Trade agreements key to removing import tariffs

Import tariffs will remain at their current levels until 2015 at the earliest, Trade Minister Tim Groser and Commerce Minister Simon Power announced today.

The decision to maintain tariff levels follows Government consideration of whether there should be a further tariff review to decide non-preferential tariff levels after June 2011.

The current 5 per cent and 10 per cent tariffs are subject to any reductions that may arise out of the World Trade Organisation (WTO) Doha Round, but New Zealand's focus will be on increasing market access through free trade agreements.

"Increased market access in key export markets, achieved through free trade agreements, can be expected to provide significant benefit to the New Zealand economy, companies, and consumers, and in turn support employment.

"We are firmly committed to the WTO Doha Round process for reducing tariffs and other barriers to trade, and are pursuing an extensive Free Trade Agreement (FTA) agenda.

"New Zealand is increasingly opening itself up to international trade and has no plans to increase its tariffs, which would increase prices for consumers. We would similarly encourage other nations to resist protectionism as we emerge from the global economic crisis," Mr Groser said.

Mr Power said New Zealand's tariffs were already among the lowest in the world.

"Through its free trade agreements, New Zealand has eliminated tariffs for imports from Australia and Singapore and is reducing and eventually eliminating tariffs on imports from Brunei Darussalam, Chile, China, and Thailand."

Import tariffs will be reduced and eventually eliminated on imports from ASEAN member economies through the recently agreed ASEAN Australia New Zealand FTA and the recently concluded FTA negotiation with Malaysia.

New Zealand's tariff situation after 2015 will be assessed again in 2013.

Background

Most imported goods enter New Zealand free of duty. Fifty-eight per cent of tariff lines are free of import tariffs. In 2008, some 80 per cent of the total value of New Zealand's imports was tariff-free.

Import tariffs of 5 per cent apply to textiles and a range of other products imported from overseas that are also made in New Zealand. These products include processed foods, machinery, steel, and plastic products.

Tariffs of 10 per cent apply mainly to clothing, footwear, and carpet.

The removal of import licensing, and regular unilateral reductions of normal tariffs since the mid 1980s have increasingly opened New Zealand's economy to international competition. This openness has been important in driving productivity and in encouraging firms to be internationally competitive by cutting costs, focusing on the range of products they produce and developing new products and export markets.

A programme of unilateral tariff reductions from 1 July 2006 to 1 July 2009 resulted in remaining tariffs of either 5 per cent or 10 per cent. Tariffs ranging from greater than 5 per cent to 12.5 per cent were reduced to 5 per cent by 1 July 2008, and tariffs ranging from 17 per cent to 19 per cent were reduced to 10 per cent from 1 July 2009.

The previous government agreed to hold tariffs at 2009 levels until June 2011.

New Zealand has already eliminated all of its tariffs under the Australia New Zealand Closer Economic Agreement and the NZ Singapore Closer Economic Partnership (CEP). Tariffs will be phased out and eliminated under the Thailand-New Zealand CEP and the Trans-Pacific Strategic Economic Partnership (Chile, Brunei Darussalam, Singapore) by 2015, under the China-New Zealand FTA by 2016 and under the ASEAN Australia New Zealand FTA by 2020.

Negotiations with Malaysia have concluded, negotiations with the Gulf Cooperation Council States and Hong Kong are in their final stages, and the second round of negotiations with the Republic of Korea was held last week. New Zealand also hopes to begin an FTA negotiation soon with India and to launch an expansion of the existing Trans-Pacific Partnership agreement to include Australia, Peru, the United States and Vietnam.

A successful WTO Round would reduce New Zealand's tariffs below current levels. Because New Zealand has already undergone significant tariff reductions, cuts for the vast majority of products are unlikely to occur until around 2015 at the earliest.

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