and passage of the Commerce Commission (Information Sharing and Fees) Bill in the House. The main impact of the legislation will be to strengthen the Commerce Commission's ability to share information with overseas competition authorities.
- On-going scrutiny of New Zealand's competition policy framework and operation of the Commerce Act 1986 to ensure that it supports dynamic growth in a small economy.
- Continued work on policy coordination with Australia, including towards implementing recommendations from the Australian Productivity Commission's report (e.g. on information sharing, cross-appointments between competition authorities and joint authorisations).
- Developing a discussion document that will be largely devoted to issues arising from work on coordination with Australia. Some of the matters to be considered in this process are Parts 4 and 5 of the Commerce Act (including the price control provisions), which relate to criminal sanctions, joint ventures and collective bargaining.
- Contributing to the analysis of competition in specific sectors or industries (e.g. gas, telecommunications, health and education services).
- Contributing to the developing international agenda for competition law and policy in the OECD and WTO, as well as supporting competition policy issues in New Zealand's bilateral and regional trade agreements being included, and recognising the increasing importance of developing international competition and regulatory principles for advancing trade liberalisation.
Quality of Regulation and Business Compliance Costs
High-quality regulation supports sustainable economic growth, but poorly-designed regulation can impede growth. The primary ways this can occur are because innovation and entrepreneurial risk-taking are curtailed, and unnecessary compliance costs are imposed on business. Recent trends indicate that the stock of regulation in OECD countries is getting bigger, with regulation tending to build upon itself rather than be rationalised over time. In addition, society is tending to becoming more risk averse. Bearing this in mind, the challenge is to have a mechanism for determining whether regulation is needed to deal with a problem and, where it is, to devise regulations that can effectively achieve objectives that minimise burdens on those regulated and any adverse side effects on others.
The Ministry, through the Regulatory Impact Analysis Unit, has responsibility for reviewing, and assessing for adequacy, those regulatory impact statements that have business compliance cost statements. These statements outline the regulatory impact analysis process, which departments do when providing Ministers with policy advice. This analysis has been identified internationally as a key means governments currently have for encouraging best practice process in regulation-making. The Unit is focused on improving the quality of such analysis across government in order to improve the quality of policy advice.
The Occupational Regulation Framework (for which the Ministry is responsible) provides a framework for government departments to consider and apply when thinking about whether or not to regulate a particular profession or occupation. The Ministry continues to play a role in advising departments on applying the framework to their policy consideration of a wide range of professions including, most recently, health practitioners, motor vehicle traders and financial intermediaries.
Next Three Years
The central priorities over the next three years will remain improving the analysis of regulatory impacts on business and encouraging better policy development across government. This requires us to further build our understanding of how regulations impact on business performance and innovation, and to work with other government departments to increase the transparency of regulation development.
Key projects over the next twelve months include:
- On-going review of regulatory impact and business compliance cost statements, and providing training for departments on doing the analyses and preparing the statements.
- Revising the guidelines for departments when undertaking regulatory impact analyses and preparing regulatory impact and business compliance cost statements.
- Progressing a proposal to change the Regulatory Impact Analysis Unit's mandate so that it would assess the adequacy of regulatory impact statements that have an impact on business, as opposed to only those that have incremental business compliance costs associated with them.
- Evaluating and trialling what is known as the Dutch standard costing model to estimate the administrative burden of new regulation and look back at existing regulation. If it proves useful in New Zealand's circumstances, it will help create better benchmarks for the impact of regulation in the future.
- Developing a regulatory portal that will be a web-based one-stop-shop for policy analysts with commentary and linkages to relevant domestic and international websites on how to undertake policy development.
Standards and Conformance
The Ministry is responsible for policy advice that promotes an efficient standards and conformance infrastructure in New Zealand. A quality infrastructure facilitates domestic economic transactions and trade with the rest of the world and meets the government's health, safety and environmental objectives. We play a key role in coordinating standards and conformity assessment requirements with New Zealand's key trading partners to reduce technical barriers to trade. This advances New Zealand's interests in the Technical Barriers to Trade Committee of the WTO, the APEC Subcommittee on Standards and Conformance and other international fora. We are responsible for negotiating and providing policy advice on the value of New Zealand participation in mutual recognition arrangements with other economies. New Zealand has two bilateral understandings: the European Union/New Zealand Mutual Recognition Agreement on Conformity Assessment and the Trans-Tasman Mutual Recognition Arrangement with Australia.
We are also involved in the negotiations of new closer economic partnership agreements and free trade agreements with bilateral trade partners. Technical barriers to trade are increasingly becoming a major obstacle and have become a key focus for international trade negotiators. Free trade agreements provide an opportunity to develop productive and on-going regulator-to-regulator relationships, with the aim of addressing technical barriers to trade, facilitating trade and enhancing regulatory compliance and risk management.
We also play a key coordination role across the public sector on approaches to standards and conformance issues and how they interface with international practice.
The Ministry is responsible for managing the Crown's ownership interests in two Crown entities with responsibility for standards development and accreditation of testing and calibration laboratories and inspection bodies - the Standards Council and the Testing Laboratory Registration Council.
We are also responsible for representing New Zealand's interest on the board of the Joint Accreditation System of Australia and New Zealand. This primarily provides accreditation of certification bodies in New Zealand and Australia undertaking certification of quality management systems, environmental management systems and product and personnel certification.
The Trans-Tasman Mutual Recognition Arrangement
The Trans-Tasman Mutual Recognition Arrangement aims to reduce regulatory barriers to the movement of goods and services between New Zealand and Australia. New Zealand's standards and conformance infrastructure is closely aligned with that of Australia. The confidence associated with this close alignment underpins the Arrangement.
The two economies have become more integrated in the last 20 years, and the Trans-Tasman Mutual Recognition Arrangement has played an important part in achieving this. The Arrangement, which came into effect on 1 May 1998, is a non-treaty arrangement between the Commonwealth, State and Territory Governments of Australia and the Government of New Zealand. It is a cornerstone of a single economic market as a powerful driver of regulatory coordination and integration.
It provides that goods that can be sold in Australia can be sold in New Zealand without having to be further tested or certified. It allows for someone registered to practice an occupation in one country to register to practice an equivalent occupation in the other, without the need to undergo further testing or re-examination. The Arrangement has helped the workforce move more freely between New Zealand and Australia and has removed many of the costs and difficulties involved in the trans-Tasman trade in goods and services.
The Trans-Tasman Mutual Recognition Act 1997 overrides other Acts. The Ministry is responsible for administering and providing policy advice on the Arrangement.
Next Three Years
The Ministry will continue to give priority to regulatory coordination with Australia to support a single trans-Tasman market for goods and services. Australian and New Zealand senior officials completed a mandated cross-jurisdictional review of the Mutual Recognition Arrangement in December 2004. Heads of governments party to the Arrangement have endorsed the review recommendations, which officials will now proceed to implement. A key recommendation is that governments undertake information and education initiatives to improve regulators' and other stakeholders' awareness and understanding of the Arrangement's strategic objectives and obligations. The review also recommends establishing central contact points in each jurisdiction to address mutual recognition issues, and that a group of senior officials from New Zealand and Australia be established with a forward-looking mandate to promote consideration of emerging regulatory coordination issues. The review recommends that the existing special exemption cooperation programmes continue, but that the administration mechanisms for resolving exclusions and exemptions, and reporting requirements under the Arrangement be made more efficient.
The Ministry will continue to build its understanding of evolving international approaches to meeting regulatory objectives in the areas of health, safety and the environment, of how these are shaping countries' approaches to their standards and conformance infrastructures, and of the implications for New Zealand. We have initiated a Standards and Conformance Infrastructure Review to:
- evaluate the New Zealand standards and conformance infrastructure against international best practice models and New Zealand specific requirements
- identify any shortcoming of the current New Zealand model, particularly in the context of meeting the needs of commerce, industry and government
- assess the strengths and weaknesses of current standards-setting and conformity assessment models that regulators use to meet their regulatory objectives
- identify what financial, effectiveness and efficiency constraints, if any, hamper the standards and conformance infrastructure being further developed
The review findings will identify key priority areas that warrant further investigation and will form the basis of future work in this area during the following two years.
Tariff Policy and Trade Rules
The Ministry plays a central role alongside the Ministry of Foreign Affairs and Trade and others in promoting New Zealand's external economic interests, especially at the WTO and in free trade agreement negotiations. The Ministry has prime responsibility for providing advice on tariff policy (including rules of origin, market access and tariff concessions), trade remedies and government procurement.
Tariff Policy
We are responsible for the Tariff Act 1988. The Act gives the Ministry the responsibility for advising on, and administering, basic tariff levels and issues that are relevant to the effectiveness of those rates, in particular, rules of origin, legislation relevant to tariff rates and tariff concessions.
New Zealand tariffs are currently frozen until 1 July 2006. A tariff review was completed, and government decisions taken in September 2003 set down a unilateral tariff reduction programme for the period 1 July 2006 to 1 July 2009. Under these decisions, tariffs will begin reducing again: tariffs on clothing, footwear and carpet will reduce to 10% by July 2009, and tariffs on all other goods, not already duty-free, will reduce to 5% by July 2009. Alternative specific tariffs ($value tariffs) which applied largely to clothing were removed on 1 July 2005 and reverted to the appropriate ad valorem (percentage-based) tariff.
A further tariff review relating to post-2009 tariffs is scheduled for 2006. Officials will provide policy advice on this review to Ministers, taking into account international developments both in the WTO and in relation to New Zealand's free trade agreement negotiations, by the end of 2005.
Tariff Concessions
The Ministry administers the tariff concessions scheme, which is designed to remove unnecessary duty imposts where alternative goods are not made locally, reduce production costs and enable New Zealand manufacturers to become more internationally competitive. As tariffs have reduced, the number of concession applications has continued to decline over recent years. The number of applications received last year (509), however, indicates that the scheme remains a significant element of overall industry policy.
Trade Remedies
The Ministry administers New Zealand's trade remedies regime under the Dumping and Countervailing Duties Act 1988 and the Temporary Safeguard Authorities Act 1987. It is also responsible for providing advice on the development of trade remedies rules in the WTO.
"Trade remedies" is the general term to describe measures to protect domestic manufacturers from specific cases of injurious imports arising from:
- Dumping and subsidisation - the Ministry's Chief Executive is responsible for conducting investigations. The Vote Minister is responsible for making final determinations as to whether dumping or subsidisation is causing injury, and on all decisions relating to duties under the Act. The processes and practices are defined by international rules established by the WTO.
- Sudden increases in the volume of imports - a Temporary Safeguard Authority carries out the inquiry and reports to the Minister on whether urgent action is needed to protect a domestic industry. The Minister is responsible for appointing an authority.
Rules of Origin
The Ministry has responsibility for preferential and non-preferential rules of origin policy. Rules of origin are a key element of free trade and closer economic partnership agreements, including the Australia New Zealand Closer Economic Relations Trade Agreement. A top priority for the Ministry is to advance the reform of CER rules of origin. The existing rules are not only constraining New Zealand exporters' ability to access the Australian market under preference, but also the ability of firms to extract further efficiencies that would support their international competitiveness. Both governments have agreed that the rules are out of date and need reform. At the CER Ministers' meeting in December 2004, it was decided to change the CER rules, based on the regional value content formula to confer origin, to a change of tariff classification model. Agreement has been reached in almost all areas except men's and boys' structured apparel. A final effort is being made to resolve this issue.
New Zealand has also moved to a change of tariff classification model for rules of origin under the Closer Economic Partnership Agreement with Thailand and the Trans-Pacific Strategic Economic Partnership Agreement with Chile, Brunei and Singapore (known as P4). The focus for 2006 will be on the rules of origin for our free trade agreements with China, Malaysia and the CER free trade agreement with the Association of Southeast Asian Nations, all of which are currently being negotiated. Businesses generally support the change of tariff classification model but many are particularly interested in ensuring that the different trade agreements' rules of origin are closely aligned.
Government Procurement
The Ministry is responsible for developing and advising on government procurement policy. A review of New Zealand's government purchasing framework was undertaken in 2001. Following the review, government expects departments, and encourages other public sector agencies, to be guided by a number of procurement principles adopted by Cabinet [CAB Min (01) 11/18]. The New Zealand procurement model supports decentralised, globally open and competitive public sector procurement markets. The main objective is to ensure that government can obtain best value for money. Within this framework, the policy aims to improve information flows to maximise opportunities for New Zealand suppliers. Departments are required (and other agencies encouraged) to notify the Industry Capability Network of intended purchases valued at over $50,000, and to publish contract award notices on the internet.
There is an important international dimension to government procurement policy. New Zealand is committed to maintaining an open government procurement market with Australia under the Australia New Zealand Government Procurement Agreement (an instrument under the CER), and with Singapore, Chile and Brunei under the recently negotiated Trans-Pacific Strategic Economic Partnership Agreement. The Ministry also participates in the negotiations of free trade agreements and in the APEC context to promote greater transparency and openness in government procurement markets.
The Ministry's Review on Government Procurement Implementation and Innovation will be completed during the later part of 2005. The focus for next year will be to implement the review findings.
Next Three Years
A key priority over the next three years is to ensure New Zealand's interests in relation to tariffs and trade rules are advanced in the WTO Doha round of negotiations and under our free trade agreements. Free trade agreements to be negotiated over the next three years include an agreement with Malaysia, with Australia and the Association of Southeast Asian Nations, and with China.
The Ministry will continue to build its understanding of key drivers of trade policy and rules positions internationally and of their impact on economic development.
In the trade remedies area, a review is to commence shortly of the legislation under which a Temporary Safeguard Authority carries out a safeguards inquiry and reports to the Minister. The aim of the review is to ensure that our legislation is fully effective in providing for urgent safeguard action in accordance with WTO rules.
Environmental Policy and Resource Regulation
The Ministry provides policy advice under Vote: Commerce on environmental measures from an economic development perspective, with a particular focus on the Resource Management and Hazardous Substances and New Organisms Acts, and government programmes such as that on a waste strategy. It is particularly focused on developing a better understanding of the implications of the Hazardous Substances and New Organisms Act for growth and innovation and on looking at ways to improve how both that Act and the Resource Management Act operate to reduce compliance costs for business.
The Ministry also provides advice on:
- multilateral environmental agreements that impact directly on New Zealand businesses, focusing particularly on the Montreal Protocol (ozone-depleting substances), the Basel and Waigani Conventions (transboundary movement of hazardous wastes), and the Stockholm and Rotterdam Conventions (controls on certain hazardous chemicals)
- administering domestic requirements pursuant to the Montreal and Basel Conventions on importing and using ozone-depleting substances and the import and transboundary movement of hazardous wastes respectively
Key emphases of this work are ensuring regulations are targeted and contributing to growth by promoting effective regulatory institutions and reducing uncertainty and compliance costs.
The Ministry seeks to implement New Zealand's international environmental obligations using appropriate domestic regulation that minimises transactions costs for business, for example by:
- administering, efficiently and transparently, restrictions on importing and using ozone-depleting substances and exporting hazardous wastes
- using market-based systems to allocate allowable quota where possible
- ensuring that synergies with other import and export controls are exploited
The Ministry also seeks to protect New Zealand's interests in this area through participating in international negotiations and ensuring these take into account New Zealand business interests to the greatest extent possible.1
Next Three Years
The focus of the Ministry's work in this area over this period will be on gaining a deeper understanding of the growth, innovation and compliance aspects of the cost of both the Hazardous Substances and New Organisms and the Resource Management Acts through a multi-year research programme. Ongoing work on multilateral environmental agreements will cover ensuring that the next phase down in ozone-depleting substances goes smoothly. Officials are also developing a strategy for methyl bromide phase out.
Crown Entities
New Zealand must maintain a regulatory infrastructure that mirrors those of other modern states and is able to monitor and enforce business regulations effectively. Effective regulatory regimes require effective regulatory institutions - regulatory institutions such as the Commerce and Securities Commissions and the Takeovers Panel in which the Ministry, on behalf of the Crown, has an ownership interest are particularly crucial. The agencies have an important monitoring and enforcement role and, if regulatory goals are to be achieved, need, too, to work effectively with private institutions like the New Zealand Stock Exchange and professional bodies.
Rapid change, the internationalisation of regulatory policy and Crown entities' changing and expanding roles and functions call for closer collaboration between policy and regulatory/administrative agencies. While this Ministry takes the lead role in developing policy, Crown entities make an important contribution to that process and to implementing policy. Good information flows between ourselves and Crown entities make for a strong mutual understanding of the policy and enforcement environment.
The Ministry is responsible for advising on appointments to the boards, and monitoring and reporting to the Minister on the financial and non-financial performance of the Crown entities and other statutory bodies noted below. (Details of these Crown entities are provided in Appendix 1.)
Commerce Commission
In the course of 2004, four major reviews of the Crown's ownership relationship with the Commerce Commission were completed. These reviewed:
- the accountability and purchasing arrangements - this review considered Vote and output class structures
- the Commission's baseline funding in the Vote: Commerce Enforcement of General Market appropriation
- the Commission's litigation fund
- the fees charged for authorisation and clearance applications
The second and third of these reviews recommended increases in Commission funding. Budget deliberations and weighing the recommended increases against other government priorities meant that the Commission received less than initially sought. We intend to continue to monitor Commission capability particularly closely over the next three years to assess whether it is sufficiently funded. Aspects of Commission capability are to be further reviewed in three years' time.
Standards and Conformance Infrastructure
The Ministry has commissioned a review of New Zealand's standards and conformance infrastructure to evaluate how it contributes to, and improves, the competitiveness of New Zealand industry as well as whether it meets government's objectives. The review will assess New Zealand's infrastructure against international trends and best practice models as well as New Zealand's specific standards and conformance requirements. Its findings will cover identifying key priority areas that warrant in-depth investigation; eventually it will recommend ways to improve the infrastructure. The first part of the review will be completed before the end of the year.
The Standards and Conformance Bill was introduced into Parliament in June 2005. It makes a number of technical amendments to the Standards Act 1988 and the Testing Laboratory Registration Act 1972, and aims to clarify the relevant institutions' functions and align them with international standards and conformance norms and practices.
Financial Markets Institutions
The domestic institutional arrangements in the New Zealand financial sector are currently being reviewed. Treasury is leading the exercise and an inter-departmental working group, which includes the Ministry, is providing support. This work, operating in tandem with the Review of Financial Products and Providers, is considering which institutions should undertake any additional regulatory functions (in particular, functions around prudential supervision) that this Ministry proposes for the Financial Products and Providers review, and whether any regulatory functions should be consolidated. Officials are due to report back to Ministers on this work in October 2005.
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