Tariffs to gradually reduce from July 1, 2006

3.30pm

A gradual reduction of tariff rates applying mainly to clothing, footwear and carpet would begin in July 2006, the Government said today.

A freeze on tariff rates was introduced in 1999 to help protect jobs.

Commerce Minister Lianne Dalziel today said that after the six-year freeze, tariff rates would again begin reducing but the Government had held off moving to a zero tariff regime.

The highest tariff rates of between 17 to 19 per cent, which applied largely to clothing, footwear and carpet, would begin reducing from July 1, 2006. These rates would reduce gradually to 10 per cent by July 1, 2009.

Tariff rates on all other goods would reduce to 5 per cent by July 2008.

Tariff reduction is an important element of international trade liberalisation, which New Zealand strongly supports because of the benefits it delivers to exports such as agricultural products.

The previous National-led government wiped out most tariffs, sharply reducing the cost of a wide range of foreign-made consumer items. The price of new and imported used cars went down significantly.

Trade unions pressed for the freeze, fearing further reductions in vulnerable industries would cost jobs.

Ms Dalziel said today that the decisions had been reached after considering a wide range of issues raised by business groups and firms throughout New Zealand.

"Previous tariff reduction has generated significant productivity and welfare gains, especially for consumers," she said.

However, the Government also recognised that previous tariff reductions had imposed "significant adjustment pressures" on industries, particularly in certain regions.

Economic Development Minister Jim Anderton said the moves were aimed at minimising this adjustment pressure.

Trade Negotiations Minister Jim Sutton said there was international uncertainty surrounding tariff liberalisation both in the World Trade Organisation (WTO) and Asia Pacific Economic Co-operation (Apec) forum.

"The Government is not prepared, therefore, to move to a zero tariff regime at this time. We will still retain some trade negotiating coin," he said.

A further review in 2006 will determine tariff rates after July 1, 2009.

Australia's apparel tariff of 25 per cent would fall to 17.5 per cent on July 1, 2005, Mr Sutton said.

Australia had completed its review of textile, clothing and footwear tariffs beyond 2005 but had not yet announced the details.

The Green Party strongly opposes tariff reductions.

- NZPA