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• 7. Post-2005 Policy Options

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• 7.1 Option A
• 7.2 Option B

195. The Review identified two options for post-2005 tariff policy. Both options involve the unilateral removal of all remaining tariffs. Option A involves tariff removal by 2010. Option B involves tariff removal by 2013.

196. Both options include the immediate removal of alternative specific tariffs on 1 July 2005 (see Section 6.4). All clothing imports (except used clothing) will consequently pay duty by way of the applicable ad valorem tariff only.

197. Both options reflect administrative simplicity. Annual percentage point cuts are in most cases 2.5 percentage points. In addition, all ad valorem tariffs will be simplified on 1 July 2006 as the first stage of reduction, except for those ad valorem tariffs at 5-7.5 per cent which will be simplified on 1 July 2008 as their first stage of reduction.

198. Both options need to be flexible enough to take account of international trade developments. The post-2005 tariff regime needs to provide for tariff reductions to be brought forward, if necessary, to comply with the outcomes of negotiated international agreements.

7.1 Option A

199. Option A provides for a relatively sharp path of tariff reduction to zero by 2010 as set out in the schedule below. Alternative specific tariffs would be removed on 1 July 2005. Ad valorem tariffs would start reducing on 1 July 2006, except for those tariffs at 5-7.5 per cent which would start reducing on 1 July 2008.

200. This option gives a heavier weighting to achieving early consumer welfare gains and allocative efficiency. It would, however, involve sharper competitive effects on the TCFC industries and some inherent risks therein on the industries' ability to efficiently and effectively adjust. Employment indicators for some regions and ethnic groups are still recovering from the impacts of macro and microeconomic reforms that included tariff reduction. To ease adjustment pressures complementary government initiatives may need to be considered. This option would meet the APEC Bogor Goals.

7.2 Option B

201. Under Option B all peak tariffs (those that apply to carpet, clothing, headgear, footwear and ambulances and motor homes) would be gradually removed by 2013. All other tariffs would be zero by 2010. As in Option A, alternative specific tariffs would be removed on 1 July 2005. Ad valorem tariffs would start reducing on 1 July 2006, except for those ad valorem tariffs at 5-7.5 per cent which would start reducing on 1 July 2008.

202. This option gives a heavier weighting to the adjustment required in the relatively highly protected industries, namely the clothing and footwear industries. It would, however, delay consumer welfare gains and allocative efficiency. There may still be a need to consider complementary government initiatives to ease adjustment pressures. This option would fall short of meeting the APEC Bogor Goals, which require free trade by 2010 for developed economies. New Zealand would, however, be the first developed APEC economy, outside Singapore and Hong Kong, to have signalled a policy commitment to have zero tariffs by a specified end date.