This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 06 WELLINGTON 001075 
 
SIPDIS 
 
STATE FOR EB/MTA/MST AND EAP/ANP 
STATE PASS USTR FOR BWEISEL AND DKATZ 
COMMERCE FOR GPAINE/4530/ITA/MAC/AP/OSAO 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EFIN NZ
SUBJECT: 2005 NATIONAL TRADE ESTIMATE REPORT: NEW ZEALAND 
 
REF: STATE 240980 
 
¶1.  Following is post's input for the 2005 National Trade 
Estimate Report on New Zealand.  We assume that Washington 
agencies will provide updated trade and investment data. 
 
¶2.  We also note that the section on "Biotechnology Food 
Approval" should be consistent with the NTE on Australia. 
 
¶3.  Begin text of NTE submission: 
 
IMPORT POLICIES 
 
In general, tariff rates in New Zealand are low as a result 
of several rounds of unilateral tariff cuts that began in the 
mid-1980s and continued until the current Labor government, 
elected in 1999, decided to freeze further reductions until 
at least July 2005.  The New Zealand government announced in 
September 2003 that it would resume unilateral tariff 
reductions.  On July 1, 2006, New Zealand plans to begin 
gradually reducing its highest tariff rates of between 17 
percent and 19 percent to 10 percent by July 1, 2009.  The 
top rates apply mostly to clothing, footwear, carpets, and 
certain autos and auto parts.  Ad valorem tariffs on other 
goods also will gradually be reduced to 5 percent by July 1, 
¶2008.  The New Zealand government will conduct a review in 
2006 to determine rates after July 1, 2009. 
 
STANDARDS, TESTING, LABELING AND CERTIFICATION 
 
Biotechnology Commercial Release Moratorium 
New Zealand's Parliament passed the New Organisms and Other 
Matters (NOOM) Bill 2003 on October 14, 2003, ending New 
Zealand,s moratorium on acceptance of applications for the 
commercial release of products produced through modern 
agricultural biotechnology into the environment. The new law 
put in place a revised regulatory framework by amending the 
Hazardous Substances and New Organisms (HSNO) Act 1996, under 
which the moratorium was scheduled to sunset on October 29, 
¶2003. New Zealand's commercial release moratorium had 
precluded applications for the commercial planting of 
biotechnology crops, the commercial importation of 
biotechnology seeds, and the release into the environment of 
biotechnology animals. It did not, however, affect the use 
and sale of processed biotechnology foods and ingredients or 
veterinary medicines. 
 
The NOOM Bill 2003 provides for a new conditional release 
category of approval for new organisms, including 
biotechnology products. This will permit New Zealand's 
Environmental Risk Management Authority (ERMA) to accept for 
review and its approval applications for release of 
biotechnology products with controls applied on a 
case-by-case basis. Under the provisions of the NOOM Bill, 
ERMA now will be able to approve a conditional release for 
biotechnology products that will allow field trial activity 
to expand from the limited scope of a fully contained trial 
to larger farm scale, encouraging ongoing research activity 
in New Zealand. Products from large-scale conditional field 
trials that ERMA may now approve could be sold domestically 
if the terms of project approval do not explicitly preclude 
such sales. 
 
A Member of Parliament representing New Zealand,s Green 
Party is sponsoring an amendment to the HSNO Act, which would 
reinstate the ban on the commercial release of genetically 
modified organisms into the environment until 2008. The bill 
is not likely to receive its first reading in Parliament 
before early 2005. After the first reading, Members of 
Parliament will vote on whether the bill should move forward 
to a select committee or be removed. 
 
Biotechnology Food Approval 
Imported biotechnology foods can be offered for sale and 
consumption in New Zealand after being assessed and approved 
by Food Standards Australia New Zealand (FSANZ) under 
delegated authority of the New Zealand Food Safety Authority 
(NZFSA). In mid-1999, a mandatory standard for foods produced 
using modern biotechnology came into effect. The standard 
established under the Food Act 1981 prohibits the sale of 
food produced using gene technology, unless the food has been 
assessed by FSANZ and listed in the food code standard. FSANZ 
had received 28 applications for safety assessments of 
bioengineered foods as of March 2004. Of these, 23 had been 
approved, four applications were being processed, and one 
approval request was withdrawn. 
 
Biotechnology Food Labeling 
Mandatory labeling requirements for foods produced using gene 
technology became effective in December 2001. Biotechnology 
labeling is required if a food in its final form contains 
detectable DNA or protein resulting from the application of 
biotechnology, with a few exceptions. Meeting New Zealand's 
biotechnology food labeling regulations places a burden on 
manufacturers, packers, importers, and retailers. They are 
especially relevant for U.S. agricultural exports, which 
consist primarily of processed food. Wholesalers and 
retailers frequently demand biotechnology-free declarations 
from their supplier/importer, which passes liability in the 
event of biotechnology labeling non-compliance back to the 
importer. New Zealand food legislation requires businesses to 
exercise due diligence in complying with food standards, 
which usually is defined as maintaining a paper or audit 
trail similar to a quality assurance system. 
 
The NZFSA conducts periodic compliance audits. Individuals 
and companies found to be in non-compliance with 
biotechnology food labeling requirements may be assessed 
penalties under the Food Act 1981. The New Zealand government 
is reviewing authorized penalties stipulated under the act to 
make sure that they represent an adequate economic deterrent. 
New Zealand food retailers are discouraged from sourcing 
biotechnology food products, in part because of these 
regulations. 
 
A retail food audit conducted by NZFSA in September 2004 
reportedly found 17 of the 117 processed products evaluated 
to have genetically modified (GM) content that exceeded a 1 
percent threshold. These included two products that had been 
labeled as GM-free, which were referred to the New Zealand 
Commerce Commission for action under the Fair Trading Act 
¶1986. Additional NZFSA measures were taken to ensure that 
companies involved with those products whose labels failed to 
provide information on their GM content, but did not have 
false GM-free declarations, meet future labeling compliance 
standards. 
 
Sanitary and Phytosanitary (SPS) Measures 
New Zealand maintains a strict regime of SPS control for 
virtually all imports of agricultural products. The United 
States and New Zealand have held discussions on New 
Zealand,s highly conservative regulatory approach as well as 
on specific SPS issues. The two sides continue to make 
progress in addressing specific issues that negatively impact 
trade in products supplied by the United States. 
 
Beef. U.S. beef and beef variety meats were restricted from 
entering New Zealand following the December 2003 announcement 
of bovine spongiform encephalopathy (BSE) in the United 
States. Import restrictions also have been imposed on live 
cattle, certain pet food, non-protein free edible tallow, and 
U.S. processed food products containing beef such as soups or 
those containing gelatin made from bovine bone material. New 
Zealand imports of U.S. bovine products for human consumption 
now require assessment and approval by NZFSA on a 
case-by-case basis before importation. This can be time 
consuming, results in additional costs to importers and 
exporters, and deters sales. As of early December 2004, the 
NZFSA had not yet responded to a U.S. Department of 
Agriculture (USDA) request for New Zealand to accept U.S. BSE 
control measures as equivalent to that of New Zealand. This 
would eliminate individual product approval procedures 
initiated following the BSE detection in the United States. A 
country assessment review by the Ministry of Agriculture 
(MAF) is under way which would permit a reinstatement of New 
Zealand,s Import Health Standard (IHS) for U.S. live cattle 
and a resumption of trade. 
 
Table Grapes. The New Zealand Ministry of Agriculture (MAF) 
in September 2002 issued a new IHS for the import of table 
grapes from California that effectively reopened trade to 
U.S. exporters. The IHS contained specific mitigation 
measures to address the detection of post-border, black widow 
and other exotic spiders. As of December 2004, no significant 
biosecurity breaches were reported to the New Zealand 
government following the resumption of trade. The United 
States requested a modification of these mitigation measures 
to reduce costs to U.S. exporters and New Zealand importers 
without compromising New Zealand,s biosecurity standards. 
MAF responded by reducing the table grape inspection levels 
for the 2004 shipping season, but mandatory cold treatment 
remains in force. As of early December 2004, MAF had not 
responded to USDA documentation supporting the elimination of 
the unwarranted cold treatment of California grapes. 
 
Pork Meat. In June 2002, New Zealand modified its regulations 
imposed a year earlier requiring pork meat products imported 
from countries with porcine reproductive and respiratory 
syndrome (PRRS), including the United States, to be cooked to 
a certain temperature, either before export or after import 
in special facilities in New Zealand. The cooking requirement 
results in a darker meat color, which tends to be negatively 
received by consumers. New Zealand revised its import 
regulations in 2003, allowing pig meat products from the 
United States to be microwave treated. MAF again modified its 
import regulations for U.S. pork meat in November 2004, this 
time allowing entry of pork meat products derived from pigs 
imported live into the United States from Canada for 
immediate slaughter. Prior to this, New Zealand,s IHS had 
allowed entry only of U.S. pork meat derived from U.S. 
resident animals or from pigs resident and slaughtered in 
Canada and further processed in the United States.  The 
Ministry of Agriculture remains willing to consider 
scientific evidence related to the PRRS issue that would 
justify a review of its import health standard for pork meat. 
 
Poultry Meat. New Zealand implemented measures that suspended 
the importation of poultry meat from various nations, 
including the United States, in late 2001 because of the risk 
of introducing infectious bursal disease (IBD). U.S. 
exporters are unable to sell uncooked poultry meat to New 
Zealand, while cooked poultry meat is restricted to canned 
products. Discussions between the United States and New 
Zealand on this issue continue. 
 
Soybean meal. New Zealand,s import regulations for oilseed 
meals were modified in May 2004, requiring an official 
phytosanitary certification to address certain manufacturing 
practices. USDA does not monitor or inspect U.S. production 
facilities for soybean meal and was unable to meet New 
Zealand,s new certification requirements. Following 
consultations with USDA, MAF again amended its IHS for 
oilseed meals in August 2004 and November 2004. These 
revisions allow an independent verification authority in 
conjunction with a manufacturer,s certificate to address the 
production process issue and, taken together with USDA 
documentation, meet New Zealand,s import requirements. The 
new import regulations establish clarity and certainty 
regarding certification of U.S. soybean meal and allowed 
normal sales and supplies to resume. 
 
INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION 
 
In October 2003, the New Zealand Parliament enacted a ban on 
the parallel importation of films, videos and DVDs for the 
initial nine months after a film's international release. 
The ban applies only to film media, not to parallel 
importation of music, software and books.  It is scheduled to 
sunset in 2008, unless extended. 
 
The new legislation, which amended the Copyright Act 1994, 
also makes it easier to challenge copyright violations in 
court by shifting the burden of proof in certain copyright 
infringement cases to the defendant, who must prove that an 
imported film, sound recording or computer software is not a 
pirated copy. 
 
By omitting a ban on parallel imports of music, software and 
books, however, the legislation failed to roll back all the 
provisions of the New Zealand government's 1998 amendment to 
the Copyright Act.  While the legislation addressed many of 
the U.S. film industry's concerns about parallel importing, 
other U.S. industries, particularly producers and 
distributors of music and software, have voiced concerns that 
allowing parallel imports makes it more difficult to detect 
and combat piracy and erodes the value of their products in 
New Zealand and in third-country markets. 
 
The music industry also is concerned about a proposed 
amendment to the Copyright Act that would legalize the 
duplication of sound recordings in other formats for a 
purchaser's private use.  The government says this would 
enable consumers to employ new digital technologies and would 
legalize what already is common practice.  The music industry 
warns that such an exception to copyright protection would 
make copyright infringement difficult to police, send the 
wrong message to consumers and cost the industry an estimated 
$13.7 million in sales revenue and $1.97 million in profits 
per year. 
 
With amendments proposed in June 2003 to the Copyright Act 
1994, the government aims to bring New Zealand law into 
closer conformity with the WIPO Copyright Treaty (WCT) and 
the WIPO Performances and Phonograms Treaty (WPPT).  The 
amendments are intended to reflect developments in digital 
technologies and international developments in copyright law 
and are expected to be introduced in 2005.  If this 
legislation is enacted, the New Zealand government will 
determine whether to accede to the WCT and WPPT treaties. 
 
New Zealand also took a number of actions to strengthen its 
IPR enforcement regime.  To deter counterfeiting and 
copyright piracy, the Trade Marks Act 2002, which entered 
into force in August 2003, creates new criminal offenses for 
counterfeiting trademarks and increases the penalties for 
pirating copyright goods.  For those offenses, the act 
provides for penalties of up to NZ $150,000 (US $97,065) in 
fines or up to five years' imprisonment. 
 
Following a government review of the Patents Act 1953 that 
began in August 2000, the Ministry of Economic Development 
has drafted legislation intended to bring the act into closer 
conformity with international standards.  The draft would 
keep the maximum patent term at 20 years, but would tighten 
the criteria for granting a patent, from a patentable 
invention being new in New Zealand, to being new anywhere in 
the world and involving an inventive step. 
 
The draft's prohibition of patents for methods of medical 
treatment concerns some pharmaceutical companies.  The 
industry also is concerned by the Cabinet's decision in 
mid-2004 to halt a study on the economic impact of extending 
patent terms for pharmaceuticals.  In a submission to the New 
Zealand government, the pharmaceutical industry group, 
Researched Medicines Industry Association of New Zealand, had 
contended that New Zealand's effective patent life for 
pharmaceuticals had been substantially eroded.  It 
recommended adoption of a supplementary protection 
certificate arrangement, similar to those used in a number of 
OECD and European Union countries.  This would effectively 
extend patent protection.  However, the draft legislation 
fails to address this issue. 
 
The pharmaceutical industry also is troubled by an amendment, 
enacted in December 2002, to the Patents Act 1953.  The 
amendment provided that it is not a patent infringement for a 
person to make, use, exercise or vend an invention for 
purposes related to gaining regulatory approval in New 
Zealand or other countries.  It effectively expedites the 
approval process for generic competition to products going 
off patent.  The amendment was passed quickly and not as part 
of the ongoing and thorough review of the Patents Act.  The 
pharmaceutical industry is strongly opposed to this 
"springboarding" legislation. 
 
The United States continues to monitor developments in IPR 
issues closely. 
 
SERVICES BARRIERS 
 
Local Content Quotas 
 
Radio and television broadcasters have adopted voluntary 
local content targets, but only after the New Zealand 
government made it clear that it would otherwise pursue 
mandatory quotas.  While New Zealand government officials 
have said they are sensitive to the implications of quotas 
under the WTO General Agreement on Trade in Services (GATS), 
they reserve the right to impose them. 
 
Telecommunications 
 
U.S. industry has expressed concern about the cost of 
completing calls onto mobile networks in New Zealand, which 
ranks among the highest in the world for this charge.  The 
New Zealand regulating authority began an investigation in 
May 2004 into mobile termination rates and in an October 2004 
draft decision said that mobile network operators had been 
able to set unreasonably high rates because of limited 
competition in the market.  The authority called for such 
charges to be regulated.  Its final recommendation, expected 
in early 2005, may or may not retain the draft decision's 
recommendations.  The final decision rests with the 
Communications Minister, who can accept the regulating 
authority's recommendation, reject it or refer it back for 
further consideration.   The final decision is expected in 
late 2005. 
 
Competitors of the formerly state-owned monopoly Telecom were 
disappointed by the New Zealand government's decision in May 
2004 against unbundling the local loop.  Although under 
competitive pressure, Telecom still dominates the market. 
The Communications Minister accepted the regulator's 
recommendation against ordering Telecom to open its national 
fixed-line network to competitors.  Saying he aimed to 
increase competition in broadband services, the Minister also 
agreed with the regulator's recommendation to require 
bitstream unbundling, or access to Telecom's equipment by 
service providers in order to sell their own broadband 
services, and to accept Telecom's offer to provide within six 
months unbundled partial private circuits, primarily used for 
business data services.  As of the end of 2004, however, 
Telecom and regulators had yet to agree on commercial terms 
and conditions for the unbundled bitstream service. 
INVESTMENT BARRIERS 
Investment Screening 
New Zealand screens certain types of foreign investment 
through the Overseas Investment Commission (OIC).  Amid a 
growing public outcry about foreigners buying coastal 
properties, the New Zealand government in November 2003 
launched a review of OIC's powers.  That review led to 
proposed legislation, introduced in November 2004, that would 
raise the minimum threshold for scrutiny of proposed business 
purchases, but toughen the screening and monitoring of land 
purchases.  Under the legislation, the threshold for 
screening non-land business assets would be increased from NZ 
$50 million (US $35.7 million) to NZ $100 million (US $71.3 
million), where a foreigner proposes to take control of 25 
percent or more of a business.  Government approval still 
would be required for purchases of land over 5 hectares 
(12.35 acres) and land in certain sensitive or protected 
areas.  For land purchases, foreigners who do not intend to 
live in New Zealand would have to provide a management 
proposal covering any historic, heritage, conservation or 
public access matters and any economic development planned. 
That proposal would have to be approved and generally made a 
condition of consent.  In addition, investors would be 
required to report regularly on their compliance with the 
terms of the consent.  Overseas persons would continue to 
have to demonstrate the necessary experience to manage the 
investment.  Any application involving land in any form still 
would have to meet a national interest test.  The United 
States has raised concerns about the continued use of this 
screening mechanism.  New Zealand's commitments under the 
GATS Agreement of the WTO are limited as a result of New 
Zealand's screening program. 
 
OTHER BARRIERS 
 
Pharmaceuticals 
 
The U.S. Government continued to raise concerns about New 
Zealand's pharmaceutical sector policies, which do not 
appropriately value innovation and diminish the contribution 
of New Zealand to research and development of innovative 
pharmaceutical products. New Zealand's Pharmaceutical 
Management Agency (PHARMAC) administers a Pharmaceutical 
Schedule that lists medicines subsidized by the New Zealand 
government and the reimbursement paid for each pharmaceutical 
under the national health care system.  The schedule also 
specifies conditions for prescribing a product listed for 
reimbursement.  PHARMAC, a stand-alone Crown entity 
structured as a statutory corporation, accounts for 73 
percent of expenditures on prescription drugs in New Zealand. 
 
New Zealand does not directly restrict the sale of 
non-subsidized pharmaceuticals in the country.  However, 
private medical insurance companies will not cover 
non-subsidized medicines, and doctors are often reluctant to 
prescribe non-subsidized medicines for their patients, who 
would have to pay out-of-pocket costs.  Thus, PHARMAC's 
Pharmaceutical Schedule decisions determine the selection and 
pricing of the bulk of pharmaceutical drugs sold in New 
Zealand.  Its decisions have a major impact on the 
availability and price of non-subsidized medicines and the 
ability of pharmaceutical companies to sell their products in 
the New Zealand market. 
 
The United States has serious concerns relating to the 
transparency, predictability and accountability of PHARMAC's 
operations.  U.S. pharmaceutical suppliers report that the 
methodology used to determine Pharmaceutical Schedule 
decisions lacks transparency.  The Boards of PHARMAC and the 
Researched Medicines Industry Association of New Zealand have 
been meeting to discuss these concerns.  The U.S. Government 
will continue to closely monitor developments in this sector. 
 
On December 10, 2003, the New Zealand and Australian 
governments signed a treaty to create a joint agency to 
regulate medical devices, prescription and over-the-counter 
medicines, dietary and nutritional supplements, and cosmetics 
such as sun creams.  Aside from prescription pharmaceuticals, 
New Zealand does not currently regulate market entry of these 
products.   TThe new agency is scheduled to begin operations 
July 1, 2005.  Each country's government will continue to 
determine funding of prescription medicines.   The new agency 
may charge full cost-recovery fees to register products and 
require additional documentation and assessments for certain 
products, even if they already have U.S. Food and Drug 
Administration approval.  U.S. manufacturers and distributors 
of non-pharmaceutical therapeutic products have expressed 
concerns that those requirements would be overly burdensome 
and costly and serve to discourage exports of their products 
from the United States to New Zealand. 
End text of submission. 
Swindells