NEW ZEALAND dollar; lifting wage, price and interest rate controls; removing export and agricultural subsidies; reducing border protection; reorganizing public sector activities; and tax reform. The timing of these actions had a pronounced effect on the pattern of adjustment among sectors. The abrupt removal of subsidies for agriculture, combined with the slower reduction in protection of import-competing manufacturers, resulted in a dramatic adjustment in agriculture. Although efficiency has improved, investment levels remain depressed from the fall in profitability and income. Manufacturing has faced much more gradual change, and certain producers retain high effective rates of protection. In March 1990 a further tariff reduction program was announced for 1993 to 1996. However, during the election campaign the National Party promised to review additional action on industrial support beyond that planned for 1992. While further liberalization is anticipated, it may be slower than previously expected. The major structural problems left unaddressed by the Labour Party were labor market reform and reform of the welfare system. In December 1990 the new National Party government announced short term cuts in welfare spending that will yield savings of NZD 245 million through the middle of 1991, and NZD 1,275 million in the 1991/92 fiscal year. It also introduced industrial relations legislation that abolishes compulsory unionism and centralized wage awards. 4. Debt Management Policies Public debt in New Zealand is high by comparison with most Organization for Economic Cooperation and Development (OECD) member countries. Gross public debt grew from 45 percent of GDP in 1973 to 79 percent of GDP in 1987. In June 1990, gross public debt was NZ$43 million. This was about the same amount as in March 1987, and represented a drop as a percent of GDP to 61 percent. Domestic debt accounted for 53 percent of the total in mid-1990. A turnaround also has been achieved in the debt service burden. This improvement in large part is due to the use of proceeds from privatization to repay external debt. Debt service on the public debt reached nearly NZ$5 billion in the fiscal year ending March 1988, equal to 8.4 percent of GDP and 20 percent of government expenditure. This is expected to drop to NZ$4.35 billion in the fiscal year ending June 1991, an estimated 5.9 percent of GDP and 14.5 percent of expenditures. Interest on public external debt represents about 8 percent of exports of goods and services. New Zealand embarked on a unilateral tariff liberalization program in 1985 with an announcement that tariffs on goods not produced in New Zealand would be reduced to zero. In 1988 the government reported that 93 percent of imports entered duty free. In December 1987 a general tariff reduction plan was announced for goods not covered by industry plans. Four categories of goods are covered by industry plans: footwear, carpet, apparel and motor vehicles. Tariffs on other goods would be reduced in four stages between July 1, 1988 and July 1, 1992 from a range of 30 to 40 percent to a NEW ZEALAND range of between 16 to 19 percent. On March 20, 1990 it was announced that further reductions would be made in the period 1993 to 1996 to bring bring tariffs down to 10 percent by July 1996, except for those goods covered by industry plans. This later program, however, will be reviewed by the new National government in consultation with industry. Despite these sweeping reforms, tariffs on goods competing with domestic products remain high by comparison with other OECD countries, and most tariffs remain unbound in the GATT. Items of particular export interest to the United States subject to high tariffs include printed matter for commercial use, plywood and aluminum products. The planned reductions for these items should expand commercial opportunities for U.S. exporters. The New Zealand also has made substantial progress in dismantling a highly restrictive import licensing regime. share of imports subject to licensing dropped from nearly 25 percent in 1984 to around 3 percent in 1989. The remaining import license controls for goods under industry plans are scheduled to be phased out by the middle of 1992. The New Zealand Apple and Pear Marketing Board, a producer organization, has a monopoly right to import apples and pears, except from Australia. A monopoly import right for oranges and bananas held by the firm Fruit Distributors will be terminated in late 1990. U.S. exporters believe these arrangements shield domestic producers from competition and constrain import growth. Approval by the Overseas Investment Commission is required for foreign investments over NZ$10 million or involving 25 percent or more foreign ownership of a firm. This approval requirement has not been an obstacle for U.S. investors. In most cases up to 100 percent foreign ownership is allowed, but there are special restrictions on foreign ownership of broadcasting; fishing, mineral, petroleum and natural gas resources; and rural land. No performance requirements are attached to foreign direct investment. Full remittance of profits and capital is permitted through normal banking channels. New Zealand acceded to the GATT Subsidies Code in September 1981. At that time, New Zealand undertook to eliminate seven export subsidy programs that were inconsistent with the code by March 31, 1985. While five of the programs were eliminated on schedule, two programs were extended through March 1987, leading the United States to deny New Zealand imports use of the "injury test" in countervailing duty cases. One of these programs, the Export Market Development Taxation Incentive, was extended a second time, but expired March 31, 1990. The United States subsequently reinstated the injury test for New Zealand once tax rebates under this remaining inconsistent program were completed. 7. Protection of U.S. Intellectual Property NEW ZEALAND New Zealand is a member of the World Intellectual Property Organization, the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, the Universal Copyright Convention and the Geneva Phonograms Convention. New Zealand has generally supported measures to enhance intellectual property protection at multilateral organization meetings. The government of New Zealand strongly endorses the protection of intellectual property and enforces effectively those laws on its books which offer such protection. This is done to protect New Zealand innovators both at home and abroad, and to encourage technology transfer. The government recognizes that New Zealand is heavily dependent on imported technology and that the country derives considerable benefit in providing intellectual property protection. There are, however, some aspects of current New Zealand legislation that present problems for U.S. intellectual property. First, the patent law contains permissive rules for compulsory licensing of pharmaceutical products. While these provisions had not been used for several years, there are now a number of cases pending with the Commissioner of Patents. Second, recently amendments were made to the Medicines Act, the Trade Marks Act and the Copyright Act to allow the government to engage in the parallel importation and distribution of medicines. Finally, the Copyright Act permits hotels to show motion picture videos on internal systems as long as there is no charge for the service. The government is engaged in a full review of its intellectual property rights regime. On July 30, 1990 the Ministry of Commerce issued a two volume study on possible options for reform. Interested parties were invited to submit comments on the paper by November 16, 1990. 8. Worker Rights a. Right of Association New Zealand workers have unrestricted rights to establish and join organizations of their own choosing and to affiliate those organizations with other unions and international organizations. Unions have the right to strike and are protected from interference, suspension, and dissolution by the government, and in fact, influence legislation and government policy. Public sector unions, however, are precluded from striking if work stoppages pose a threat to public safety. b. Right To Organize and Bargain Collectively The right of labor unions to organize and bargain collectively is assured by law. They actively recruit members and engage in collective bargaining. Sixty-four percent of wage earners are represented by unions. New Zealand unions operate under a "closed shop" system where union membership is compulsory if the majority of workers in a workplace vote in favor of union coverage. Mediation and arbitration procedures are independent of government control. A system of labor NEW ZEALAND courts hears cases arising from disputes over interpretation of these laws. The Arbitration Commission and the Mediation Service are available to handle wage disputes and assist in maintaining effective labor relations. C. Prohibition of Forced or Compulsory Labor All New Zealand workers are protected from forced or compulsory labor by law and in practice. d. Minimum Age for Employment of Children Children under 15 may not be employed without special government approval and must not work between the hours of 10 p.m. and 6 a.m. These laws are enforced effectively. e. Acceptable Conditions of Work New Zealand enforces a 40 hour workweek, a minimum of three weeks annual paid vacation for all employees, and observance of 11 paid public holidays. Most workers earn more than the hourly minimum wage which is the approximate equivalent of US$3.50. In most cases, minimum wage recipients also receive a variety of government payments. f. Rights in Sectors with U.S. Investment The conditions in sectors with U.S. investment do not differ from conditions in other sectors of the economy. (D)-Suppressed to avoid disclosing data of individual companies Source: U.S. Department of Commerce, Survey of Current Business August 1990, Vol. 70, No. 8, Table 13 |