NEW ZEALAND " does seek "comparative exchange rate stability.' The key instrument for monetary control utilized by the Reserve Bank is the quantity of settlement cash balances held by banks at the Reserve Bank. This control of primary liquidity influences the exchange rate indirectly through its impact on short-term interest rates. 3. Structural Policies The Labour government's reform program included deregulating financial markets, floating the 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 1991, a further tariff reduction program was announced for 1993 to 1996. Liberalization beyond 1996 will be determined by a review to be held in 1994. The major structural problems left unaddressed by the Labour Party were labor market rigidities and an overly generous welfare system. Both of these problems have adversely affected labor mobility, and welfare expenditures must figure in any effort to control overall expenditure levels. The National Party has moved promptly to extend the reform process to both of these areas. In December 1990, the government introduced industrial relations reform legislation, and the Employment Contracts Act was passed on May 15, 1991. This law abolished compulsory unionism and the practice of centralized, occupational awards. The removal of these restrictive practices is expected to lead to more flexible workplace arrangements with consequent improvements in productivity. The December 1990 initiative also included immediate reductions in expenditures for social benefits through better targeting, and initiated a broad review of the social assistance structure. This process was extended in the July 1991 budget package through the introduction of partial user charges for health and education and rationalization of the provision of housing assistance. Plans to better target the provision of retirement benefits are under review. Debt Management Policies Public debt in New Zealand is high by comparison with most OECD member countries. Gross public debt grew from 45 percent of GDP in 1973 to 79 percent of GDP in 1987. In June 1991, gross public debt was NZ$44 billion. This was slightly higher than in 1987, but represented a drop as a percent of NEW ZEALAND GDP to 62 percent. 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 dropped to NZ$4.6 billion in FY1991, equal to 6.5 percent of GDP and 16.7 percent of expenditures. Domestic debt accounted for 53 percent of the total in mid-1991. Interest on public external debt in FY1991 equalled eight percent of exports of goods and services. 5. Significant Barriers to U.S. Exports and Investment 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 are being reduced in four stages between July 1, 1988 to July 1, 1992 from a range of 30 to 40 percent to a range of between 16 to 19 percent. In September 1991 it was announced that tariff reductions would be continued between 1993 and 1996, with general tariffs dropping by about one-third. Separate treatment will continue for goods covered by industry plans. A review for the post-1996 period will be conducted in 1994. Despite this extensive reform, tariffs on goods competing with domestic products remain relatively high, 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, aluminum products and wine. Reductions in tariff levels in accordance with the aforementioned plan should result in expanded commercial opportunities for U.S. exporters. The United States is also pursuing further reductions on items of particular U.S. exporter interest through the Uruguay Round market access negotiations. New Zealand has nearly completed the dismantling of a highly restrictive import licensing regime. The 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. This liberalization has benefitted U.S. exporters. The New Zealand Apple and Pear Marketing Board, a producer organization, has a monopoly right to import apples and pears, except from Australia. This partially shields domestic producers from competition and constrains 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. NEW ZEALAND 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 rural land and of fishing, minerals, petroleum and natural gas resources. A similar restriction on broadcasting was recently removed. No performance requirements are attached to foreign direct investment. remittance of profits and capital is permitted through normal banking channels. 6. Export Subsidies Policies Full 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 reinstated the injury test for New Zealand once tax rebates under this last inconsistent program were complete. 7. Protection of U.S. Intellectual Property New Zealand is a member of the World Intellectual Property Organization, the Paris Convention for the Protection of Industrial Property, and the Berne Copyright and Universal Copyright Conventions. 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 owners. 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 cases pending with the Commissioner of Patents. On December 18, the Government announced, in the context of on-going GATT negotiations, that the Patent Act would be amended in early 1992 to remove provisions for compulsory licensing for food and medicines. Existing cases under the old law will lapse. 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. NEW ZEALAND 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 of possible options for reform. Interested parties were invited to submit comments on the paper by November 16, 1990. A second review paper with recommended options is to be issued in early 1992. Interested parties will again be invited to comment, and this second round of comments will be considered in framing recommendations to the Cabinet. New Zealand workers have unrestricted rights to establish and join organizations of their own choosing. Unions are protected from interference, suspension, and dissolution by the Government and, in fact, influence legislation and government policy. Unions have and freely exercise the right to strike. Public sector unions, however, are precluded from striking if work stoppages threaten public safety, and new legislation prohibits (in both the public and private sectors) strikes designed to enforce national wage awards. b. The Right to Organize and Bargain Collectively The right of labor unions to organize and bargain collectively is provided by law. Unions actively recruit members and engage in collective bargaining. Approximately half of all wage earners are represented by unions, and the level is dropping. The Employment Contracts Act which became law on May 15, 1991, ended compulsory membership in labor unions. This legislation also scrapped the past system of national awards, whereby one contract covered workers across the country and across industrial lines. Under the new law, employers may negotiate contracts with unions, with other voluntary associations of workers, or with individuals. Mediation and arbitration procedures are independent of government control. A system of labor courts hears cases arising from disputes over interpretation of labor laws. In addition, 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 workers are protected from forced or compulsory labor by law and in practice. d. Minimum Age for Employment of Children Children under the age of 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 effectively enforced by the Department of Labour. 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. There is a governmentmandated minimum wage. In most cases, minimum wage recipients also receive a variety of welfare benefits and most workers earn more than the minimum wage. New Zealand has an extensive body of law and regulations governing health and safety issues. Rules are enforced by Department of Labour inspectors, who have the power to shut down equipment if necessary, and unions may file safety complaints on behalf of workers. 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. Extent of U.S. Investment in Goods Producing Sectors (D)-Suppressed to avoid disclosing data of individual companies Source: U.S. Department of Commerce, Survey of Current Business August 1991, Vol. 71, No. 8, Table 11.3 |