Key Decisions on Post-2005 Tariff Policy
[ Last Updated 27 January 2006 ]
September 2003
Contents
On 29 September 2003, Cabinet made the following decisions on post-2005 tariff policy. Cabinet:
1. noted that the Terms of Reference for the Tariff Review, as agreed by Cabinet on 10 December 2001 were broad and included assessing:
- the impacts of previous tariff reduction;
- the benefits and costs of existing tariffs in the context of the government's broader economic and industry development objectives;
- the implications of New Zealand's international obligations for tariff policy;
- the merits of pursuing a policy of reciprocity;
Submissions on the Tariff Review
2. noted that there was strong support in submissions on the Tariff Review from trade unions, Business NZ, Chambers of Commerce, industry associations and many manufacturing firms for the continuation of tariff protection and the argument that New Zealand should only reduce its tariffs on the basis of others reciprocating. Some of these groups traditionally argued for tariff reduction;
3. noted that other business organisations, agricultural groups, importers and a small number of firms argued that tariffs should be removed and that New Zealand should meet the APEC Bogor Goals of free and open trade in the Asia-Pacific region by 2010 for industrialised countries;
4. noted that the textile, clothing, footwear and carpet (TCFC) industries have entered into an industry-government partnership, have developed a Strategy to reposition the sector and that these industries, in general, are not in favour of unilateral tariff reductions;
5. noted that the automotive components, flexible packaging (plastics), heavy engineering, furniture and building products industries and several large firms indicated they would be adversely affected by tariff reductions;
Impact of Tariff Reduction
6. noted that tariff policy remains a key domestic economic policy instrument to improve productivity and that there are further welfare gains to be had across the economy and within industries from further tariff reduction;
7. noted that previous tariff reduction has generated significant productivity and welfare gains, but that it also had particular negative employment impacts on the clothing, footwear and transport equipment industries and imposed considerable adjustment costs on the New Zealand economy in a relatively short space of time;
8. noted that the largest efficiency gains from tariff reduction have already been achieved and that further productivity gains will come from investment in innovation, R&D and export development, rather than from cost savings;
9. noted that the costs from further tariff reduction across the economy as a whole are likely to be small and essentially confined to the clothing and footwear industries. Some regions, notably in the lower North Island, will be more affected than others;
Programme of Tariff Reduction
10. agreed to a programme of tariff reduction whereby:
- All alternative specific tariffs are eliminated on 1 July 2005;
- Ad valorem tariffs that are between 17 and 19 per cent are simplified to 17 per cent on 1 July 2006, then reduced to 15 per cent on 1 July 2007, and then to 12.5 per cent on 1 July 2008, and to 10 per cent on 1 July 2009;
- Ad valorem tariffs that are between 10 and 12.5 per cent are simplified to 10 per cent on 1 July 2006, then reduced to 7.5 per cent on 1 July 2007, and then to 5 per cent on 1 July 2008, and then are maintained at that rate until 1 July 2009;
- Ad valorem tariffs that are between 5 and 7.5 per cent are simplified to 5 per cent on 1 July 2008 and then are maintained at that rate until 1 July 2009;
| Current tariff | 07.2006 | 07.2007 | 07.2008 | 07.2009 |
| 17-19 | 17 | 15 | 12.5 | 10 |
| 10-12.5 | 10 | 7.5 | 5 | 5 |
| 5-7.5 | 5-7.5 | 5-7.5 | 5 | 5 |
Impact of Current WTO Round and CEPs
11. noted that under the programme set out in paragraph 10, it is possible that a faster path of tariff reductions may be required in some areas as a result of the current WTO Round, but it is not yet clear whether any such provision would need to be implemented in practice;
12. noted that these decisions do not preclude the negotiation by New Zealand of more open trade arrangements with other countries;
Specific Tariffs
13. agreed that specific tariffs for used clothing and used footwear reduce at the same rate as the ad valorem tariffs on clothing and footwear and that specific tariffs on spirits reduce at the same rate as the ad valorem tariffs on spirits;
14. agreed that tariff concessions policy continue unchanged, including the policy for the non-withdrawal of Reference 99 concessions (imports where there is no suitable locally made alternative good);
15. agreed that existing policy with respect to Less Developed Country preferential rates of duty remain unchanged and that existing policy with respect to United Kingdom preferences on certain automotive components and Canadian margins of preference remain unchanged;
TCFC Sector Strategy
16. noted that the TCFC Sector Strategy is aimed at repositioning the sector to continue its transformation to higher value-added products, and that officials will continue to work with the sector to ensure that existing industry and regional development initiatives assist the sector in making its transformation to a lower tariff environment;
Next Steps
17. directed officials from the Department of Labour, the Ministry of Social Development, the Ministry of Economic Development, the Tertiary Education Commission and the Treasury to consider possible additional employment assistance (including upskilling) initiatives and report back to relevant Ministers by 28 November 2003.
18. invited the Minister of Commerce to undertake a tariff review in 2006 to determine the continuing tariff reduction path post 1 July 2009.
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